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Regunberg’s Drug Innovation Disincentive Act

Barely out of the gate in the new legislative session, progressive Democrat Representative Aaron Regunberg of Providence is proving exactly how dangerous he is to the health and well-being of Rhode Islanders:

The bill (2018-H 7042), which Representative Regunberg introduced Jan. 3, would establish a board of pharmacy to examine how prescription drug manufactures set the price for certain prescriptions, and give it the authority to set a maximum allowable price to protect the Rhode Island consumers.

The price-fixing scheme would give nine unelected board members, most of them pharmacists with a financial interest in the industry, deep access to the private information of drug companies and the power to set prices for drugs — particularly those that are among the most innovative and life changing — below the level that companies believe necessary to make it worthwhile to develop more.

There is no reason to expect pharmacists to understand every aspect of drugs’ production and sale generally, let alone the internal operations of a particular company.  If companies are forced to justify pricing decisions to Rhode Island’s socialist-nine board members and beg their indulgence, the potential for corruption is immense.  If the members are cycled out every three-year term, then they’ll lack a long-term perspective, but if they’re kept on the board for much longer, they’ll become less accountable.

The minimum price for a drug in the state will always be zero… in the sense of being unavailable.

Given the critical nature of its products, our health care market does need controls against price gouging, but we should go the route of reform and competition, not the philosophy that has brought Venezuelans into the gutter.  Reform patent laws, giving generic drug manufacturers more opportunity.  Take the thumb off of insurance companies so they’ll have more leverage against drug companies.  Take the restrictions off of health care providers and consumers so they’ll have leverage to shop around for drugs, insurers, and types of treatments.

Above all, Regunberg’s bill illustrates how close we are to the end game of government control, and that’s an extremely unhealthy place to be.

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Jobs Lost to Regulation

Katie Wendell’s article on occupational licensing in Ohio brings to mind questions about Rhode Island:

Ohio lawmakers are considering changes to some requirements amid concerns that over-regulation is keeping some people — including many from the generation most apt to leave the state — from gaining employment.

“Ohio’s licensing requirements have prevented more than 7,000 people between the ages of 25-45 from pursuing licensed occupations in the state,” says a new study by the Buckeye Institute, a conservative think tank.

I don’t think it’s so much a generation that might leave as a class, which I’ve called the “productive class.”  (Again, that description is meant to distinguish from, say, an “investor class” or “student class,” not a “lazy class” or something.)

I do wonder what the Buckeye Institute’s model would find Rhode Island’s job prevention number would be.  According to the Institute for Justice, Rhode Island has the 10th most burdensome licensing laws for low-to-middle-income occupations, compared with Ohio’s 38th.

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Locking People Out with an Explosion of Regulation

The topic of occupational licensing has been trending, lately, and Nila Bala adds this on The Hill:

Nearly one out of three Americans has a record in the criminal justice system and, as a result, faces a difficult road to becoming employed. Adding to their woes is the fact that many jobs — including interior designer, barber, pest control applicator and fire alarm installer — require some kind of occupational license.

Unfortunately, many states still deny licenses for individuals with criminal convictions, even when those convictions are decades old or relatively minor. The good news? Several states and cities across the country are poised to become leaders in reforming the law.

The number of jobs requiring occupational licenses has ballooned in the last 50 years. Occupational licensing has expanded from covering five percent of the workforce in the 1950s to 30 percent today. In recent years, occupational licenses have come under fire for creating unnecessary barriers to work without any measurable gains in safety or quality of services provided to the public.

Of course, one could argue that the mix of jobs has changed in the last half-century, but somehow people got along without government oversight of a big chunk of the economy in the past.  It isn’t clear that the benefits of all this regulation outweigh the costs, or even have substantial benefits looking only at that side of the ledger.

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Licensing Puts Us at the Mercy of Legislators and Bureaucrats

Eric Dexheimer, staff writer for the Austin American-Statesman, relates the story of Shayne Gatlin, who made the dumb decision as a teenager to agree to drive the getaway car for his friends after they broke into a house.  Some years later, he took up the trade of locksmith, and over 30 years, he has built up a solid reputation and stellar Better Business Bureau rating.

In 2004, however, his home state of Texas began licensing locksmiths, which presented him no problem, beyond the embarrassment of disclosing his record, until he recently had to supply a digital fingerprint under a new rule:

That appears to have set into motion a mandatory new review of his background, said Steve Thornton, Gatlin’s attorney. But rather than acknowledging Gatlin’s long and clean track record, court records show, the Private Security Program instead treated him as a new locksmith applicant. That meant applying an inflexible rule it had adopted in 2014 stating that any applicant with a house burglary conviction, no matter how long ago it occurred, was to be rejected.

The public can disagree about the appropriate rigidity of the law for professionals working in home security, but Gatlin’s story illustrates an important point:  When you need the government’s permission to work, you’re constantly at their mercy.  The rules can change arbitrarily and a single decision — made by legislators or bureaucrats who are too confident in their ability to foresee every consequence — can wipe out your entire life’s work.

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Returning to the Rule of Law and Consent of the Governed

A recent Wall Street Journal editorial applauded the work of the Trump administration in its “great rules rollback”:

The results have been impressive. Ms. [Neomi] Rao [of the White House Office of Information and Regulatory Affairs] reported this month that through Sept. 30 the Trump Administration had taken 67 deregulatory actions but only three new significant regulatory actions. That’s a 22 to 1 ratio. She also reported that since fall 2016 more than 1,500 planned regulatory actions have been withdrawn or delayed. For fiscal 2018, the current agenda includes 448 deregulatory actions and 131 regulatory actions, a better than 3 to 1 ratio.

One reason for success is forcing agencies to abide by the Administrative Procedure Act, which outlines a public comment period for proper rule-making and which the Obama Administration routinely ignored.

Imagine government following its own rules!  After eight years of Obama, that feels new and refreshing — as if we have the rule of law and the consent of the governed (or are moving back toward it).

In recent weeks, I’ve been noticing a number of Trump skeptics come around (which is to say, people more skeptical than I was, which was pretty skeptical).  The reevaluation is justified, and minds ought to be changing across the political spectrum, not the least for reasons like this:

… the far larger impact is lifting the pall of government hassle and arbitrary enforcement from business. In the Obama era, CEOs never knew when or how a federal agency might strike for political reasons, no matter the law. Simply lifting that constant fear has had a liberating effect on risk-taking and investment.

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Minimum Wage Calories Go Right to the Hips

Via Tyler Cowen (by way of Instapundit) comes a study of minimum wage law effects from the University of Zurich, abstracted as follows:

We study the impact of increases in local minimum wages on the dynamics of prices in local grocery stores in the US during the 2001-2012 period. We find a signifi cant impact of increasing minimum wages on prices in grocery stores. Our baseline estimate of the minimum wage elasticity of grocery prices is 0.02. This magnitude is consistent with a full pass-through of cost increases into prices. We show that price adjustments occur mostly in the months following the passage of minimum wage legislation rather than at the actual implementation of higher minimum wages. This forward-looking pattern of price adjustments is qualitatively consistent with pricing models that feature nominal rigidities. We fi nd no differential price effect for products consumed by poorer and richer households, and no evidence for demand effects. Our results suggest that consumers rather than firms bear the cost of minimum wage increases. Moreover, poor households are most negatively affected by the price response. Price increases in grocery stores alone offset at least 10% of the nominal income gains of the poorest households.

Companies pass the cost on to consumers, and it harms lower-income households disproportionately.  So, if employers reduce hiring, low-income households lose income; if employers raise prices, low-income households have to spend more for the same goods.  That doesn’t sound like a very helpful policy.

One wrinkle not mentioned is that government gets to win on two fronts.  Politicians take credit for “giving” people raises, and then the government itself gets a boost.  If income goes up, government gets a bigger income tax take, and if prices go up to pay the salaries, government gets a bigger sales tax take to the extent that the goods are taxable.

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Minimum Wage Up, Pressure on Jobs Down

Rachel Nunes writes succinctly about one change in Rhode Island policy and economics as of the start of the new year:

Thousands of workers in Rhode Island will see an increase on their next paychecks.

On Monday the start of 2018 brought a 50 cent increase to the minimum wage, bringing it to $10.10 per hour. That’s an increase of about six percent.

I’m just wondering:  what do folks suppose is the most-direct economic effect of increasing the cost of a particular segment of workers by 6%?  Sure, those with such jobs will have more money to spend, which they’ll do in a dispersed way, in and out of the state and with a varying degrees of broader economic benefit.

I’d argue, though, that the most-direct economic effect is to make such workers more expensive for employers and reduce the number of such employees.  Those whose work is correctly valued at below the minimum amount will not be able to find work, which is just one of the reasons this legislative conceit and political ploy is immoral.

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When People Get to See What Was in the Bill

If by some chance you haven’t seen the video below, by all means watch it.  Here’s the quick summary by David French:

… CBS talked to three different families in three very different financial circumstances — a single mom in North Carolina who makes less than $40,000 per year, a married couple in Rhode Island with no kids who make $150,000 per year, and California parents with three kids who make more than $300,000. Each family gets a break – which shouldn’t surprise anyone who’s closely followed the details of the tax plan. But two of the families thought their taxes would be higher.

Procedurally, we’ve seen a lot of comparisons between the GOP’s tax cut and the passage of ObamaCare, but the direction is entirely different, thanks to the mainstream media’s converse activism in both cases.  Some parts of ObamaCare proved popular, but they were well advertised.  The surprises were the things that folks were told would not happen, like losing plans and doctors that they liked.

With the tax cut, the surprise will be that most people will actually see a decrease in their taxes.  If the plan delivers on stronger economic growth, as well, public opinion could not just improve, but flip.

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The Market Will Produce a “Comfortable Default”

Fred Schwarz makes a point that unfortunately appears to be accurate:

One reason that conservative health-care schemes are less popular than we’d like is this: They assume that what Americans want is choices, when in fact what most Americans want is a comfortable default. The same goes for school choice, even in otherwise conservative areas. New York City has a vast number of options for schooling your kids — large, small, public, private, parochial — and I have yet to meet parents who consider it anything but a burden. Customizing health insurance and education options is like customizing Microsoft Word — yes, that little elevated “th” every time you type an ordinal number is annoying, but hardly anyone bothers to fix it. That’s why people say they like their employer-provided health insurance: It’s not because of the benefit structure or the customer service, but because you don’t have to do anything to get it; it’s just there.

There are caveats.  As I’ve written before, the availability of school choice in Vermont is associated with higher property values, for example.  We shouldn’t be surprised if New York City is a somewhat unique circumstance; throughout most of the country, the options will be more manageable than in the most bustling metropolis on the planet.

Similarly, support for conservative health care policies might improve if they’re explained (accurately) as allowing for just the “comfortable default” that people tend to want.  That’s the beauty of conservative reliance on the market.  Policy wonks may make the public feel like they’d be facing an incomprehensible maze of options, because that’s what excites wonks, policy but in the absence of overwhelming government regulation, the market will provide simple options, too.

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Bag Ban Mania Has Come to Tiverton

The activists are going town by town pushing fruitless plastic bag bans, and in Tiverton the debate raises more disturbing beliefs:

Hilton apparently believes that government’s providing educational services creates an excellent opportunity to manipulate children into conflict with their parents to advance a cause whenever a handful of elected officials agree with activists that the cause is righteous. While one would have to research how much class time must be devoted to an issue in order to turn children into a government youth corps, Tiverton parents might rightly wonder whether the school district’s academic results illustrate available slack in the school day. Just 28% of Tiverton high school students are proficient in math and fewer than half in reading. Perhaps indoctrination can wait until those results improve.

On the other hand, perhaps the school department could seize on the issue to provide practical lessons in math, science, and critical thinking.

The town administrator is warning of big spending increases next year, and this is what elected officials are spending their time on?

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