"regulatory state is failing"
You don’t think airlines can just provide hand sanitizer to passengers, do you? On Tuesday the FAA wrote to American Airlines granting permission, and the letter they sent (.pdf) offers a window into process the airline had to go to in order to secure the government’s blessing.
Tuesday’s correspondence came from the FAA’s American Airlines Certificate Management Office in Irving, Texas. Imagine having a local office of a federal agency dedicated to your business, with its own letterhead.
American wanted permission to provide “personal use quantities of hand sanitizer gel and sanitizing wipes to customers prior to boarding and/or distributed during flight.” That means there would be hand sanitizer on the aircraft, and that falls within the FAA’s jurisdiction.
Before writing for permission, a team from American Airlines held two separate meetings with FAA inspectors, from two separate FAA offices – the airline’s direct regulators in their certificate management office, and also with the Office of Hazardous Materials Safety. The purpose of these meetings was “to discuss the 14 CFR part 5 required safety risk assessment” required to have hand sanitizer on board.
Passengers and crew are permitted to carry hand sanitizer, consistent with 49 CFR §175.10. And shippers can carry hand sanitizer, consistent with 49 CFR §173.150(g). For the airline to carry and distribute it, though, 49 CFR §175.8 (a)(4) requires permission of the Administrator of the FAA.
The FAA issued a finding that American’s proffered plan to offer hand sanitizer to passengers “meets conditions for FAA approval allowed in 49 CFR §175.8 (a)(4).” Even so, the specific products that the airline sources for use must be “approved by the AA Chemical Review Board (CRB) to meet the above CFR limitations and will be tracked on an internal reference list.”
Furthermore, permission is contingent on “mitigations and procedures included in the AA RWM ‘Corp SMS and Team – 200512- 01 / Hand Sanitizer in Amenity Kits and Snack Bags’ [being] “completed and complied with.” Any deviations require advance coordination with the dedicated FAA Certificate Management Office for American Airlines “prior to any further flights that provide personal use quantities of hand sanitizer gel and sanitizing wipes to customers.”
A number of commentators suggest that the real problem is President Trump, rich people overly concerned with tax cuts, a Republican Party with a deregulatory ideology, and so on.
Instead I have been repeating insistently that “our regulatory state is failing us.” The FDA and CDC, for instance, have through their regulations made it harder for testing and also widespread mask supply to get off the ground.
I don’t see how you can blame (supposed) deregulatory fervor for the presence of too many regulations, as we have been observing in these instances.
I do think you can blame President Trump, along multiple dimensions, for a poor response to the pandemic, see my grades here. (If there were a separate risk communication grade, Trump would get an F minus for that.) Nonetheless a regulatory state cannot be said to work well if it requires such extraordinary attention from a sitting president.
It can be the case that both Trump and the permanent bureaucracy are at fault. If something takes a long time to get done for reasons relating to preexisting rules, regulations, and laws, usually the current president is not directly at fault for that particular problem. Was it only Trump’s fault, for instance, that the permits to build a mask factory can take months to acquire? Or that the HHS did not respond to inquiries about gearing up mask production in Texas? Or that a law had to be changed to allow industrial companies to sell quality masks to hospitals? Or that so many a-legal or extra-legal activities (e.g., rich people arranging deliveries by plane, etc.) had to occur to sneak masks into this country? That the trade barriers on masks persisted for so long? (And yes likely the Trump administration is at fault for de facto toughening restrictions on masks from China.)
It is fine to say “the buck stops here,” and to criticize Trump for not having erected processes to be more aware of these problems and to dissolve them more quickly. I would agree with some of those criticisms, while noting the Trump administration also has tried to ease many of the regulations hampering adjustment.
This is more something on the horizon, but how do these apples make you feel? Comforted? The fault of plutocratic Republicans most of all?
And in both cases, vials and stoppers, a vaccine manufacturer cannot just switch to a slightly different product or another brand. They typically have to run manufacturing changes by FDA first, which could make quick supplier changes to curb shortages a difficult prospect.
The FDA can decide how flexible it will be about this type of change, says Sklamberg. The agency said in a December 2017 draft guidance that companies could note some changes in their annual reports rather than waiting for approval, but it has not finalized the policy.
The ability to switch products could be crucial as the entire world readies for a possible vaccine and vies to secure their supplies.
If you wish, consider a simple question. When the CDC pooh-poohed masks early on, or botched their testing kit thereby delaying U.S. testing by weeks or maybe months, did the permanent staff of the CDC rise up and rebel and leak howling protests to the media, realizing that thousands of lives were at stake? That is surely what would happen if say the current FDA announced it was going to approve thalidomide.
Those are still cases of our regulatory state failing us.
Officials at the Internal Revenue Service have warned that $1,200 relief checks may not reach many Americans until August or September if they haven’t already given their direct-deposit information to the government. Taxpayers in need of answers from the IRS amid a rapidly changing job market are encountering dysfunctional government websites and unresponsive call centers that have become understaffed as federal workers stay home.
Here is the full piece by Jeff Stein. And here is me in WaPo:
Cowen said it’s inexplicable why the federal government, given all the warnings and evidence from China of a spreading pandemic, did not move more rapidly.
“You know, Trump was terrible, but you can’t just pin it on him. It’s far more systemic than that. The NBA [which suspended its season on March 11] really gets so much credit. I would put the NBA in charge of fighting climate change at this point.”
The piece there is by Dan Balz.
Top U.S. banks have threatened to give the federal government’s small-business rescue program a miss on concerns about taking on too much financial and legal risk, five people with direct knowledge of industry discussions told Reuters…
Their main concern is that the Treasury Department has said it expects lenders to verify borrower eligibility, and take steps to prevent fraud, money laundering and protect customer information under the Bank Secrecy Act, sources said. Banks are worried they could face regulatory penalties or legal costs down the line if things go awry in the haste to get money out the door, or get blamed for not moving funds fast enough if they perform due diligence the way they would in ordinary times, the sources said.
Here is the full story.
For Atlantic, here is one excerpt:
“Our regulatory state is failing us.”
And to troll some of you, here is another bit:
Friedersdorf: Libertarians and small-government conservatives are highly skeptical of the regulatory state. What do they get wrong?
Cowen: Very often, the alternative to regulation is ex post facto reliance on the courts and juries to redress wrongs. Of course, the judiciary and its components are further instruments of governments, and they have their own flaws. There is no particular reason, from, say, a libertarian point of view, to expect such miracles from the courts. Very often, I would rather take my chances with the regulators.
Also, let’s not forget the cases where the regulators are flat-out right. Take herbal medicines, penis enlargers, or vaccines. In those cases, the regulators are essentially correct, and there is a substantial segment of the population that is flat-out wrong on those issues, and sometimes they are wrong in dangerous ways.
Recommended, there is much more at the link.
1. Where have all the briskets gone? A good lesson in supply chain economics. And China to slap big tariffs on Australian barley exports.
10. Millie Small, RIP (music video).
11. To be clear, I am not against this kind of article (NYT). “Sweatpants and Caviar,” but in the paper edition it is called “A Chance to Think About Composing that Opera.” Still, we can learn a bit from doing a small amount of modeling of how it came about.
13. “Ethics of controlled human infection to study COVID-19.” That is what you might call “an establishment piece.” On one hand, it is nice to see them not reject the idea, though they cannot agree on monetary compensation for exposure. I wonder how they feel about fishing boats?
Another HHS official, also speaking on the condition of anonymity, said: “There is a process for putting out contracts. It wasn’t as fast as anyone wanted it to be.”
The masks still are not being made, and this would be in Texas. I’ll say it yet again: our regulatory state is failing us in this matter. Here is a bit more:
From his end, Bowen [the mask maker] said his proposal seemed to be going nowhere. “No one at HHS ever did get back to me in a substantive way,” Bowen said.
The senior U.S. official said Bowen’s idea was considered, but funding could not easily be obtained without diverting it from other projects.
While we are on the topic of diverting funding, surely we would all agree that the NSF funding for the social sciences all should — for at least two years — be diverted to biomedical research? I wonder how many economists are willing to tweet that policy recommendation.
Nutrition labeling also frequently doesn’t comply with Agriculture Department and Food and Drug Administration guidelines for consumer sales, said Geoff Freeman, president and CEO of the Consumer Brands Association, a trade organization for the consumer packaged goods industry. A company that sold hamburger buns to major fast food outlets could try to pivot to retail, but that entails changing packaging on the fly, a relaxation of labeling requirements and new distribution contracts.
Here is a longer story, about how supermarkets are changing, by Laura Reiley, interesting throughout. I’ll say it again: America’s regulatory state is failing us.
4. Is American innovation speeding up? (WSJ)
10. A proposal for releasing British young people (ever listen to early Clash?).
12. A Swede explains Sweden to an Israeli: “Some maintain that the Swedish policy can succeed only in Sweden, because of its distinctive characteristics – a country where population density is low, where a high percentage of the citizenry live in one-person households and very few households include people over 70 cohabiting with young people and children. Those are mitigating circumstances which the Swedes hope will work to their advantage.”
We derive a measure of firm-level regulatory costs from the text of corporate earnings calls. We then use this measure to study the effect of regulation on companies’ operating fundamentals and cost of capital. We find that higher regulatory cost results in slower sales growth, an effect which is mitigated for large firms. Furthermore, we find a one-standard deviation increase in our preferred measure of regulatory cost is associated with an increase in firms’ cost of capital of close to 3% per year. These findings suggest that regulatory risk is a major cost to firms, but the largest firms are able to manage that risk better.
That is the abstract of a new NBER paper by Charles W. Calomiris, Harry Mamaysky, Ruoke Yang, a piece written in pre-Covid-19 times. It has never been more relevant, except that the estimates for regulatory costs turn out to be far too low (no criticism of the authors is intended here). To repeat my earlier point, America’s regulatory state is failing us.