Category Archives: #NeverNeeded

2020 Second Quarter GDP Decline Is Worst in U.S. History—But Not 32.9 Percent

The good news is that the second quarter’s GDP numbers aren’t nearly as scary as the more dramatic headlines are saying. The economy has not shrunk by a third. The bad news is that yes, we really have just experienced the worst crash in U.S. history. And it’s not over yet. This post gives some context, and some ideas for how to aid the recovery for both the virus and the economy.

Several newspapers are reporting a 32.9 percent decline in GDP. This is a projection. It is not what has actually happened. If the economy were to continue shrinking for an entire year at the rate it did last quarter, GDP will have shrunk by 32.9 percent.

While normalcy might be years away, that steep of a decline is unlikely to happen. 9.5 percent and 7 percent are more accurate numbers for what has happened to the economy. Here is why.

GDP numbers are often seasonally adjusted. For example, an outsized amount of spending happens during the holidays, while other parts of the year are slower. So, GDP figures are often compared to what they looked like at the same time the previous year. That is what seasonal adjustment is, a way to compare apples to apples. For example, 2020’s second quarter GDP is 9.5 smaller than 2019’s second quarter. It is the worst decline in U.S. history, and barely begins to explain the pain that people all over the world are experiencing due to COVID-19. But it is not a 32.9 percent decline.

The non-seasonally adjusted number is a 7 percent decline. That is the change from one quarter to the next. That number also provides useful context. Lockdowns began late in the first quarter, so while the economy took a 5 percent dent then, it makes sense that the second quarter would be even worse, since the full three months were under lockdown. But since the dip had already started, it makes sense that the quarter-to-quarter number is a couple of percentage points gentler than the seasonally adjusted number.

For a fuller explanation, I refer readers to an excellent article by University of Central Arkansas economist (and my former grad school classmate) Jeremy Horpedahl, who has a gift for understanding and explaining statistics.

It will be another three months before we know for sure, but there is a chance the worst of the economic shock has already happened. People are finding ways to adapt. Today’s hardships will be with us for a while longer, and we need to help each other out. If you can, please do. But our troubles are 9.5 percent bad or 7 percent bad, not 32.9 percent bad.

What should we do to fight the virus and help the economy? Two things come to mind.

The first has nothing to do with public policy. It is simply to be prudent. COVID-19 is on pace to be America’s third-leading cause of death this year. Almost everyone who reads this has someone they care about who is high-risk, whether due to age, occupation, or a health condition. Think of them. Do right by them. The more people do to keep the virus under control, the more it will be under control. Some form of masks and social distancing might be necessary until a vaccine or other proven treatment is widely available. That could take a year or more. But it will happen, and the virus will lose. Until then, people need to be prudent. Not living in a hermetic seal, but prudent.

The second thing has everything to do with public policy. It is regulatory reform. CEI’s #NeverNeeded campaign has spent the last several months crafting as many COVID-related policy reforms as we can and explaining them to policy makers, media, coalition members, and the public.

Regulations against telemedicine should never have been on the books in the first place. A more realistic approval process would get new and proven COVID treatments to the public as quickly as possible. Factories wanting to retool to make personal protective equipment for health care workers should not have to wait 45 to 90 days for permits to come through. If a restaurant wants to deliver food to willing customers, regulations should never have forbidden it. The Centers for Disease Control and Preventions should focus on controlling diseases instead of spending $125 million on an anti-vaping campaign.

Nearly a third of occupations now require some kind of government license. In many states, this includes fields such as barbers and decorators. During normal times, these regulations protect incumbents by keeping competitors out. During times of double-digit unemployment, keeping people out of work on purpose is immoral.

President Trump has roughly doubled tariffs. They now cost the average household more than $2,000 per year. For families where someone just lost a job, that tariff money could help to keep them afloat instead.

Just this week, Congress held a hearing regarding potential antitrust cases against large tech companies. These are the companies that are making contactless deliveries and grocery shopping possible. They keep people informed and in touch with friends and family. They are improving video conferencing and other technologies that make remote work and education possible. And they provide on-demand entertainment to help keep people’s spirits up during a difficult time.

To this point, Congress and the president have mostly dealt with the virus and the economic crash with hasty “flash policy” such as stimulus bills. The next one is being drafted right now. Policy makers at all levels of government have already removed more than 800 #NeverNeeded regulations. President Trump issued an order directing agencies to remove more unneeded rules. But the Code of Federal Regulations alone contains 1.1 million regulatory restrictions and 185,000 pages. There is much more to do. For lots of ideas, see neverneeded.cei.org.

New #NeverNeeded Paper: Price Gouging

Massive shortages happened almost instantly when it became clear that the coronavirus would require a nationwide lockdown. Grocery stores almost instantly cleared out of frozen foods, non-perishables, hand sanitizer, and, bizarrely, toilet paper. Stores dealt with the shortages in different ways. But one of those ways, raising prices, is almost universally unpopular. In fact, 36 states have anti-price gouging legislation on the books. Both Commerce Secretary Wilbur Ross and an Amazon vice president have called for federal price gouging legislation.

In a new paper, I explain that price gouging legislation is a bad idea, regardless of one’s feelings about price gouging. The main reasons are:

  • Private companies have their own anti-price gouging responses. Moreover, they can evolve in ways regulation cannot, and more quickly. For example, Amazon’s artificial intelligence (AI) algorithms for policing price gouging among its third-party sellers turned out to have unintended consequences. But unlike Congress, they don’t have to wait until the political winds blow just right before doing something about it. Part of trial is error, and that’s okay. Without mistakes, there is no learning.
  • Price controls make shortages worse.
  • Rent-seeking. Big companies such as Amazon have already invested in AI algorithms and other anti-price gouging measures to prevent their third-party sellers from price gouging. Their smaller competitors have not. Amazon’s call for federal legislation likely has a bit more than good PR behind it.
  • Anti-price gouging measures don’t actually reduce prices. They reduce money prices at a tradeoff: non-money prices go up even more. These non-money price increases include worse shortages, longer searches, waiting lines, longer shipping times, lower quality, and in some cases, more black market activity.
  • There is no objectively correct mix of money- and non-money prices during a crisis. Different people have different needs and different preferences. Legislation, by imposing one single standard, does no favors to people’s diverse situations.

The whole paper is here. I touched on a few other price gouging tradeoffs here. CEI’s #NeverNeeded website is here.

How to Spot a #NeverNeeded Regulation

Regulatory reform is one of the most important weapons there is for fighting COVID-19 and for aiding the economic recovery after the worst passes. But with 1.1 million regulatory restrictions and 185,000 pages of rules at the federal level alone, where should policy makers start? This handy infographic shows policy makers and regulators what to look for. If a rule meets one or more of these guidelines, it is probably a #NeverNeeded regulation.

  • It slows distribution of proved medical diagnostic tests and services.
  • It blocks patients’ remote access to medical providers.
  • It increases the cost of energy at a time when people can least afford it.
  • It makes it more difficult to hire employees.
  • It adds another layer of bureaucracy or complexity to legal compliance.
  • It blocks access to capital for both consumers and businesses.

A good rule of thumb is that if a regulation isn’t needed now, during a pandemic, then it probably was never needed in the first place.

Getting rid of #NeverNeeded regulations should be a top priority for lawmakers and regulators. But it is also not enough. Regulatory sludge has been building up for decades. Federal agencies issue more than 3,000 new regulations in most years, and usually remove old or outdated rules only when forced to. Reforming the rulemaking process itself, so that it generates fewer #NeverNeeded rules going forward, will be essential to resilience against the next crisis. If net neutrality rules hadn’t been repealed, for example, people in the U.S. would have had to deal with congested, throttled networks, such as many Europeans have been dealing with. The transition to new technologies, such as telemedicine and Zoom meetings for students and workers, would have been more difficult, or even impossible.,

For more resources on identifying and reforming #NeverNeeded regulations, see neverneeded.cei.org.

Deregulate to Stimulate: #NeverNeeded Regulations Are Harming Health and Economy

The Code of Federal Regulations contains more than 1.1 million regulatory restrictions spread out over 185,000 pages. State and local governments have additional rules. Some of those rules have a valid purpose. Many others are making the COVID-19 crisis worse than it has to be. They get in between sick people and the health care they need. They make it harder for people to keep their jobs or educate their children during lockdown. If these rules are harmful during a crisis, they were probably never needed in the first place—hence CEI’s #NeverNeeded campaign.

CEI has produced a slew of studies, events, and commentary on everything from the Center for Disease Control and Prevention’s (CDC) mission creep to the Jones Act, which makes shipping slower and more expensive. There is also the #NeverNeeded hashtag on social media, which has brought together policy experts, policy makers, activists, and media outlets.

There are a lot to important reforms keep track of, so we put together an infographic that collects in one place the most urgent #NeverNeeded regulations that need reform. These focus on fighting COVID itself, and on making the economic recovery easier once it is safe to do so:

  • First and foremost, the Food and Drug Administration needs to speed up its approval process. For the average drug, this process can take a decade and cost several hundred million dollars. COVID-19 treatments must not take this long.
  • Public transportation is not exactly conducive to social distancing. Urban planners should stop trying to shoehorn people into it with a complicated web of subsidies, taxes, building and street regulations, and more. Right now, cars are safer. When the pandemic passes, people should be allowed choose their transportation options for themselves, on the level.
  • The recent decision to liberalize the Environmental Protection Agency’s rules related to the National Environmental Policy Act was a wise one. Permitting processes and environmental inspections long ago crossed from being a reasonable precaution into a politicized, ideological weapon.
  • Doctors and nurses face licensing restrictions that keep qualified people out. Loosening them to reasonable levels would make health care more abundant and more affordable. This is good policy during good times; right now, it is essential.
  • Higher utility bills are the last thing people need when record numbers of people are on unemployment insurance and small businesses are going under at alarming rates. Restrictions on fracking and other affordable energy technologies might be a burden people can bear during a boom, but not now.
  • Some cities have already rolled back their bans on single-use plastics, such as bags and straws. More need to. Plastics are vital for sanitation and preventing the spread of diseases, including COVID.
  • The Centers for Disease Control recently spent $125 million on a campaign against vaping. This and its many other other lifestyle-focused programs left the agency distracted and underprepared for the coronavirus outbreak. The CDC should get out of the lifestyle business and focus on its core mission of controlling diseases.
  • People spend more on gas than they need to, thanks to ethanol requirements in gasoline. Economists and environmentalists agree that the program has dubious environmental benefits. Instead, it raises gas and food prices while increasing the need for farmland. That means less habitat for wildlife and less money left over for families who need to stretch every dollar during lockdown.
  • Rules that discriminate against independent contractors, such as California’s AB5 legislation, had already put thousands of people out of work before COVID-19 hit. At a time when many people, especially high-risk individuals, need to work from home when possible, AB5 and similar proposals make that difficult or impossible. Rules that harm both public health and the economy need to go.

For more reform ideas and resources, see neverneeded.cei.org.

In the News: Lowering Tariffs

Bloomberg’s Ana Monteiro was kind enough to quote from my tariff relief paper in a recent piece:

While some duties have been relaxed to help with importing inputs needed for the coronavirus response, repealing tariffs related to health care altogether is something that Ryan Young, a senior fellow at the Competitive Enterprise Institute, in a July 8 paper said would have the immediate benefit of lowering costs for equipment and medical treatments. He argued that removing all duties imposed since 2017 would “aid economic recovery by reducing businesses’ supply costs,” and provide them some regulatory certainty.

The CEI’s Young also called for tariff-making authority to be moved back to Congress. That would mean repealing:

  • Section 232 of the 1962 Trade Expansion Act, which allows for tariffs without a vote by Congress if imports are deemed a national-security threat;

  • Sections 201 of the 1974 Trade Act, which gives the president authority to impose trade restrictions;

  • Section 301 of the 1974 Trade Act, which President Donald Trump has used to impose tariffs on French and Chinese goods.

Read the whole article here. The paper is here.

In the News: Tariff Reform in the CBC

It’s not often that phrases such as “institution-level reforms” and “never needed” appear in state-run media at all, let alone favorably. I am pleased this happened in a recent article on trade policy in Canada’s CBC:

In a report issued Wednesday, the U.S.-based Competitive Enterprise Institute, a conservative think tank, urged the Trump administration to get rid of all tariffs.

“Tariff reform should have been a priority before the coronavirus hit, but now it’s even more urgent to lift trade barriers, in particular for health care supplies and treatments,” said Ryan Young, CEI senior fellow and author of the report, in a statement.

“Tariffs were never needed in the first place, and they are causing harm during a potentially Depression-level economy. The time to act is now.”

Among other things, the report calls on Congress to “make big-picture, institution-level reforms to U.S. trade policy” — including the repeal of Section 232 of the Trade Expansion Act of 1962 and Sections 201 and 301 of the Trade Act of 1974 — to “restore tax authority to the legislature and make trade policy less subject to presidential whim.”

CEI is misidentified as conservative rather than liberal, in the correct sense of the word. But there are bigger battles to fight. The full article is here; my recent paper on tariff relief is here.

In the News: Tariff Relief

Reason‘s Eric Boehm was kind enough to draw on my recent paper on tariff reform in a piece urging the inclusion of tariff relief in the next coronavirus stimulus bill. The article is here; the paper is here.

Interview: #NeverNeeded Regulations

I recently appeared on the John Locke Foundation’s HeadLocke podcast via Zoom to talk about regulatory reform and CEI’s #NeverNeeded campaign.. The video is now on YouTube. Astute viewers will notice my cat Bella putting in a cameo around the 4:00-4:30 mark.

How to Make #NeverNeeded-Style Reforms Stick

There are lots of good regulatory reform ideas out there. The ideas with the most staying power share a common theme. They don’t just treat this or that rule. They treat the larger rulemaking system that keeps churning out those harmful rules. With a tough economic recovery ahead once masks, prudence, and treatments defeat COVID-19, now is a good time to implement them.

In a recent paper, I outlined two institution-level reform ideas: an independent Regulatory Reduction Commission, and automatic sunsets for all new rules. For those who don’t have time for the paper-length version, there is now an op-ed version, courtesy of Inside Sources. It concludes:

Dealing with COVID-19’s health and economic effects are the two top political priorities right now. Nothing else even comes close. As policymakers find and eliminate never-needed regulations that are blocking recovery, they must also reform the system that made those rules possible in the first place.

If left untreated, that regulatory sludge will build back up, and stifle the next emergency response in ways no one can predict today. Repeal is not enough.

We also need resilience.

The whole piece is here. The original paper is here. For more regulatory reform resources, see neverneeded.cei.org.

New #NeverNeeded Paper: Remove or Reduce Tariffs

Trade barriers are an obvious #NeverNeeded candidate for removal during a pandemic and a recession. They make medical supplies scarcer and more expensive. They raise consumer prices at a time when millions of people are losing their jobs and wondering how to make ends meet. And because other countries retaliate every time President Trump raises a tariff, U.S. businesses find shrunken markets for their goods through no fault of their own. Tariffs are a self-harming policy. They must go.

In a new paper for CEI’s #NeverNeeded series, I lay out a plan for making that happen. But simply getting rid of the Trump-era tariffs is not enough. Reformers need to make sure they do not come back. That means, as with so many areas, that institution-level reform is necessary. In this case, that reform involves the separation of powers.

The backstory is that Congress originally delegated away some of its tariff-making power in the 1960s and 1970s to the president because it found itself incapable of reducing tariffs the way it wanted to in the early postwar era. Vote-trading and favor exchanges that are a common part of congressional operating procedure weakened trade liberalization attempts. The thinking was that the president, with a national constituency, would be less prone to giving narrow favors to a single congressional district at the expense of the whole country.

This worked until an ideologically protectionist White House more than doubled U.S. tariff rates in just three years. Those tariffs and the retaliations they inspired are costing roughly a half percentage point of growth. The country might be able afford this kind of ideological luxury good during a boom, but not during COVID.

The tariffs must go, and Congress must reclaim its authority. Fortunately, the reform is pretty simple. Congress can repeal three sections from two different trade bills to reclaim its proper taxing authority from an executive branch that will not use it responsibly.

Those sections are Section 232 of the Trade Expansion Act of 1962 and Sections 201 and 301 of the Trade Act of 1974.

The whole paper is here.

A brader agenda for reducing trade barriers is in Iain Murray’s and my paper Traders of the Lost Ark.

CEI’s #NeverNeeded website is here.