Eric Adams’ Emergency Price Controls on Baby Formula Will Make the City’s Shortage Worse

“The country’s ongoing shortage of infant formula has been exacerbated and prolonged by a long list of counterproductive government interventions: from tariffs and trade restrictions to price-distorting subsidies and nonsensical labeling requirements.

New York City Mayor Eric Adams has decided to throw one more log on the fire by issuing an emergency order limiting price increases on infant formula.

“The nationwide infant formula shortage has caused unimaginable pain and anxiety for families across New York—and we must act with urgency,” said Adams on Sunday. “This emergency executive order will help us to crack down on any retailer looking to capitalize on this crisis by jacking up prices on this essential good.”

The mayor’s order invokes city rules that prohibit merchants from raising prices more than 10 percent from where they were 30–60 days preceding the emergency. Adams urged people to report potential gouging to the city’s Department of Consumer and Worker Protection.”

“sudden price hikes discourage people from engaging in harmful and unproductive hoarding.”

“Higher prices make once unprofitable activities suddenly lucrative. For example, it’s usually not profitable to drive 100 miles to sell people bags of ice. That calculation changes when a hurricane drives up the price of ice to $15 a bag.

Conversely, if price gouging laws force a bag of ice to be sold at $1, hurricane or not, a lot fewer potential suppliers are going to be induced to take that trip. The result is more people go without ice.

Adams’s order will similarly deprive New Yorkers of much-needed formula. Out-of-city suppliers who might have incurred higher transportation costs to reap the rewards of higher prices in the Big Apple will instead sell off closer to home. That’ll be particularly true if they’re located in a jurisdiction that hasn’t banned market prices on baby formula.

The federal policies driving the formula shortage—whether that’s prohibitive tariffs on baby formula or labeling rules that keep European products off the market—are outside the control of local officials like Adams, who are nevertheless expected by their constituents to do something.

The least the mayor could do, however, is not make the formula problem worse. His emergency order shows he can’t even clear that bar.”

How the baby formula shortage links back to a federal nutrition program

“The uproar over infant formula shortages is prompting lawmakers to confront how a federal nutrition program may be helping a small handful of formula manufacturers dominate the U.S. market.

The federal government’s widely-used nutrition program for women, infants and children, known as WIC, is by far the largest purchaser of formula in the U.S., with more than half of infant formula in the U.S. going through the program. And just two companies serve close to 90 percent of the infants who receive benefits through the program, in part because of the way WIC awards its contracts.”

“The Abbott recall and resulting shortages were especially disruptive for WIC recipients. About half of all babies born in the U.S. qualify for WIC, which serves low-income families. Many of these households don’t have the time or resources to drive around looking for alternative formula brands or scour the internet for available stocks. Even if parents and caregivers could find alternative formulas, their WIC benefits might not have covered the specific brand they could find when the shortages first hit.

For the past three decades, WIC has used what’s called sole-source contracting, which is designed to save the program money by allowing the states to buy formula far below retail prices. The National WIC Association estimates that state rebates save about $1.7 billion in costs each year. When a state contracts with a company, all WIC participants in the state use that same manufacturer. Just three companies have been awarded contracts during this time: Abbott Nutrition; Mead Johnson, which makes Enfamil; and Nestle, which makes Gerber.”

““The dirty secret about WIC is these formula companies actually lose money on formula that they sell through WIC,” because the lowest bidder ends up winning the state contracts, explained a former Democratic Senate aide. “But what happens is… if you give birth in a hospital and you request formula, you’re going to get the formula that is whoever has the WIC contract,” allowing the formula makers to reach a massive pool of new customers. Getting a state WIC contract can also mean more favorable shelf space at retailers across the state and more brand loyalty.

Not everyone agrees about the extent to which sole-source contracting has driven consolidation in the formula industry, versus other factors, like overall consolidation across the food sector and high food safety regulatory costs, since infant formula is more highly regulated than most other foods.”

” But the USDA’s Economic Research Service in 2011 found that switching a state WIC contract gave the new manufacturer about a 74 percent bump up in market share in the state. Most of that is the result of WIC participants switching — since they make up more than half the market — but the rest is the result of more preferential treatment at the retail level.”

Biden’s Baby Formula Airlift Stunt Should Never Have Been Necessary

“America’s current shortage of baby formula is a crisis created, in significant part, by the failures of government policy aimed at protecting domestic companies from foreign competition.

But rather than sweep aside the rules and regulations that have contributed to this mess, the Biden administration and Congress are gearing up to address a problem created by industrial policy with…more industrial policy. We’re now weeks into the crisis, but the best response that our political leaders have been able to muster is an attempt to use public resources to duplicate the market response that would have solved (or at least eased) the mess if it had merely been allowed to operate. The entire saga is a sad and infuriating commentary about the entirely predictable failures of central planning.

Take the White House’s latest idea for addressing the shortage as a perfect example. On Wednesday, President Joe Biden announced plans to send military aircraft to Europe—”Operation Fly Formula,” as the White House is calling it—to bring back formula for American parents.”

“The baby formula shortage isn’t the result of there not being enough planes to transport baby formula from Europe to the U.S.; it’s the result of the federal government making it nearly impossible to transport baby formula from Europe to the U.S.

As Reason’s Elizabeth Nolan Brown explained earlier this week, the Food and Drug Administration’s (FDA) rules that prohibit many baby formulas made in Europe from being imported to the U.S. have nothing to do with health or nutritional safety issues. Often, those brands are banned because they fail to meet the FDA’s labeling requirements.

In addition, the U.S. imposes huge tariffs—technically tariff-rate quotas, which are designed to make it completely unprofitable to import more than a small amount of a certain product—on imported formula. Those tariffs exist for no reason other than to protect domestic formula manufacturers and the American dairy industry that supplies them. As a result, about 98 percent of the formula sold in the United States is produced here as well.”

“Rather than moving to ease those regulations, however, the House of Representatives approved a bill on Wednesday that throws $28 million at the FDA to “boost the part of the workforce focused on formula, as well as FDA inspection staff,” according to CBS News. As if the FDA deserves to be rewarded for its incompetence and over-regulation of baby formula. This crisis demands less from the FDA, not more.”

Why well-qualified medical school graduates can’t get jobs — despite doctor shortages

“despite the great need for more doctors, there are still huge gaps between the number of aspiring physicians and the space available to train them, a dynamic that keeps perfectly well-qualified medical school applicants and graduates out of the pipeline.

In 2021, for instance, there were a record-setting 42,508 active applicants for residency programs — 3,741 more than in 2020 — but only 35,194 first-year positions, according to the National Resident Matching Program. Although the number of residency spots has been creeping upward in recent years, the growth has not been fast enough to close the gap.

At the root of the mismatch between physician supply and demand are decades-old limits on medical school enrollment and outdated rules governing the federal funding for most residency programs. While Congress has taken some baby steps toward increasing that funding, it has yet to make the kinds of bold changes necessary to create a sustainable and pandemic-resilient physician workforce.”

“The US medical system falls behind those of our peer countries in so many ways. We have higher administrative costs and worse outcomes than other high-income countries — and we also have fewer physicians available per person.

“If you take a look at EU countries that have sophisticated medical systems,” explained Janis Orlowski, chief health care officer at the AAMC, “they have between 30 and 40 physicians per 10,000 people. In the United States, we have about 26 to 27.”

It’s not an apples-to-apples comparison, in part because physicians use their time differently in different systems. But it’s clear the shortage is a burden, and it’s likely to get worse as the US population grows larger and older.”

“In a December 2021 survey conducted by the American Medical Association, one in five physicians said they would likely leave their current practice within two years, and about a third said they’d likely reduce their work hours in the next year.

The larger workforce trend has been dubbed the “Great Resignation,” and the reasons doctors are quitting echo the factors contributing to shortfalls among other health professionals, including nurses, medical assistants, physical therapists, and pharmacists. Burnout, fear of exposure, pandemic-related mood changes, and workload were all associated with intent to leave the profession.”

“It’s easy to imagine a simple solution for this problem: Incentivizing doctors from other countries to immigrate to the US. But this is not as quick a fix as it seems. Most states require doctors to complete residency training in the US, which takes at least three years. That applies even for doctors who practiced independently at expert levels in other countries; the chief of surgery at the fanciest hospital in India would still have to repeat residency in order to practice in the US.

About 13,000 of the residency match applicants this year were graduates of international medical schools, 8,000 of whom were not US citizens. But no matter how many additional doctors want to jump through the hoops necessary to practice in the US, long waits for visas and restrictive terms limiting where and for how long they can practice in the US make it unlikely many more will be added to the health care workforce in the near term.”

“One major bottleneck in the physician pipeline is medical school admissions, which are only graduating about 27,000 students each year. “That started in the 1980s with the freakout over a physician surplus,” said Robert Orr, a social policy analyst at the Niskanen Center in Washington, DC. At the time, miscalculations about population growth and changes in medical care delivery contributed to a moratorium on medical school enrollment that lasted until 2005.

Although medical schools have since continued to grow, expanding too quickly could result in a surplus of medical graduates with nowhere to do their residencies. That’s because of the other major bottleneck in the pipeline — the low number of residency positions. This year’s 36,000 first-year residency slots are inadequate to meet the US need for physicians and inadequate to provide training positions for all the applicants seeking them — and like the dearth of medical school seats, it is a consequence of restrictions created long ago with arguably good intentions.

Since the Medicare and Medicaid Act was first passed in 1965, medical residents have been paid for mostly by the Medicare and Medicaid programs. The goal was to ensure Medicare beneficiaries had access to the best health care, which was thought to be found in teaching hospitals.

In 1983, Medicare made changes to the way it reimbursed hospitals for residency programs. At that time, it created formulas that calculated the dollar amount of residency training funds it supplied to each hospital as a percentage of that hospital’s care expenditures and its volume of Medicare patients — sort of like a restaurant tip, said Orr.

Those formulas have never been updated — and because they tie funding to the cost of care, they have resulted in better funding for hospitals providing high-cost care in high-cost (usually urban) areas.

Over the years, this inequitable distribution of residency program funding has meant that hospitals prioritizing primary care services in rural areas get less funding and fewer residents than those that perform lots of expensive procedures in cities. That leads to fewer primary care specialists, and because physicians often practice near where they train, fewer rural physicians.

This fee structure also incentivizes hospitals to raise the cost of the care they deliver, and results in lower funding for residency programs at hospitals that treat younger populations less likely to be covered by Medicare.

Worse yet, to reduce Medicare expenditures, the Balanced Budget Act of 1997 capped the number of resident slots that could be funded by Medicare each year. It also capped the number of residents each hospital could have at their 1996 levels, which meant hospitals couldn’t get additional residents even if the population they served ballooned in size. Obamacare undid this restriction in 2010, and since then, the number of residency spots has grown modestly.

In 2020, Congress passed a federal budget bill that provided for 1,000 new Medicare-funded residency slots to be added over the next five years. But that’s nowhere near enough to close the current gaps.

Money donated by private insurers funds some residency positions at “the hospitals with the prestige and market power to extract it,” said Orr, but “it’s not a super-equitable way of trying to get residents out to different hospitals where maybe the population isn’t as well served.””

“There are also some solutions that sidestep the residency bottleneck entirely. One of the more promising fixes to the physician shortage is to allow other highly trained providers, like nurse practitioners, physician assistants, and pharmacists, to practice independently of doctors. The American Medical Association has vigorously fought this change for more than 30 years, and physicians who oppose the move often cite patient safety concerns, although they are not substantiated by safety studies.

Much of the real motivation to prevent these providers from practicing independently may be about money and professional sovereignty; private practice doctors in particular are financially disincentivized from expanding the scope of other practitioners.”

Immigrants could help the US labor shortage — if the government would let them

“Amid nationwide labor shortages in critical industries, more than a million immigrants are waiting on the US government to issue them work permits. Without these permits, many could lose their jobs, and some already have.

Biraj Nepal, a Nepali asylum seeker living in Woodland, California, has been working as a software engineer in the IT department of a bank for the last four years. Nepal went on unpaid administrative leave starting on January 26 because his work permit expired and the government has yet to process his renewal application. That has left his employer in a lurch: There’s long been a shortage of IT workers, and the pandemic accelerated that trend as companies went remote. Now, nearly a third of IT executives say that the search for qualified employees has gotten “significantly harder.”

If Nepal isn’t issued a new work permit within 90 days of taking administrative leave, his company will, by law, no longer be able to hold his job for him and will likely look for a contractor to fill his role. Under normal circumstances, that wouldn’t be a concern; work permits are meant to be issued quickly so that immigrants can be self-sufficient even while they are waiting on other applications for visas and green cards, which can take months or years to process. But the backlog at US Citizenship and Immigration Services (USCIS) has reached crisis level.”

“The pandemic is partly to blame. Monthslong USCIS office closures and staff shortages have created a backlog of more than 8 million applications across all types of immigration benefits — including green cards, visas, and protection from deportation — and most work permit applicants have to be photographed and fingerprinted in person. USCIS was also plagued by a budget crisis under the Trump administration, and work permit applications spiked last fiscal year to an all-time high of 2.6 million, straining the agency’s capacity.

Under President Joe Biden, USCIS has taken some measures to combat the problem, though has stopped short of automatically extending the validity period of expired work permits as advocates have requested. It temporarily waived fingerprinting requirements for some applicants, exempted spouses of certain visa holders from having to apply separately for work authorization, and extended the validity period of newly issued work permits from one to two years for some immigrants who have been admitted to the US on humanitarian grounds. It has also hired new staff, including 200 people in the agency’s asylum division, to address the backlog. But it’s not clear why the agency hasn’t also adopted the extension policy that activists have called for.

Earlier this month, a federal court vacated two Trump-era rules that had restricted access to work permits for asylum seekers, meaning that their applications could be processed more quickly going forward.

“Agency personnel is addressing outstanding processing issues and making changes to underlying procedures to achieve new efficiencies while ensuring the integrity and security of the immigration system. This includes improving processing times and decreasing pending cases,” said Matthew Bourke, a USCIS spokesperson.

But the backlog remains too large to be solved quickly by USCIS’s new policies or the court decisions. That would require additional regulatory action: In addition to extending the validity of expired work permits, the government could also streamline the application form for work permits to speed up processing, Cruz said. That could help immigrants who can’t afford to wait much longer for their applications to be approved.”

Where have all the truck drivers gone?

“Long-haul driving, in particular, can be grueling, with lengthy wait times that aren’t compensated and other costs to being out on a route for stretches at a time. “Why do people not want to become truck drivers? That’s the situation, or the root of the issue. And the reason for that is it’s a shitty job,” said Hanno Friedrich, associate professor of freight transportation at Kühne Logistics University.”

“The first thing to know about the truck driver shortage, experts said, is that it’s not exactly a shortage. “It’s a recruitment and retention problem,” said Michael Belzer, a trucking industry expert at Wayne State University.
In the US, “there are in fact millions of truck drivers — people who have commercial driver’s licenses — who are not driving trucks and are not using those commercial driving licenses, more than we would even need,” Belzer said. “That’s because people have gotten recruited into this job, maybe paid to get trained in this job, and realize, ‘This is not for me. This is not adequate for what I’m doing.’”

When it comes to recruitment, it’s hard to get people into the business, especially young people. There’s often a gap between when people leave school (say, age 18) and when they can legally drive a truck across state lines (typically age 21), which means those folks may have already found jobs and aren’t going to be wooed away to become truckers.

There are other barriers to entry, like schooling (the costs of which can vary) and the ability to obtain a special class of driver’s license. Around the world, training and testing for truck drivers stalled because of Covid-19 lockdowns. The industry also struggles to attract women into the workforce because of safety concerns and inadequate accommodations along routes and at rest stops.

But truck driving also isn’t the job it used to be. In the United States, for example, deregulation of the industry, which accelerated in the 1980s, alongside the decline of unions, means trucker wages have been shrinking for years. But the work itself hasn’t really changed. It involves long hours, and a lot of that can be time spent uncompensated. “You could spend all day or a day and a night waiting around to get a load at a port site offloaded and loaded up, and you’re not getting paid for any of that time,” said Matthew Hockenberry, a professor at Fordham University who studies the media of global production.

This feeds not just into the recruitment problem, but also the retention problem. Truck drivers are burned out. Long-haul drivers, especially — that is, those who are moving cargo long distances or across states — typically get paid for the trips they take, and they have to go where the cargo needs to go, with little control over when and where. “The route is the route,” as Weaver put it.”

“The toughness of being a truck driver — the long hours, the treks, the waiting at ports or warehouses to get the goods — isn’t an accident. It’s mostly a consequence of being caught up in the demands of the modern supply chain, the one that is under so much pressure now.

Experts told me that even as wages for truckers have declined, shipping and logistics companies are increasing their rates. But that hasn’t really trickled down to the truck drivers’ pockets. “The trucking companies fight over the scraps. And the drivers fight over the scraps left over after the trucking companies fight over it. All of this cascades down, and the most powerful party here is always the one to win,” Belzer said.

And, he added, when it came to truckers: “Because of where they stand in the power relations throughout the supply chain, they’re the least powerful people.”

Experts and those involved in the trucking industry said wages for truckers have ticked up because of the labor demand in this stage of the pandemic, just as they have in other parts of the labor market in the US. There may be good signing bonuses to be had, too. But truckers don’t have a say in the routes they drive, or how long it takes for their cargo to be offloaded at a port. The job remains difficult, and it might not be enough.”

Ukraine Still Hungers for Independence

“In the late 1920s, Soviet leader Josef Stalin sent Communist Party officials and activists out into the countryside with orders to convert private, family-owned farms into collective enterprises.

Ukrainian farmers resisted, and party leaders resorted to torture, threats, and graphic public shaming. In one Ukrainian province, according to Anne Applebaum’s Red Famine (Doubleday), a gang of Communist apparatchiks marched farmers into a room one by one and demanded they submit. Those who refused were shown a revolver. If they still did not comply, they were marched into jail, with the words malicious hoarder of state grain inscribed on their backs.

Stalin’s radical economic program was rooted in the idea that virtually all food supplies, land, and farming equipment were the property of the government. Collectivization was a state-sponsored program of mass theft perpetrated under the premise that Ukraine wasn’t even a real country.

Without private property, personal profit, or local pride there were few incentives to work. The new state-run farms were far less productive than expected, leading to -shortages. At the same time, Stalin increased grain procurement requirements from Soviet localities—Ukraine in particular—so that most of what was produced was seized by the state. By the spring of 1932, Ukraine had begun to starve.”

‘Expect additional long-term damage’: U.S. labor shortage exacerbated by immigration slowdown

“Immigration into America has slowed down tremendously, which may hurt the labor market and economic growth as the country tries to bounce back from the coronavirus pandemic, according to a new note from J.P. Morgan.

“Population slowdown threatens trend growth,” the Nov. 12 note stated, highlighting the fact that due to more aging boomers retiring from the workforce and 3 million fewer immigrants in the country, trend labor force growth is going to be limited at only 0.1% per year and risks hurting overall GDP growth.”

““Immigration is crucial to growing the labor force and for economic growth, particularly in the medium and long term,” Stuart Anderson, executive director of the National Foundation for American Policy, told Yahoo Finance.

Anderson added that the Trump administration’s policies greatly limited legal migration and the pandemic worsened the numbers overall, contributing to a shortage of available workers. “If similar policies were to resume in 2025, expect additional long-term damage to U.S. economic growth and the American labor market,” Anderson warned.

J.P. Morgan researchers noted that the Census Bureau estimated that the working age population (ages 16 to 64) peaked in 2019, and has been “falling for almost two years,””

The chip shortage has a silver lining

“Manufacturers haven’t overcome the worldwide semiconductor shortage. Gaming consoles like the PlayStation 5 are still scarce, automakers are delivering cars with missing features, and Apple may end up producing 10 million fewer iPhones in 2021. For a few companies, however, these supply chain woes may have an unexpected upside.

The manufacturing delays abroad and relentless demand for consumer electronics have turned into a windfall for some chipmakers in the United States. Even lesser-known American manufacturers with aging or secondhand equipment have seen a surge in sales for the legacy chips, or microcontrollers, they produce. These parts are inexpensive to make but are a critical component for many devices, and as supply chain troubles have affected larger companies that focus on more advanced technologies, demand for the more basic chips has grown. Flush with customers, the companies that make these microcontrollers are now on a spending spree to boost their overall manufacturing capacity.”