I noted in a previous post the decline in resources devoted to monitoring the safety of products in previous years, contributing to perceived gaps in consumer safety, and hence resistance to international trade.
This seems to be an issue that cuts across parties. Consider this article from the WSJ (sub. req.):
Republicans Grow Skeptical On Free Trade
By JOHN HARWOOD
October 4, 2007; Page A1
WASHINGTON — By a nearly two-to-one margin, Republican voters believe free trade is bad for the U.S. economy, a shift in opinion that mirrors Democratic views and suggests trade deals could face high hurdles under a new president.
The sign of broadening resistance to globalization came in a new Wall Street Journal-NBC News Poll that showed a fraying of Republican Party orthodoxy on the economy. While 60% of respondents said they want the next president and Congress to continue cutting taxes, 32% said it’s time for some tax increases on the wealthiest Americans to reduce the budget deficit and pay for health care.
Six in 10 Republicans in the poll agreed with a statement that free trade has been bad for the U.S. and said they would agree with a Republican candidate who favored tougher regulations to limit foreign imports. That represents a challenge for Republican candidates who generally echo Mr. Bush’s calls for continued trade expansion, and reflects a substantial shift in sentiment from eight years ago.
“It’s a lot harder to sell the free-trade message to Republicans,” said Republican pollster Neil Newhouse, who conducts the Journal/NBC poll with Democratic counterpart Peter Hart. The poll comes ahead of the Oct. 9 Republican presidential debate in Michigan sponsored by the Journal and the CNBC and MSNBC television networks.
…
The new poll asked a broader but similar question. It posed two statements to voters. The first was, “Foreign trade has been good for the U.S. economy, because demand for U.S. products abroad has resulted in economic growth and jobs for Americans here at home and provided more choices for consumers.”
The second was, “Foreign trade has been bad for the U.S. economy, because imports from abroad have reduced demand for American-made goods, cost jobs here at home, and produced potentially unsafe products.”
Asked which statement came closer to their own view, 59% of Republicans named the second statement, while 32% pointed to the first.
How did safety concerns bcome such an issue? Consider the case of the Consumer Product Safety Commission. From Reuters (Sept. 6):
Rachel Weintraub, director of product safety for the nonprofit Consumer Federation of America, said the CPSC has seen its budget cut so drastically over the last 30 years that the number of full-time staffers has dropped from 978 in 1980 to the 401 allowed in next year’s budget.
This trend is representative of safety expenditures over the past six years. The time series for the actual budget authority deflated by the GDP deflator (blue) and by nominal GDP (red) are plotted in the figure below.
Figure 1: Consumer and occupational safety budget authority, by fiscal year, deflated by GDP deflator (blue) and by nominal GDP (red). Dashed line indicates the first year the Bush Administration budget is in place. Gray shaded area denotes proposal as indicated in the FY’08 budget. Source: For budget authority, Table 5.1—BUDGET AUTHORITY BY FUNCTION AND SUBFUNCTION: 1976–2012. For GDP deflator and Nominal GDP, Table 10.1—GROSS DOMESTIC PRODUCT AND DEFLATORS USED IN THE HISTORICAL TABLES: 1940–2012.
Two observations:
- The proposed budget authority was what was planned as of the President’s FY’08 budget rollout in February. It is obvious that, before the advent of the lead-in-toys/tainted toothpaste episodes, the Administration intended a real decrease in the funding for regulation of safety, continuing the decrease in spending-to-GDP ratio observed over the previous six years. Of course, it is hard to determine on the basis of time series data alone what is the right level of spending, but given the increased penetration of foreign goods into the U.S. economy, one would suspect that more — rather than less — spending would be appropriate.
- The deflation of nominal budget authority into real uses the GDP deflator. This assumes that the costs associated with monitoring and regulation safety concerns rise in line with costs associated with production in the U.S. economy. If, however, regulatory costs are more associated with labor costs, then the CPI-U would be a more appropriate deflator; this accentuates the stagnation in spending, so that FY’08 proposed spending is less than FY’02 (even while the US economy has increased by 14.8% over the same period, in log terms).
A large portion of the total figures are associated with the FDA’s operations. In order to consider the allocation of funding for checking safety of consumer products, refer to the figures for FY2006.
Figure 2: Consumer and occupational safety budget authority, in millions of dollars, for FY2006. Source: Table 25–13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION, CATEGORY, AND PROGRAM.
The chart indicates that the spending for food safety accounts for 26% of spending in the consumer and occupational safety category, while consumer product safety accounts for 2%.
Of course, I do not want to reduce everything to dollars and cents. Clearly, what is also important is the objectives the Administration would have the agencies pursue. In this regard, the policy level personnel the Administration has nominated in the past for, e.g. the CPSC, is instructive [1].
Once again, the GOP proves that they do not sufficiently understand the confidence-building importance of effective and credible government regulation and enforcement. A well-functioning market requires trust, confidence, and information. When the rules aren’t enforced, people stop playing the game, whether it’s checkers or international trade.
I think it just goes to show the most effective form of regulation is self-regulation. It does not help a producer if his product gets a black eye.
Mattel Tells China It’s Sorry
The Tampa Tribune
Published: September 22, 2007
The world’s largest toy maker sent a top executive to personally apologize to China’s product safety chief, Li Changjang, as reporters and company lawyers looked on.
‘Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys,’ Thomas A. Debrowski, Mattel’s executive vice president for worldwide operations, told Li.
The problem with the toys imported from China was not an import or inspection problem. It was a specification problem from Mattel. Would increased funding for product safety or inspection have caught this problem? Obviously not since it was a spec with full Chinese compliance.
Currently the federal government looks at only 2% of imports. I am still waiting for somone to tell me how much we should increase the budget to make you feel safe. Would 50% inspections be enough – increase the budget 25 times as high as it is now.
This is the problem with central planning ideas. They never deliver on their promises and only make the problems they are to solve worse and more expensive.
Note this quote from Jim Fedako:
Robert Higgs identified the Leviathan as an opportunistic beast, using crises real or manufactured to expand its realm, to slither its tentacles into the remaining halls where large amounts of liberty are found. Any national or international event can be spun into the need for more government, more interventions, and more intrusions of its slimy appendages.
Crises never seem to arise often enough for those wanting more power. Therefore, government will manufacture events, or spin the innocuous or unrelated incident into a crisis, whenever it desires more of the people’s liberty.
Concerning polls remember they only measure the effectiveness of propaganda and advertising not real opinions and by the wording of the questions they can elicit any response desired. This is more election year politics than a real measure of attitude. It is simply an attempt to justify more central planning.
the CPSC has seen its budget cut so drastically over the last 30 years
This proves that this is not a Democrat or Republican issue. In the last 30 years, both the Dems and Reps have had control of the administration for very long periods of time. If this is such a big issue for Democrats, why didn’t they dramatically increase funding during the Clinton administration?
Self regulation is the answer. Major corporations have to take responsibility for the safety and quality of their sub-suppliers. This was lost in the headlong rush to outsource to China.
“I think it just goes to show the most effective form of regulation is self-regulation. It does not help a producer if his product gets a black eye.”
Right, cigarettes don’t kill people. Ford didn’t build an Explorer that blew out a right rear tire.
Self regulation has not worked. Shall I bring up Viox? Avandia?
me,
It is time to grow up and stop looking to “daddy” government to save you with my money everytime you make a mistake. If you smoke the problems are your problems not mine. If Ford built a faulty automobile and you bought it sue them, but don’t look to me to pay your bills.
Shall I bring up the Great Depression, the Great Inflation, thalidomide, the US government being the greatest polluter in the world?
Buzzcut: I agree that it would be useful to consult the term-begin/end points of the red line, before making a blanket statement about Democratic and Republican propensities to cut funding. Reagan and G.W. Bush seem to have the lowest propensity to increase real spending.
“Right, cigarettes don’t kill people. Ford didn’t build an Explorer that blew out a right rear tire.
Self regulation has not worked. Shall I bring up Viox? Avandia?”
Interesting you bring up some of the most heavily regulated products on the market(cars, drugs, cigarettes) that exist to make a point that more regulation is required.
I would never argue that free markets create perfectly safe products, but I don’t see much evidence that government regulation greatly improves the safety of products or successfully blocks all unsafe products either.
If it creates a belief that all government regulated products are safe and a person need not worry about taking/using government approved products it may actually make people less safe.
If it is true that higher funding for regulation will successfully weed out bad products and help the support free trade I am all for it… but I remain skeptical that that is indeed true.
I might point out that Vioxx was approved by the FDA, and that cigarettes have long been known to have serious health effects. I doubt that anyone who chooses to smoke is not aware of this.
Of all the millions of products that have been provided to hundreds of millions consumers this is all you can cite?
Rich, you figure it is just a matter of “awareness”? That young daughter of yours who is targeted by the major tobacco companies might also be “aware” of how glamorous it is.
But that one product (the billions of little cancer sticks) might be unrepresentative (and I think it is) and point to a growing population despite all these purported hazards. [But possibly a growing demented population cultivating the grounds for a truly monumental future hazard.]
Back to that glamor of running a successful business (you and Buzzy) [you with the chain saw, Buzzy up the tree, holding on tight] without those pesky regulations: you figure that business has long term considerations that outweigh their short term goals of profit maximization? Does the recent increase in M&As and LBOs (not to mention coincident windfalls to CEOs) support this view?
Oh, DF, JS, and RB, you are too logical!
Calmo,
Business has the goal of making the most profit and perpetuating itself. If that means using government regulations to achieve these goals they are happy to do it.
The free market is not kind to business. Free markets exercise the worst kind of discipline by forcing businesses to perform. Generally businesses love central planning but hate
the free market.
Government gives business cover and keeps out competition. Established businesses embrace regulations because they make it much more difficult for their competition. They have already paid startup costs so their marginal cost increase is simply the cost of the regulation, but their potential competition sees an increase in startup costs and so fewer can afford to enter.
“me,
It is time to grow up and stop looking to “daddy” government to save you with my money every time you make a mistake. If you smoke the problems are your problems not mine. If Ford built a faulty automobile and you bought it sue them, but don’t look to me to pay your bills.”
I suppose you didn’t mind my taxes educating your children. are you one of the selfish Ayn Rand followers, like Neil Boortz. Hey, don’t tax me but he doesn’t[‘t mind my tax dollars subsidizing his private aircraft.
Logical, hardly. Let’s all go back to the 1800s and buy our own fire department. I am tired of paying “my money” for your fire protection.
Deregulation of airlines, now there is another success story. Unregulated hedge funds, they sure helped a lot.
Tainted fish from Thailand, killer green onions from Mexico. In the age of globalization government has a role of increased oversight, hot less.
You should buy and island and live by yourself. Then you could keep everything to yourself.
Many of the people who sing the praises of the “free market” are the same ones who want to put restrictions on torts. Litigation is a part of the free market and can in some ways serve the same purpose as regulatory oversight and fines. The possibility of a costly lawsuit can motivate businesses to greater self-regulation. Europe has taken the approach of strong regulatory control and as a result has a relatively small amount of litigation. In the U.S. the so-called free-marketers want neither, which leaves the consumer exposed with no protection or recourse.
Europe has taken the approach of strong regulatory control and as a result has a relatively small amount of litigation.
They’ve also got “loser pays”. That makes a big difference.
Joseph wrote:
Many of the people who sing the praises of the “free market” are the same ones who want to put restrictions on torts.
Joseph,
I am not one of those people, but I do agree with Buzzcut that the loser should pay and I also believe that the defendant should be paid first and not have to pay the lawyer any fee or expenses because he is the injured party not the lawyer. Legal expenses should be paid by the loser.
Would you accept that the free market solution?
A good example of government regulation failing miserably…
http://money.cnn.com/2007/10/04/news/meat_recall.ap/index.htm?section=money_topstories
“A good example of government regulation failing miserably…”
And we can feel secure that they would have voluntarily recalled the product before government intervention? Sorry, they didn’t.
We will probably find out the big delay was due to beef industry contributions to the republican party, just like the mad cow delays and success in watering down testing.
You already have the least regulation, the lowest taxes, and what is the result? An anxious population that 3/4 of the people say is on the wrong track.
me-
You are completely unhinged.
Rich Berger
Nice.
You really said it all with this silliness, “I think it just goes to show the most effective form of regulation is self-regulation.”
me,
As I said in my previous comment, the free market doesn’t ensure that all products are safe… I don’t think anyone would ever argue that.
The real question is will government regulation improve safety or will it do nothing(in which case, you are both wasting money and giving the public a false sense of security). In the case of meat… its the ladder.
its what? “the ladder”?
JohnS, funny boy, leaving us on the hook…the meat hook…up the ladder.
Thank you (check the proximity of those keys and know this was not the typo gods) for that crack, esp after all this “free” talk amid trashing any and all government regulations because this administration’s performance proves that…groan.
In Business we trust? Bob Nardelli for president? Sam “IBM is too big for one governemtn” Palmisanno?
You really trust an airlien losing money not to cut corners without FAA oversight? You trust nuclear power plant operators?
AH Robbins murdered women with their IUDs. GSK knew Avandia caused heart problems and withheld the data from even the government.
Government regulation isn’t perfect, especially when business deceives the regulators. When the department of Agriculture quits testing cows for mad cow disease, that is a failure of the political leadership, not regulation. Testing for mad cow is not a failure, failing to test is a failure.
Letting the fox guard the hen house is not the answer.
Me-
Menzie made a specific observation that ..”the decline in resources devoted to monitoring the safety of products in previous years, contributing to perceived gaps in consumer safety, and hence resistance to international trade.” I commented that this really has had little effect, that the self-interest of producers is a much greater check on bad goods than government agencies. A few other commenter, such as DickF and JohnS and Anonymous took a similar approach.
Your responses to these posts quickly degenerate into unsupported statements like “I suppose you didn’t mind my taxes educating your children. are you one of the selfish Ayn Rand followers, like Neil Boortz. Hey, don’t tax me but he doesn’t[‘t mind my tax dollars subsidizing his private aircraft.” I don’t think you have the slightest support for that statement. I could cite other examples from your posts, but why waste the time?
There are tradeoffs in any activity. The vast majority of consumer products are safe and effective. There is no perfection. To assume that businessmen are out to harm their customers while government officials are pure as the wind-driven snow (HT to Rush) is ridiculous.
Calmo – something tells me that you consider yourself a wit. Don’t stop believing.
BTW Menzie – I think your connecting the consumer safety to opposition to free trade was a stretch. I also think the WSJ is trying to push an agenda with these polls – trying to harm the Republicans. The OP-ed page may be pro-free market but the rest of the WSJ is in the same mold as the NYT and WaPo. I think the poll claiming that Republicans are deserting the party over fiscal discipline was especially tendentious; I read the article and I don’t think the results support the headline. Given the play that got in blogs this week, I am sure the WSJ got the effect it wanted.
Rich Berger: Seriously, you’re referencing Rush Limbaugh, and then dismissing the WSJ analysis?
Yes, Menzie, I am. I used a phrase that Rush often uses (pure as the wind-driven snow), because I like it. The rest of the opinion is mine, and yes, I am skeptical of the WSJ poll and polls in general. I think a poll is too easily rigged by the choice of questions, and the choice of respondents. I also agree with Rush that most of the polls that one reads about are designed to drive an agenda, not to discover the truth.
“You really trust an airlien losing money not to cut corners without FAA oversight?”
Airlines have more incentive than the government to not crash their airplanes. Its also worth mentioning that the longer it takes to get on airplanes and the more expensive airline travel is the more likely people will drive. Driving is more dangerous than flying and therefore good intended regulation can really hurt more people than it helps. Its never as simple as “The government can step in, ensure greedy corporations won’t ignore safety and save lives.”
“Government regulation isn’t perfect, especially when business deceives the regulators.”
If business deceives regulators just as easily as it deceives customers, what good is regulation? Isn’t that supposed to be the point of regulation?
And suppose your assumption that Republicans were taking contributions from the meat industry is true… doesn’t that further demonstrate the problems with regulation? More regulation will only create the opportunity for more corruption and will mislead the public.
In the case of meat the government DID check and didn’t say anything. Who cares what party is in charge? It’s a simple failure of regulation.
If you think that because the government regulates the safety of a product it is safe you are mistaken. The question I am asking(and not really answering either way) is does regulation improve the safety at all or does it simply give the illusion of safety? Is it possible that for government regulation to truly be effective it must be of a much greater scale and must cost so much more it really isn’t worth it?
calmo,
Eye am sorry eye met two say latter butt eye was thinking of yuan word and eye rote another!
I’m surprised that nobody has mentioned the obvious limitation to self-regulation: While indeed “it does not help a producer if his product gets a black eye,” companies are not monolithic entities but collections of individuals with different motivations and goals. What if there’s a big payoff right now for a decision that will hurt the company only after the decision-maker is gone? (The name Jay Gould springs to mind.) Self-regulation breaks down in such cases, which are by no means rare. Self-regulation is only effective to the extent that business decision-makers possess strong un-economic motivations such as loyalty and honor.
It’s also debatable whether today’s cigarette smokers are necessarily aware of the health risks. My brother-in-law’s 30-year-old son, for instance – a libertarian, btw – knows that smoking causes cancer, but doesn’t regard his behavior as risky because he’s positive there will be a cure by the time he’s stricken. Although he’s very rational about most things, he’s irrational about this, because he enjoys smoking.
JohnS thanks for the reply and this honest-to-Jesus bit:
The question I am asking (and not really answering either way) is does regulation improve the safety at all or does it simply give the illusion of safety?
about which I am asking you now (no illusions, no appearances):
Are you this cynical about regulations or this brave? [This could be a cynical question from me. The mere reportage of my possible cynicism tells you I’m charmed by your “not really answering either way” and I need to follow your exemplary honesty.]
Do you wear seat belts or have you taken these encumbrances out of your car because they are only safety illusions? [You might think this (re)dissolves any “honesty” I might have promised, but I do need to respond to your question to show the 1st impressions.]
Is this it (the careful 2nd look):
The presence of seat belts encourages drivers to drive recklessly because they are under the illusion of safety
…which also explains why some drivers blindfold themselves such is the depth of their belief in seat belts..and hence the perils of these safety regulations because with them people just live dangerously.
I’m going to guess that you haven’t removed the seat belts from your car John. [But also that you have not installed a roll bar and a snow plow on the front end of your SUV.]
I’m hoping that you see that regulations allow people to practice with confidence, not with reckless abandon.
I’m hoping you have more gems like “ladder”…
so much more promising than that Rich dude.
Rich Berger and buzzcut: Regarding “self-regulation” by business, I find this quote illuminating:
–Adam Smith
Menzie-
And the rest of the quote: “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”
And even more to the point about the virtues of competition: “Every individual necessarily labors to render the annual revenue of society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it…He intends only his own gain, and he is, in this, as in many other cases, led by an invisible hand to promote an end which was not part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. ”
I think Adam Smith was a pretty shrewd professor, and his observations remain true today.
“Do you wear seat belts or have you taken these encumbrances out of your car because they are only safety illusions? ”
Well if there was no evidence that wearing a seatbelt made someone safer than they would otherwise be I might not wear seat belts.
Of course, that simply isn’t the case. We can very safely say seat belts make us safer in cars. We can’t as easily say that regulations make us safer. That is my general question, what proof is there that regulations do ensure safer products?
To relate it back to the original post, if spending on safety was the same as % of GDP as it was in the 70’s, would our products really be safer? Maybe if we had some evidence that products are more dangerous today than they were in the late 70’s I would believe that… As far as I can tell products are safer.
Would we really have had no problems with unsafe products from China if spending was the same as %GDP as the late 70’s? I seriously doubt it.
Ok John, your last ( and clarifying) reply was closer to my first interpretation: the evidence that safety regs are not performing is proof that regs do not ensure safer products. [That Katrina like responses can be taken broadly (and cynically) to diss regulations in general.]
And so this:
needs to be pruned back to avoid the insinuation that we can do away with regulations. The fact that some regulations were not enforced properly, should not poison the waters for all regulations –should not poison the intention to provide safety (and not merely those ‘good-for-nothin-government-meddlin’ regulation jobs).
This administration has cut funding for these regulations…which shows up in the stats on these hazardous products. It is not a “no problems” but “less problems” proposition here:
We say that regulations *help* (vs “fix” or “cure”); that they need to be enforced with adequate funding and we agree that sometimes it is possible to be over-regulated (wearing 2 seat belts), but that is not the case here.
As I suspected the sequence of the questions on the poll primed the response against free trade. The initial questions about imports were about product safety reinforcing the idea that foreign products were unsafe. Then the question critical question was not about free trade but “Foreign trade has been bad for the U.S. economy, because imports from abroad have reduced demand for American-made goods, cost jobs here at home, and produced potentially unsafe products.” Once again the question was not about free trade and asked about product safety a current news topic.
Asking these same questions in a period where there had been no hype concerning unsafe products from China would give a totally different response. Ask directly about free trade and the difference would be huge.