Summer Reading: Back to School Edition

The school year is beginning, meaning it’s time to sharpen those pencils, reload the stapler, and log onto ChatGPT (just kidding). While long division isn’t most students’ strong suit, most of America’s schoolchildren have learned enough addition and multiplication by now to realize that federal budget numbers just don’t add up. For fiscal year (FY) 2023, the federal government has already rung up an astounding $1.6 trillion in deficit spending, and the annual total will almost certainly exceed $2 trillion. Adding these figures perpetually to the national debt (nearly $33 trillion) will surely lead to calculator “ERROR” messages and exponential angst down the road. Fortunately, the Taxpayers Protection Alliance (TPA) has some light reading for members of Congress, who are returning to Washington, D.C. this week. If lawmakers take the following advice to heart, future taxpayers can focus on their exams without fretting about massive bills down the road. 

1. Let private providers, not taxpayers, foot the bill for broadband deployment. 

The federal government, states, and localities have picked up the unfortunate habit of spending exorbitant sums of money for broadband deployment. TPA has been following this issue closely for years and has written two reports detailing the high costs and low quality of services provided by government owned networks (GONs). In the second “GON with the Wind” report, TPA reports that, “Currently, at least 16 federal programs totaling more than $413 billion provide funding for broadband deployment which regulators can use to support municipal networks… With the vast amounts of federal taxpayer money allocated for broadband infrastructure, many communities across the U.S. are entertaining the idea of building their own high-speed internet networks.”

Cities such as Bowling Green, Kentucky and Bloomington, Indiana readily use taxpayer funds to build out their networks, but as noted in the report, consumers already have access to multiple, private internet options in these cities. GONs are largely redundant, and not at all cheap. According to one example from the report, “In 2018, Opelika [Alabama] sold off its broadband network for a massive loss. George Ford, chief economist at the Phoenix Center, noted that the city increased monthly power rates by about $5 per customer to cover the internet system’s loss. Ford described it in The Montgomery Advertiser as ‘a failed cross- subsidy scheme wherein all electric customers helped pay the internet bills of the one-third of homes that bought broadband service from the city.’” Lawmakers need to protect taxpayers from these boondoggles.

2. Protect consumers, not bureaucrats, in antitrust enforcement. 

It seems like every session of Congress is brimming with terrible new antitrust proposals. While the prospects for new antitrust legislation are low (for now), the Biden administration has empowered enforcement agencies to go after businesses for all sorts of dubious reasons. In January 2023, law firm Morgan Lewis noted, “In what appears to have been in part a trade for tabling new antitrust legislation, at least for now, the Biden administration dramatically increased funding for the Federal Trade Commission and the Antitrust Division of the Department of Justice [DOJ]….The Consolidated Appropriations Act, 2023 (the Spending Bill) increases the annual budget of the Federal Trade Commission (FTC) from $376.5 million in FY 2022 to $430 million and the annual budget of the Antitrust Division of the Department of Justice (Antitrust Division) from $200 million in FY 2022 to $225 million.” This funding hike is especially troubling because the DOJ and FTC are rolling out aggressive new guidelines for targeting merging companies.

In draft guidelines, the agencies lower permitted levels of market concentration, generally assuming (without evidence) that mergers and acquisitions are bad. Under the status-quo, markets are considered “highly concentrated” if the Herfindahl-Hirschman Index (HHI; which relies on squared and summed market shares) is greater than 2,500. A transaction that increases HHI by more than 200 will garner additional scrutiny by regulators. The draft guidelines lower the market threshold from 2,500 to 1,800 and the transaction threshold from 200 to 100. As noted in an advisory post by law firm Arnold & Porter, this new approach would imply that, “a transaction between a competitor with 28% and a competitor with 2% would be presumed anticompetitive, even if no other competitors in the market had shares of more than 1%.” Congress should respond to these ludicrous guidelines by tying any future funding to a more flexible, pro-consumer approach.

3. Reject price controls.

When prices are allowed to reflect supply and demand, innovators and producers get the signals they need to continue or shift production. Unfortunately, this free-market approach has often been stymied in the healthcare sector, which remains one of the most regulated industries in the U.S. The Biden administration certainly hasn’t shied away from even more regulation and price control and has recently begun “negotiating” drug prices with pharmaceutical companies via the Medicare program. It’s not much of a negotiation, of course, when Medicare is the largest payer for drugs and the government has absolutely no incentive to operate within market constraints. 

On August 29, AP reported, “President Joe Biden touted the potential cost savings of Medicare’s first-ever price negotiations for widely used prescription drugs… The drugs include the blood thinner Eliquis, diabetes treatment Jardiance and eight other medications. The negotiation process was authorized under the Inflation Reduction Act, which Biden signed last year, capping decades of debate over whether the federal government should be allowed to haggle with pharmaceutical companies.”

To see the lasting effects of price controls on drug supplies, look no further than Western European nations, where governments have used a heavy hand over the past half-century to lower costs. Prior to these federal interventions, these industrialized countries were global leaders in drug innovation and manufacturing. Yet over the past 50 years, the share of new drugs originating in countries such as France, Germany, and the United Kingdom has plunged from 45 percent to 20 percent. Life-saving medications such as statins have become steadily more difficult to obtain, and European pharmacists cite persistent shortages. The U.S. has been spared from the same issues but could suffer the same fate if Congress fails to act against this worrying policy.

In conclusion….

Lawmakers have their work cut out for them as they flock back to Washington, D.C. TPA hopes that they do their homework and stop making empty, AI-generated promises.