Monday, April 13, 2020


We should not be shutting down the economy. Where we are is a sign of a great loss of bureaucratic competence, of state capacity. The old joke that the federal government is an immense insurance company with an army has never been so true.

Our government has,  apparently, the capacity to spend two trillion dollars in a month. But, with three month's notice, it cannot procure 50 cent face masks or plastic face shields (properly certified and regulated). (Actually, unemployment insurance and SBA snafus suggest it cannot even disburse the rivers of cash.)

We lack the basic state capacity, bureaucratic, technical infrastructure for anything more nuanced than blanket shut downs -- no trace, track and isolate, no apps to check temperature and symptoms, no commonsense that maybe (say) gardeners and tree trimmers can work now. It took Walmart to figure out that taking employee's temperature every morning might be a good idea.

I hope a lesson that comes out of this is the need to clean up America's bloated regulatory state, and to re construct a competent effective bureaucracy.

To these general points, Veronique de Rugy writes on  The monumental failure of the CDC,
The lack of preparedness at every level of government (federal, state, and local) has nothing to do with a lack of funding or inadequate staffing. Instead, it has everything to do with governments’ bloat, mismanagement, cronyism, and poor focus.  ...
“CDC officials botched an initial test kit developed in an agency lab, retracting many tests. They resisted calls from state officials and medical providers to broaden testing, and health officials failed to coordinate with outside companies to ensure needed test-kit supplies, such as nasal swabs and chemical reagents, would be available, according to suppliers and health officials…
“This was kind of a perfect storm of three separate failures,” said Tom Frieden, who directed the CDC from 2009 to 2017, citing the botched test, overstrict FDA rules and sidelined private labs.”
Veronique's piece contradicts the common conservative view that our government got incompetent because it spent so much money on programs -- writing checks to voters -- that no money is left for core institutions.
 the agency’s poor record and its lack of preparedness has nothing to do with a lack of funding. From 2004 to 2018, total CDC spending grew by over 30 percent, from $8.3 billion to $11.1 billion.
Unfortunately, the vast majority of this growth in spending—shock!—did not go to pandemic prevention and protection from COVID-19. 
For instance, funding for its National Center for Emerging and Zoonotic Infectious Diseases—which aims to prevent diseases like Ebola—received only $514 million in 2018, a tiny sliver (less than 5%) of total CDC funding. And less than half of that $514 million went to emerging diseases like COVID-19. The rest of that budget is spent on stuff like chronic fatigue.
Meanwhile, funding for the CDC’s chronic-disease programs—which aim to prevent smoking, alcohol consumption, and poor diets—received nearly $1 billion over that same time, almost double the funding for infectious-disease prevention. As Michelle Minton at the Competitive Enterprise Institute notes in a must-read piece, more money goes to efforts like “environmental health ($180 million), injury prevention ($270 million), and occupational safety ($330 million).” All these projects are also funded by other agencies.
And, of course, let’s not forget the large amount of time the CDC (along with its companion in failure, the FDA) spends on alarming everyone about youth vaping. It is not an epidemic, it’s not contagious but it’s certainly got plenty of attention from the CDC, and the FDA. Isn’t it obvious now that these busybody government bureaucrats should have focused their efforts instead on fighting and preventing actual, real-world epidemics—you know, of the contagious type. 
This is a picture of unsupervised bureaucratic drift,  not lack of money

Brett Stephens writes of bureacratic bungling in the New York Times. 

A lot of poor kids get lunch at school, a pretty important source of regular meals. School is closed.
The U.S.D.A. didn’t have any trouble responding to school closures by switching to summer feeding programs. And Congress knew enough to give the department authority to waive some of the regulatory requirements. But,.. “Every waiver has layers and layers and layers on it.”
“To get a waiver each district has to apply to the state,” she notes. “The state has to decide whether to accept it. If they agree, then they have to apply to the U.S.D.A. If the U.S.D.A. says yes, the state can get the waiver, the district can get the waiver, but then the state has to interpret how you do it.”
Example: Oregon applied to the U.S.D.A. for an area-eligibility waiver so it could provide food for needy families living in non-poor areas. The department allowed the waiver, with the requirement, Wilson says, that each school district would have to work with a state agency “to develop a plan as to how they are going to target the most-needy students.”
Brett links to the  "F.D.A.’s almost-comical mishandling of an effort to roll out coronavirus test kits" here, and summarizes
First the F.D.A. approved a flawed test. Then they stymied an effective test by requiring its developer to submit his request not only electronically but also mailed in paper and via thumb drive. Then the F.D.A. demanded that the developer see if his test worked against other coronaviruses. Then the F.D.A. shut down a testing regime developed by the Seattle Flu Study because it lacked the correct licensing requirements.
Congress also had to overturn F.D.A. regulations in order to permit hospitals to purchase N95 masks previously approved only for industrial use. The country may need billions of such masks now. But as Reason magazine reported last month, federal regulators have told one would-be manufacturer that certification and approval might take between 45 and 90 days.
And this is government operating in an emergency. 
Dan Frosch, Deanna Paul and Ian Lovett write in the Wall Street Journal the story of Abbott Labs' amazing 15 minute coronavirus test:
After conducting a bulk purchase with Abbott, the federal government this month gave every state except Alaska 15 devices and 120 cartridges, regardless of its population or severity of its coronavirus outbreak.
In Illinois, where Abbott Laboratories is based, Gov. J.B. Pritzker said he spoke to the company more than a week ago and thought he had an agreement to conduct 88,000 tests a month, or about 3,000 tests a day. He subsequently learned that the federal government was taking over purchasing and distribution of the tests.
Instead, Illinois received 15 Abbott machines and 120 cartridges. “That’s eight tests per machine for all of Illinois” 
My italics. Lots of people are touting the need to "centralize" critical supplies, to stop states "competing" over them. Here is a look at how that's going to work out.

We are relying on the amazing creativity of American scientists and industry. The knowledge that the federal government is going grab your market cannot be salubrious to innovation and supply.

WWII generals fought each other viciously for supply too. Centralized allocation does not increase amounts.


  1. Who knew electing a bunch of buffoons will lead to "a great loss of bureaucratic competence."

  2. "Congress also had to overturn F.D.A. regulations... ."

    Hell, Congress approved the original regulations!

    We live through this nonsense; we see this nonsense. 'Twill not change.

  3. This reminds me of your piece (I believe it was about Hurricane Sandy) that where dislocations occur, enterprising people will step up in response. If certain foods are scarce due to supply chain problems prices will go up and someone will take advantage of that, fixing the supply chain and (deservedly) making a bunch of money. And the increased supply would reduce prices.

    The idiocrats would rather enforce rationing and price controls.

    I wish the bureaucrats would just step aside and let people do what they do best: optimize their situation.

  4. For more than a decade the CDC has been distracted by researching topics such as the relationship between obesity and lesbianism.

  5. I can buy cheerios, but not an N95 mask.

  6. Also note that the current director of the CDC has a hideous track record in public health. He was chosen for political reasons....

  7. I vacillate between feeling like we should open back up or remain shut down. On the one hand, the "essential" industries have figured out how to operate without ostensibly exacerbating the situation. Masks, 6ft, stay home if you have a fever or cough, easy enough right?

    On the other hand, every time I venture out to the grocery store there are a handful of people who clearly think this is all a big media hoax and are not taking it seriously at all. My wife got a snarky response from an elderly woman as she rode past her on her bike a pulled her mask over her face. Some people will ruin "re-opening" for all of us.

  8. John,

    Agree on the facts (unfortunately), but must question the conclusion of the piece.

    The fact that an alternative A is failed is not the proof that we should do an alternative B. Because there are alternatives C, D, etc.

    The fact that the federal government is incompetent (alternative A) does not mean that decentralized procurement process (alternative B) is the solution. Competent government (alternative C) managing limited resources could be superior to both, right? I know that asking for a competent government might be a stretch, but is not a binary property. The US had much more competent governments in the past. Other countries do have them now. Not perfect, but better.

    This is the basic idea behind diversification and the value of flexibility, right? You want to pull as many demand shocks in one portfolio to average the demand for the limited resources.

    Moreover, there is well-understood idea in Operations that when multiple buyers bid for limited supplier's capacity, this creates over-ordering, phantom orders, waste, all kinds of inefficiencies. This is one of the explanations of the bullwhip effect that Operations studies a lot. Under normal circumstances the inefficiencies are just money lost and product wasted. But now, because of the structural deficiencies of the process real lives are at stake.

    So, with all due kudos to the wonders of markets and how they promote creativity, let's not disregard other fundamental properties of the process.

  9. Thank you for summarizing all these findings. I had no idea, for example, that N95 masks were restricted to industrial use. Or that Illinois lost out on testing kits because of federal bungling. Enjoying lockdown with my work and the balcony but would have appreciated some options and gladly accepted track and isolate, apps to check temperature and symptoms. No supplies leaving our bldg staff vulnerable so when out I buy for people on the desk liquid soap, hydrogen peroxide.


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