The White House Formula for Feeding Babies
The great baby formula airlift of 2022 will soon be underway. After 40 percent of popular brands were out of stock by late April, Swiss manufacturer Nestle, which owns Gerber, announced it will fly extra baby formula to the United States. FDA rules effectively prevented the importation of foreign-made products, and were only suspended on Monday.
Cargo planes are fast, not cheap, and American parents will likely pay a premium. But the market is finally solving the shortage once the government freed it to do so. Dave Brat, Dean of Liberty University’s Business School, asserted, “the free market in itself can solve this in a week.”
Still, red tape will continue hampering the supply of baby formula for months. The largest U.S. baby formula factory has been offline since February after FDA inspectors shut it down. Tuesday, the manufacturer Abbott announced “a consent decree” with the FDA, whose inspectors found bacteria in the plant (although it was found in no product and linked to no illnesses), to reopen America’s largest formula factory. Once a court approves the deal, Abbott plans to resume operations within two weeks, although it will take six to eight weeks to reach the shelves. Nearly four months after the plant was shut down, we discover we’re still at least two months away.
On Thursday, former White House Press Secretary Jen Psaki (her last day was Friday) assured America that the Biden administration has been working “urgently” to solve the shortage “for months.” Yet questions abound. What took so long to reopen the plant? Were they cleaning the factory with toothbrushes? How did it take the FDA nearly four months to reach an agreement? Why did the FDA wait until the crisis was severe before relaxing guidelines on foreign imports?
The administration is understandably eager to pin the blame on somebody else. “Fundamentally, we are here because a company was not able to guarantee that its plant was safe,” argued Transportation Secretary Pete Buttigieg. “The government does not make baby formula, nor should it.” He got one thing right; government has no business wrecking the economy.
But Brat said the baby formula is far from “a free market enterprise.” Baby formula produced overseas is subject to tariffs up to 17.5 percent. State contracts under Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) — which often include hefty rebates to the government — impose monopoly pricing on nearly two-thirds of all infant formula sales. That’s in addition to exclusive regulation by the FDA and additional inspections, like the one which has snarled Abbott’s production for months. “It’s called economic capture,” said Brat. “James Buchanan [not the president] won a Nobel Prize for studying the obvious, that government wants to grow itself.”
“The free-market system is an information puzzle,” explained Brat, “which is impossible for our finite human minds to analyze.” How should limited goods with alternative uses be best distributed, based upon each individual’s preferences and available production capacity? Like a super-computer, prices solve the puzzle for us, without any one person having to understand the solution. “If you let the free-market system work, one company’s failure isn’t going to mess up the entire country.”
On the other hand, “what you expect from central planners is a loss of rationality.” Persistent government interference is sure to snarl the economy. “Given his economic philosophy,” argued Brat, Biden’s demoralized answer makes sense. Oh, if only we were better mind readers! “All of human history has been run by pharaohs, kings, despots, tyrants, and central planners. And all of human history was marked by $500 a year [your family] gets to live on,” he added. “That’s all of human history except for this miracle of free markets.”
It’s no accident that free markets developed under the influence of Christianity. In the Bible we find respect for private property, justice under the law, and enforcement of contracts — principles which allow markets to function and flourish. So, it should come as no surprise that, in an increasingly post-Christian society, free markets are increasingly under attack. The indisputable superiority of free market principles has spread the Bible’s wisdom to all corners of the globe, but now an anti-Christian ideology (Marxism) seeks to impose state supervision on all economic activity. In elevating the state to the place of God, it denies the well-known limits of human reason, and presumes to play God in circumstances beyond its control. Its legacy is spiritual poverty and mass graves.
When asked whether the administration could have acted sooner, President Joe Biden seemed unaware that the economy works better when government gets out of the way. “If we’d been better mind readers, I guess we could have,” was his downtrodden reply. “But we moved as quickly as the problem became apparent to us, and we have to move with caution as well as speed.” Comprehending basic economic principles does not require telepathy, nor does answering the question, “and what happens then?” Yet the Biden administration is like a kindergartner piloting a spaceship — giddy with power but unaware of how anything works. So, invariably, they wind up pressing the ominous red button.
Biden’s woebegone formula response typifies his response to every other economic issue — inflation, debt, the labor shortage. He assumes the problem is everything except the government and realizes, belatedly, government is usually the problem. In her last press briefing as his spokeswoman, Psaki blamed inflation on “the pandemic, and [its] impact on supply chains, and then the uptick in the pandemic with Delta,” and finally “the invasion of Ukraine by Russia.” Brat’s response was simple: “No! F in economics for Psaki. The only cause of inflation ... is always and everywhere a monetary phenomenon. You printed too much money.”
According to the economist John Taylor, said Brat, the federal funds rate should be 6.5 percent to avoid inflation, but it’s currently at 1 percent. Hiking interest rates is how Paul Volcker solved inflation under President Reagan. “Increase the federal funds rate, increase the interest rate, take a mini-recession,” he argued. “That’s going to be some pain, but ... if you don’t get rid of inflation, the house is out of the barn.”
Joshua Arnold is a staff writer at The Washington Stand.