Trends

MILKING THE CONSUMER

The Council on Wage and Price Stability reports that U.S. consumers pay an extra $5-600 million each year for milk, because of state and Federal regulations. The Department of Agriculture is investigating charges that large dairy co-ops illegally raise milk prices. The 1975 President's Economic Report acknowledged the effect of regulations on raising retail milk prices. And the Justice Department's Antitrust Division is now looking into Federal milk regulation.

In addition to talk there has been some action. In the past two years the Virginia and Louisiana legislatures have repealed their milk regulations, leaving only 11 states with such laws. After a 1975 California repeal effort failed, the Consumer Cooperative of Berkeley challenged the constitutionality of the state price-fixing law by lowering its price 8¢ below the legal minimum (see "Trends," May 1976, p. 34). The State Director of Food and Agriculture has gone to court seeking a permanent injunction against the coop. The latter, meanwhile, has been joined by Consumers Union, which has filed a "cross complaint in intervention." Thanks to this filing, if the injunction is denied and the law found unconstitutional, the finding will apply statewide, not just in the Berkeley area, thereby saving California shoppers an estimated $100 million per year.

Besides California, milk price fixing states include Alabama, Maine, Montana, Nevada, New Jersey, North Dakota, Pennsylvania, South Carolina, South Dakota, and Utah. Hopefully, repeal efforts will begin in these states, too, before long.

SOURCE:
• "The Revolt Against Milk Price-Fixing," Consumer Reports, July 1976, p. 416.

MEDICAID CAPITALISM

"Anything you can do I can do better," seems to apply no matter where private enterprise turns its attention to performing government services on contract. The latest example is state medicaid programs and the case in point is North Carolina. Last year that state signed a two-year, fixed-price ($405 million) contract with Health Application Systems, Inc. to operate the state's entire medicaid program. In return for that $405 million, HAS will pay all legitimate claims, even if costs rise and more people become eligible for the program. State officials are pleased with the contract because they know in advance what the program will cost, and estimate a two-year saving of $4.5 million compared with running the program themselves.

How does the company expect to make money on the deal? For one thing, it has developed automated claims-processing and management techniques that can spot fraud and waste far more effectively than the state's former manual processing methods. Secondly, the firm has full control over hiring and firing of its employees, unlike the state bureaucracy with its civil service workers. Consequently it fully expects to make a profit on the contract. HEW officials regard the North Carolina experiment with interest, as a possible prototype for replication in other states. Creeping capitalism turns up in some of the least expected places

SOURCE:
• "When a State Turns Over Medicaid to a Private Firm," U.S. News and World Report, March 22, 1976, p. 20.

PROFESSIONAL LOOSENING

Yet another skirmish in the battle to free the market for professional services has been initiated by the ever-innovative Federal Trade Commission. The agency has announced an investigation of state laws that prohibit dental laboratories from selling dentures directly to customers, permitting only dentists to practice this arcane trade. An FTC spokesman noted that this most recent probe is, as REASON readers are well aware, part of a wide-ranging program investigating "matters that restrict competition and may be raising the price" of health care services.

One might think, with such FTC pronouncements becoming common and with the Supreme Court beginning to throw out such laws, that other professions would get the message. Not so. At the recent National Water Resources and Ocean Engineering Convention of the American Society of Civil Engineers, many speakers urged that state engineering registration boards be made stronger. The ASCE Committee on Standards of Practice even urged that the state boards, rather than the professional societies, enforce professional codes of ethics. Fortunately, cooler heads than the Committee's prevailed when it came to a vote, with a final tally of 150-2 in favor of ASCE continuing to enforce its own code of ethics.

SOURCES:
• "FTC to Weigh Bypassing Dentists in Denture Sales," AP (Washington), July 23, 1976.

• "Highlights of the San Diego Convention," Civil Engineering, June 1976, p. 70.

PEANUT SUPPORTERS

Perhaps anticipating a Jimmy Carter presidency, the Agriculture Department has launched a drive to terminate the government's program of peanut price supports. Peanuts are the last remaining food crop being kept out of the free market by government programs—in this case (1) import controls to prevent the entry of low-priced foreign peanuts, (2) restrictions of peanut crop sizes by acreage restrictions, and (3) government support prices above free-market levels (i.e., prices at which the government guarantees to buy up any surplus—typically 30 percent of the crop). The net effect of these programs is to raise the prices of peanuts and peanut products, besides taking some $200 million each year directly in tax money.

Repeal of the peanut program faces tough going in a Congress in which agricultural Democrats still control important committees. If Earl Butz can pull this one off, he can take a certain well-deserved satisfaction in hitting the potential next president where he lives.

SOURCE:
• "Costly Peanut Plenty," Time, July 19, 1976, p. 48.

CURBING THE BIG SPENDERS

One morning in the not-too-distant future, Congress might wake up to find itself stripped of a major power. Prospects have increased substantially for a new Constitutional convention that would force Congress to balance the budget. Twelve states to date have passed a resolution insisting upon just such a convention to end deficit spending.

The drive has been led by a Maryland state senator and member of the National Taxpayers Union, James Clark. His efforts have been successful in New Mexico, North Dakota, Nebraska, Oklahoma, Louisiana, Mississippi, Indiana, Florida, Georgia, Virginia, Maryland, and Delaware. Besides these states, the resolution has passed one house of the legislature in West Virginia, South Carolina, Missouri, and Colorado. And four other states (Idaho, Kentucky, Iowa, and Tennessee) have passed a resolution calling for a balanced Federal budget but not for a Constitutional convention.

In the second phase of the budget-balancing drive, the National Taxpayers Union is opening a massive petition campaign directed at Congress. While the resolutions continue to make their way through state legislatures, NTU will distribute thousands of petition forms calling for approval of its Balance the Budget Amendment (House Joint Resolution #932 and Senate Joint Resolution #180). The Taxpayers Union believes that two million signatures would spur Congressional approval of the measure—and with polls showing that 78 percent of the electorate favors a balanced budget, the goal does seem achievable. The group has already taken out major ads in support of the Amendment, including a page and a half ad in the Wall Street Journal. Further information may be obtained from NTU, 325 Pennsylvania Avenue SE, Washington, DC 20003.

SOURCE:
• "Balance the Budget," Dollars and Sense, May, 1976.

DESEGREGATION VS. INTEGRATION

A noted group of scholars, both black and white, met with President Ford in June to support desegregation—and to vigorously oppose attempts to integrate schools through forced busing. Their criticisms were said to have made a favorable impression at a time when the White House is seeking to exploit the overwhelming anti-busing sentiment of the country.

The leader of the 11-member group, Henry Marcheschi, told Ford that busing was an "intellectually and morally bankrupt tool to achieve racial desegregation." To back up his contention, three distinguished professors loosed their critiques. Professor James Coleman, a former advocate of busing and the author of the influential 1965 "Coleman Report," called court-ordered busing in Boston and Louisville "wholly inappropriate" to the problems identified. Professor Nathan Glazer, of Harvard University, challenged the view that a "good, fair, decent society" demanded that ethnic groups be forced to attend school together. And Dr. Thomas Sowell, a black UCLA economics professor, noted that busing in many cases appeared to be correlated to lower achievement by blacks.

Whether these views will change public policy is open to doubt. But the poverty of coercive busing as a tool to desegregation, as opposed to voluntary choice of schools, is becoming increasingly clear to those who study the issue.

SOURCE:
• "Ford Meets With Supporters, Opponents of Forced Busing," Los Angeles Times, June 13, 1976.

SWISS "CHEAPSKATES"

As an indicator of moral decay, one can look to the proportion of a country's Gross National Product that goes to foreign aid. The more money extracted from the taxpayer, the more likely are the politicians to have stampeded citizens into guilt about affluence.

By this indicator, Sweden leads the league. The self-proclaimed conscience of the West contributes 0.72 percent—highest of the 17-member Development Assistance Committee, the charitable branch of the Organization for Economic Cooperation and Development. The United States and Japan are tied for 12th place with 0.25 percent. In last place is Switzerland, whose citizens are every bit as wealthy as those in Sweden, and substantially more so than those in America. The Swiss contribute 0.14 percent.

Of course, hand-wringing about success can be found even in Switzerland. Politicians recently prevailed upon parliament to pass an $80 million contribution to the World Bank, which wanted to use it for soft loans to the Third World. The Swiss grass roots are alive and well, however. A right- and left-wing alliance launched a petition drive against the measure, bringing it to a referendum in June. By a landslide, the voters rejected the aid giveaway.

SOURCE:
• "Who Is Stingiest of All?" Time, June 28, 1976.

MILESTONES

Not-so-swift couriers. The doctrine of "sovereign immunity" (whereby the State is immune to suit) has been breached in a landmark San Diego case. The U.S. District Court there ruled that although the U.S. Postal Service is still protected by this doctrine, its individual employees are not. Thus, the court dismissed a motion to throw out a suit against nine postal officials who are being sued for $31,500 by a retailer whose 25,000 leaflets announcing a sale were delivered after the sale was over. (Source: "The Swift Couriers," Business Week, July 5, 1976.)

Goodbye helmets. The Federal requirement that states force motorcyclists to wear helmets (on pain of losing Federal highway aid funds) has been quietly repealed. The 1967 requirement had been acquiesced in by all states except California, whose highway officials decided the better course of action was to provide safety information to bikers. In June, a bill sponsored by Sen. Jesse Helms (R-NC) and Rep. Stewart McKinney (D-CT) was signed into law, removing this ridiculous requirement from the Highway Safety Act. (Source: "End of a Motorcycle Madness," James J. Kilpatrick, column, July 5, 1976.)

Local taxes, goodbye. Citizens of Gilbertsville, Kentucky are like a lot of folks—they don't think local government delivers much for the money. Unlike most folks, however, they decided to do something about it, by getting rid of the city that taxed them. In a referendum last May, they voted 111 to 63 to dismantle the government. Now they have no street lights, no police officer, no city hall paper-shufflers—and no taxes. "I'll just be glad when it's over and we won't be harassed by a little board that can't furnish us any facilities of any description and never would be able to," said one citizen during the referendum. (Source: "The Lights Go Out All Over Gilbertsville," Los Angeles Times, June 16, 1976.)

Heathen rejoice. A defeat for the anti-capitalist mentality, in New York of all places: the Supreme Court of the state declared that commercial activities are legal on Sunday. For the past 320 years, the state's "Blue Laws" have attempted to restrict such activities. Saying the laws were "devoid of rhyme or reason," the court unanimously declared the statutes to be unconstitutional. (Source: "N.Y. City Court Overturns Sunday 'Blue laws,'" AP (Albany), June 18, 1976.)