We are currently in the midst of mass shortages, whether it be of food, energy, or semiconductors, but the past few months have seen yet another basic commodity become ludicrously scarce— baby formula.
The amount of baby formula available in the US has decreased by 40% since pre-pandemic levels, and 40% of baby formula products are out of stock. While there are many factors involved, this is largely the fault of the incompetence and anti-market policies of the Biden Administration.
The current crisis began in February when four infants tested positive for Cronobacter sakazakii and Salmonella. The FDA believed that baby formula may have been the vector for these diseases, particularly formula made by Abbott Laboratories. Despite the formula from Abbott’s factory testing negative for the disease, the factory was shut down anyway pending further investigation. Three months later, it was announced that Abbott would be reopening its factory after making safety improvements, despite there still being no conclusive evidence linking the outbreak to the formula. The factory likely won’t be running at full capacity until July, and the FDA has announced it plans to investigate why it took so long to clear the plant.
The Biden administration has, typically, been MIA on the crisis. When asked, in May, why he didn’t respond to the crisis sooner, Biden said “If we had been better mind readers, I guess we could’ve, but we moved as quickly as the problem became apparent to us.” This is absolutely ridiculous. What Biden is claiming is that, in the midst of a supply chain crisis that was already making baby formula unavailable, his own Administration shut down the factory of the company that makes 42% of our baby formula for months— and he thinks it would take a “mind reader” to realize that this might be a problem? Either the Administration was aware of the problem and is trying to cover this up, or was asleep at the wheel, and was completely unaware of what its own appointees in the FDA are doing. Neither picture is flattering. Whatever the case, for months, the Biden Administration did nothing.
For months, the Biden Administration refused to waive the 17.5% tariff on imported baby formula.
For months, the Biden Administration refused to allow families on the WIC program to buy baby formula from any brand except the ones with which the program has a contract, which is usually one per state.
For months, the Biden Administration’s FDA refused to waive some of its Byzantine labeling requirements, which would have made quickly importing formula easier, even from places such as the EU which have equivalent safety levels. What sort of safety standards did it refuse to waive? Well, on May 17th, the FDA announced that it will “be more lenient on other technical requirements, such as formatting on labels.” But it gets better: The FDA “will permit agents to apply discretion if a foreign manufacturer does not list its baby formula ingredients in the exact order prescribed by FDA regulations.”
Yes, for the past several months, the FDA has been preventing firms from importing baby formula because they didn’t list their ingredients in the correct order.
And, for nearly a year now, the Biden Administration has ignored the fragile state of the baby formula supply chain. There were already warning signs as early as last fall when the out-of-stock rate for formula was already at 11%. The Biden Administration repeatedly ignored these warnings.
But as much as Biden has dropped the ball on responding to the crisis, we would never have been in this crisis in the first place if it wasn’t for decades of anti-market, big-government policies pursued by his predecessors. Take, for example, the WIC. The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) for low-income mothers account for up to 68% of all formula sales in the US. Each state awards individual contracts to an individual contractor, which basically guarantees the industry will consolidate into a few large players. The way these contracts are distributed gives massive structural advantages to big companies, who have both the lobbyists and large production capacity which is necessary to get these contracts.
And that is exactly what happened— the biggest firm, Abbott Laboratories, has a 47% market share. So when the FDA ordered them to shut down their factory, the US lost half its production capacity. If it weren’t for decades of government intervention in the market, Abbott would likely have had a much smaller market share, and the shutdown of one factory would not have caused a national crisis.
Another example of how long-term anti-market policies have made the current situation worse is through onerous restrictions on imports. The Biden Administration continues to maintain a 17.5% tariff on imported formula, and the FDA has stringent and costly regulations which are expensive and difficult for companies, even those in places such as Canada or Europe with similar levels of safety requirements as the FDA. These factors make rapidly scaling up the levels of formula we import infeasible.
But, despite the royal mess he has made of the situation, Biden seems to finally realize the gravity of the problem, and he can still help mitigate the crisis he created. In a time of national shortage, having a 17.5% tariff on baby formula is absolutely ridiculous. He should waive the tariff on baby formula, and, to prevent such problems from reoccurring in the future, Congress should consider repealing it. Similarly, the FDA needs to be less stringent on minor things, such as what order ingredients are listed. Finally, Biden announced Monday that he was going to work with firms to “reduce red tape” for formula producers. This is good, but he needs to go further. And maybe whatever regulations are being waived will prove to not have been so necessary after all.
Finally, though I highly doubt he will consider it, Biden could prevent such crises from happening again by reforming WIC. The fact that the government program which dominates the formula market only allows a select few firms to participate in its program is a recipe for the concentration of the market in a few hands, and thus the potential for such a crisis as this. WIC needs to be reformed so that this does not happen again, or perhaps eliminated entirely and replaced with a better program,
What is clear, however, is that Biden created a crisis, failed to get out of the way of the people trying to stop it, and is only now waking up to the danger. This is yet one more incident demonstrating the unfitness of this Administration to govern.