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Political Editors / May 23, 2022

In Brief: Baby Formula Shortage Was Made in Washington

Federal politicians tacitly admit that their policies are responsible for hungry babies.

The nationwide shortage of baby formula has gotten a lot of play in recent weeks and for good reason. But The Wall Street Journal’s editorial board boils it down to the essence: It’s government’s fault.

Politicians are scrambling to pacify mothers angry about the baby formula shortage, but the one thing they won’t do is look in the mirror. Fixing the shortage requires fixing the government policies that helped to create it.

The shortage began after Abbott Laboratories shut down a plant in Michigan after four infants who consumed formula made at the facility fell seriously ill. Abbott controls about 42% of the U.S. market, and the other three large manufacturers (Perrigo, Nestle and Mead Johnson) haven’t been able to increase production fast enough to compensate. Ergo, empty shelves.

Enter President Biden, who [last] Wednesday invoked the Defense Production Act. The Cold War-era law lets the federal government conscript private businesses to produce goods for national defense and to reorder supply chains, putting some customers ahead of others. Progressives think government is the solution to every problem, which is why the law has become their household remedy to every product shortage.

Mr. Biden says the law will let his Administration prioritize raw ingredients for baby formula. He also plans to send government planes to fly in supply from overseas. But there doesn’t appear to be a shortage of formula ingredients. Nor is there a problem transporting it. The main barriers to increasing supply are regulatory.

For one thing, tariffs mean that “98% of U.S. infant formula is made domestically.” In many ways, that’s a good thing. Imagine if 98% of semiconductor chips were made in America! But when there’s a top-down supply crisis, it can be bad.

That’s especially true when federal welfare rules create monopolies. Instead of giving the FDA more money, the Journal’s editors argue:

A more helpful House bill would let the Secretary of Agriculture waive rules for the Women, Infants, and Children (WIC) program amid formula shortages. These rules limit new mothers to buying formula from the sole-source contractor in the states, which manage WIC.

Exclusive state contracts effectively give formula providers a monopoly. WIC makes up about half of the U.S. formula market, and Abbott and Mead Johnson have program contracts covering 87% of infants. Many supermarkets only stock shelves with the exclusive state-contractor, and doctors at hospitals are more likely to recommend them. Where are Lina Khan’s Federal Trade Commission trust busters when you really need them?

Ultimately, the Journal’s editors conclude:

The formula shortage should ease as the Abbott plant comes back online and imports increase. But the lesson for America’s political class is that government policies that limit competition create supply-chain vulnerabilities that eventually bite consumers.

WSJ subscribers can read the whole thing here.

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