John Locke Update / Research Brief

North Carolina’s COVID-19 Response: Regulation and Red Tape

posted on in COVID-19 Series, Law & Regulation, Legal Update, Rights & Regulation
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As North Carolina faces societal upheaval from the novel coronavirus COVID-19, we’re given the comforting reminder that “We’re all in this together.” And we are: epidemiologists, government officials, business leaders, private citizens, restauranteurs, retailers, schoolkids, parents and grandparents, media, researchers, all of us.

The John Locke Foundation’s Research Division is pitching in with a series of policy recommendations for how North Carolina can fight this coronavirus and its impacts on society. My colleagues are making recommendations in the areas of health care, education, affected workers, and the budget.

My focus is on red tape that makes it harder for North Carolinians to engage in this fight fully, as well as begin the recovery process as quickly as they could. I will give my recommendations, followed by my rationale and explanation for each one.

Repeal or suspend the anti-“gouging” law

Why: to prevent shortages, discourage hoarding of key supplies, and return supplies quicker

Part of Gov. Roy Cooper’s March 10 executive order included activating the state law against “price gouging.” Economists have repeatedly shown that anti-“gouging” laws are doubly bad during an emergency. They lead to shortages faster and more often, and they make restocking harder.

The reason is simple: they are government price controls that prevent prices from reflecting sudden changes in supply and demand. Price controls are what kept shelves in Venezuela and former Communist bloc nations habitually empty of necessities.

During an emergency, people naturally want to stock up on necessities. Short-term demand for necessities goes up, especially when people fear a shortage.

By now, I think we understand the need to “flatten the curve” of people contracting the virus to keep demand for emergency medical services manageable. Letting prices reflect changes in demand for goods (market pricing) will help “flatten the curve” of supplies:

  1. The temporarily higher prices will make people less likely to hoard (shortages less likely)
  2. The temporarily higher prices will invite more supplies in, quicker (shortages less lengthy)
  3. Bringing in more supplies will allay people’s fear of running out of supplies, bringing short-term demand back down, and bringing prices back down sooner

Most importantly, market pricing helps ensure necessities are still available to people who need them, not just to people who can get to retailers first. Remember: all too often the ones with the deepest needs aren’t the ones most able to get to the stores.

Finally, anti-“gouging” laws waste the attorney general’s time and make people suspicious of their natural allies in retailers and enterprising neighbors. During Hurricane Florence, the AG’s office received 712 complaints of “gouging,” most of which were questionable and also duplicative.

The anti-“gouging” law makes shortages more likely, makes shortages more extensive, makes people more suspicious, discourages outside suppliers and quicker restocking, and penalizes enterprising people bringing in additional supplies. It’s not a law for a free society.

Suspend occupational licensing and rethink licensing going forward

Why: Licensure keeps out needed health professionals and other workers and raises prices on people

The governor’s order waives licensure requirements for health care and behavioral health care professionals licensed in other states. It also lets physicians, physician assistants, and nurse practitioners designate qualified employees and other personnel (such as medical students) to help collect swab specimens from people for the purpose of COVID-19 testing.

It’s a good start. We can go much farther. Last year Arizona became the first state with universal license recognition. It directs the state’s occupational licensing boards to recognize licenses from other states rather than require duplicative training and other requirements from already qualified individuals (they still have to apply, pay fees, be Arizona residents, etc.).

Arizona’s reform applies not only to medical professions but to all other state-licensed professions. It’s a good idea for North Carolina. But it’s also not the only reform out there since it applies only to licensed professions. We need to rethink how many jobs we require licenses for in North Carolina, period.

Disruptions from the coronavirus are going to cause people a lot of economic pain. A recession seems inescapable. In general, but especially now, there’s no need for the state to impose regulations causing a whole slate of services to be harder to get, harder to find work in, and more costly to people than they should. But that’s what occupational licensing does.

The General Assembly’s Program Evaluation Division (PED) just released a report on the burdens of occupational licensing on military veterans and military spouses. The report’s findings apply to many other North Carolinians, too. It also makes it clear that licensing is an extreme regulation for use only in the most extreme cases.

Going forward, North Carolinians need more occupational freedom. That includes upholding the right to earn a living, honoring certification, allowing consumer choice, and making sure any occupational regulation is demonstrably necessary and carefully tailored to achieve legitimate public health and safety needs.

Give extensions for expiring driver’s licenses, expiring vehicle registrations, and other nonessential services that require in-person visits and standing in lines at government offices

Why: To encourage social distancing

The governor has already taken the unprecedented steps of closing all public K-12 schools in the state and banning mass gatherings of 100 people or more. The Centers for Disease Control recommend no gatherings of 50 or more. Pres. Donald Trump’s Coronavirus Guidelines recommend avoiding social gatherings of 10 or more. University classes, sporting events, concerts, even restaurants are voluntarily going on hold. (As of March 17, Cooper has forbidden dine-in or sit-down food and beverage service at restaurants and bars.)

At this time, the importance of social distancing calls for smart thinking about waiting in lines at the Division of Motor Vehicles (DMV) and other government offices unless the paperwork is absolutely essential. Services and payments can be made online, but people should be given the benefit of the doubt if they cannot.

Repeal North Carolina’s Certificate of Need (CON) laws

Why: Other states have, and health regulations that stand in the way of providing health services in a health emergency definitely aren’t worth keeping

The N.C. Department of Health and Human Services (DHHS) has temporarily waived the state’s CON requirement for new hospital beds. It should stay waived permanently, as my colleague Jordan Roberts has written.

North Carolina has one of the nation’s toughest array of CON laws, covering 25 different health services. Fifteen states have gotten rid of their CON laws since the federal government repealed the CON mandate in 1987, which was done because CON laws proved to make health care more expensive by restricting supplies and competition. (The idea behind the CON mandate was actually to restrain health care costs.)

CON laws make health care cost more, make health services harder to obtain (especially for poor and elderly patients in rural areas, not to mention people with emergency needs), and make improvements in community health options take longer and cost more to bring about.

Why do that? Worse, why be one of the nation’s leaders in doing that?

Because of our CON laws, a pandemic found North Carolina lagging in hospital beds, rural hospitals, and other health services as well. Going forward, North Carolina policymakers should repeal CON.

Conclusion

This is war. This is no time to fight with one arm tied behind our backs. Plus, we’re all in this together.

Jon Sanders is an economist studying state regulations, that spreading kudzu of invasive government and unintended consequences. Serving as Senior Fellow of Regulatory Studies and also Research Editor at the John Locke Foundation, Jon gets in the weeds of all… ...

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