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CPSIA – Do Accidents Happen?

Accidents happen . It’s an old saying. Once upon a time acts of fate were no one’s fault and we each bore the risk individually. Today, things seem different – when bad things happen, the search begins for someone to blame. The media and politicians feed this trend in hysterical tones (they profit by doing so). Individual responsibility is passé. In the case of children’s products today, blame is often laid at the feet of the product or its manufacturer by the CPSC. In some cases, the fault is clear (the hazard is “substantial”); in other cases, it’s not nearly as clear. In this article, I am only interested in those more ambiguous cases where there is an element of fate or other factors outside the control of the manufacturer. Should we be satisfied with how the CPSC draws the line? CPSC as Allocator The CPSC’s assignment of responsibility for injuries (in the form of recalls) is an inherently “legal” process. Our laws allocate risk and responsibility in society in the form of rights. About 75 years ago, legal theorists developed a field of inquiry known as “ law and economics ” which held that legal systems incorporate economic principles which ensure efficient allocation of resources and promote economic activity. “Rights” are essentially factors of production in economic terms. Ronald Coase of the University of Chicago Law School won the Nobel Prize in Economics in 1991 for his seminal work on law and economics over the preceding 50+ years. Notably, Obama regulations “czar” Cass Sunstein is an ex-University of Chicago Law School law professor, as is President Obama himself.  Sunstein is closely associated with the study of law and economics . The issues confronting the CPSC over injuries to children are not emotional in nature at all. They are actually purely economic issues because the CPSC is a market regulator. It is an objective fact that injuries to children or other consumers are a cost we bear in exchange for the benefits of economic activity (availability of innovative manufactured products, the provision of jobs, etc.). Naturally, as a community we want to bear as few such costs as is efficient, again to promote growth, hence a societal interest in reducing injuries. The interest in reducing injuries is economic, however; we are not indifferent to cost and judge them in light of corresponding benefits. For instance, this explains why you do not wear a crash helmet on the way to work despite your awareness that fatal auto accidents happen every day. The costs outweigh the benefits. As a regulator, the agency brokers costs among a large group of parties. Consumer costs related to injury (including emotional loss and lost income, among other things) are weighed against manufacturer and market costs (recall costs, damage to brands, decreased growth, lost jobs, etc.). Whether the CPSC does the math properly or not, their decisions allocate resources by directing that one party incur costs to protect other parties from incurring costs. These decisions are purely economic even if stated in emotional terms. It is therefore clear that CPSC regulators have the capacity to promote economic growth or stifle it. Is the Goal “No Injuries” Ever? The CPSC has a legal responsibility to differentiate between a product hazard that causes accidents and accidents caused by the hand of fate. Congress limited the authority of the agency to regulate only those product hazards deemed “substantial” (a term of art under the CPSA and FHSA). As stated here many times previously, I believe the CPSC under current leadership regularly exceeds its legislative authority in this regard. The CPSC acts as though its role is to move society toward a Utopian ideal in which children are never injured or die prematurely. While I certainly don’t endorse injuries to children, the Utopian ideal of injury-free childhoods is illusory. In fact, an injury-free childhood could only be achieved at a very high cost. If the CPSC attaches an almost infinite value to preventing injuries, their allocation decisions will always constitute a transfer (a tax) and cause economic inefficiency (depress economic activity). This over-appraisal of the cost and consequence of childhood injury is illustrated by recent remarks of Chairman Inez Tenenbaum about a recall of one million pool drain covers. Ms. Tenenbaum appears to justify the recall on the possibility of injury despite media reports confirming that no deaths had occurred since 2009: “I want to make it clear that this recall announcement does not mean that one million drain covers will need to be replaced or repaired. The recalled covers were marked with the wrong flow rating . . . . Now for those public pools and spas that need their covers replaced or fixed, I have an obligation to advise that those facilities be closed at this time. They should reopen as soon as the work is completed that addresses the recall and brings the facility into compliance with the law. I know this is a very difficult message for many communities to hear so close to Memorial Day weekend, but we cannot risk a child becoming entrapped in a recalled drain cover .” [Emphasis added] This unstated policy attaching infinite value to childhood injury is much more than a strict liability standard because the CPSC only acts after an assessment of fault (rather than simply assigning responsibility). Isn’t the agency saying that the actions or inactions of manufacturers cause accidents? Recent Recalls Allocate Uncontrollable Costs to Manufacturers Consider some recent recalls for perspective: a. Big Lots recalls bunk beds recalled after a three-year-old child died when caught under a futon. b. Maclaren recalls one million strollers sold over 11 years because of more than a dozen fingertip amputations caused by a hinge. c. Mattel recalls more than 7,000,000 children’s trikes sold over 14 years because of genital injuries to ten young girls jumping on the trike. While it may be hard to look past these sometimes grisly childhood injuries, each of these cases calls into question whether the injuries were really the fault of the manufacturer. It’s not worth defending the product designs – let’s concede that in retrospect the products could have been better designed. Parental supervision appears to be an issue in each case. Manufacturers are typically unwilling to resist CPSC recalls by blaming consumers for injuries incurred using its products. That route is very risky and may in fact be more costly than going along with the CPSC’s dictates. As a result, the record in these cases is usually very one-sided – the CPSC has the first and last word on the subject, often on TV. Why would anyone stand up for these companies in public? There’s no incentive to do so; after all, the costs are paid by only one party, and that party isn’t talking. There is a fundamental error in routinely blaming manufacturers for accidents or fate. It is widely accepted that laws operate efficiently when they allocate responsibility for risk to the party in the best position to address the risk. Manufacturers can efficiently bear many such costs – but not all. For instance, product safety is best assigned to manufacturers rather than consumers. This is fairly obvious – manufacturers know their own products better than consumers do and are best able to take steps to keep products safe at the lowest possible cost (most efficient). This is the reason why the common law tort system assigns product liability costs to manufacturers. So who is in the best position to control costs associated with accidents or fate? Risks associated with acts of fate are difficult to control.  In fact, many foreseeable risks leading to childhood injuries are completely outside the control of manufacturers: 1. Fate 2. Failures of adult supervision 3. Product abuse or misuse 4. Mental deficiencies or mental illness (e.g., pica) 5. Risks well-known to the user (e.g., knives are sharp). I would advance that good adult supervision is the lowest cost way to prevent accidents with children’s products. There are significant limitations to what a manufacturer can achieve on behalf of consumers who don’t adequately supervise their children. Of course, drawing the line is a big issue here. But can’t an argument be made that adult supervision of the toddlers using the Mattel trike could have prevented foreseeable injuries from jumping on the trike? That a parent must carefully supervise the location of a child’s hands before closing a stroller? This is a simple point – manufacturers cannot control these factors from their offices or warehouses. The cost for a manufacturer to do so would be excessive. Some people might argue that assigning blame for matters of fate to manufacturers of consumer products is a neat way to efficiently spread cost among the community. Why not make the manufacturer pay the uncontrollable cost of fate relating to their products, and let them pass the costs along to consumers in the form of higher prices? Manufacturers can be converted into involuntary insurers by public policy, risk intermediaries for events of misfortune. The appeal is irresistible; after all, it doesn’t cost tax dollars to pay for these losses if we force responsibility on manufacturers. Of course, if you are a careful consumer, you might resent paying more to subsidize free-riding consumers who don’t take appropriate precautions.  But money aside, doesn’t it reflect a hardening of our society if if we ignore heart tugs when kids are injured? Is this heartless . . . or sensible? Is the CPSC doing the American public a favor by increasingly pushing responsibility for uncontrollable risks to manufacturers? The Important Role of Economic Efficiency in Laws Governing Children’s Products I believe bad things do sometimes happen to good people. What is the economic effect of assigning these costs to manufacturers by default? Unfortunately, this invariable result is not economically efficient and will have the effect of a tax on the children’s market. In other words, the economic incentive to participate in markets will shrivel as manufacturer returns on investment decline because of legal risks (costs) they cannot control. This is basic stuff, folks – the reduced economic incentive causes market participants to withdraw, just as high taxes cause people to stop taking risks (trading). Ronald Coase addressed this subject in two articles that led to his Nobel Prize. In a 1937 paper on the nature of the firm , Coase articulated what became known as the Coase Theorem which holds that if trade in an externality is possible (in this case, childhood injuries) and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights. Translated into English and applied to the facts here, Coase theorized that it would not matter which party was responsible to pay the costs of an injury (victim or tortfeasor) if there was no cost to bargaining between the parties. This of course is not the case in the real world. Coase returned to the subject in a 1960 article entitled “ The Problem of Social Cost ” and explored the role of regulations in achieving economic efficiency when economic activity creates social costs. This eminently readable article is a foundation stone of modern legal theory. Considering the social costs of human activity (such as pollution or injuries from the use of children’s products), Coase concluded that efficient allocation of resources would be achieved regardless of allocation of rights relating to social costs (responsibility to pay those costs) provided that trading can be conducted without transaction costs. In other words, in an efficient market, economic factors (resources) will always be put to their highest and best use through allocation of resources and bargaining. Through bargaining in an efficient market, the party with the most productive use of economic factors will ultimately possess the resources, thus ensuring compensation for social costs regardless of who has been assigned legal rights. Coase cites numerous examples (including torts) in making this point. Coase notes the symmetry of these disputes in his analysis. When cattle overrun crops causing economic losses, there would be no damage without the cattle, and likewise no damage without the crops! Causation is not black-and-white to an economist interested in efficient outcomes. As he notes, a smoothly operating pricing system ensures that “the fall in the value of production due to the harmful effects would be a cost for both parties.” Nevertheless, Coase recognized that there ARE transaction costs in the real world (e.g., legal expenses, bargaining holdouts, etc.). These costs of altering and recombining rights allocated by the legal system can interfere with the ability to bargain and thus prevent the efficient allocation of resources in the market. He argued therefore that regulations are justified to the extent they allocate rights to the most efficient risk-bearer. Regulations can supersede market transactions by imposing the most efficient outcome. This is presumably the underpinning of President Obama’s call for more federal regulation. According to him, this will be good for us.  Coase might demur, noting that it all depends on the facts as we shall see below. Coase was realistic in his assessment of the inherent dangers of regulation: “But the governmental machine is not itself costless. It can, in fact, on occasion be extremely costly. Furthermore, there is no reason to suppose that the restrictive and zoning regulations, made by a fallible administration subject to political pressures and operating without any competitive check, will necessarily always be those which increase the efficiency with which the economic system operates. Furthermore, such general regulations which must apply to a wide variety of cases will be enforced in some cases in which they are clearly inappropriate. . . . It is my belief that economists, and policy-makers generally, have tended to over-estimate the advantages that come from government regulation.” Coase’s solution: perform a cost-benefit analysis to make sure that regulations increase economic output (the all-in costs must be less than the all-in benefits when reduced to dollars). We encounter situations regularly in which the party causing a legal nuisance does not bear the consequential costs. For instance, a home remodeler does not have to pay compensation to neighbors for noise and debris that may adversely affect them. He may feel a social obligation to give them freshly-baked cookies but is under no legal obligation to do so. This is one of many legalized nuisances. Why is this the legal rule? The allocation of rights takes into account that as a society, we want to encourage investment and capital improvements. The small cost of dealing with these inconveniences is considered a cost we all should bear in exchange for the benefits received from the economic activity. This rule does not apply to exceptional cases of nuisance where the costs outweigh the benefits. Not every instance of damage is remediable under our legal system for good reason. Coase cites a fascinating real world example of this rule carried to a surprising extreme: under traditional English law, railroads are protected from liability for fires caused by sparks from their engines. Coase devotes considerable ink to prove that this legal rule creates an efficient allocation of resources (a positive effect for society) notwithstanding that there are “winners” and “losers”. This result would be very difficult to achieve through bargaining. Clearly a railroad would have a very difficult time working out a deal with every landowner along its lines as a precondition to laying down track. Importantly, Coase points out that the opposite rule (where the railroad must pay for the fires its engines cause) does much more than just transfer liability. It also shifts incentives to everyone’s detriment. A farmer along the track now can gamble with the railroad’s money – he can get a market price from market buyers if he can harvest his crops or from the railroad if there is a fire. The farmer’s return is thus guaranteed, the incentive to take care is removed, and he will be rewarded for planting crops likely to be burned. This alternative rule’s transfer of costs to the railroad will simultaneously reduce tje potential reward for constructing tracks and likely result in fewer train lines, reducing the broadly-distributed economic benefits that come with the expansion of the rail system. In other words, shifting liability in this case makes everyone along the train line poorer. Coase notes that “nuisances” are not always against our interest: “[Pigou] is wrong when he describes these actions as ‘anti-social’. They may or may not be. It is necessary to weigh the harm against the good that will result. NOTHING COULD BE MORE ‘ANTI-SOCIAL’ THAN TO OPPOSE ANY ACTION WHICH CAUSES ANY HARM TO ANYONE.” [Emphasis added] CPSC, are you listening? Placing the cost for nuisances on the producers’ shoulders may be well-intentioned but it is not necessarily the right result because it does not provide any incentive to consumers to take steps to prevent injury. “A tax system which was confined to a tax on the producer for damage caused would tend to lead to unduly high costs being incurred for the prevention of damage.”  The CPSC’s tendency to blame products via recalls and bans is the equivalent of a tax in this case. The “unduly high costs” leads to a reduction or suspension of economic activity. We can observe this in the children’s market over the past three years – the agency and Congress have both received considerable testimony on this topic (and seemingly ignored it). Coase won the Nobel Prize for pointing out that regulators often neglect to look at the full economic picture and thus fail to achieve optimal social results. It goes without saying that the regulators may nevertheless achieve optimal newspaper headlines. Conclusion Why is it inefficient to invariably push costs to manufacturers for injuries associated with children’s products? As Prof. Coase notes, in a raucous marketplace, transaction costs can distort the allocation of resources. In this case, the prospect of liability and uncontrollable losses are a high transaction cost that affects the efficient allocation of resources by trade. Coase posits that a cost-benefit analysis must be performed to make sure that efficiency is achieved. The rule for such analyses is quite clear – the all-in cost of the regulation must be less than the all-in economic benefits achieved. The best way to understand the formula in this case is to look at all marginal children’s recalls as a class. Let’s agree that there actually are some “substantial” product hazards out there and exclude them from our analysis.  [Manufacturers are in the best position to evaluate and prevent "substantial" hazards on behalf of consumers.]  We must also assess all the money spent as a result of CPSC action as a group. It does not matter who spends the money – we want to tote up all the costs and lay them off against all the benefits. The benefits are easy to calculate – there is an economic value to a life and also to injuries. This type of analysis is not only common, it is a requirement of federal law (as a result of Coase’s work outlined above). The government has tables of these values . Likewise, the costs are pretty easy to tote up: out of pocket costs for the recall, replacement of inventory, damage to reputation and brand, legal and regulatory costs, lost jobs, reduced investment, etc. In the case of accidents or other uncontrollable factors leading to injury, the CPSC’s calculus is defective. It is quite telling that the regulators are not interested in my point that no victims have been identified. Lead-in-substrate victims – NONE. Phthalates victims – NONE. The ledger on the benefits side is undocumented, vague and untested, but the regulators’ indifference suggests that they place an almost infinite value on injury or even the possibility of injury. On the cost side, the regulator also seems to largely ignore the impact on markets. As noted by Coase, the regulators are not subject to competitive pressures so they can easily overlook these costs. The math does not add up, and as a result, their decisions inevitably will choke the market. The CPSC acts as though not subject to the laws of economics . The legislative fix for this misguided regulatory effort is clear – mandate economic analyses as a justification for any CPSC regulation. It is also necessary to restore (actually, to mandate the use of) risk assessment by the CPSC. Risk is all about cost allocation and cost management. By removing the ability to assess risk, Congress essentially removed the wiring necessary for the CPSC to make an intelligent assessment of the economics of their decisions. While the CPSIA was clearly written and passed into law in anger, enough time has passed to expect cooler heads to prevail. Congress, it’s time to act!

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CPSIA – Do Accidents Happen?

CPSIA – AAP Publicity Campaign Tries to Block CPSIA Amendment With Half-Truths and Worse

May 11, 2011 by mbougie  
Filed under BLOG, Featured Articles

The notorious American Academy of Pediatrics, a political organization masquerading as a scientific organization, is mounting a furious effort to stop Congress from amending its baby, the misconceived and defective CPSIA.

CPSIA – The CPSIA Testing "Dilemma"

April 27, 2011 by Rob  
Filed under BLOG, Featured Articles

As the House considers how to move a CPSIA Amendment forward, the issue of third party testing looms large.

CPSIA – The Senate Wants to Save ATVs . . . What about the Rest of Us???

Yesterday Senators Klobuchar and Tester offered an amendment to S. 493, a moving bill to reauthorize the small business administration (“SBIR/STTR Reauthorization Act of 2011″).

CPSIA – John Stuart Mill and Crib Safety

“I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage.”

John Stuart Mill

The CPSC recently congratulated itself for banning drop-side cribs. Scott Wolfson clucked on Twitter: “RT @Scott_wolfson: The lifesaving crib rules approved by #CPSC today are a key part of the #CPSIA. #CPSC wants all babies to have a #safesleep.” Other people, like Rep. Jan Schakowsky, also rushed forward to take credit for this change in regulation.

To judge from these press releases, a real crisis in public safety has been addressed. Is that true?

Wasn’t it Winston Churchill who once said that history is written by the victors???

I have not touched the crib issue previously because, frankly, it’s too hot to handle. Who would want to defend a product associated with baby deaths? There but for the grace of G-d goes I. On the other hand, the projected compliance expense of $550 million is breathtaking, particularly given the fact that the agency’s ruling is both retroactive and mandates replacement of cribs in certain childcare facilities. Even Commissioner Robert Adler calls this expansion of the CPSC’s role as “uncharted territory“. This sets a new precedent for government (CPSC) intrusion that I find troubling, even under these circumstances.

The always astute Lenore Skenazy questions the CPSC’s justification of three fatalities a year linked to drop-side cribs. She labels herself “subversive” for looking at the numbers. [You know you were thinking it, admit it!] Based on the injury figures released by the CPSC, she notes that the deaths attributed to drop-side cribs are less than those attributed to spider bites (five per year). She puts the drop-side crib-related deaths in the context of 4 million births per year and asks where the limit is in our effort to save ourselves.

Skenazy rattles off many other death statistics (such as 1,300 per year from stair falls) for further perspective on the scale of the drop-side crib “crisis”. She does not discuss pool deaths, which number between 1-2 per day and generate 11-12 childhood emergency room treatments for serious injuries daily. But the obsession of this CPSC is drop-side cribs, so we should not worry about those other things . . . .

Lenore makes a good point. What IS the limit? And how much should we pay? Is this really a public health crisis, and if it is, aren’t all those other causes of childhood deaths similarly a crisis? Who gets to decide which crisis is our top priority?

As J.S. Mill points out, despair sells well so we are naturally inclined to accept on face value the shrill self-congratulations of the politicians who are so busy making us so safe. I have been battling the same self-justifications and self-praise by politicians and consumer “advocates” over lead for three years. Does the absence of injury statistics matter to anyone?

Interestingly, the CPSC provides some context on its crib decision. If you read through the document announcing the change, you will find out a few interesting tidbits:

  • Despite Ms. Schakowsky’s claim to have created this regulatory storm, the industry has been working on standards for many years. ASTM F 1169–10, the full-size crib standard, was originally published in 1999 and has been revised several times since 1999, including 2010. The same can be said of the voluntary standards for non-full-size cribs. The statement in the CPSC press release noting that “[t]he federal crib standards had not been updated in nearly 30 years” is pretty misleading – the voluntary standards relied upon by the agency and the industry have been regularly revised. [Until this administration took over, the CPSC relied on voluntary standards as a matter of public policy.] Even more remarkably, please note that the current CPSC action adopts these voluntary standards as the new mandatory standards with minimal amendments, calling the adopted standards “substantially the same” as the voluntary standards. Hmmm.
  • The CPSC initially issued mandatory standards for cribs in 1973 and amended them in 1982. There has been on-and-off activity at the agency in the ensuing years. Crib safety was not a new subject to the Commission when Ms. Schakowsky announced the latest crisis. Ms. Schakowsky didn’t solve the crisis either when she purportedly wrote this provision of the CPSIA. Is it actually certain that there ever was a crisis in drop-side cribs . . . or was Ms. Schakowsky simply looking to bulk up her hagiography?
  • Annual sales of cribs are estimated at 2.4 million per year, including non-full-size cribs (approximately 300K per year). Thus, over 11 years (2000-2010), that’s 32 deaths and an estimated 26.4 million cribs sold and 40 million babies born. Crisis? There are approximately 591 models of full-size cribs and 81 non-full-size cribs on the U.S. market, according to the CPSC. In recent years, the CPSC has recalled 11 million “dangerous” cribs defect” since 2007 (about 40% of the estimated total sales in the last 11 years).
  • A pilot CPSC project of data gathering on crib injuries from November 1, 2007 to April 11, 2010 generated a total of 3,584 “incidents”, including 147 deaths associated with full-size cribs. Some of these incidents go back as far as 1986, btw. Of the 147 fatalities, 107 were not related to any structural defect in any way. Of the 35 fatalities related to “structural problems”, 18 were related to drop-side cribs. [The CPSC document contains a detailed analysis of the injuries, as well.] So of entire pool of fatalities from cribs in this period, 18 of 147 were related to drop-side cribs in some way – 12% of the total fatalities. The CPSC press release somehow omitted this additional fact.

This data cannot be correlated to the December 17 CPSC press release in which they note 32 deaths since 2000 (11 years). There is no data provided on the AGE, CONDITION or QUALITY of the cribs involved in the deaths, no information on the MAINTENANCE or STRUCTURAL INTEGRITY of those cribs or whether the hardware failure was apparent or not. In its May 7th press release, the CPSC notes however that the 32 deaths include “some [fatalities which] occurred in cribs where the drop side detached without caregivers noticing the detachment, while some other deaths occurred after a consumer tried to repair the detached drop side, but the repair ultimately failed.” [Check out the photos to see what a consumer "repair" might look like.] No quantification whatsoever. Arguably, this CPSC statement suggests that any solution to the problem involves, in whole or in part, user education.

The CPSC did not supply data to distinguish between product failures/defects and parental or caregiver error or misuse. It’s all laid at the feet of the crib design. The CPSC’s “analysis” is pretty simple – you don’t need drop-sides for your baby to sleep comfortably in a crib, and if we eliminate drop-sides from the market, presumably a certain number of unnecessary infant deaths can be avoided. It’s a presumption, however.

It’s hard to argue with their logic but it’s also hard to know what has been accomplished. We do know that the ban of drop-side cribs costs a lot of money, however. Isn’t that relevant, even a little bit? If user education is essential to ANY “solution”, how do we know we have spent our $550 million well or achieved anything whatsoever? The precise mechanism leading to the fatalities cannot be determined from the paltry data released to the public. Table pounding by advocates is, regrettably, not data. As Mr. J.S. Mill notes, the advocates’ histrionics are likely to be taken as “sage” in this case. What if we knew that ten years out, the replacement cribs caused the same number of deaths or perhaps even MORE deaths? The rate of fatalities in these cribs in already remarkably low. How can we be sure that the new cribs will be better? Should we just take Nancy Cowles’ word for it?

I find it interesting that the crib industry has been rather quiet on this change in rules. There are literally dozens of suppliers of cribs in this country, and more than 11 million units have been recalled. Why such quiet from these companies? I suspect the reason is that most consumer do not blame the brands for these recalls, and few people are motivated to return their cribs. [That includes me. Consumer advocates label recalls "unsuccessful" when we the people don't do what they want us to do.] So the cost of the recalls is probably modest BUT the government is mandating that $550 million be spent by childcare providers on NEW cribs. Why would crib manufacturers object to this cost-effective stimulus plan?! Surely many people taking the old drop-side crib out of the attic will say “Whoa, that was recalled. I better buy a new one . . . .” Many, many people.

Thank you, CPSC, for making us so darned safe! The crib industry probably loves you (secretly). Not so sure about hotels and childcare providers. Ultimately I know who pays for all this, however, and it isn’t the consumer advocates or the regulators. It’s the guy who stares back at you from your bathroom mirror.

The CPSC for its part did something easy and self-serving: they saved us from yet another lurking danger that none of us could see, all at our expense. I wonder if the CPSC would be as enthusiastic in their actions if they had to pay for it out of their own budget (or pocket). The money they spend is OURS, and they never even need to steady their hand to write the check. I don’t know about you, but I think it’s much easier to spend someone else’s money, especially when there are a lot of zeroes involved. The CPSC is making us do it for our own good. Does anyone see a problem here?

The new rule sets dangerous new standards for CPSC (government) intrusion into our businesses and into our lives. The CPSC’s action means that the Commission thinks it’s now okay to take retroactive action with impunity. This is a BIG change in regulatory policy. Bob Adler notes: “The Commission has never before entered into a rulemaking, whether or not required by Congress, that not only has retroactive applicability, but also requires the replacement of every product in a given product class – particularly in an occupational setting like child care facilities.” OMG – and this is okay . . . why??? Because he says it’s a crisis and it’s important to do.

This is government power without restraint, and it’s a serious issue. This is much more serious that drop-side crib deaths. I do not know how to run a business in a market regulated by people who make up the rules to suit their mood. I thought there were protections against this.

Let’s hope Mr. Adler and his associates made a good judgment for all of us. They are spending our money and we have no choice but to do as we’re told. That’s “government of the people, by the people, for the people” nowadays, I guess.

I wonder what Abe Lincoln would think of this government . . . .

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CPSIA – John Stuart Mill and Crib Safety

CPSIA – Save "Lost Souls", Vote for the Slanderbase!

The semi-religious mission of the safety zealots was on full display in today’s New York Times. In an article entitled “Deep Divisions as Vote Nears on Product Safety Database“, the Times profiled the controversy of the pending public database final rule approval (due on November 24th in a rubber stamp Commission session), highlighting on the idealist objectives of the database supporters. As per its typical leftist slant, the Times article gives scant credence to the legitimate concerns of manufacturers or the demonstrable consequences of the unrealistic Utopian vision underlying the CPSIA. After all, we manufacturers only care about money, right?

Every drama needs a hero, villain and victim. The public database controversy has all the right elements – manufacturers and Republicans as “villains”, consumer groups and Democrats as “heroes” and consumers as “victims”. Positioned this way, why would anyone ever support manufacturers? Who would want to even listen to the black hats? Hmmm. Good strategy, Naderites!

Consider the illustration used in the article – Michele Witte suffered the unspeakable horror of losing her child in a crib death. She asserts that the database might have saved her child. Perhaps that is true, perhaps it is not. Nothing can salve the wounds she has suffered . . . but that does not make the database a good idea. [I might feel differently about the database if, for instance, it was limited to deaths.]

The implication that the database is necessary to protect consumers is not a well-examined assertion. There is already a lot of data available to consumers. For instance, the CPSC maintains a massive national injury database called NEISS. A search of crib injuries on the NEISS database for 2009 (classes 1543-1545) reveals 572 reports which extrapolates into a national injury estimate (for 2009 ALONE) of 16,537 incidents.

Here are a few representative NEISS entries (the first five in the above sample):


Did you learn a lot from this information? Can you verify that it’s true? Can you see ANY issues with attaching (unverified) product identities to this unverified and uninvestigated data? Are you a plaintiff’s attorney?

What are the zealots saying to justify their support of the database in the face of persistent and rational criticism of its design? Commissioner Bob Adler, former Henry Waxman staffer and longtime board member of Consumers Union, sums it up:

Some folks are worried more about lost sales and not worried enough about lost souls.

So, in other words, Adler condescendingly asserts that people like me are only concerned with MONEY. Instead, he claims that what’s really at stake here are “lost souls”. What is Adler talking about? Here’s what Wikipedia says about “souls”:

A soul, in certain spiritual, philosophical, and psychological traditions, is the incorporeal essence of a person or living thing. Many philosophical and spiritual systems teach that humans are souls; some attribute souls to all living things and even to inanimate objects (such as rivers); this belief is commonly called animism. The soul is often believed to exit the body and live on after a person’s death, and some religions posit that God creates souls.” [Emphasis added]

Mr. Adler’s POV makes the question of having a federal database a moral imperative. Wow, now that’s a heavy decision – souls are at stake! Furthermore, Mr. Adler positions those who support the database as moral people and those who oppose it as immoral money-grubbers who prize financial well-being over the safety of consumers. Ugh. I would hate to be a Republican Commissioner voting against the final public database rule with Mr. Adler’s curse hanging over my head! Ouch.

Catching on to the theme, Ami Gadhia of Consumers Union, chimes in: “It’s a slow death . . . . [The] information never gets out in the public.” [Emphasis added] Death . . . souls . . . database! Do I hear a new slogan???

CPSC Chairman Inez Tenenbaum, ever sensitive to criticism, archly defends the agency’s effort to dialogue with people like me. Please recall that part of their “outreach” was to ask me to spend our company’s money to fly to Washington, D.C. to give testimony on the public database. Matt Howsare, Tenenbaum’s then Counsel and now Chief of Staff, told me that they needed more perspective from manufacturers and kindly asked me to prepare testimony. As previously noted, NOTHING that I said in my testimony was adopted or used in any way apparent to me. The NYT notes:

“The commission chairwoman, Inez Tenenbaum, disputed the idea that manufacturers’ concerns had not been properly considered. She said the agency offered numerous forums for comment and some of those ideas were incorporated into the final proposal. ‘We have been abundantly fair,’ Ms. Tenenbaum said.” [Emphasis added]

Apparently, testimony at a CPSC hearing is meant as an outlet for venting, not for listening. That’s “abundantly fair”, we are assured. Makes you wonder what “unfair” might look like . . . .

[A Senate Commerce Committee CPSC oversight hearing is said to be in the offing for next week. One fantasizes that they may take an interest in this issue, but the Senate is still a Dem stronghold. Don't hold your breath. Expect self-congratulatory positioning by the self-serving and deaf Dems.]

Consumer groups are portraying manufacturers demands for Constitutionally-guaranteed due process and other appropriate procedural safeguards as a grab for “advantage”. In other words, procedural safeguards for manufacturers are not legitimate protectible interests in light of the POSSIBILITY that consumers may glean some useful information among the garbage that will accumulate in the “post-it-and-forget-it” slanderbase being put up by the agency. Again, the NYT provides the bully pulpit for the zealots:

“Consumer advocates suggested the opponents were trying to weaken the database to protect business interests. ‘They have a great deal now, and I think they are trying to maintain the status quo by levying these unfounded arguments,’ said Rachel Weintraub, director of product safety for the Consumer Federation of America.” [Emphasis added]

If ever-disingenuous Rachel Weintraub is saying that we Americans have a “great deal” because we enjoy the protections of the Bill of Rights and other Constitutionally-guaranteed rights protecting groups and individuals against persecution and excessive governmental power, I agree. I agree heartilyand don’t want to lose those essential legal protections that form an important basis for our investments. Please REMEMBER, everyone loses something when ANYONE loses their legitimate legal protections. Btw, Bob Adler is a lawyer and a former Scholar in Ethics and Law at the business school at UNC Chapel Hill . . . .

Mr. Adler plays a little fast and loose with his database concepts. Apparently, it’s okay to put garbage into the database because the government “disclaims” its accuracy:

“Mr. Adler, the Democratic commissioner, said the database was not meant to be a legal forum like a court but more like a catalog of consumer experiences. He noted that a disclaimer on the database said the commission did not guarantee its accuracy. ‘”I put my baby in a diaper and my baby developed a rash.” That goes up. It’s an early warning system to alert other consumers,’ Mr. Adler said.”

Ahem: “But Ms. Nord said the proposal remained far too vague. She cited the recent case of Pampers Dry Max, made by Procter & Gamble, in which thousands of parents asserted that the diapers were causing their babies to get a rash. A commission investigation found no link between the diapers and the rashes. ‘We would have posted all these complaints about them even though they proved to be wrong,’ Ms. Nord said.”

Any idea why the CPSC “must” put up such a controversial database? The zealots know that there is legal risk in hosting a database that may include erroneous information or information that might slander manufacturers or tortiously interfere with commerce. They know this might violate manufacturers’ legal rights and could lead to lawsuits – and don’t want the legal liability or the hassle. How to get the data and avoid the legal problems? Get the government to host the legally-dubious information! Clever – but not necessarily in the interests of consumers or American markets.

Is the CPSC supposed to provide Mr. Adler’s catalog of “consumer experiences”? Is that part of its mission? [Readers of my blog know that] I realize we have a right of Freedom of Speech (check out the Bill of Rights), but is the federal government really supposed to foster that Freedom of Speech? I appreciate that Mr. Adler thinks a consumer “experiences” database is a really good idea (I disagree) but since when do our tax dollars need to be used to provide it? Is that the only option that makes sense? And that goes double for such a dangerous proposal that presents the realistic prospect of discouraging investment and other economic activity.

So many words wasted on people who won’t listen. Expect a “spirited” debate on the database as foreplay followed by the 3-2 partisan screwing that masquerades as safety administration these days. The song plays on . . . .

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CPSIA – Save "Lost Souls", Vote for the Slanderbase!

CPSIA – Why Hasn’t Data Changed Opinions at the CPSC?

I have recently published numerous blogs on CPSC recall data documenting the dearth of injuries and deaths from lead in the past decade. I am certainly not indifferent to the suffering of any victim, however, I note that data on injuries is a way to measure the urgency of the threat. There has been one death and three asserted injuries in the last eleven years from lead. We are a country of 300 million-plus and have a $15 trillion dollar economy – presumably, we need to prioritize.

I have also provided CPSC data on injuries and deaths from other hazards, such as cadmium (zero), pool drains (very low, but greater than lead), phthalates (zero) and pool and spa (extremely high, more in an average day than in a decade for lead, phthalates and cadmium put together). In fact, I documented the distribution of injuries and deaths among all recalled children’s products over an 11-year period. At one death and three unverified injuries, lead comes in last among all recall categories with more than eight recalls over 11 years (lead and lead-in-paint accounted for 248 of 899 total recalls in the surveyed period of time). Literally every significant hazard facing children in consumer products is worse and much more dangerous than lead according to the CPSC’s own data.

I have also shown that the data on recalls publicized by the CPSC tends to magnify the scale of lead recalls, making the recalls seem more threatening and the implied hazard more urgent than they really are. Among other things, the quantity of recalled products typically (if not always) includes inventory in the possession of the manufacturer. This inventory NEVER MADE IT TO THE MARKET. In addition, recall data also includes product still on the shelf at retailers. This inventory, which was sold by the manufacturer to the retailer, was never sold to consumers. Inventory in the possession of the manufacturer, its factories or its retailers has no conceivable potential to harm a child. The amount of product in the hands of consumers could be tiny. Please consider these facts when evaluating the claims of consumer groups on the “poor” effectiveness of recalls. The math gets all tangled up, doesn’t it?

Call me crazy, but this seems like some rather shocking data. The deaths and injuries from lead and phthalates are so small that they are trumped in a single day by pool and spa deaths and injuries. [The reported deaths and serious injuries from pools and spas since Memorial Day, at least 210, are AT LEAST FIFTY TIMES THE NUMBER OF DEATHS FROM LEAD IN THE LAST ELEVEN YEARS. In other words, it will take more than 500 years for lead to produce as many deaths and serious injuries as the last 53 days from pools and spas (if the lead death and injury rate doesn't taper off).]

And yet the CPSC seems to have no interest in this data, their OWN data. Why? Well, the best I can say is that they believe every life is precious and thus, economics cannot be considered when designing a response to the hazard. I did not invent this view of the consumer group-dominated Commission – I asked this very question of a person in a position to know, and got this answer. So there you go.

Does this hold water, that economics are irrelevant and should never be considered? First, on the relevance of economics, I think that’s a silly proposition. Of course economics matters. Please don’t feign shock or disgust. Let’s do an exercise: How much shall we spend to save a life? A child died from swallowing a lead charm on a single bracelet several years ago. This is the lone reported death from lead or lead-in-paint from a consumer product in at least 11 years and has been cited as a justification for the CPSIA maelstrom. In this space, I have adopted a proxy estimate of $5.6 billion in annual CPSIA compliance costs for the children’s product industry (based on a submission of the HTA to support their Congressional testimony).

So, is $5.6 billion the “right” amount to spend annually to prevent the next loss of life? Sure, you say, spend the $5.6 billion each year, every life is precious. Okay, does the cumulative spend of $61.9 billion over 11 years (to match the period in which the one death occurred) sound a bit extreme? Can you think of anything else that might be a better use of $61.9 billion? [Like a new national highway system? A new electrical grid? A few more cruise missiles? A few months of national health care?] I would note that $62 billion is double the provisional losses of BP from the Gulf oil spill. That’s a lot of coconuts, if you ask me.

Should we spend $61.9 billion on every cause of death? What about causes of death that are “worse”, meaning that loss of life is greater? Should we spend proportionately? If our resources are limited (I used to think that was relevant but lately, who knows?), how should we allocate our limited dollars? Is it okay to prioritize? Does lead make the cut if we try to allocate rationally?

It is worth noting that the value of a life or an injury is a heavily-litigated subject. It is a staple of tort litigation to estimate damages by assessing the economic value of a life or an injury. The U.S. government also engages in the same analysis. Certain agencies are forbidden by law to issue regulations that do not show an economic profit, that is, the cost of the regulation must be outweighed by its economic benefits. [Money spent or saved by the public versus the government is not relevant to this analysis - a dollar's a dollar no matter who spends it.]

The benefits of the regulation are calculated by assessing the economic value of lives and injuries. To regulate otherwise is economically irrational – which is where the CPSC seems to be. More to the point, economic irrationality is against the weight of U.S. jurisprudence, not to mention laws limiting the ability of the government to issue regulations. Hate to sound trendy, but it is Big Government completely out of control to contend that lives are “priceless” and to assert that the cost to avoid injury or death should not be limited by economic considerations. Please note that the EPA assesses the economic “value” of a life at $6.1 million. For even more perspective, the EPA says that one IQ point lost to lead is worth $8,346. CPSIA compliance costs are not less than $5.6 billion EACH YEAR. Do the math.

Okay, this is bordering on insulting your intelligence. Yet, astoundingly, the CPSC doesn’t get it. What about the behavior of the CPSC itself – do they ever consider economics? Again, at the risk of insulting your intelligence, of course they do. For one thing, they themselves have limited resources. They can’t do everything they want, and have to make choices. They have a BUDGET. They can’t hire everyone they want, can’t inspect everything, can’t process every claim immediately and so on. They also make practical judgments on some things. I reported recently the tarring the Commission received for making a practical judgment about how to implement the pool drain law. In that case, they chose to agree with the recommendations of industry, which is heresy in some circles . Certain members of Congress live in those circles . . . . No doubt the savaging of the Commission over that minor practical judgment will have the intended effect of eliminating whatever shreds of common sense or backbone extant at the CPSC and the Commission. Perhaps this is the end of their consideration of economics . . . .

Where does this leave us? Come on, guys, right where we were for the last two years! We continue to rail against this awful law, and the CPSC gets progressively more and more stone deaf. I feel increasingly like I am mumbling to myself, especially when they won’t respond to their own data or other data-driven rational arguments. Given that the Dems have made their name by being totally deaf to the legitimate concerns of industry, what choices are left to us? I am turning more of my energies to the 2010 Midterm elections. I hope you will also do what you can to change the dynamic in Washington. You’ve seen what these people have done in the last 18 months. Ready for more?

I’m not. And I am doing something about it.

Read more here:
CPSIA – Why Hasn’t Data Changed Opinions at the CPSC?

CPSIA – Happy Pool and Spa Safety Week!

Happy Pool and Spa Safety Week! The CPSC this week strode bravely forth to combat pool fatalities in the United States – finally. I have written about swimming pool deaths in the past (as early as May 26, 2009 in this blog and earlier in letters to Congress). They are shocking in number. The CPSC says that deaths in pools and spas AVERAGE 385 children per year from, 2005-1007. Of this average, 299 victims were (on average) YOUNGER THAN FIVE YEARS OLD.

The childhood pool injury count is even more breathtaking. For pools, submersion injuries requiring emergency room treatment averages 4,200 children per year (47% were for two- and three-year-olds), or 46,200 projected submersion injuries to go with the projected 4,235 childhood drowning deaths over 11 years.

Whoa. This is shameful.

In the same 11-year period, CPSC recall data notes ONE death from lead and THREE injuries from lead. You read that right:

  • Pools: 4,235 drowning deaths and 46,200 injuries
  • Lead: 1 death and 3 injuries

There are no phthalates injuries on record.

The CPSIA addressed pool safety. A highly-publicized section of the CPSIA is known as the Virginia Graeme Baker Pool And Spa Safety Act (the “Baker Act”). This law was implemented in response to the tragic pool drain entrapment death of the granddaughter of former Secretary of State James Baker. The CPSC cites 11 fatalities from pool drain entrapment from 1999-2008. Over 11 years, at this rate, 12 pool drain entrapment deaths would be projected. The Baker Act dictates that pools replace their drain covers to avoid this awful risk. Not an unreasonable approach to a completely avoidable source of injury, at a relatively low cost. Good idea.

It is, however, apparent that the Baker Act does not address the overall massive risk of childhood pool drownings. Of the projected 4,235 deaths in an 11-year period, the Baker Act addresses the cause of only 12 deaths. That leaves the projected deaths of 4,223 children completely unaddressed by our ever-vigilant Congress.

Remember, according to my analysis, compliance costs for the CPSIA are about $10,000 per dollar of avoided lead injury costs. Each death is valued at $6.1 million using EPA estimates. The projected unaddressed pool drownings have a “cost” of $6.1 million x 4,223 = $25.8 Billion over 11 years. At the same rate of compliance costs incurred by the lucky companies attempting to comply with the lead rules, the pool industry would have to spend $10,000 per dollar of injury cost over 11 years, or a mere $257.6 trillion. At this rate of spend, the industry would only have to spend $23.4 trillion per annum which happens to be nearly double the projected 2010 U.S. GDP of $14.8 trillion.

But who’s counting?

And how did our Congress respond to the threat of childhood pool drownings? Surely they really threw the book at this terrible problem – it is literally thousands of times worse than lead. Ummm, well, they mandated a public awareness campaign (see Section 1407 of the Baker Act). The CPSC blitz is the effort to comply with this master plan: a press release, a new website and a “a first-of-its-kind national public education effort”. Apparently, all you need is a few ads and press releases to solve pool deaths.

Strangely, the CPSC is straying from their newly-adopted precautionary principles in this blitz. They actually recommend a strategy of “staying close, being alert, and watching children at the pool”. Huh, you’ve got to be kidding! That sounds a lot like individual responsibility. The CPSC even refers to the need for a “personal system of safety”. Being a good parent and keeping an eye on your kids is so “Old School”. I assumed that the CPSC had moved beyond such shallow advice. They would certainly never do that for lead. Of course not.

I should note that I have long considered the effort to combat pool deaths to be long overdue, so don’t get me wrong. I think it’s great that the CPSC is actually doing something. Pool deaths claim WAY too many kids’ lives every year – we need to take a real threat like this very seriously. But please pardon my waves of nausea over the proportionality of the response. Pool deaths are expected to exceed 4,000 over 11 years (including more than 3,000 kids under five), and in response the CPSC puts up a new website and produces public service announcements with Olympic swimmers. Lead deaths are expected to be one or zero in the next 11 years – and we have to spend $5.6 billion every year in compliance costs.

This is terrible government in its purest form. It is indefensible and incomprehensible. I defy the Democrats to stand up and actually defend their policy positions or legislative solutions. They won’t debate the issue because it’s a total loser for them. The children’s product industry is collateral damage to the Dems’ reelection campaigns. Well, I won’t just grin and bear it. Falling on the sword for their ridiculous sound bites and reelection posturing is not how I plan to go out.

This is un-American. Happy Pool and Spa Safety Week.

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CPSIA – Happy Pool and Spa Safety Week!

CPSIA – Numbers Don’t Lie (2nd Update – An Upside Down World)

I have previously reported that my study of reported lead recalls over the past 11 years shows that there has been ONE reported death, the widely-discussed Jarnell Brown who died after swallowing a lead jewelry charm in Minnesota. This single death, plus three injuries, is the entire database of injuries reported by the CPSC from lead and lead-in-paint in the past 11 years. That’s it.

The New York Times reported on Sunday that data from the EPA sets the economic “value” of a human life at $6.1 million. Whether that number is high or low, it’s a good placeholder for an economic analysis of the CPSIA. [The EPA originally set this figure for an economic analysis of one of its rules.] According to federal rules governing regulations issued by the EPA, the benefits of a regulation must outweigh its costs. Therefore, as the NYT reports, if you save one life (worth $6.1 million) with a new regulation that imposes a compliance cost of $8 million, the regulation is illegal and must be withdrawn.

I wonder if this analysis would give us any insights into the CPSIA. . . .

Another relevant data point from the NYT article is that one IQ point lost to lead poisoning is worth $8,346 over a lifetime. That’s a real figure – think of the cost and disruption imposed on the children’s product industry to avoid the POSSIBILITY of the loss of an IQ point. Consider that the CPSC has reported three injuries from lead-in-paint in 11 years – that’s 3 x $8,346 = $25,038 in “damages” in lost IQ points or a little over $2,200 per year.

Even this miniscule cost is conjectural as I am simply not aware of a single, PROVEN case of lead poisoning from a children’s product. The victims assert a link between their (often undocumented) lead poisoning and the offending children’s product – but the causal link is rarely if ever challenged or conclusively verified. Even the consequences of the (asserted) lead poisoning is itself conjectural – although I am not defending lead poisoning. It is not certain, however, that lead poisoning always leads to long term problems or diminished capacity. [This issue gives fresh perspective on the recent policy of the CPSC to recall ALL lead-in-paint violations, a strict liability standard. This almost certainly violates the "substantial product hazard" standard that governs the ability of the CPSC to issue recalls as a matter of law. CPSC leadership should be held accountable for this change in policy in violation of the "substantial product hazard" statutory standard.]

On the basis of this very doubtful data, my entire industry has been trashed.

Let’s do the math on the CPSIA: In 11 years, one death ($6.1 million) and three IQ points ($25,000) = total cost $6.1 million. On other side of the ledger, the HTA estimates that the ANNUAL cost to test products for compliance with the CPSIA is $5.63 billion. The all-in cost is probably higher by a factor of 2-3x, but the HTA number is fine for illustration purposes. At this rate, ignoring the likely impact of inflation, the 11-year projected cost to comply with the CPSIA would be not less than $61.9 BILLION.

Spend $61.9 billion, save $6.1 million. In other words, thanks to the wondrous CPSIA, Americans spend $1,000 on “safety” to save a buck in injury costs. This is the legislative scheme that your Congressional Dem leaders have been fighting tooth-and-nail to preserve intact for the last two years.

The Dems want you to spend $1,000 to save a dollar. They won’t give an inch and have stubbornly refused to listen to reason for two years. The illegality and remarkable fiscal irresponsibility of this regulatory scheme doesn’t impress them. They tell us there’s no safe level for lead . . . but the real danger appears to be that there is no safe level of Democrats in our government.

November, November. Mr. Waxman, go ahead and fiddle while Rome burns. We’ll see you and your colleagues in the voting booth.

Read more here:
CPSIA – Numbers Don’t Lie (2nd Update – An Upside Down World)

CPSIA – Reaction to my Testing Guidance Comments

On November 11, I published my thoughts on the recently-announced Testing Guidance. These guidelines will be the subject of the upcoming two-day workshop at the CPSC on Dec. 10/11.

In my blogpost, I noted that children’s products with paint require independent testing while painted non-children’s products used in the home and around children only require a GCC, no testing. That makes NO sense to me, as explained in my blogpost.

I received a series of emails from a regular reader of this space, someone with a great deal of expertise in the CPSC and its practices. Let’s just say, this person knows quite a bit more than me. Here’s what my reader said in reply to this essay:

“I think the implication that children’s products needed some special class of testing by someone other than the manufacturer was highly questionable to begin with. (Put another way, why should we distrust children’s product manufacturers? Or in the alternative, is the risk from such products really so much higher that special safeguards were necessary? In truth, most of the serious injuries and deaths that led to recalls were because of defects and not because of non-compliance with rules that you could test for.)

. . . .

Unfortunately, there seems to be a national trend–including other agencies and state and local governments–of legislating requirements based on junk science disseminated by interest groups. This leads not only to incredible costs, or loss of product for consumers, but diverts the attention and resources of the agencies from their core mission of reducing deaths, injury, and illness. That is the ultimate irony here: that in promoting safety some of these presumably well intentioned people are in fact likely decreasing the public safety.”

Score one for people that actually know what they’re talking about! Couldn’t say it better myself (although I have been trying for about a year).

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CPSIA – Reaction to my Testing Guidance Comments

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