Congress passed the Affordable Care Act, now known as Obamacare, using a host of parliamentary moves rather than the normal process. Politically, there was a huge rush to pass the gargantuan piece of legislation before the Democratic Party lost control of both houses. House Speaker Nancy Pelosi (D-CA) was speaking to a meeting of the National Association of Counties. During that speech she famously said, “You’ve heard about the controversies, the process about the bill…but I don’t know if you’ve heard that it is legislation for the future – not just about health care for America, but about a healthier America… But we have to pass the bill so that you can find out what is in it – away from the fog of the controversy.”
The suggestion that Congress had to pass the bill, before finding out what was in it, is a major problem particularly considering the nature of regulatory legislation. These rules are so complicated, the bills so full of legalese and spurious provisions, and much of the power surrounding how laws are implemented is left to the regulatory bureaucracy. This means that nobody knows what is in the bill even after it is signed into law.
Today, we examine just one costly – and duplicative – provision in the Affordable Care Act, the requirement that vending machine companies put nutrition labels – on their machines.
Requiring Nutrition Labels on Inedible Machines Will Cost Consumers Millions of Dollars
The Affordable Care Act as passed by Congress stretches out over 900 pages. Hidden right in the middle of the legislation is a provision requiring restaurants with over 20 outlets to provide calorie information on their menus. This provision, which mirrors similar legislation enacted by New York City’s nanny-in-chief, then Mayor Michael Bloomberg, is extremely costly. According to the FDA, the compliance cost for all regulated business covered under the rule could be as high as $537 million in the first year, with annual compliance costs of over $130 million per year. Note that the agency could not quantify any benefits in its analysis of the rule.
According to the law, like restaurants, vending machine operators must provide a sign in close proximity to each article of food or the selection button that includes a clear and conspicuous statement disclosing the number of calories contained in the article. In other words, vending machine operating companies must post the calorie content of each item in the machine somewhere near the selections themselves. They must do this even though the calorie content is already included on the product nutrition label. The FDA suggested that the implementation cost of the legislation for vending machine operators would be $25.8 million with a recurring annual cost of about $24 million.
Notwithstanding the fact that most people purchasing from vending machines are likely buying soft drinks, candy, salty snacks or something other thin quinoa or kale, and probably don’t care much about calorie counts, over a 5-year period, this rule will cost consumers well over $120 million dollars.
According to Automatic Merchandiser, in 2012, the industry sold about $17.94 billion worth of food products. Inflating this to 2014 would suggest that about $18.59 billion worth of products are sold today. If the regulations cost what FDA suggests – and regulatory impact analysis figures are always low by a huge amount – the cost would appear to be small, just under 0.13 percent. But this is the cost to the operator. When this is marked up using very conservative retail margins, the cost of the regulation to the consumer would be about 0.16 percent. So the cost to consumers over 5-years would be more like $144 million.
On top of this, consumers receive virtually nothing for their $144 million in higher overall costs. The information on the required sign is already available on the products themselves, so the regulation is repetitive. The effect of the information on consumer behavior is also murky. While activists like Mayor Bloomberg love regulations like calorie counts on vending machines, consumers really don’t get much value from them. Research on whether menu labeling has an impact on nutrition suggests that while people generally underestimate the calorie count on food purchased at restaurants, but they react by increasing calorie intakes once they find out. (United States Department of Agriculture’s Economic Research Service). In New York, consumers reacted by purchasing more calories after menu labeling went into effect.
This is probably why the FDA was unable to quantify any benefits to the proposed rule in its own Regulatory Impact Analysis. Even so, the law is now the law, and since it was passed without ever being read, we are now finding out that silly provisions, like calorie counts on vending machines, are part of Obamacare. As with the silly provisions related to school lunches that we reported on last week, ill conceived regulations like those mandating calorie information on vending machines really just hurt the poor who have to pay more to obtain information that they neither require nor use.
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