Should the city try to curb sugary drinks?

As a new resident of Baltimore City, I feel a convert’s zeal for my new home. One aspect of this is a subscription to the local newspaper of record, the Baltimore Sun. Unfortunately, me being of a conservative/libertarian persuasion, ttthis at times results in a good deal of grumbling on my part over the paper’s liberal editorial slant. To get things off my chest, therefore, I have set up this blog to offer my critique of their positions, along with suggestions for better approaches to the problems they address.

Today’s editorial on a proposal to mandate health warnings on sugary drinks, however, came as a pleasant surprise. The context is that Councilman Nick Mosby and Health Commissioner Leana Wen have proposed that businesses in the city be required to post warnings along the lines of a similar requirement imposed last summer in San Francisco. The San Francisco warning reads as follows: “WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay.” While the intentions behind such a warning are no doubt good ones, the Sun rightly notes that there is as yet no evidence that such warnings help curb obesity, and therefore, from a purely consequentialist and utilitarian point of view, the cost of forcing businesses to post such warnings is not justified as of this time, especially in view of the current economic woes of the city.

They also allude to a more principled reason to object to the proposed mandate, which is that government should exercise special care before imposing new regulations on the private sector. “Just as individuals should be cautious about their dietary choices, government must wield the regulatory bludgeon with care,” they declare in the final paragraph. This is a reasonable position to take even for one who is otherwise supportive of the notion of private sector regulation, since it puts the burden of proof on government to show that the new regulation would help, rather than harm, people. In other words, the government shouldn’t use the public as guinea pigs, in order to try out new rules that seem like good ideas in the abstract; on the contrary, proposed regulations should only be imposed after evidence has been produced of their benefits.

However, the Sun concedes that, if it could be shown that such warnings brought about a reduction in obesity, the city would be justified in forcing businesses to post them. This is where I part ways with the editors’ reasoning. While I agree that prevention of obesity is a worthy goal in itself, I don’t believe the government has any business interfering in private exchanges between businesses and customers; as long as no force or fraud has taken place, what goes on between a business and its customer should be between them only. Secondly, the government’s job is not to ensure that we live healthy lives, but to ensure that we are free to live our lives healthily or unhealthily as we choose. I find it ironic when people refuse to countenance legislating private morality, while feeling justified in legislating private health for our own good. As far as I’m concerned, either you believe in individual freedom, or you don’t.

The only justification for imposing such costs on businesses would be to offset the costs of obesity on the public. The editorial mentions CDC estimates of over $147 billion in annual costs due to obesity, though there is no mention of how much of these costs are borne by the taxpayer and how much are borne by private citizens. I took the trouble to look up the academic paper that is the source for this figure (1), and the abstract suggests that about half the costs are paid by Medicare and Medicaid, with the rest paid by private insurers, which are themselves heavily subsidized by the taxpayer in one way or another. So it is reasonable to conclude that at least $75 billion of these costs are paid by the government, i.e. the taxpaying public.

Full privatization of the health industry, of course, would ensure that all the costs of obesity are borne by the private individuals concerned, rather than the public. This, I believe, would provide the necessary incentive for individuals to take precautions against obesity and limit their own consumption of sugary drinks and other fattening foods, or for parents and guardians to limit the sugar consumption of their dependents. Naturally, it must be recognized that this idea has very little public support, and this post is not the place to argue for a completely free market in healthcare. As long as we insist on socializing the costs of healthcare, I believe the government does have an interest in limiting or offsetting these costs by well-considered regulation.

However, let me suggest that enforcing mandatory warnings on private businesses are not the best use of government resources. As the editorial already concedes, the effects of such warnings have not been demonstrated. But even if it could be shown that such warnings led to a reduction in obesity, this mandate would only represent an added cost to businesses and government, without any compensating savings or revenue, except indirectly in the form of a possibly reduced public bill for obesity treatment.

There is a better way for the government to capture the costs of obesity more directly: the soda tax. The advantage of the soda tax is that the government would raise revenue that could go directly towards offsetting the costs of treating obesity. There would also be an added incentive for the consumer to reduce consumption and help stave off obesity, for those whose primary motivation is actively reducing obesity rates.

The evidence that soda taxes actually do help reduce obesity rates is mixed. In 2014, Mexico imposed a 10% tax on sugary drinks, but a study showing that the tax led to decreased consumption is disputed (2). Nevertheless, from a strictly economic point of view, what matters is not whether the tax limits an undesirable behavior, but whether it captures the cost of the behavior that is borne by the government. Of course, once this is granted to be the main motive behind the tax, other possible solutions present themselves: one could reallocate spending, or increase taxes on completely unrelated things. An excise tax on sugar itself, however, would seem to be the most “fair”, given that it is the sugar that is held to be the direct cause of obesity.

But once sugar is recognized as the culprit, it’s worth reminding ourselves that the market price of the form of sugar used in American soda, i.e. corn syrup, is probably lower than it should be, owing to government subsidies. Yes, what’s so often unmentioned in these debates over public health is the extent to which the government is already subsidizing the obesity epidemic through various misguided agricultural policies (3). Imposing a soda tax to balance out the corn subsidy would represent a pinnacle of bureaucratic absurdity. Perhaps before the government considers imposing more costs on the private sector to fight obesity, it should entertain the idea of spending less on promoting it in the first place.

(1) http://content.healthaffairs.org/content/28/5/w822.abstract

(2) http://www.therecord.com/opinion-story/6229203-opinion-sugar-coating-the-truth-about-soft-drink-taxes/

(3) http://www.huffingtonpost.com/2013/07/18/agriculture-subsidies-obesity_n_3607481.html