Organic Foods Deceptive Advertising

 

Do you prefer your foods to be “organic?” If so, you’re paying a higher price for this preference – and you may not be getting what you think you’re paying for.

The U.S. Department of Agriculture (USDA) provides products with its organic seal. For a product to be certified organic, it’s required to meet specific standards:

  • Organic crops cannot be grown with synthetic fertilizers, synthetic pesticides or sewage sludge.
  • Organic crops cannot be genetically engineered or irradiated.
  • Animals must eat only organically grown feed (without animal byproducts) and can’t be treated with synthetic hormones or antibiotics.
  • Animals must have access to the outdoors, and ruminants (hoofed animals, including cows) must have access to pasture.
  • Animals cannot be cloned.

 

According to a Market Watch 2015 study, prices at Whole Foods, a national supermarket chain specializing in organic foods, were 12 -15% higher than other supermarkets in the study. If you believe organic foods are actually better for you and you’re willing to pay the higher price, that’s your decision. But what if those higher prices are based on false advertising?

Dr. Henry I. Miller, physician and molecular biologist at Stanford’s Hoover Institution, says the organic food industry is lying to you – and the Food and Drug Administration (FDA) is letting them get away with it.

He says the organic food industry is a $47 billion-a-year market and “. . . the FDA gives a complete pass to blatantly false and deceptive advertising claims.” As an example, he notes the Whole Foods website, which explicitly claims that organic foods are grown “without toxic or persistent pesticides.” Miller says, in fact, organic farmers rely on synthetic and natural pesticides to grow their crops, just as conventional farmers do, and organic products can contain numerous synthetic as well as natural chemicals.

According to UC Berkeley biochemist Bruce Ames and his colleagues in 1990, “99.99% (by weight) of the pesticides in the American diet are chemicals that plants produce to defend themselves.”

Miller says pesticides are by definition toxic, and many organic pesticides pose significant environmental and human health risks. Copper sulfate is a widely used broad spectrum organic pesticide that persists in soil and is the most common residue found in organic foods. The European Union has determined that copper sulfate may cause cancer and intended to ban its use, but backed off because organic farmers don’t have any viable alternative.

Misleading Advertising

Food marketers are experts in subtly misleading consumers. One method often used is the “absence claim.” Their advertising asserts a meaningless distinction between products in order to make theirs seem better. The FDA is generally good at monitoring such advertising and punishing abusers. They would never allow an orange juice producer to market their product as “fat free” since there is no fat in any orange juice. To claim an absence of a certain ingredient, there has to be a “standard of presence” in that product to begin with, and no such standard exists for orange juice.

But Miller points out the FDA’s inconsistency. Tropicana labels its orange juice “Non-GMO Project Verified” and Hunt’s labels its canned crushed tomatoes “Non-GMO” even though there are no GMO (genetically modified organism) oranges or tomatoes on the market.

Miller has researched the market and found the “Non-GMO Project” butterfly label is found on more than 55,000 organic and nonorganic products on supermarket shelves today – even though many have no GMO counterpart or couldn’t possibly contain GMOs. He says, “The clear purpose of these labels, as one peer-reviewed academic study found, is to ‘stigmatize food produced with conventional processes even when there is no scientific evidence that they cause harm, or even that it is compositionally any different.”

FDA guidelines are in fact stringent and explicit. These guidelines include statements such as this: “Another example of a statement in food labeling that may be false or misleading could be the statement ‘None of the ingredients in this food is genetically engineered’ on a food where some of the ingredients are incapable of being produced through genetic engineering (e.g., salt). They also state “GMO absence claims can also be false and misleading if they imply that a certain food is safer, more nutritious, or otherwise has different attributes than other comparable foods because the food was not genetically engineered.”

But Miller notes this is exactly what Non-GMO Project butterfly labels are all about. Its website describes certain foods as being at “high risk” of “GMO contamination.”

It is clear there is a disconnect between what the FDA says and what the FDA does. Consumers should be aware of this when reading food labels. They must ask themselves the question, “Is this organic food really worth the higher price I’m paying?”

 

Should We Keep the ObamaCare “Cadillac” Tax?

 

Is the ObamaCare “Cadillac” Tax a good thing or a bad thing? That’s today’s question as Republicans continue to tinker with President Obama’s legacy healthcare system.

The ObamaCare “Cadillac” Tax was originally slated to begin in 2018 but thus far it has been delayed until 2022. House Republicans want to pass a bill further delaying this tax by another year to 2023. Is this a good idea? 

First, let me explain the ObamaCare “Cadillac” Tax. It is a 40% excise tax on high-cost employer-provided healthcare insurance plans. It applies only to those insurance premiums costing greater than $11,000 for individuals and $30,000 for families.

The tax is actually paid by the insurance companies, but the impact on the insured is ultimately the same as if they paid it themselves. As ObamaCare co-architect Jonathan Gruber famously noted, ““We just tax the insurance companies, they pass on higher prices that offsets the tax break we get, it ends up being the same thing. It’s a very clever, you know, basic exploitation of the lack of economic understanding of the American voter.” This was one of many deceptions of the American people Gruber bragged about in his candid remarks that were caught on videotape.

The Cadillac Tax Purpose

The pre-ObamaCare tax treatment of insurance policies has been unequal since the 1950’s. In the post WW II era of wage and price controls, employers were limited in their ability to attract new and better employees with higher wages. To offset these limitations, employers began offering health insurance benefits as an incentive to attract better workers. The IRS did not treat the cost of the insurance policies as extra income. Those who purchased their insurance as individuals apart from an employer did not enjoy this tax exclusion. This unfair and unequal tax treatment of insurance premiums has continued to this day.

ObamaCare imposed the Cadillac Tax as a method to discourage employers from increasing spending on insurance benefits as a means of avoiding higher taxes. By imposing the Cadillac Tax on amounts above the limits, the Obama administration hoped to lower expenditures on health insurance, which they falsely labeled “lower costs” to support their narrative that ObamaCare “bends the cost curve” of healthcare.

James C. Capretta, a healthcare economist at the American Enterprise Institute, writes in The Wall Street Journal that the ObamaCare Cadillac Tax is worth keeping. He explains the current tax system encourages employers to shift compensation toward generous health benefits. “Overly rich health plans encourage consumers to use more health services than they otherwise would, which drives up costs. On average, employer plans cost 35% more than they would if health benefits were fully taxed like cash compensation, according to a 2008 study.”

This issue has been a political football kicked around by both parties for years. President Reagan tried to cap the tax exclusion in 1983 and President George W. Bush tried in 2007. These efforts failed due to opposition by business and labor unions. In 2008, John McCain campaigned on a proposal to tax job-based health benefits to level the playing field but Barack Obama hammered him in political ads for “taxing health benefits for the first time in history.” Then Obama reversed himself, once he was president, when he supported the Cadillac Tax.

Pros and Cons

Capretta says the Cadillac Tax impact would be higher wages for workers as employers were forced to use savings on the expensive plans (which they would avoid) to raise wages in a competitive labor market. He says this tax is essential for a market-based approach to cost control. The current system, which is subsidized by the tax exclusion, undermines the incentive for employers and workers to seek out lower-cost options.

In 2015 I did a three-part series on the Cadillac Tax. (Understanding the ObamaCare Cadillac Tax – Part I, Understanding the ObamaCare Cadillac Tax – Part II, Understanding the ObamaCare Cadillac Tax – Part III) In that series I explained the impact of the tax using the work of Duke University economist Chris Conover. The conclusions of that series were:

  • The Cadillac Tax would eventually affect nearly everyone
  • The impact would be greater on larger businesses than smaller businesses
  • The impact would be harsher for low-income workers than high-income workers

 

Capretta concedes that while the initial impact would affect only 4% of all employer plans, over time, more employer plans would be affected. But he believes the Cadillac Tax should nevertheless be retained. He says, “Many provisions in ObamaCare should be repealed, but the Cadillac tax isn’t one of them. Republicans should look past its origin as part of ObamaCare and leave it alone. They don’t have the will to replace it with something better, and killing it would help those who say the only answer to rising costs is more government regulation.”

Below is a chart put together by former Senate Majority Leader Bill Frist (R –TN) that projected the impact of the Cadillac Tax over time:

The chart shows that in 2018 only about 15% of employers would be impacted by the Cadillac Tax. But by 2029 the tax will impact 76% of employers.

The problem is the tax exclusion of health benefits paid by employers. The playing field must be leveled by some means. Eliminating the tax exclusion for everyone would be an obvious solution but it is politically impossible. The Cadillac Tax provides a disincentive for abusing the current tax exclusion but has drawbacks as we have discussed above. It’s a complex issue that deserves greater study and bipartisan compromise to achieve the greater good. Unfortunately, that’s unlikely to happen in Washington today.

States Become Laboratories of Healthcare

 

U.S. Supreme Court Justice Louis Brandeis is credited with coining the phrase “laboratories of democracy” to describe state governments. He used this phrase in 1932 in his opinion in the case New State Ice Co. v. Liebman to describe “how a state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”

Today, some states are following this suggestion as they respond to recent changes in ObamaCare by the Trump administration. Liberal states are pushing back on Trump’s de-regulation while conservative states are embracing these changes with more of their own.

For example, ObamaCare imposed a mandate for the first time in our history that forced all Americans to purchase health insurance or pay a tax penalty. This so-called Individual Mandate was so unpopular it was loosely enforced by the Obama administration. The Trump administration repealed it entirely as part of the tax reform bill of 2017.

But now some states are requiring their own residents to pay the tax penalty again – to their state. The State of New Jersey just imposed a “state Individual Mandate” for any resident who fails to purchase health insurance.

Stephanie Armour, healthcare reporter for The Wall Street Journal, says this practice is gaining popularity in liberal state governments. Other liberal states with mandates include Vermont, Massachusetts, and Oregon.

The Trump administration recently increased flexibility of short-term health plans that are non-compliant with all the ObamaCare regulations in order to give patients options to purchase less-expensive plans. Republican state governments have embraced these plans while Democratic state governments have taken steps to limit such plans. The Trump administration also is allowing flexibility in selling plans outside the ObamaCare exchanges. Some states are blocking these changes for their residents. Some conservative state governments are adding work requirements for able-bodied adults who receive Medicaid support.

The different approaches of various states reflect the broad national divide on the issue of healthcare. Conservatives want to give people more flexibility to choose the insurance plan that best meets their needs. Liberals believe the government should make those decisions for you. They are still trying to preserve ObamaCare, despite its failings, and reject Trump administration efforts to fix some of the problems.

Is this a good or a bad thing?

I regard this as a good thing. This will give states the freedom to devise their own healthcare systems and measure the impact on their state without forcing the rest of the country to go along. Liberal states can preserve all the awful regulations of ObamaCare while conservative states can enjoy the freedom of deregulation. The people of each state can decide for themselves if they are better or worse off. It won’t take long to measure the differences.

The differences will impact not just healthcare but state economies as well. Armour says, “ The states’ accelerating tendency to peel off in different directions will have significant financial repercussions for nearly 30 million U.S. small businesses, about 17 million people who buy individual coverage, 75 million Medicaid recipients and scores of hospitals and insurers.”

This trend should continue as long as complete repeal and replacement of ObamaCare is stymied by Congress. The “laboratories of democracy” should soon reveal which direction Americans prefer. I’m betting on an exodus from blue states where high taxes and high healthcare costs will eventually make residence there economically – and medically – unaffordable.