Congress is pressed to pass a $1 trillion spending bill before this weekend or cause a partial government shutdown, and the president’s demand for funding to begin construction of a southern border wall is a political sticking point. Yet, even as legislators debate the cost, as I recently wrote, construction of a southern border wall could actually be cost-beneficial if it limits narcotics trafficking and reduces the number of drug overdose fatalities.
To provide a perspective of the important work that Customs and Border Protection (CBP) is doing, in fiscal year 2016, they seized 7,910 pounds of drugs daily. In 2015, they seized 9,435 pounds of drugs every day, a decrease of about 1,500 pounds per day. The decrease in drug seizures does not say anything about what is coming across our southern border. Consider two examples:
- On March 29, 2017, CBP officers seized 31.5 pounds of cocaine with a street value of about $1 million. On April 5, another 16.5 pounds of cocaine worth about $528,000 was seized at the same port.
- Also on April 5, it was reported that more than $3 million worth of cocaine, heroin, and methamphetamine was seized in three stops at the Laredo Port of Entry. This included five packages containing about 29 pounds of black tar heroin, 30 packages of nearly 20 pounds of crystal meth, and 6 packages containing 4.5 pounds of brown heroin. Another seizure included 28 packages totaling 51 pounds of cocaine and 19 pounds of heroin.
The fact that significant amounts of drugs are crossing our border led me to think further about my brief analysis on how the wall could be cost-beneficial. It is worth considering the benefits and costs of regulatory alternatives, as well as whether the border wall will actually stop the flow of drugs coming into the United States.
First, economic analyses developed by the Federal government are supposed to have alternatives analyses. A primer developed in the previous administration states that agencies, in these analyses, are supposed to consider a range of potentially effective and reasonably feasible regulatory alternatives. These alternatives might involve different approaches with distinct advantages and disadvantages that are designed to meet the regulatory objectives. They could also include economic incentives to encourage a desired behavior.
My previous analysis was not meant to include an alternatives investigation; I was only trying to show that if the border wall could eliminate a given percentage of drug-overdose fatalities, it would make the wall cost-beneficial. I agree, however, that it is entirely possible to show that an alternative to building the wall might be less burdensome for achieving the desired incremental benefits. Maybe CBP will be able to show this analysis and objectively demonstrate how these alternatives compare (i.e., the incremental benefits and costs of successively more stringent and less stringent alternatives). One alternative might be to increase outbound enforcement, which includes searching more vehicles for currency moving out of the country. Another alternative might be to reduce inbound enforcement and use the monies saved to improve drug rehabilitation.
In my previous analysis, I implied a correlation that slowing the flow of drugs into the United States would reduce the number of drug-overdose deaths, but some argue that the wall will not impact drug flows. The Daily Caller’s Steve Birr wrote:
Many experts on drug trafficking argue this will not address the main issue behind the opioid epidemic, which is U.S. demand for narcotics and other illicit substances. They say a wall will do little, except possibly spike prices for the drugs domestically, which will not curb use by those already addicted.
These experts might not understand that if the same number of people are vying for fewer drugs, the equilibrium price level (i.e., the price people will pay) will in nearly every case increase. Most people (in aggregate) will purchase less of an item the higher the cost. The experts cited in Birr’s article also indicate that the wall will not curb drug use of those already addicted, but no mention is made regarding those not addicted. Do these experts believe that that drug use will increase if the wall is built? I doubt it, but there is merit in allocating monies (from a policy perspective) for drug treatment programs.
Evan Nison, executive director of NORML New Jersey, told the Daily Caller that “Increasing the price of those drugs by doing something like this does not actually reduce demand and will likely increase crime, because addictive drugs are not elastic, meaning price does not affect demand like regular consumer products.”
Yet, Mr. Nison and others who make this argument might not understand the difference between something being elastic and inelastic. Even if the demand for drugs is inelastic, usage will still decrease. For a good to be inelastic, a one percent increase in the price of drugs will still result in decrease in demand. I suspect that some crime will increase, but reducing crime is also part of President Trump’s mandate. In conclusion, as long as there is a positive correlation between building the wall and reducing fatalities, it should not be difficult to demonstrate with a break-even analysis that the wall is cost-beneficial.