Category Archives: Economy

Florida Mounts New Raid on Virginia Carrier Fleet

U.S.S. George Washington arrives in Virginia for almost-cancelled overhaul (Huntington Ingalls Photo)

Here we go again.  Florida wants one of Virginia’s aircraft carriers. U.S. Sen. Mark Rubio, R-Fla., and others are apparently trying once again to authorize the Mayport naval base to make the improvements it would need to become home port for one of the eleven jewels of the fleet. Virginia’s congressional delegation is gearing up to fight off the idea for the third time in a decade.

In a recent joint letter they wrote that limited defense funds shouldn’t be spent on “a non-existent requirement and duplicative capability that will cost the Navy nearly $1 billion over 15 years.” Right now five carriers sail out of Norfolk and one is being overhauled in Newport News.

The official position of Huntington Ingalls Industries, parent company of Newport News Shipbuilding, will probably be no position. The line has been that the company builds and maintains the ships and where the customer chooses to park them is none of the company’s business. But expect the rest of Virginia and Hampton Roads to care deeply, because along with the personnel who serve on the ship there are hundreds more support jobs ashore, and all of the economic benefit created by those many thousands of sailors and dependents.

It is a little dance the Florida and Virginia politicians do, burnishing their images with the home folks. We are probably seeing another attempt because the White House has changed hands. You might think these are weapons systems vital to the world’s stability, but we all know they are also political boodle of the highest order. Michael Dukakis sank his chances in Virginia in 1988 by proposing to cancel two carriers.

The total cost of the upgrade to the Florida base to host a carrier full time would approach $600 million, given the special facilities tied to its nuclear reactors. This apparently would defend us against the dangerous naval threat posed by, what, Venezuela? Brazil? Cuba is within easy reach of land based squadrons. There is no strong argument for moving a carrier to Florida except to boost Florida.

Norfolk likely will lose a carrier one day but it will go to the Pacific. And when the Pentagon is ready to make that move, adding to the five carriers now based in California, Washington and Japan, Virginia’s political class needs to drop its objections. That will be based on sound strategic requirements, unless of course President Trump makes a Glorious Peace with Dear Leaders Kim and Xi.

There also remains a chance Norfolk will lose a carrier because the Navy stops building them or chooses not to overhaul one and puts it in mothballs instead, as almost happened to the U.S.S. George Washington (CNV 73, pictured above). Given the total cost of ownership of a carrier strike group, that threat will not go away.

Make The Next Round A Double

USS Gerald R Ford CVN 78 Christening 2013

Virginia leaders like to get up on their soapboxes and worry that Virginia is too dependent on defense spending and promise elaborate strategies to diversify the economy.  Be grateful in some places the focus remains on building more combat ships at Newport News Shipbuilding, keeping its 20,000 plus employees and thousands of suppliers and contractors fully engaged well into the future.

As the House and Senate in Washington inch toward a fiscal year 2019 defense budget, the House has offered a version that expands on the Trump Administration’s proposal by setting up a single order for two nuclear aircraft carriers.

USS New Mexico Crossing Hampton Roads

The Senate isn’t there yet.  CVN 80, the future U.S.S. Enterprise, is already in the early stages of construction but the main construction contract has not been signed.  The proposal is to contract for the unnamed CVN 81 at the same time.

Huntington Ingalls Industries, parent of the shipyard, claims that ordering two carriers at the same time would save the Navy $1.6 billion because it would allow more negotiating leverage with the supply chain and would keep the workforce steady state. While working there I heard it was ideal to start a new carrier every four or five years, but the gap between them recently has been more like seven years.  One result of that is a labor valley every so often.

Two carriers included in a single contract would still need to be built in sequence, since there remains only one dry dock and crane capable of accommodating the assembly process. But as Enterprise sailed out of Dry Dock 12, the pre-built sections of CVN 81 would be ready to start going in. Enterprise will be the replacement for the first-of-its-class U.S.S. Nimitz, CVN 68, aging into its 40s and nearing retirement.

The ship in the dry dock now is CVN 79, the future U.S.S. John F. Kennedy. She is about 80 percent structurally complete and her christening and launch date are coming up fast. Debate continues over the utility of the large deck nuclear carrier in this submarine and missile-infested world, but it remains one weapons platform that our rivals obviously covet but cannot yet duplicate.

There is more potential good news for Virginia in the House version of the defense plan. The Navy is now starting two Virginia Class submarines annually, splitting the work between Huntington Ingalls and General Dynamics, but the old Los Angeles Class boats are retiring fast. The House adds a third submarine start in 2022 and 2023 – which is also when construction of the first new ballistic missile submarine, the future U.S.S. Columbia, should be in full swing at both Newport News Shipbuilding and Electric Boat.

Finally in the mid-2020s the aforementioned U.S.S. Nimitz returns to the yard for decommissioning of her nuclear components. That’s a couple thousand more jobs, too. So diversify the economy, certainly, but as they say in politics: Don’t forget your base.

After watching the christening of the U.S.S. George Bush CVN 78 in October 2006 I was heading out on Warwick Boulevard and there was a protester with a sign saying the money should have been spent on jobs. That was one clueless ideologue.

Note:  Both attached images were by the excellent staff photographers at NNS.

The Tax Cuts Are Working

by Jack Hubbard

We’re barely three months into 2018 yet, and Virginia is already off to an incredible start.

The passage of the Republican tax plan in late 2017 has allowed Virginia’s more than 700,000 small businesses to breathe a sigh of financial relief.

Prior to the passage of the Tax Cuts and Jobs Act, the majority of small businesses (95%) were taxed at nearly 40% by the federal government. After state and local taxes were added in, that number often reached 50%. This astronomically high tax burden diverted valuable resources from job growth to government coffers. President Trump and Congress knew something had to be done.

Under the new tax code, small businesses whose income is less than $315,000 can now claim a 20% tax deduction, leaving more resources for investment and job creation. In Virginia, that increased deduction applies to nearly all of Virginia businesses. And these businesses now can take these tax savings, reinvest them, and expand their enterprises.

What happens when businesses expand? New hiring follows, putting more Virginians on the career ladder. And more Virginians working leads to greater investment in the Old Dominion.

Additionally, the tax plan’s lower tax rates and increased deductions have empowered businesses throughout the country to pass on tax savings and to their employees. So far, more than four million Americans have received a pay increase or bonus from their employer since the tax bill was passed. Larger companies such as Walmart, BB&T Bank, and Capital One have all increased starter wages.

Here in Virginia, the Bank of James in Lynchburg has raised starting wages to $15, added vacation days, and increased its charitable giving plans.

The list of beneficiaries of the tax bill continues to grow. Even many public utilities have announced that they will be cutting rates on their customers. Residents in nearby Washington, D.C., will see their electric rates cut after Pepco announced lower rates during the first quarter of 2018, and I can only hope that Virginia companies follow suit. These cuts are occurring only because President Trump and Congress did their jobs, and people are seeing real  money in their pockets.

Media reports notwithstanding, the Tax Cuts and Jobs Act has proven itself time and again in only one month since its passage.

While Democrats may call tax savings “crumbs,” the real-world benefits of tax cuts suggest otherwise. Job creators—and the people they serve—are more optimistic than ever. Imagine what the rest of 2018 will have to offer.

Jack Hubbard owns the The HomeMade Gin Kit in Alexandria.

Chesterfield County Leaking Affluent Households

Which better represents the future of Chesterfield County? Rudd’s Trailer Park……. (Photo credit: Richmond Magazine

This column was published originally in the Chesterfield Observer. While the details of migration trends in and out of Chesterfield is unlikely to prove of great interest to anyone outside of Chesterfield, the analysis shows how citizens can use IRS migration data to gauge the health of their home locality. 

Hobbled by the sequestration-driven budget squeeze of defense spending, Virginia experienced its fourth consecutive year in 2016 of out-migration, the University of Virginia’s Demographic Research group reported late last year. While 301,000 income tax-filing households moved into the state, 315,800 moved out, for a net loss of 14,800 households. The last four years are quite a comedown for a state that previously had seen healthy population inflows every year since the Internal Revenue Service began compiling the statistics in 1978.

The picture looks somewhat better for Chesterfield County, which saw a net gain of 687 households from people moving in and out of the county in 2016. Some 10,300 households entered the county while 9,600 left and another 123,400 stayed put.

….or this McMansion?

People move from one locale to another for a multitude of reasons, but it’s normally a good sign when more people move in than out. Insofar as people follow jobs when they move, a net gain in migrants could mean that more jobs are being created. An inflow of residents also pumps up demand for housing, retail and services, thus stimulating local economic activity.

On the flip side, an influx of households places greater burden on the county to provide education, public safety, streets and roads, and other basic government services. In an ideal world, the newcomers bring in more taxable income and spending power to help pay for those services than those who leave. Unfortunately, that’s not what’s happened in Chesterfield. Households that moved here in 2016 reported an average income of $56,200; those that left reported $58,500 – for a total net loss of $17 million in countywide income. Admittedly, that’s a drop in the bucket compared to the $10.1 billion in total income reported by all non-migrants. But if this becomes a trend and persists for years and decades, it could fundamentally change the nature of the county.

A large percentage of the coming and going consists of people moving to and from neighboring jurisdictions in the Richmond metropolitan area. In 2016, Chesterfield experienced a net gain of 401 residents from Henrico County, 229 from the City of Richmond, and 56 from the city of Petersburg. However, the county lost a net of 126 households to Powhatan County.

The good news for Chesterfield is that it is importing more affluent households from Richmond, Henrico and Petersburg than it is exporting.

Newcomers from Richmond earned on average $46,100, while those moving from Chesterfield to the city reported only $39,500 in income.

Similarly, Henrico immigrants to Chesterfield earned $60,200 on average while households going the other way earned only $49,900.

The differential for Petersburg was $37,200 on average for households heading from the city to the county compared to a lowly $29,800 for households heading in the reverse direction.

However, Chesterfield lost significant income to Powhatan County in 2016. While the number of migrants is relatively small, the income differential is vast. Households moving from Powhatan to Chesterfield made $48,900 on average while those leaving Chesterfield earned $87,200, a differential of $37,300.

The largest sources of in-migrants from outside the region are Fairfax County, Virginia Beach, and Wake County, North Carolina (in the Raleigh metropolitan area).

The wrong conclusion to draw from this data is that Chesterfield taxpayers might benefit from crafting policies and ordinances that make the county less attractive to the poor, say, by blocking real estate projects developed for lower-income households. Aside from the ethical issues raised by discriminating against the poor, that’s not even good policy. Poor people will gravitate toward the cheapest, least desirable housing stock available in the metro area, whether it’s public housing projects in Richmond or aging cul-de-sac neighborhoods of small, rundown 1950s and ’60s era ranch houses in Chesterfield, regardless of any policies the county pursues.

A better strategy is to make carefully considered investments that help build a more prosperous, livable and sustainable community for all. Tracking the IRS migration data is a good way to tell how well county leaders are doing to create a desirable place for everyone to live, work and play.

Virginia Consumers’ Heavy Debt Load

Consumer spending is a driving force behind the U.S. economy, accounting for about 70% of economic activity. When consumers borrow, they stimulate economic growth. When they stop borrowing, the economy retrenches. Thus, when analyzing the prospects for the nation’s economy, economists take into consideration the size of the consumer’s debt load. All other things being equal, a debt load that is high by historical standards suggests that consumers have less room to grow the economy by borrowing (although the consumer economy still can grow when people back to work, get better paying jobs, or benefit from tax cuts).

Compared to other states, Virginia’s consumers are among the more heavily indebted in the nation. Indeed, comparing payments for credit cards, student loans, and housing as a percentage of annual income, Virginians’ indebtedness is sixth highest in the country, according to Credible, a consumer finance website.

Virginia has enough economic troubles as it is, ranging from dependence upon federal spending to infrastructure issues to undeveloped innovation ecosystems. High consumer debt is icing on the cake.

For what it’s worth, Credible doesn’t provide a complete picture. The numbers don’t include auto-financing debt, a significant contributor to consumer debt.  Maybe the consumer picture in Virginia isn’t as bad as it appears…. Or maybe it’s worse.

Meanwhile, there’s this news: Nine years of central bank stimulus and debt-bingeing around the world has made the U.S.  and other economies more vulnerable than ever to a rise in interest rates, says William White, the Swiss-based head of the OECD’s review board and ex-chief economist for the Bank for International Settlements. “Market indicators right now look very similar to what we saw before the Lehman crisis, but the lesson has somehow been forgotten,” he says.

The edifice of inflated equity and asset markets is built on the premise that interest rates will remain pinned to the floor. The latest stability report by the US Treasury’s Office of Financial Research (OFR) warned that a 100 basis point rate rise would slash $1.2 trillion of value from the Barclays US Aggregate Bond Index, with further losses once junk bonds, fixed-rate mortgages, and derivatives are included. It said losses could dwarf the “bond massacre” that bankrupted Orange County California in 1994 – and detonated Mexico’s Tequila Crisis. …

The global fall-out from such a shock could be violent. Credit in dollars beyond US jurisdiction has risen fivefold in 15 years to over $10 trillion. “This is a very big number. As soon as the world gets into trouble, a lot of people are going to have trouble servicing that dollar debt,” said Prof White. The offshore dollar funding markets would dry up, triggering a liquidity squeeze. Borrowers would suffer the double shock of a rising dollar, and rising rates. …

Central banks are now caught in a ‘debt trap’. They cannot keep holding rates near zero as global inflation pressures build because that will lead to an even more perilous financial bubble, but they cannot easily raise rates either because it risks blowing up the system. “It is frankly scary,” he said.

Recessions are painful but cleansing. Economies need small but regular downturns to wring out speculative excess and maintain long-term stability. The U.S. is enjoying a burst of stronger economic growth this year thanks to tax cuts and a rollback of regulations, but the business cycle is one of the longest-running in U.S. history. It can’t go on forever, and it won’t.

I know my warnings must be tiresome. I raised the same alarm when I wrote “Boomergeddon” back in 2010, and look where we are now. The economy seems just fine…. just like it did before every big catastrophic market meltdown.

Retirement, Not Jobs, Pushing Virginians Out of State

Virginia has been losing population to domestic out-migration for the past five years. Most people (including me) have assumed that the reason for the exodus (well, not really an exodus, more of a drip… drip… drip… leakage) can be attributed to sub-par economic growth. In other words, more people are leaving than coming because more jobs are being created elsewhere than here.

But the latest data from United Van Lines calls that assumption into question. United’s data roughly tracks that of the Internal Revenue Service taxpayer change-of-address data in noting that for every 100 moves in and out of Virginia 53% were outbound compared to only 47% being inbound.

But get this: Two-thirds of the reasons cited for moving into Virginia were jobs, while only a little more than half were so cited for moving out. The widest outbound-over-inbound gap was for retirement, the second widest for family. Virginia also suffered smaller gaps for health and lifestyle.

Why would there be such a large retirement gap? Our 5.75% top income tax bracket? Hellish traffic in Northern Virginia? Too many polar vortexes? Perhaps readers can chime in with their speculations.

Farewell Parade

Don’t mess with Virginia.

by Stephen D. Haner

I was very flattered that the U.S. Navy arranged that parade of ships just to mark my departure from Newport News Shipbuilding last month.

I’m kidding, of course, because the recent demonstration of naval firepower out in the Pacific (pictured above) was arranged for Dear Leader Kim and his friends Vladimir and Xi. But it is such a magnificent image I had to share it. I don’t think enough Virginians know that all three of those nuke carriers were built right here in the Old Dominion, along with the other eight in the fleet.  And many of the nuclear submarines submerged around that task force are also Virignia-built.

Virginia’s most famous product is not peanuts or tobacco.

Virginia builds naval supremacy.

Shipbuilders come and go from the shipyard every day – most with far more than my 12 years of service — and a lobbyist is far less important and far easier to replace than a nuclear-qualified welder.  I stole that line from the CEO, who is fond of saying even his job is easier to fill than some of the specialty jobs on the waterfront.

When I started, they issued me a Blackberry, and I joked that it was a leash.  “No,” the vice president dryly responded. “This is a nautical company. That’s a tether.” The tether later became a smartphone, but it has never been more than a few feet away in the past 12 years except for two trips overseas. It has been gone almost a month now and I still reach for it.

And it was a tether. My relationship with Bacon’s Rebellion started long before I got hired by the yard, but I quickly discovered that the yard was off limits for my commentary. As a former reporter and political communicator my lobbying style has always involved working with the media, and in my first session I had a routine discussion with a local reporter about a routine bill. When my quotes appeared in the Daily Press, the negative reaction was swift and instructive.

So I have never discussed the shipyard on Bacon’s Rebellion and rarely mentioned it. Now that I’m an ex-shipbuilder that may change a bit, at least with regard to its general operations and its products and its importance to the Virginia economy. Somebody else will be responsible for communicating its views to the General Assembly and the state executive branch. I may use this space from time to time to share with you some of the things I learned working in that marvelous place with so many dedicated people building the most complicated machines in the world.

Reports of my retirement are like the reports of Twain’s death – premature.  I may handle a few more clients in the coming years. But the shipyard is fading from sight off the fantail.

Stephen D. Haner, principal of Black Walnut Strategies, is a Richmond-based lobbyist.

The GOP’s Hail Mary Pass

House Speaker Paul Ryan savors his biggest legislative victory.

Faced with a chronically slow-growth economy, expanding deficits, mounting federal debt, and a looming funding crisis for the U.S. welfare state, Republican congressmen are, to borrow a football metaphor, throwing a hail Mary pass into the end zone in the desperate hope of scoring a winning touchdown. They are gambling that tax cuts combined with President Trump’s deregulation agenda will boost economic growth from roughly 2% per year to 3% or more, reducing the tax burden for millions of Americans, creating new jobs, boosting wages, and bending the curve on long-term deficit projections.

Convinced that the tax cuts will prove to be a disaster for everyone but the rich, Democrats and the mainstream media have subjected the tax plan to relentless, unremitting attacks. Viewed in terms of static economic analysis, we are told, the tax cuts will inflate federal deficits by a cumulative $1.5 trillion over the next ten years. Suddenly, deficits matter!

Republicans respond that measures in the bill — accelerating write-offs for business investment, encouraging the repatriation of hundreds of billions of dollars in corporate profits to the U.S., and making the corporate tax rate more competitive internationally — will stimulate economic growth. Unlike the Democrats, I think that much will prove to be true. My question is: Will faster economic growth generate enough new tax revenue to offset that $1.5 trillion? Longer term, will it avert Boomergeddon?

Let’s dig into the numbers. The Congressional Budget Office’s current 10-year budget forecast assumes a modest 2.1% annual growth rate over the next ten years, a slight uptick from the trend established during the Obama years. But economic growth has accelerated to roughly 3% in the past couple of quarters, and the Trump administration’s deregulation + tax cuts strategy could nudge it even higher. Let us assume for purposes of discussion that, thanks to the tax cuts, the U.S. can grow the economy at a sustainable rate of 3.1% annually. What does an extra percentage point in economic growth get us in deficit fighting?

Well, the latest CBO federal revenue forecast for the next ten years is $43 trillion. A 1% boost in federal revenues will yield $430 billion, not nearly enough to close the $1.5 trillion gap. The analysis gets a bit more complicated because economic growth and higher incomes push Americans into higher tax brackets while a roaring stock market generates massive capital gains. So a 1% increase in economic growth could produce more than a 1% increase in federal revenue. Let’s go for the gusto and double the growth-to-revenue ratio, assuming that federal taxes increase actually increase by $86 billion per year over current projections. That’s still doesn’t close the ten-year $1.5 trillion gap.

Could the economy grow much faster than 3.1% over the decade ahead? I’m skeptical. First, Baby Boomers are retiring in droves, and the working-age population is stagnating. A growing labor force supports economic growth; a stagnant labor force undermines it. Second, the Federal Reserve Board, intent upon unwinding the monetary stimulus of the Obama years, will continue to raise interest rates. It goes without saying that higher interest rates are a damper to economic growth.

In summary, in my untutored opinion, I think that the U.S. will see modestly faster economic growth over the next few years. The Dems have predicted economic Armageddon. They won’t get it. The lives of millions of Americans will improve… in the short run. But Republicans are deluding themselves if they think modestly faster economic growth will reduce the nation’s long-term structural budget deficit. Entitlement spending is still running out of control, and the nation still faces a hideously painful fiscal reckoning. Our 20-year future still looks like Boomergeddon.

The Airbnb Dilemma: Regulate or Not?

Revenue growth in the rental of dwellings in Virginia through Airbnb has outstripped the rental of single rooms. Source: “2017 State of the Commonwealth Report”

Airbnb, the website that allows homeowners to rent rooms and houses for short periods, no longer occupies an obscure niche in the Virginia lodging marketplace. The company is capturing a disproportionate share of growth in lodging industry rooms and revenues, and it depresses the ability of hotels to raise rates during periods of peak demand, concludes the “2017 State of the Commonwealth Report.”

The number of Virginia listings has surged from just over 2,000 in October 2014 to 10,400 in October 2017. Total revenue has increased over the same period from $1.52 million to $17.4 million. Airbnb share of the lodging market rose from less than a half percent to nearly 4.7%.

“While the Airbnb rental sector may be smaller than the traditional lodging sector, Airbnb is a rising competitor,” write Robert M. McNabb and James V. Koch, the lead authors of the report.

The image most people have of Airbnb participants is of homeowners renting out a spare room for pin money. But the data suggest that it’s becoming an increasingly big business in which property owners are renting entire dwellings. While private room revenues increased sixfold over the three-year period studied, the rental of entire places increased thirteenfold, as seen in the chart above.

That reality has implications for how Airbnb should be regulated. Whole-house oceanfront rentals in Virginia Beach have generated numerous complaints regarding unruly behavior, illegal parking, and trash. The lodging industry has argued that Airbnb rentals should be taxed on the same basis and should meet the same regulatory standards as hotels and motels are.

McNabb and Koch are sympathetic to Airbnb to a degree.

It is not the job of government to protect existing firms and industries from new, more efficient or more attractive competitors that would serve consumers better and do so at lower prices. … Enabling citizen consumers to spend their dollars where they wish is a welfare-maximizing stance for government to adopt. … As a rule, challenging competing firms to meet “the market test” — that is offer goods and services at prices and levels of quality that are attractive consumers… — not only is an equitable approach that treats all citizens and firms the same, but also generates the best overall results for the citizenry.

However, they add an important caveat: Government should not intervene as long as the use of Airbnb “does not generate undesirable side effects such as pollution, noise, traffic congestion, crime, unsanitary conditions that impact the public health, and the like.”

While some Airbnb hosts have consciously evaded city regulations and taxes, it does not necessarily follow that localities should devote substantial resources to cracking down on them. Single-room hosts account for a small percentage of rooms, revenues and taxes, and they are rarely the source of behavioral problems. They go in and out of the market, and they’re difficult to identify and force to comply. The payoff for local governments is low.

Cities would do better to devote scarce enforcement sources going after Airbnb hosts offering their entire place for rent. “Plainly speaking, this is where the revenue is and evidence suggests that any behavioral problems that Airbnb generates are concentrated among these properties as well.”

Meanwhile, the authors advise hotels operators to re-evaluate their pricing and quality strategies. “Airbnb and similar rental hosting firms are not going to go away.”

The Economic Cost of Virginia’s Opioid Epidemic

Source: “2017 State of the Commonwealth” report

The rate of drug overdose-related deaths is lower than Virginia than it is in the United States as a whole — 16.5 deaths per 100,000 compared to 19.8 nationally — but that is about the only morsel of consolation that can be derived from a special focus on the opioid crisis in the 2017 State of the Commonwealth Report.

The number of opioid deaths in Virginia was relatively stable between 2007 and 2010, after which it began climbing sharply as the epidemic spread, reaching 1,138 in 2016. Aside from the personal tragedies of overdose victims and their families, the economic cost has snowballed as state and local governments has spent more on emergency response and substance abuse treatment, and as drug addicts have dropped out of the workforce.

“The consensus is that opioid addiction causes individuals to drop out of the labor force by making them less ambitious, more lackadaisical and even unresponsive to ordinary labor market incentives,” states the report, written by Robert M. McNabb and James V. Koch with the Center for Economic Analysis and Policy at Old Dominion University.

Labor force participation in the U.S. has been on decline for many years, reaching a 40-year low in May 2015. As of Sept. 2016, 11.4 million men between the ages of 25 and 54 were not working or seeking work. Forty-four percent of men not in the labor force were taking painkillers daily; by contrast only 20% of working men and 19% of unemployment men took painkillers. A Federal Reserve Bank of Boston-sponsored study estimated that 20% of the decline in labor force participation could be attributed to opioid use and abuse.

What is the cost of such behavior to the Virginia economy? This is not easy to measure. If, however, labor force participation rate data in Virginia have declined 3 percent due to opioid addiction, then the Commonwealth has experienced between $4.5 billion and $7.6 billion in lost productivity. To put it another way, the lost productivity is at least equal to 1 percent of the Commonwealth’s gross domestic product for 2017 and may be as high as 1.6 percent.

In addition, in 2008, untreated substance abuse resulted in $613 million in public safety expenditures (police, jail, prison) and health car services by local and regional governmental units, according to a Joint Legislative Audit and Review Commission (JLARC) study. In 2010, the average hospital stay for drug abuse patients was 3.8 days, and the treatment cost was almost $30,000. “No doubt these numbers are higher today,” the authors write.

What is to be done? While the opioid epidemic has become a top-of-mind, national issue, some physicians are insufficiently trained in how to prescribe opioids while managing chronic patient pain. “Both physician and pharmacy education are in order.” McNabb and Koch also recommend researching nonaddictive painkillers, creating a national prescription registry to catch abusers who obtain multiple prescriptions from multiple physicians, and funding the use of methadone to wean users from their addiction and naxalone to reverse the effects of overdoses.

But there are no magic solutions. “Opiate misuse and abuse ultimately reflect our society — the values attitudes, laws, geography and range of economic opportunities that together make us who we are. Hence, one cannot press a single button and eliminate the scourge of opiate addiction because this wave of abuse represents the conjunction of a set of complex phenomena deep within us.”