Testifying to the House Financial Services Committee, Federal Reserve Chair Jerome Powell stressed the impact that the U.S. opioid crisis is having on the nation’s economy.
“An extraordinary number of people are taking opioids in one form or another and it weighs on labor force participation,” Powell said at the Wednesday hearing. “It’s a national crisis, really. The humanitarian crisis of it is completely compelling but the economic impact is also quite substantial.”
Numbers support that statement. A study found that between 2000 and 2016, the opioid crisis cost the U.S. about $37.8 billion in state and federal taxes. State governments lost $10.1 billion in income tax revenue, while the federal government lost $26 billion during that time.
And the White House’s Council of Economic Advisers (CEA) puts that number significantly higher. It estimates that the opioid crisis cost the economy $504 billion in 2015 — 2.8% of GDP that year.
‘We want prosperity to be broadly shared’
Powell hinted at the effects of the crisis on the economy.
“We all want the U.S. economy to grow faster and be larger, and we want prosperity to be broadly shared,” Powell said. “There are people who are in their prime working years who are on opioids, and it’s a national crisis.”
In June 2019, the labor force participation rate stood at 62.9%. And research has suggested that prescription opioid use has contributed to a decline in this percentage. A Cleveland Fed study concluded that “prescription opioids can account for 44% of the realized national decrease in men's labor force participation between 2001 and 2015” and a 17% decline for prime age women.
Powell’s comments and the Cleveland Fed study are on part with a 2018 chart from Deutsche Bank’s Torsten Slok showing that the opioid crisis appeared to be contributing to decreased labor force participation, especially in certain U.S. states.
West Virginia, Mississippi, Alabama, and Arkansas saw a particularly high correlation between opioid prescriptions and lack of labor market participation, as the chart shows.
This hasn’t gone unnoticed by politicians of both parties. In October 2018, President Trump signed a bipartisan bill aimed tackling opioid addiction in the country. The bill reauthorized funding from the Cures Act, “which put $500 million a year toward the opioid crisis, and makes tweaks to hopefully give states more flexibility in using the funding.”
Presidential candidates Sens. Kirsten Gillibrand (D-NY) and Elizabeth Warren (D-MA) each released their own plans for addressing the issue as well.
And in June 2019, freshman Congresswoman Alexandria Ocasio-Cortez pushed to divert $5 million from the DEA to opioid abuse treatment.
“I know people are working on it, but it’s out there,” Powell said, “and there’s a human tragedy, but there’s also an economic motivation to get these people in the labor force where they can lead healthy lives.”
Adriana is an associate editor for Yahoo Finance. Follow her on Twitter @adrianambells.
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