The Cost of Universal Background Checks

The Senate now has a bill that would require universal background checks in the hope that this will keep guns out of the hands of criminals.  While we can all admit that it won't keep all of the guns out of their hands (afterall, Great Britain's criminals have had no problem getting their hands on guns), we should ask ourselves two questions before considering whether this is a viable solution 1) How much is this going to cost (and to whom)? 2) How many guns is this going to keep out of criminals hands (and thereby how many crimes are averted)?

OK, that is 4 questions.  And I haven't even brought up the 2nd Amendment.  Let me look at this issue universally so that it could be applied whether there was a 2nd Amendment or not and whether people had a natural right to self defense or not.  In other words, if it passes the "economics" test we can consider it and debate other issues, if it doesn't then there is no need to debate this further - i.e. it is unicorn rainbow farts. 

Obviously, I am prejudiced.  We all are.  The dispicable ones are those who don't admit it.  I am prejudiced for facts.  I am prejudiced for truth.  So, before you say that I am opinionated and discount my opinion, back up your opinion with facts.

Lets start with question 1) How much is this going to cost?  Well, last year there were 19.5 million NICS background checks.  Not all of these represent a single firearm purchase.  Some of them are for carry permits.  Some of them are for multiple firearms.  Some states allow firearms to be bought with a carry permit without another NICS. This number averaged between 8 and 9 million from 1999 to 2005.  It appeared to level off at 14 million in 2010, then election season came. The three highest months were Dec 2012, Feb 2013, and Jan 2013.  So, if this keeps up all of 2013, we could see NICS checks of 25 million.

For simplicity sake, lets say the multiple gun sales cancel out the carry permit checks. Also, lets assume that NICS checks are artificially high.  Therefore, I'll use 15 million firearm sales checks a year as the baseline.  Now, the figure I have heard most bandied about is 40% of firearm sales are in the secondary market (i.e. no background check).  Since this is an unregulated market of no records, there is really no way to verify this one way or the other. So without any other information, I'll accept this as is.  Coincidentally, I did a tally of my firearms and just under 40% were bought on the secondary market.

So universal background checks will cover an additional 10 million sales. Now the states that already require all private transfers to go through an FFL as well as internet sales give us some idea of what the pricing will be.  I have seen rates from $25 to $50 as the basic charge.  So, I'll use $35 as the average.

How much is universal background checks going to cost? $350 million a year. This of course assumes that none of the transfers are exempted (which the current bill allows) and that the secondary market isn't depressed because of the increased cost (why would you buy a $75 used rifle if there is going to be a $35 mark-up when you can buy the same rifle from an FFL for $105). So let me cut this down to $200 million for a more realistic idea of what the price entails.

Which leads us to the next question 1a) Who is paying this?  Well, that would be the people who are buying guns. What was the problem trying to be solved? Oh yeah, criminals getting their hands on guns. So, how does charging gun owners more money help decrease criminals getting their hands on guns? 

Let's go to our next source of information, the Department of Justice report about Firearm Use by Offenders.  This compared survey results of incarcerated criminals in 1991 (before background checks) and 1997 (after background checks).  Now, I have taken the liberty to do some corrections because the background check requirement didn't go into effect until 1994.  Also, some of the prisoners in 1991 would still be prisoners in 1997.  So, I am going to assume that 100% of the prisoners from 1991 are still serving time in 1997, therefore, I'll subtract out their numbers from the 1997 numbers and re-calculate (there were significantly more prisoners in 1997 than in 1991, and significantly more prisoners that had firearms in 1997 than in 1991) ro get an approximate idea of how the background check requirement changed the procurement of firearms.

	Reputo Estimate w/ NICS	DOJ FUO 1997 Inmates	DOJ FUO 1991 Inmates
Retail	7.6%	13.9%	20.8%
Friends/Family	8.2%	39.6%	33.8%
Illegal	84.2%	39.2%	40.8%

Assuming that all of the friends and family abide by the new law, and assuming each of the 500,000 crimes involving firearms each year represent unique individuals/firearm acquisitions, then 41,000 * $35 = $1.4 million will be paid by the people purposefully supplying firearms. $1.4/$200 million is 0.7% of the total cost will be shouldered by the portion of the population who may be responsible.  99.3% of the additional costs to this are paid for by law abiding gun owners.  Can you imagine if we charged the everyone in the country $10 a year to pay for the costs of car accidents, regardless of whether they drove or not or how safe of a driver they were?  That is what is being proposed here.

And a reminder for those anti-capitalists.  All of this money is not going to crime prevention.  All of it is going to FFL dealers.  I don't fault them for charging whatever the law will allow.  I fault the law for being stupid.  Continuing on.

Question 2 How many guns is this going to keep out of the hands of criminals?  Well, looking back at the chart above, the DOJ report provides evidence that prior to the background check requirement, 21% of criminals bought guns from retail outlets (I included flea markets and gun shows because they only made up 2% of this figure).  After the background check requirement, it appears that the number dropped to 14%.  Except that we have the problem of substitution.  Because if you will notice Friends and Family had an increase of 6%.  But that is a 1% difference still, right? Not quite, at the end of the report it identifies standard errors of up to 2%, for these numbers. So 6% and 7% for purposes of this report are essentially equal.

Remember though that a lot of those criminals in 1991 were still in prison in 1997, so if you look at my estimate, then yes, the background check was very effective at driving criminals away from both retail outlets and friends and family.  So, the question then becomes did the number of guns decrease overall?  Simply put, no.  In 1997 there were 70% more prisoners than in 1991.  Furthermore, those prisoners who had a firearm during their latest crime also went up (Table 3).  If a larger percentage of criminals have firearms, you can't really argue that a particular gun control measure has been effective at reducing the number of guns criminals get a hold of.

Well, surely we can crack down on the Retail sales to criminals? No, because criminals are already prohibited from buying guns (whether retail or private party).  The current background check already drove them out of the retail market.  What about that 7.6% that are still buying from retail? Well, take a look at Table 7.  25% of inmates were first time offenders and 20% of them had a firearm for their most recent crime.  Which means that they would have passed a background check so buying at retail was not a problem.  25% * 20% = 5%.  Close to 7.6%, then if you recognize that using a fake ID and lying on the forms will also get you to pass a background check and the last 2.6% (if it isn't statistical noise anyway) is easily explained (Table 9 .

What about the family and friends aspect?  Won't universal background checks prevent those people from providing guns?  Probably not.  Look at the table again.  Using my estimate, the introduction of background checks also drove people out of the family and friends market.  Why? Increased enforcement of straw purchaser laws, increased publicity of the fact that providing a firearm to a felon is illegal already.  I don't know specifically since you would have to do a survey of family and friends of criminals.  The fact remains though, friends and family who were selling firearms to criminals before the background check system were breaking the law.  If they were willing to break the law before, what is going to prevent them from continuing to break the law.

Finally, it should be noted that the illegal market has shown that it can adequately supply the firearms needed by criminals.  In 1991 it accounted for the largest percentage.  In 1997 it was equal with Family and Friends (which had a significant rise). My estimate based on the DOJ numbers is that the illegal market is already supplying the vast majority of firearms, 84%.  This market will be unaffected by the universal background check law.

In summary, universal background checks are going to cost about $200 million per year.  They won't prevent criminals from getting guns and the vast majority of the cost will be paid by law abiding gun owners.  Retail outlets already do not sell to criminals, and law abiding friends and family don't either (those that do are criminals themselves).  The illegal gun market has always been a sizeable amount of the source of guns for criminals and could easily expand. So, universal background checks don't pass my simple economics test, therefore, it is a form of sniffing unicorn rainbow farts (don't worry while sniffing farts may not sound appealing, unicorns are imaginary and rainbows are just the reflection of light through droplets of water, in other words a mirage).