Archive for July, 2009
DC Residents Want Private School Choice
As Adam Schaeffer mentions below, a new poll commissioned by the Friedman Foundation and others reports that the vast majority of DC residents are in favor of the DC opportunity scholarships voucher program and are critical of the decision of congressional Democrats, President Obama, and ed. sec. Arne Duncan to phase out the program.
Many on the city council have already voiced their support for the program as well.
This begs a question: Why doesn’t the DC government just create its own private school choice program and save itself a boatload of money in the process?
DC spends about $28,000 per pupil on k-12 education right now. The federal vouchers, at an average of $6,600 each, are rather more cost effective, in addition to producing much better academic achievement after students have been in the program for a few years.
So most folks in DC want it. It would save the city massive amounts of money. And it would do great things for kids.
What are the mayor and the city council waiting for?
It’s Dangerous For Pols to be on the Wrong Side of Overwhelming Support
Any City Council members who aren’t vocally supporting the DC voucher program need to take a good long look at these numbers:
Nearly 75 percent of District residents support the city’s federally funded school voucher program, according to a rigorous, independent poll released today. Widespread support for the program crosses party lines—with 74 percent of Democrats, 77 percent of Republicans and 70 percent of Independents backing the program—and extends across each of the District’s eight wards. . .
Two previous polls have demonstrated local support for the program; in 2007, a Greater Washington Urban League poll demonstrated almost 70 percent support for the federal funding creating the D.C. Opportunity Scholarship Program. A 2008 poll by the national nonprofit Education Reform Now demonstrated equally strong support for the voucher initiative, with 63 percent of D.C. residents supporting school vouchers in general and 77 percent voicing supporting for parental choice in education.
Why Mortgage Modifications Aren’t Working
As covered in both today’s Wall Street Journal and Washington Post, the Obama administration has called 25 of the largest mortgage servicing companies to Washington to try to figure out why the Obama efforts to stem foreclosures has been a failure.
The reason such efforts, as well as those of the Bush Administration and the FDIC, have been a failure is that such efforts have grossly misdiagnosed the causes of mortgage defaults. An implicit assumption behind former Treasury Secretary Paulson’s HOPE NOW, FDIC Chair Sheila Bair’s IndyMac model, and the Obama Administration’s current foreclosure efforts is that the current wave of foreclosures is almost exclusively the result of predatory lending practices and “exploding” adjustable rate mortgages, where large payment shocks upon the rate re-set cause mortgage payment to become “unaffordable.”
The simple truth is that the vast majority of mortgage defaults are being driven by the same factors that have always driven mortgage defaults: generally a negative equity position on the part of the homeowner coupled with a life event that results in a substantial shock to their income, most often a job loss or reduction in earnings. Until both of these components, negative equity and a negative income shock are addressed, foreclosures will remain at highly elevated levels.
Sadly the Obama Administration is likely to use today’s meeting as simply an excuse to deflect blame from themselves onto “greedy” lenders. Instead the Administration should be focusing on avenues for increasing employment and getting our economy growing again. Then of course, this Administration has from the start been more focused on re-distributing wealth rather than creating it, which explains why it views mortgage modifications as simply a game of taking from lenders (in reality investors – like pension funds) and giving to delinquent homeowners.
Education Has Diminishing Returns!?
Inside Higher Ed features a terrific essay today by economist Michael Rizzo. Rizzo takes issue with President Obama’s goals to have all Americans complete at least one post-secondary year of education or job training, and for the nation to have the world’s highest percentage of college graduates by 2020. I’ve opined about this before, but Rizzo does it much more comprehensively, noting especially that - surprise! – education can suffer from “diminishing returns.”
Here’s the meat of Rizzo’s piece, but you really should read the whole thing:
More education has to be a good thing. After all, receiving more schooling can’t make you less productive, right? Education is like exercise, reading, spending time with one’s children, and sleeping – each of these is good for you. It is obvious that dedicating more attention to each of these is good. It is obvious … and wrong – for both individuals and societies as a whole.
While investing in each of these likely generates enormous benefits when starting from scratch, at some point each additional unit invested generates fewer benefits than the one before it – just as eating that fourth doughnut brings you less satisfaction than did the second. What if these so-called “diminishing returns” never set in for education? In a world of scarce time and resources, they must, albeit indirectly. Dedicating more resources to the production of educated workers must come at the expense of resources dedicated to creating other important capital goods, institutions, or consumption goods. An individual cannot dedicate 24 hours in a day to everything, nor can society dedicate all of its resources to everything. Put another way, if merely leading the world in educational attainment is desirable, why not aim to have every American receive a college degree? Better yet, why not aim to have every American earn a Ph.D.?
What Keeps Poor Kids Out of College?
In his Washington Post column today, Jay Mathews suggests that poverty isn’t what keeps poor, especially urban kids out of college. The problem according to Mathews, is that too few schools prepare these kids to enter and succeed in college in the first place. True, so far as it goes. But, no doubt due to his long-standing aversion to writing about policy rather than individuals, Jay neglects to mention the policy solution to the problem he has correctly identified.
There’s ample econometric evidence showing that private schools boost high school graduation rates, college acceptance rates, and college graduation rates, especially for urban minorities, over the levels seen in public schools (and after appropriate controls for student and family background). Policies that give these studens easier access to private schools should thus improve their college prospects significantly.
And you know what, there’s even a way for Jay to write this up as a human interest story: just interview kids from the DC voucher program who credit it with helping them get into college. And perhaps ask them what they think of the fact that Congress, ed. sec. Duncan, and president Obama have decided to kill the program that gave them a boost up the ladder to higher education.
Jay?
Message to the International Community: There’s Separation of Powers in Honduras
Roberto Michelleti, the interim president of Honduras, has an op-ed in today’s Wall Street Journal that should be read by members of the international community that continue to push for the immediate restoration of Manuel Zelaya to the presidency.
Michelletti states that
“The Honduran people must have confidence that their Congress is a co-equal branch of government. They must be assured that the rule of law in Honduras applies to everyone, even their president, and that their Supreme Court’s orders will not be dismissed and swept aside by other nations as inconvenient obstacles.”
The message is clear: there’s separation of powers in Honduras, and the country’s authorities cannot simply ignore the rulings of both Congress and the Supreme Court in order to reach an agreement. The international community, which is supposedly acting on behalf of democracy, should know that.
Nader Supports Health Savings Accounts?
In a recent article Ralph Nader attacks several critics of Obama’s health care reform proposal, including Cato:
Now enters the well-insured libertarian Cato Institute with full-page ads in the Washington Post and The New York Times charging Obama with pursuing government-run health care. A picture of Uncle Sam pointing under the headline “Your New Doctor.” Nonsense. The well-insured people at Cato should know better than to declare that this “government takeover” would “reduce health care quality.”
I agree that Cato employees are “well-insured” – a description so appropriate that Nader used it twice in a single paragraph. At Cato we have Health Savings Accounts, which are probably the closest thing to free market health insurance allowed by law.
It’s nice to see Nader, a proponent of socialized medicine, praise HSAs. But it’s unfortunate that his preferred options for health care would abolish HSAs entirely.
Washington Post Misrepresents Individual Mandates
Here’s a poor, unsuccessful letter to the editor I sent to The Washington Post:
“Like Car Insurance, Health Coverage May Be Mandated” [July 22, page A1] paints a misleading picture of proposals to require Americans to purchase health insurance – i.e., an “individual mandate.”
First, the article lacks balance. It cites three politicians who support an individual mandate but none who oppose it, a group that includes a majority of Republicans. The article claims an individual mandate “has its roots in the conservative philosophy of self-reliance,” even though most conservatives, including the movement’s flagship magazine National Review, oppose the idea. The closest the article comes to offering an opposing perspective is one conservative who has supported an individual mandate in the past and may yet again, just not yet.
Second, the article makes the demonstrably inaccurate claims that an individual mandate “lowers overall costs” and “help[s] keep premiums down” by adding more young and healthy people to the insurance market. Forcing healthy people to purchase insurance does not affect premiums for sicker purchasers, because insurers set premiums according to each purchaser’s health risk. The article confuses a mandate with price controls, which force low risks to pay more so that high risks can pay less.
Finally, if an individual mandate reduced overall costs, then health care spending would be falling in Massachusetts, which enacted the nation’s only individual mandate in 2006. Instead, overall health spending is rising, and the rate of growth has accelerated under the mandate. Rising health spending implies rising health insurance premiums, which has also been the Massachusetts experience.
Market Bets that ObamaCare Won’t Cut Costs
According to Don Johnson of The Health Care Blog:
Speculators seem to be betting that a watered down health insurance reform bill won’t hurt health insurers, hospitals, drug makers or medical device and supply manufacturers.
Stocks for almost all of these health sectors and for exchange trade funds that track health stock indexes turned higher last week.
In other words, those with real money at stake don’t believe that health reform will hurt the firms that make a living off of America’s highly inefficient health sector — President Obama’s assurances notwithstanding.
Johnson provides seven possible explanations for this development, including:
3. If the very liberal Coastal Democrats who lead Congress and most of the five committees drafting health insurance legislation want to get the support of Democrats from Western, Midwestern and Southern states, they’ll have to up Medicare payments to providers in those states. This is bullish for hospital chains, which operate mostly in the fly-over states…
6. Proposals to tax millionaires to pay for covering the uninsured and increasing benefits for others are in trouble, if not dead on arrival. The economy’s in no shape to be stalled by tax hikes, and there appear to be enough Democrats opposed to the tax to stop it.
7. While the so-called Blue Dog Democrats are stalling health insurance reform for economic and ideological reasons, the Congressional Black Caucus has made it clear that it won’t support a bill that the Blue Dogs will support. Throw in the opposition by anti-abortionists who don’t want the legislation to use taxpayers money to pay for abortions, and you have a pretty complex political problem for President Obama, Sen. Majority Leader Harry Reid (D-NV) and Speaker Nancy Pelosi (D-CA). While the Speaker claimed Sunday that she has the votes to pass health insurance reform, few believe her.
Gallup Poll: Federal Reserve Makes the IRS Look Good
A recent Gallup Poll surveyed the public’s impression of how various federal agencies were doing their job. Of the agencies evaluated, on the bottom was the Federal Reserve Board. Only 30 percent of the respondents rated the Fed’s performance as either excellent or good. I can understand now why Chairman Bernanke felt the need to take his act on the road. Even the IRS managed to get 40 percent of respondents to see its job performance as excellent or good. A majority of the public, 57 percent, sees the Fed’s current performance as either poor or fair.
The result is not just driven by a general public disdain for federal agencies; over a majority of respondents thought such agencies as the Center for Disease Control, NASA and the FBI were doing an excellent or good job.
Nor is the result driven by public ignorance or indifference to the Fed; only a few years ago, back in 2003, 53 percent of Americans said the Federal Reserve was doing an excellent or good job and only 5% called its job performance poor. But then, the Fed was also giving us negative real interest rates at that time as well. Perhaps there’s a good reason to insulate the Fed from short-term public and political pressures. Let’s hope Chairman Bernanke does not read these results as an excuse for repeating the Fed’s 2003 monetary policies.
‘The presence of terrorists is not an excuse to surrender to your limbic system—quite the opposite.’
. . . says a commenter on a Federal Computer Week story about the Department of Homeland Security gathering more personal information about employees, contractors, and volunteers accessing DHS facilities.
And well said indeed.
Does the Left Know We Had a Housing Bubble?
Over the last week, speaking at a variety of events, I heard three different representatives of the Left; first a Democrat US Senator, then a senior member of the Obama Administration, and finally a “consumer” advocate, all repeat the same narrative: all was fine in the housing market until predatory lenders forced hard-working honest families into foreclosure, which reduced house prices, bringing the economy to a crash. That’s correct, apparently the Left believes we all would still be seeing double-digit home price appreciation if it wasn’t for those evil lenders.
Undoubtedly foreclosures, especially those that result in houses that remain vacant for a considerable amount of time, have an adverse impact on surrounding property values. Many constitute a serious eye-sore and provide a haven for criminal activity. But did foreclosures really drive down prices, or were foreclosures first driven by price declines resulting from a bursting housing bubble? While causality is always difficult to establish with certainty, we do know that the rate of house price appreciation peaked and started declining about 18 months before the dramatic up-turn in mortgage delinquencies. If one prefers a more rigorous test, economists at the Boston Fed have directly tested if prices first drove foreclosures or whether foreclosures drove prices. Their results conclude that its was declining prices that matter, and that the price effect of foreclosures is minimal.
Why does any of this ultimately matter? Because if we craft policies to avoid the adverse impacts of the next property bubble based upon a narrative of “consumer protection” — as is being pushed by the Obama Administration, we will do little to avoid the creation of the next housing bubble and its damaging aftermath. Instead we should be focusing attention on those policies that contributed to the creation of the housing bubble: expansionary monetary policy and the Federal government’s blind pursuit of ever-expanding home-ownership rates at any cost.
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