Archive for August, 2009
Barney Frank Endorses Regulatory Protectionism
When a government increases the burden of taxes, spending, and/or regulation, this makes it more likely that productive resources – on the margin – will gravitate to jurisdictions with better economic policy. Crafty politicians understand that the freedom to cross borders is a threat to statist policies, which is why international bureaucracies dominated by high-tax nations, such as the Organization for Economic Cooperation and Development, are trying to undermine tax competition between nations by imposing fiscal protectionism. The same is true for regulation. The Chairman of a key House committee wants to impose regulatory protectionism to restrict the ability of Americans to patronize banks and other financial services companies based in jurisdictions with more laissez-faire policies. The Financial Times has the unsavory details:
Barney Frank, chairman of the House financial services committee, said he was concerned the new U.S. push to regulate banks and brokers more rigorously could put it at a competitive disadvantage if other countries did not follow suit. As a result, he would like to ban U.S. banks from doing business with countries not subject to similarly tough standards on everything from leverage limits and capital requirements to rules on transparency and clearing of derivatives. “Once we have rules . . . we will say to anybody who wants to be an outlier, ‘you forfeit your right to participate in the American system’,” Mr Frank told the Financial Times. “We will instruct the [Securities and Exchange Commission] and Treasury and the Fed to deny access to the American financial system to any country that holds itself out as a haven to escape our financial regulation.” …“It is absolutely the wrong approach,” said a top industry lawyer, who did not want to be identified criticising Mr Frank. “The assumption is that everybody has to do business in the U.S. and we can set global standards. That is absolute nonsense. There are alternatives, including Hong Kong,” the lawyer added. …Tim Ryan, president of the Securities Industry and Financial Markets Association, said that U.S. regulations should not be imposed on other countries. …Mr Frank’s interest in banning groups from non-co-operating countries stems in part from the U.S. experience after it adopted the Sarbanes-Oxley corporate accountability law. Many overseas companies opted to list outside the U.S. rather than comply with Sarbox requirements.
Debating the Future of Shool Choice
I have blogged repeatedly of my concern that charter schools are likely to succumb to the same heavy burden of rules and regulations that beset traditional public schools. And that, in doing so, they will expand rather than contract the existing state monopoly – first assimilating independent private schools into their fold, and then homogenizing them as the regulatory burden mounts.
This does not appear to be one of the concerns that will be represented at a forthcoming Fordham Foundation event on charter schools and the future of school choice. Instead, Fordham staff and their guests will discuss whether the current administration’s desire to expand the number of charter schools has doomed the voucher movement to irrelevancy.
It’s an interesting enough topic by itself, and suitably provocative, but it also excludes from consideration a far larger segment of the private school choice policy spectrum: education tax credits. Perhaps to their occasional advantage, tax credits seem to garner far less attention among education technocrats than do vouchers. Yet scholarship donation and personal use credits are benefitting more than 5 times as many students as vouchers, though the benefit is generally smaller. Credit programs are growing faster than vouchers, on average, and seem to enjoy more bi-partisan support — certainly when it comes to programs not limited to special-needs students.
I’m sure the upcoming Fordham event will be interesting, almost as much for what it will omit as what it will include.
Children, Turn in Your Parents
That was my response to a comment from talk radio host Brian Wilson, about 14 minutes into this podcast, on the White House’s Snitch Project. Of course, the conversation leading up to that is well worth 14 minutes.
Using Twitter to Confront an Anti-Semitic Attack in Chile’s Paper of Record
After a morning workout and attending Mass this Sunday, I read El Mercurio (Chile’s paper of record) online. Although I seldom read Chilean newspapers blogs (too many attacks and too much dirt), I did so that morning because I was impressed by the indignation expressed by my friend Luis Larraín in his Sunday blog (titled “Canallas” – Shameless). I had named Larraín Superintendent of Social Security when he was 25 years old. At that time I was 30 and Secretary of Labor and Social Security.
With astonishment I discovered that a certain “Mr. Murillo”, in the comment number 10 on the blog (which I copied immediately, and backed up electronically), explicitly attacked another commenter, Mr. José Fregoso Edelstein, by saying that his previous comment was due to the fact that he is from a “bad race” because he is Jewish.
I immediately logged in to Twitter and posted a ‘tweet’ demanding El Mercurio delete the blog comment, because it is a terrible insult directed at a group of people that have suffered indescribable horrors, not only in the 20th Century, but throughout history. I would have done the same thing if the insult was directed at Palestinians, Lebanese, Croatians, or any other racial/religious/national group.
However, I found an unexpected surprise. Instead of receiving immediate support for an action I thought just and reasonable, several people on Twitter attacked Jews, and me for defending them (one wrote, “You have used your enormous prestige in Chile to become “a shield for the Jews”). They also accused me of “encouraging censorship”, suggesting a “media dictatorship”, etc. . . . I replied inmediately in Twitter to the least offensive ones. Fifteen minutes later I received a ‘tweet’ from an editor at El Mercurio, saying that they had seen my complaint in Twitter and that they were studying the situation. With another tweet I insisted on immediate deletion of the comment. Twenty minutes later the newspaper editors deleted the offensive comment number 10. I want to emphasize that the editorial mistake, even this grievous one, does not compromise the newspaper El Mercurio as a whole, and its fast action in regard to the issue speaks to the newspaper’s chief editor’s integrity. It was an extraordinary triumph of the fast boat Twitter over the “media carrier” in Chile, another demonstration of the liberating potential of the wonderful new technologies being developed in the land of the free and the brave.
What left me very worried, and the reason I wrote this, is having detected a worrisome anti-Semitic sentiment among my fellow countrymen. Is this unjust anti-Semitic sentiment widespread, though hidden, in Chile, or was this only a “black swan?” I declare myself in a state of alert. We are building a free and good country. There should be no place whatsoever for the language of hate and the discrimination of minorities. As the great Albert Einstein said: “The world is a dangerous place, not because of those who do evil, but because of those who look on and do nothing.”
Government Schooling vs. Freedom
Yesterday, I posted a blog entry responding to an interview with historian Diane Ravitch in which she criticized “privatization” and asserted that “deregulation nearly destroyed our economy in the past decade.” My response was directed at Prof. Ravitch, but touches on a bigger issue with which all people in the education debate need to grapple: How much should the school choice debate be centered not around test scores or financial costs – though those are obviously very important considerations – but on the role and structure of education in a free society? Can we not trust free people to make their own education decisions? If not, how can our system of education be compatible with a nation firmly rooted in individual liberty?
That is a debate I think we desperately need to have – it is fundamental for a free society – and I hope others will join in.
Fear of Freedom Leaves Only Faith Healing for Our Schools
Historian Diane Ravitch drives me nuts. She has written numerous, terrific books chronicling the ills of government control of education, including the wrenching social conflict it has caused; the ejection of meaningful content from textbooks and tests it has required; and the dominance of educrats over parents and children it has enabled. She has been, essentially, the official historian of government-schooling’s failure. And yet, in a new blog interview with journalist John Merrow, she appears not to comprehend the most important lesson her copious works have to offer: that government education is doomed to fail.
Why the huge disconnect between her historiography and willingness to act on its clear implications? Because, it appears, as much as she knows that government schooling fails, she fears educational freedom even more. “Privatization,” in her mind, is simply too dangerous:
I remember your saying in an interview years ago that you favored public schools but not the public school system that we have. In New Orleans Paul Vallas has called for ‘a system of schools, not a school system.’ What’s your ideal approach? Are we moving in that direction?
If “a system of schools” means that the public schools should be handed over to anyone who wants to run a school, then I think we are headed in the wrong direction. Privatization will not help us achieve our goals. We know from the recent CREDO study at Stanford that charter schools run the gamut from excellent to abysmal, and many studies have found that charters, on average, produce no better results than the regular public schools. Deregulation nearly destroyed our economy in the past decade, and we better be careful that we don’t destroy our public schools too.
Unfortunately, while Prof. Ravitch knows a gigantic amount about education history, she exhibits precious little understanding of freedom or its economic subset, free markets. For one thing, charter schooling – a system by which public schools are given a right to exist and largely held accountable by government – isn’t even close to “privatization,” if by that we mean taking control from government and giving it to free, “private” individuals. Worse, Ravitch evinces a reflexive and, frankly, simplistic fear of free markets in hyperbolically asserting that “deregulation nearly destroyed our economy in the past decade.” I’d strongly suggest that she explore some non-education history – for instance, that of government-sponsored institutions such as Fannie Mae and Freddie Mac; federal laws such as the Community Reinvestment Act; and federal regulation – before making any such over-the-top declaration again.
Ultimately, it seems likely that Prof. Ravitch fails to grasp – or, perhaps, to intuitively feel – how freedom works, and hence she fears it. Like many people, maybe she’s just not comfortable with seemingly ethereal spontaneous order, and needs to have some higher power pulling the strings to feel safe. Perhaps she fails to see how freedom, by fostering competition and innovation, produces all of the wonderful things we take for granted. Maybe she doesn’t really understand that it is due to freedom that we have an abundance of computers, coffee cups, cars, houses, package delivery services, miracle drugs, and pencils, not to mention religious pluralism, marketplaces of idea, and even happiness.
Timmy Throws a Temper-Tantrum
As reported in yesterday’s Wall Street Journal, Treasury Secretary Tim Geithner called fellow bank regulators, included Fed Chair Ben Bernanke and FDIC Chair Sheila Bair, over for an obscenity-laced rant about their audacity in raising questions about his scheme to fix our financial system.
Reportedly the Secretary told regulators that “enough is enough” and that they’ve been heard, so the time for debate is over. This sounds eerily like the President’s previous comments about including Republicans in the talks over the stimulus – you’ve been heard, so you were “included,” now shut up. The shouting down of debate is becoming all too much a signature of this Administration.
The Secretary apparently also told the regulators in attendance that it was the administration and the Congress that sets policy. Perhaps next he’ll tell us that the power of the purse lies with the Treasury and the Congress. Secretary Geithner has no more constitutional authority to set policy than do any of the bank regulators. It is the job of Congress to make laws, not the Treasury Secretary’s. He can offer his opinion, just as they can, and should, offer theirs.
Of course, Secretary Geithner’s frustrations are understandable, given that his regulatory proposals have hit a brick-wall with both Congress and the Public. He has made no effort to explain to either Congress or the public how exactly his plan will stop future bailouts. Instead, any reasonable read of his proposal would lead to the conclusion that we will have more bailouts, rather than less, under the Obama-Geithner plan. Instead of directing his energies at anger, he should put them toward coming up with solutions that actually increase the stability of our financial system.
We were all told during his confirmation process that we must overlook such facts as his failure to pay taxes, because Tim Geithner was the “boy-wonder” who would save our financial system. As his recent out-bursts demonstrate, “boy-wonder” is only half-right.
The Boston Globe Misleads Readers About the Cost of Health Reform in Massachusetts
An editorial in today’s Boston Globe announces, “Mass. bashers take note: Health reform is working.” The editors write:
Pundits and politicians who oppose universal healthcare for the nation have a new straw man to kick around – the Massachusetts reform plan that covers more than 97 percent of the state’s residents. In the myth that these critics have manufactured, this state’s plan is bleeding taxpayers dry, creating nothing less than a medical Big Dig.
The facts – according to the Massachusetts Taxpayers Foundation – are quite different. Its report this spring put the cost to the state taxpayer at about $88 million a year, less than four-tenths of 1 percent of the state budget of $27 billion.
Here’s why the claim that the reforms cost Massachusetts taxpayers just $88 million per year is wrong.
- According to the Massachusetts Taxpayers Foundation, $88 million is not the annual cost of the law, but the average year-to-year increase in state spending due to the law. It’s a marginal-cost estimate, not a total-cost estimate.
- The foundation used (uncertain) future spending cuts to make the average annual increase in spending appear smaller. In 2009, the total cost to the state government, according to the foundation, will be $408 million, nearly five times what the Globe claims.
- That $408 million is just the cost to the state government. According to the foundation’s estimates, the state government’s share amounts to just 20 percent of the law’s total cost of $2.1 billion in 2009. The remaining 80 percent is borne by the federal government (20 percent) and private individuals and employers complying with the law’s individual and employer mandates (60 percent). Since Massachusetts taxpayers also pay federal taxes and must comply with the law’s mandates, state taxpayers pay much more than $88 million to comply with the law. In fact, the total cost of the law is about 24 times what the Globe says it is.
So the Globe is wrong. But here’s why the Globe should have known better.
I recently wrote an op-ed where I picked apart the Massachusetts Taxpayers Foundation numbers. The op-ed hardly “manufactured myths” or “kicked around straw men.” I reached these conclusions using the foundation’s own data, and by talking with foundation president Michael Widmer. Widmer agrees with all of these points. (With one exception: he maintains it’s legitimate to use assumed future savings to reduce the average year-to-year increase in spending. But really, that’s a minor issue.)
I submitted that op-ed to The Boston Globe. They sat on it for a week, then rejected it. Which is fine. (FYI, the op-ed has been accepted at The Providence Journal.)
At a minimum, that raises the question of whether this misinformation was in fact disinformation.
On Health Reform, Massachusetts Is the Model
Last week, former Massachusetts governor Mitt Romney (R) penned a wonderfully misleading oped for USA Today. In response, I submitted this poor, unsuccessful letter to the editor:
If Massachusetts were covering the uninsured for less than $800 a pop, as former Gov. Mitt Romney suggests [“Mr. President, What's the Rush?”, July 30], then the health reforms he signed in 2006 would truly be a model for the nation. Yet data from the very watchdog organization Romney cites (the Massachusetts Taxpayers Foundation) indicate something different.
The Massachusetts reforms cost more than five times what Romney claims, because the state pushed more than 80 percent of the cost off-budget, and onto private individuals and the federal government. In fact, “RomneyCare” covers a family of four at a cost of at least $27,000 – more than twice the average cost of employer-sponsored coverage ($12,680).
Romney is correct that President Barack Obama has the wrong prescription for health reform. But that’s because Obama’s approach is Romney’s approach. Like Romney, Obama would have government force people to purchase health insurance; control the content, terms, and price of “private” health insurance policies; expand Medicaid; and create new government subsidies and bureaucracies. Like Romney, Obama would push most of the cost off-budget by imposing mandates on states and private individuals – which constitutes a huge tax increase on the middle class.
ObamaCare, like RomneyCare, is socialized medicine with a private façade.
“Ad Audit” Audit
Kaiser Health News has launched a new “Ad Audit” series that critiques the TV ads that various groups are airing both to promote or hinder the health care reforms moving through Congress. KHN correspondent Jordan Rau makes two solid contributions to the series. Two other audits leave something to be desired, however, while a fifth audit is just…well, you decide.
One lackluster audit examines an ad by the health-insurance lobby, AHIP. KHN dings AHIP for making bland statements in support of “bipartisan reforms” and “universal coverage” without offering “policy specifics about what these statements mean.” But the AHIP ad does make two policy statements that are susceptible to analysis:
If everyone’s covered, we can make health care as affordable as possible. And the words “pre-existing condition” become a thing of the past.
How is covering everybody supposed to make health care more affordable? Might there be a downside to requiring insurers to cover pre-existing conditions? KHN provides no analysis of the former statement. And rather than analyze the latter, KHN offers a spat between a left-leaning analyst and an AHIP lobbyist (I suppose that’s considered a balanced discussion) over whether AHIP’s proposed price controls go far enough.
No, Please Don’t Think Outside the Box
National Journal‘s CongressDaily reports ($$) on a speech by Department of Homeland Security secretary Janet Napolitano:
“We need to be looking at [cybersecurity] not from a traditional standpoint of how we do law and order, but how we need to do it in a new and evolving world,” Napolitano said during the keynote speech at a cybersecurity conference hosted by the Secret Service. “We need to be thinking outside our traditional boxes. We need to be thinking ahead,” Napolitano said . . . .
Security expert Bruce Schneier sees it differently: “Securing our networks doesn’t require some secret advanced NSA technology. It’s the boring network security administration stuff we already know how to do: keep your patches up to date, install good anti-malware software, correctly configure your firewalls and intrusion-detection systems, monitor your networks.”
Entrepreneurial government officials would like you to think cybersecurity is big and new and all-different—a game-changer. But while there are some real challenges, it’s not anything so different that we need to “think outside of the box,” especially not the box that keeps government in its properly scoped law enforcement and national security roles.
Pessimism About Afghanistan
Despite the happy talk from some government officials, the American people see the situation in Afghanistan as more likely to deteriorate than improve. Rasmussen Reports tells us:
Voters are less hopeful about the war in Afghanistan these days.
A new Rasmussen Reports national telephone survey finds that only 22% expect the situation there to get better, down seven points from a month ago.
The plurality (41%) says things will get worse in the coming months, an increase of two points since the beginning of July. Another 24% say the situation will stay about the same during that time, up from 21% in the previous survey.
Forty-three U.S. soldiers and 31 soldiers from other Western allies were killed in Afghanistan in July, the highest monthly total for both groups in the eight-year-old war. President Obama began shifting more U.S. troops to Afghanistan shortly after taking office because he contends that the country is the central front in the war on terror.
Unfortunately, there is much to be pessmistic about, as Cato’s Malou Innocent has been reporting.
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