Archive for September, 2009
‘Behind the Headlines’? Despite the Headlines!
STRATFOR—a group I hadn’t heard of before—provides, in their words, “geopolitical intelligence – independent, non-ideological and non-partisan analysis and perspective that is unavailable anywhere else in the world.” They also say they provide the “intelligence behind the headlines.”
Well, I was struck—delighted, really—to see them outright contradict the headlines in a report of theirs that mercilessly skewers H1N1 (swine) flu fears:
It has been five months since the A(H1N1) influenza virus — aka the swine flu — climbed to the top of the global media heap, and with the start of the Northern Hemisphere’s annual flu season just around the corner, the topic is worth revisiting.
If you take only one fact away from this analysis, take this: The U.S. Centers for Disease Control and Prevention (CDC) believes that hospitalization rates and mortality rates for A(H1N1) are similar to or lower than they are for more traditional influenza strains. And if you take two facts away, consider this as well: Influenza data are incomplete at best and rarely cross-comparable, so any assertions of the likelihood of mass deaths are little more than scaremongering bereft of any real analysis or, more important, any actual evidence.
One would expect “intelligence” reporting firms to have the same incentives as politicians and other media: drum up fear to drum up business. But there is value in providing actual facts and sound strategies for responding to world events. As a non-expert, I’m not able to evaluate the substance of the STRATFOR report or its conclusions, but I give it credibility as a statement against interest.
After the early ineptitude shown by the Obama Administration, I was beginning to think that the steady drumbeat of news about preparation for flu season was appropriate societal girding for what could be a notable disease outbreak. I am more inclined now to believe that we are flushing more money down the drain because of fears the administration generated.
Overreaction harms the country, and it is the responsibility of governments—if they take a role—to quell impulses toward overreaction when incidents of national significance occur.
Washington Legal Foundation Opposes GBS Deal
Via James Grimmelmann, the Washington Legal Foundation, a group known for its defense of property rights, filed an objection to the Google book deal earlier this month focusing on concerns related to those I raised in my posts earlier this week.
WLF points out that the Supreme Court has mandated that plaintiffs seeking to certify a class must make a diligent effort to notify all affected class members. According to the high court’s Shutts decision, this effort must include—at a minimum—sending a letter to every identifiable member of the class. In this case, this would mean sending a letter to every address in the US Copyright Office’s database of authors. WLF questions whether this was done; the foundation reports that it never received notification related to any of the books for which it holds the copyrights.
Now, it might be objected that this process would be prohibitively expensive. But if the class is so large that it’s impractical to notify all of its members, then the class is certainly too large to expect a judge to verify that the interests of all class members is being served by the settlement. If the class is too large to notify, then it’s too large to certify.
Repeat after Me: “We Are All Individuals”
A millennium or so ago, Steve Martin played a stadium with his stand-up act. He got the crowd of tens of thousands to repeat a series of statements in unison. My favorite, for sheer irony: “We Are all Individuals.”
But, the thing is, we are.
This is why I never cease to be amazed by disagreements like the one currently playing out between the curriculum groups “Common Core,” and “Partnership for 21st Century Skills.”
Is there really one curriculum that is right for every child in this nation of 300 million people? Really?
Rather than fighting a winner-take-all Shootout at the O.K. Curriculum, which is what our illustrious leaders seem to want, how about this peace-loving alternative: we let teachers teach whatever and however they want, and we let families choose and pay for whichever schools they think are best for their kids (with financial aid for those who need it).
‘Cause the thing is, a quarter century of econometric research is repeating, in Steve-Martin-Like unison that: educational freedom works.
Online Privacy and Regulation by Default
My colleague Jim Harper and I have been having a friendly internal argument about Internet privacy regulation that strikes me as having potential implications for other contexts, so I thought I might as well pick it up here in case it’s of interest to anyone else. Unsurprisingly, neither of us are particularly sanguine about elaborate regulatory schemes—and I’m sympathetic to the general tenor of his recent post on the topic. But unlike Jim, as I recently wrote here, I can think of two rules that might be appropriate: A notice requirement that says third-party trackers must provide a link to an ordinary-language explanation of what information is being collected, and for what purpose, combined with a clear rule making those stated privacy policies enforceable in court. Jim regards this as paternalistic meddling with online markets; I regard it as establishing the conditions for the smooth functioning of a market. What do those differences come down to?
Australian Trade Scholars Offer Perfect Cure for ‘Protectionitis’
Earlier this month, the Lowy Institute in Australia published a paper offering some very sound and, obviously, very timely advice about how to contain, and ultimately, eradicate protectionism. The paper is being circulated among the G20 delegations, who will undoubtedly discuss the topic of trade and protectionism in Pittsburgh next week. So for those of you interested in getting a sense of what will probably be the single best idea on (or at least near) the table at the G20 summit, I highly recommend this 20-pager.
The solution proposed by the authors boils down to a two-word phrase: “Domestic Transparency.” What is meant by that phrase is that “defeating protectionism begins at home.” And by that slogan, the authors mean that the key to reducing, and ultimately eliminating, protectionism is not external pressure from other countries, mercantilist trade negotiations, or filing trade complaints at the WTO, but rather greater awareness at home of the real costs of protectionism. I couldn’t agree more. (In fact better transparency is one of our recommendations in this paper).
When governments impose trade barriers at the behest of special interests, they usually justify that protectionism with diversionary rhetoric concerning some vague conception of the “national interest,” and the imperative of shielding domestic business from unfair competition and other vagaries of the globalized economy. That the protectionist measure itself—the product of special interests diverting productive resources from economic to political ends—forces involuntary and usually unknowing subsidization of those protection-seekers by the same citizens at large who are expected to buy into the national interest canard is a detail about which most people remain in the dark.
Republicans Just as Guilty of Flawed Keynesian Thinking
The core of Keynesian economic policy is that the government must come in and replace reductions in private sector demand with public sector demand, therefore bringing overall demand back to its previous level. One of the many flaws in this thinking is in assuming that the previous level of demand was “correct” and getting us back to that level is the appropriate policy response.
Take the example of the housing market and the government response. The primary response of Republicans in Washington has been to offer tax credits and other incentives to replace the drop in demand for housing. Witness Senator Johnny Isakson’s recent comments on why we need to extend the $8,000 homebuyer tax credit: “If you take that kind of business out of what’s already a very weak housing market, you do nothing but protract and extend the recession.”
This analysis could not be more wrong. The tax credit largely acts to keep housing prices from falling further. However, that is how markets are supposed to clear in an environment of excess supply. If there’s too much housing, the way to address that is to allow housing prices to fall, which attracts buyers back into the market.
We should also recognize that the tax credit does not help the buyer, it helps the seller, by allowing the seller to charge that much more for the price of the home.
Bob McDonnell: The Modern Republican
This is from the Reagan administration’s deregulatory 1981 energy plan: “All Americans are involved in making energy policy. When individual choices are made with a maximum of personal understanding and a minimum of government restraints, the result is the most appropriate energy policy.”
Many modern Republicans claim devotion to Ronald Reagan’s ideas, but they often seem to forget about the “minimum of government” thing. The following points are from Republican Virginia gubernatorial candidate Bob McDonnell’s “More Energy, More Jobs” plan:
- “McDonnell was the chief sponsor of legislation creating the Virginia Hydrogen Energy Plan.”
- “McDonnell also supported grant programs for solar photovoltaic manufacturing, tax exemptions for solar energy and recycling property, and tax credits for solar energy equipment.”
- “In order to protect Virginia’s citizens from the skyrocketing wholesale prices of electricity seen in other states, McDonnell brought together all the necessary stake holders to re-regulate electricity in Virginia.”
- “Currently, Virginia is the second largest importer of electricity behind California. This is unacceptable.”
- “Bob McDonnell will establish Virginia as a Green Jobs Zone to incentivize companies to create quality green jobs. Qualified businesses would be eligible to receive an income tax credit equal to $500 per position created per year for the first five years.”
- “The Virginia Alternative Fuels Revolving Fund was established to assist local governments that convert to alternative fuel systems . . . Bob McDonnell will expand the purpose of this fund to include infrastructure such as refueling stations, provide seed money and aggressively pursue additional grants.”
- “Bob McDonnell will make Southwest and Southside Virginia the nation’s hub for traditional and alternative energy research and development…To assist with the attraction, building and operation of major energy facilities in Southside and Southwest Virginia, we will also support the establishment of the Center for Energy.”
- “To help Virginia universities gain access to federal stimulus money, as Governor, Bob McDonnell will establish the Virginia Universities Clean Energy Development and Economic Stimulus Foundation.”
- “As Governor, Bob McDonnell will leverage stimulus funding to incentivize individuals and businesses to conduct energy audits and encourage public private partnerships between small businesses and government.”
It’s true that McDonnell’s plan has some free market elements, and also that Ronald Reagan supported some wasteful energy boondoggles. However, the degree to which the modern Republican wants to micromanage and manipulate the energy industry is remarkable. McDonnell is almost setting out a Soviet five-year plan for a substantial part of the Virginia economy. For goodness sakes, he wants to treat Virginia like a separate country and try to fix the supposed problem that it is “importing” too much energy from other states!
It’s not just energy. Look at the top-down central planning ideas that McDonnell has for “creating jobs”:
Taxpayers, Anyone? And How About Tuition Inflation?
The Student Aid and Fiscal Responsiblilty Act will probably be approved by the House of Representatives today, and to push it along the bill’s sponsor, Rep. George Miller (D-CA), makes clear for whom he is working:
Let’s remember whose voices really matter here. It’s time to listen to our students and our families.
First of all, do the voices of taxpayers not matter at all? You know, the folks who are going to foot the bill for all this largesse? Oh yeah – concentrated benefits, diffuse costs. And have students and their families really been trees falling in the wilderness with no one to hear them? With inflation-adjusted aid per full-time-equivalent student (table 3) rising from $4,454 in 1987 to $10,392 in 2007 — a 134 percent increase — it sure doesn’t seem so.
In fairness, the bill’s proponents have paid lip service to taxpayers, saying with straight and utterly deceptive faces that SAFRA won’t cost taxpayers a dime. The thing is, not only is this totally unsupportable according to several Congressional Budget Office analyses, it completely ingores that tax money is covering all of the costs of the bill. SAFRA would simply transfer taxpayer ducats from backing ostensibly private loans to loans directly from Washington, as well as lots of other federal expenditures.
And then there’s this: SAFRA supporters can talk all they want about helping students and families, but increasing grants and loans ultimately just hurts college-goers. Why? Because colleges and universities raise their prices to capture every additional penny of aid, as basic economics makes clear they would. So the only people politicians are ultimately helping are colleges, and by appearing to care ever so much about likely voters, themselves.
Have the Democrats Outsmarted the Republicans on Health Care?
In their attempt to defeat Obamacare, Republicans have focused their criticism on the public option, painting it as the most objectionable feature of existing proposals. Senator Max Baucus, (D-Mont.), has now proposed a plan without the public option. This leaves the Republicans in an awkward position, especially since Baucus’s plan is projected to cost less than earlier proposals.
If Republicans oppose the Baucus plan, they surely risk the ire of voters who will be told during the mid-term elections, “The Republicans blocked a plan that would have covered the uninsured and reduced the deficit.”
The problem is, the public option was never the crucial issue; instead, it was the mandate to purchase insurance. Once government mandates insurance coverage, it gets to define what constitutes insurance, which means it can ban pre-existing condition clauses and the like. The mandate also”justifies” large subsidies for insurance, to avoid non-compliance with the mandate. So, an individual mandate, which the Baucus plan includes, implies a rapid takeover of the entire health care system by the federal government.
Something like the Baucus plan will pass. It will either cost far more than existing projections, if government administrators fail to impose the restrictions on reimbursements that generate the projected cost savings, or it will involve massive rationing of care.
The Democrats played it perfectly. The Republicans got sucker-punched.
When Stimulus Is No Stimulus
The Obama administration has been touting its wasteful “stimulus” package as the answer to the recession. Now that Uncle Sam has started his spending binge, John Cogan, John Taylor, and Volker Wieland assess the result. Their conclusion: for all of the money spent, the effort wasn’t much of a stimulus.
They write in the Wall Street Journal:
Direct evidence of an impact by government spending can be found in 1.8 of the 5.4 percentage-point improvement from the first to second quarter of this year. However, more than half of this contribution was due to defense spending that was not part of the stimulus package. Of the entire $787 billion stimulus package, only $4.5 billion went to federal purchases and $17.7 billion to state and local purchases in the second quarter. The growth improvement in the second quarter must have been largely due to factors other than the stimulus package.
Incoming data will reveal more in coming months, but the data available so far tell us that the government transfers and rebates have not stimulated consumption at all, and that the resilience of the private sector following the fall 2008 panic not the fiscal stimulus program deserves the lion’s share of the credit for the impressive growth improvement from the first to the second quarter. As the economic recovery takes hold, it is important to continue assessing the role played by the stimulus package and other factors. These assessments can be a valuable guide to future policy makers in designing effective policy responses to economic downturns.
If policymakers really want to stimulate the economy, they will stop prodigiously wasting money, unfairly redistributing people’s earnings, making the tax system ever more complex, and imposing job-killing regulations. In other words, politicians will stop being politicians.
Public Schools Should TEACH Lord of the Flies, Not REENACT It
Let the Common School be expanded to its capabilities, let it be worked with the efficiency of which it is susceptible, and nine tenths of the crimes in the penal code would become obsolete; the long catalogue of human ills would be abridged; men would walk more safely by day…
– Horace Mann, the father of U.S. public schooling, 1841
How would Mann have reacted, I wonder, to the knowledge that his Common Schools would be expanded beyond his wildest expectations, end up enrolling 50 million children at a cost of over half a trillion dollars annually, and produce results like this:
And of course this attack wasn’t unique. A search for “school fight” on YouTube returns over 100,000 hits. How do private and charter schools compare to traditional public schools when it comes to safety and crime? Have a look at the Heritage Foundation’s recent study of the DC area.
And as for “the efficiency of which” Mann believed public schools were “susceptible,” it’s hard to find any sign of it a century-and-half into our experiment with them:
U.S. Total Per Pupil Spending vs. Achievement of 17-year-olds
Do we wait another century and a half to see if public schools will end crime and start spending efficiently? Or do we give families and taxpayers alternatives today?
Wednesday Links
- Quantifying misery in Iran.
- Why sending more troops to Afghanistan would only weaken the authority of Afghan leaders and undermine the U.S.’s ability to deal with security challenges elsewhere in the world. Plus, an exit strategy for Afghanistan.
- Grading the Baucus health plan: The good, the bad and the ugly.
- Who’s really indoctrinating the nation’s schoolkids.
- Podcast: How to quietly tax the poor, anger a giant nation, and reward a labor union, all at the same time!
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