Archive for July, 2010
Obama Tells It Like It Is
The New York Times reports:
President Obama signed into law on Wednesday a sweeping expansion of federal financial regulation….
A number of the details have been left for regulators to work out, inevitably setting off complicated tangles down the road that could last for years…complex legislation, with its dense pages on derivatives practices….
“If you’ve ever applied for a credit card, a student loan, or a mortgage, you know the feeling of signing your name to pages of barely understandable fine print,” Mr. Obama said.
Thoughts on NYT National Standards Debate
While national education standards have been advancing largely under the radar, they have at least generated enough attention — probably because there has been a modicum of controversy in Massachusetts — to inspire a New York Times “Room for Debate” installment. I bring this up because (a) such attention is a pretty rare thing, and (b) I’m a contributor and want to critique my “opponents.”
I’ll take my co-discussants one at a time and just pick whatever nits I think need picking. I do so noting that our arguments were supposed to be very short, so it is quite possible that my adversaries have good replies to my complaints and simply couldn’t include the relevant information in their posts.
Here we go:
Richard Kahlenberg: This must seem like Rip Kahlenberg Day, but I assure you it’s not intentional. I just go where the news takes me.
I find Kahlenberg’s response the least persuasive of the entries. He ignores almost all the evidence on national standards, and essentially asserts that such standards make sense because former AFT president — and Kahlenberg biography subject – Albert Shanker wanted them. Oh, and Shanker noted that “virtually all the nations that beat us on international assessments had in place uniform standards.”
National standards don’t make sense because they ignore the political reality in which they would be implemented (not to mention the fact that all kids are different). Taking fifty government monopolies and casting them aside for a single monopoly does nothing to change the crippling problems inherent to monopolies. (The most notable being their utter lack of incentive to perform well.) And could we please dispense with the “all countries that beat us” factoid? As Alfie Kohn thankfully pointed out in his entry, “while most high-scoring countries have centralized education systems, so do most of the lowest-scoring countries.” It is a point, by the way, I fleshed out in my recent analysis Behind the Curtain: Assessing the Case for National Curriculum Standards.
Speaking of Kohn…
A Response to Gruber on RomneyCare & Health Care Costs
I just came across this letter to the editor of the Wall Street Journal from MIT economist Jonathan Gruber. I don’t know how to confine myself to just one of the letter’s many problems. So brace yourselves, here comes the fisk.
Joseph Rago’s article on Massachusetts health-care reform (“The Massachusetts Health-Care ‘Train Wreck‘,” op-ed, July 7) is exactly the type of selectively misleading use of facts upon which opponents of health-care reform have been relying over the past year.
No comment, other than remember the phrase “selectively misleading use of facts.”
Health-care reform in Massachusetts has covered 60% of the state’s uninsured, has done so at roughly the cost projected before reform was enacted in 2006, and remains overwhelmingly popular with the residents of the state.
Regarding coverage gains, Massachusetts officials used to claim that RomneyCare reduced the share of uninsured residents from around 10 percent to 2.6 percent. In a study released this year, Aaron Yelowitz (a former student and coauthor of Gruber’s) and I show why that figure is too low and why the actual figure is likely 5.1 percent or higher. The study on which Gruber relies — like all other such studies — neither mentions nor attempts to measure the problem that Yelowitz and I identified: uninsured Massachusetts residents appear to be responding to the individual mandate by concealing their lack of insurance, which would inflate the coverage gains. Since that study obtained results similar to our results for Massachusetts adults, that study’s estimate of a 60-percent reduction in the uninsured appears to be an upper-bound estimate, rather than a point estimate.
Regarding costs, I haven’t seen any updated numbers since the Massachusetts Taxpayers Foundation’s whitewash from May 2009. I’d like to see an updated, non-whitewashed report on actual spending and how it compares to the original projections, especially considering that in 2006, the Kaiser Family Foundation reported that Massachusetts “anticipates that no additional funding will be needed beyond three years.“ Updated figures would also allow us to judge how much RomneyCare spent per newly insured resident.
The state has seen a decline in its nongroup premiums of more than 50% relative to national trends…It reduced the costs to individuals of purchasing insurance…[an] enormous reduction relative to pre-reform…
Here’s where Gruber engages in his own “selectively misleading use of facts.” Yes, non-group premiums appear to have fallen for the 4 percent of residents in the non-group market — because RomneyCare shifted those costs to workers with job-based coverage.
It is true that reform has not slowed the growth of group health-insurance premiums, which have continued to rise at exactly the same rate as in the nation as a whole.
The first part of this sentence is an understatement; the second part is false. This report from the left-wing Commonwealth Fund shows that premiums in Massachusetts are growing faster than anywhere else in the nation. And the only study that has tried to isolate the effect of RomneyCare finds that it increased premiums for employment-based coverage by 6 percent (see cost-shifting, above).
Despite Gov. Mitt Romney’s claims, the Massachusetts reform was not designed to slow the growth of health-care cost growth.
It should be obvious by now that RomneyCare wasn’t designed that way. But it sure was sold that way. And so was ObamaCare. Any bets on how long before we hear apologists for both claiming that ObamaCare wasn’t designed to slow cost growth?
The PPACA also includes a series of changes that represent the best thinking about how to control costs, such as an independent rate-setting board for Medicare, pilots of innovative medical reimbursement approaches, and an end to the open-ended tax subsidy to the highest cost health insurance plans in the U.S. None of these is guaranteed to slow the rate of cost growth. But each is better than doing nothing, which was the alternative.
So the, ahem, best thinking on how to contain health care costs is (1) price and exchange controls set by (2) an unelected and unaccountable rationing board, plus (3) taxing health insurance. Bra-vo. Sure, Obama’s National Economic Council chairman Larry Summers says, “Price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time.” But when the alternative is nothing — nothing! — that means the bar for “best thinking” isn’t very high.
In the end, it is impossible to control health-care costs without first bringing as many citizens as possible into our health-insurance system.
As I blogged earlier today, it does not speak well of the Left’s approach to health care that in order to reduce wasteful government spending — or at least pretend to — they must first create more wasteful government spending.
Filed under: Cato Publications; General; Government and Politics; Health Care
Conflict and Class Integration in Wake County, NC
Explicit, forced racial integration of the public schools is almost completely a thing of the past, buried in part by broad distaste for it among Americans of all races who had grown tired of the conflict, coercion, and plain inconvenience it often caused, as well as numerous Supreme Court rulings sharply curtailing it. But coerced integration has not gone away: Proponents of engineering racial integration have turned to income as the basis for assigning kids to schools, with the goal of achieving greater socio-economic — and, in the process, racial – balance.
To listen to some proponents of coerced integration by class, this new focus is a clear social and educational success. To illustrate the success, in All Together Now: Creating Middle-Class Schools through Public School Choice, Century Foundation scholar Richard Kahlenberg highlights Wake County, North Carolina, among a few other places. Here’s his conclusion on Wake County as of about 2000, when school board candidates campaigning for “neighborhood schools” — meaning school assignment based on geography instead of racial or economic mix — were roundly defeated:
Wake County citizens knew firsthand that racial integration in the schools had worked, and now they were at the forefront in promoting a bold new version in the twenty-first century.
Apparently, much has changed in ten years: Today, the Wake County school district seems to be almost in the midst of a civil war as a new majority attempts to return the district to neighborhood schooling. Indeed, just yesterday a board meeting descended into bedlam – as previous meetings have — as protestors and school board members on all sides fought one another over the effort to return to neighborhood schooling.
What’s the lesson here? The same one we should learn every time Americans fight — and they fight a lot – over their public schools: Lots of people want myriad different things for their kids — racial diversity, schools near their homes, specific curricular focuses – and government schooling simply cannot give it to all of them. That is why if we ever want real, lasting peace in education we must end government schooling and move to a system of universal educational freedom. It’s the only way that all people can pursue the education they want without having to impose it in on everyone else.
The Joint Committee on Taxation’s Voodoo Economics
The Wall Street Journal has an excellent editorial this morning on the obscure — but critically important — issue of measuring what happens to tax revenue in response to changes in tax policy. This is sometimes known as the dynamic scoring versus static scoring debate and sometimes referred to as the Laffer Curve controversy.
The key thing to understand is that the Joint Committee on Taxation (which produces revenue estimates) assumes that even big changes in tax policy have zero macroeconomic impact. Adopt a flat tax? The JCT assumes no effect on the economic performance. Double tax rates? The JCT assumes no impact on growth.
The JCT does include a few microeconomic effects into its revenue-estimating models (an increase in gas taxes, for instance, would reduce gasoline consumption), but it is quite likely that they underestimate the impact of high tax rates on incentives to work, save, and invest. We don’t know for sure, though, because the JCT refuses to make its methodology public. This raises a rather obvious question: Why is the JCT so afraid of transparency? Here’s some of what the WSJ had to say about the issue, including some comparisons of what the JCT predicted and what happened in the real world.
…it’s worth reviewing whether Joint Tax estimates are accurate. This is especially important now, because President Obama and Democrats in Congress want to allow the 2003 tax cuts to expire on January 1 for individuals earning more than $200,000. The JCT calculates that increasing the tax rates on capital gains, dividends and personal income will raise nearly $100 billion a year. …we are not saying that every tax cut “pays for itself.” Some tax cuts—such as temporary rebates—have little impact on growth and thus they may lose revenue more or less as Joint Tax predicts. Cuts in marginal rates, on the other hand, have substantial revenue effects, as economic studies have shown. …So how well did Joint Tax do when it predicted a giant revenue decline from the 2003 investment tax cuts? Not too well. We compared the combined Congressional Budget Office and Joint Tax estimate of revenues after the 2003 tax cuts were enacted with the actual revenues collected from 2003-2007. In each year total federal revenues came in substantially higher than Joint Tax predicted—$434 billion higher than forecast over the five years. …As for capital gains tax receipts, they nearly tripled from 2003 to 2007, even though the capital gains tax rate fell to 15% from 20%. Yet the behavioral models that Mr. Barthold celebrates predicted that the capital gains cuts would cost the government just under $10 billion from 2003-07 when the actual capital gains revenues over five years were $221 billion higher than JCT and CBO predicted. …Estimating future federal tax revenues is an inexact science to be sure. Our complaint is that Joint Tax typically overestimates the revenue gains from raising tax rates, while overestimating the revenue losses from tax rate cuts. This leads to a policy bias in favor of higher tax rates, which is precisely what liberal Democrats wanted when they created the Joint Tax Committee.
All of the revenue-estimating issues are explained in greater detail in my three-part video series on the Laffer Curve. Part I looks at the theory. Part II looks at the evidence. Part III, which can be watched below, analyzes the role of the Joint Committee on Taxation and speculates on why the JCT refuses to be transparent.
Standards Were Higher, More Local, a Century Ago
I think it’s important to study historical trends in education, but I always chafe when people talk about how difficult high school graduation or even entrance examinations were in the mid-to-late 1800s. As late as 1890, only about one student in 10 attended high school (though the figure was higher in New England), so these tests tell us only what the best and brightest were expected to know and be able to do.
But the same is not true for the earlier grades.
There were 380,000 children between 5 and 16-years-old in New York State in 1821; 342,479 of whom–90 percent–were enrolled in school. Granting that the North Eastern states lead the nation in enrollment, it was still the case that obtaining a grammar school education was the norm in the United States by the mid 1800s. So how challenging was the content these children were taught? How does this strike you:
It was during one of my lonely journeyings, amid a far distant region of mountain locked within mountain, and sad rivers and melancholy tarns writhing or sleeping within all–that I chanced upon a certain rivulet and island. I came upon them suddenly in the leafy June, and threw myself upon the turf, beneath the branches of an unknown odorous shrub, that I might doze as I contemplated the scene. I felt that thus only should I look upon it–such was the character of phantasm which it wore.
That’s an excerpt of Edgar Allan Poe’s “Island of the Fay,” which appeared in William Elson’s Grammar School Reader, Book Three–published in 1910. As late as a century ago, adolescent children were still taught rich and complex prose written by masters of the language. Not simplified. Not dumbed down.
Why?
It wasn’t because the federal Department of Education was pushing it; it didn’t exist yet. And it wasn’t because a consortium of governors banded together to raise standards, either. In 1910, control over the content of instruction was still chiefly local–as it had been throughout the 1800s.
After generations of centralization of authority–district consolidations, the rise of state education bureaucracies, and increasing federal intrusions in the classroom–standards are lower now than they were a century ago. Why, then, should any sane person expect that further centralization–the kind advocated by national standards advocates–would improve rather than worsen matters?
Why Politics Is Stupid
Ezra Klein and Jonathan Chait argue the only way government could reduce inefficient Medicare spending was to create a new health care entitlement program. Think about that.
The worst part is, they’re not entirely wrong. And that same system will now be controlling your health care and an ever-growing share of your income.
Chávez Signals Takeover of Globovisión
Since Hugo Chávez promised last year to shut down Globovisión—Venezuela’s last independent TV station—it’s only been a question of when and how he will try to fulfill his pledge. A dictator can’t tolerate a free press, and Globovisión’s critical and independent coverage has long been a thorn in Chávez’s side.
However, shutting down Globovisión would’ve been an abrupt move that would have drawn international condemnation around the world, and it would’ve made life harder for those international leaders who still claim that Venezuela is a democracy, such as Brazil’s President Luiz Inácio Lula da Silva, Spain’s Prime Minister José Luis Rodriguez Zapatero and OAS Secretary General José Miguel Insulza. Yet Chávez could ill afford having an independent TV station in light of collapsing poll numbers, rising social discontent, and a critical election in September for a new National Assembly that might lead to his party losing control of that body.
This is why Chávez has launched a takeover strategy of Globovisión, which became clear yesterday with his announcement that the Venezuelan government will take almost half of Globovisión’s shares, and name a representative in the network’s Board of Directors. His shady plan consists of seizing the shares of a bank whose owner is also a partial owner of Globovisión, and also seizing the stake of a Globovisión shareholder who recently died. This would give the government 45.8 percent of the network’s ownership. (The story is explained in full detail here). This move has been called “legally absurd” by Guillermo Zuloaga, president of Globovisión, who escaped Venezuela last month after a government-controlled court issued an arrest warrant against him and his son for “hoarding cars.”
Chávez also announced that he may appoint, Mario Silva, the Goebbels of Venezuela, to the Board of Directors of Globovisión. That would also be patently illegal.
If Chávez goes ahead with his plan to take a minority ownership share of Globovisión, despite the blatant illegal nature of his move, the case will probably end up in the courts, which are controlled by the regime. It is also easy to foresee that sooner or later Chávez will try to seize Zuloaga’s stake in Globovisión, claiming that he’s a “fugitive of justice.” Then Globovisión will be completely in the government’s hands, and Venezuela’s last independent TV station will cease to exist.
Baptists and Pot-Growers
The L.A. Times reports that the city of Oakland has approved an ordinance paving the way for the industrial production of marijuana. There is more to this than simply a victory for liberty in the drug war. As the story describes and Josh Blackman analyzes, the episode demonstrates “Baptists and Bootleggers”-style public choice economics in action: existing small-time growers are displeased at the competition, barriers to entry are high, the approved pot factories engaged in serious rent-seeking, and the city profits from a new stream of tax revenue.
And so, as liberty expands, government reserves the power to decide who gets to benefit most — after taking a slice for itself off the top.
The Miscellaneous Tariff Bill: No Trivial Matter
As soon as today, the House may vote on a trade bill that sounds trivial but is in fact quite important: H.R. 4380, the Miscellaneous Trade and Technical Corrections Act of 2010.
Without passing judgment on the specific bill, the miscellaneous tariff bill (MTB) process has been a quiet trade policy success for almost 30 years. MTBs typically contain hundreds of provisions suspending tariffs on imported goods important to U.S. manufacturers but no longer made in the United States. The most common items included in the bills are parts, specialty manufactured products, and industrial chemicals with long, tongue-twisting names. The suspensions are usually temporary, lasting three years.
At least eight such MTBs have been enacted since 1982, most recently in 2006 when Congress passed two such bills. The bills tend to garner broad bipartisan support because the tariff suspensions do not negatively affect specific domestic producers, since no domestic producers compete with the imports, or at least do not object to the tariff suspensions.
A broad range of companies and industries also support MTBs, including the National Association of Manufacturers, because it helps U.S. producers cut costs to better compete in global markets. A 2009 study by Andrew Szamosszegi of Capital Trade Inc. concluded that passage of an ambitious MTB would boost GDP by $3.5 billion and manufacturing exports by more than $1 billion. Passage of an MTB would be right in the spirit of the Obama administration’s National Export Initiative.
Complicating passage of an MTB this time around is the curious stance of GOP leaders in the House, who insist that tariff suspensions be included in an “earmark moratorium.” I’m all for banning spending earmarks, those secretive provisions in huge spending bills that dole out tax dollars for bridges to nowhere and other unnecessary projects. But the provisions of an MTB are a completely different type of legislation.
In contrast to pork-barrel spending, a tariff suspension repeals a narrow tax that falls disproportionately and unfairly on a small group of producers. Instead of granting a favor at the public’s expense, a tariff suspension relieves individual producers of a burden that falls on them and nobody else. Unlike a spending earmark, a tariff suspension creates no new claim on public resources. It does not expand the scope or size of government.
Republicans should suspend their moratorium on tariff suspensions and give the latest miscellaneous-tariff bill a fair hearing.
On Differentiating ‘Realists’
Jacob Heilbrunn wrote a piece recently wondering “where have all the serious Republicans gone [on foreign policy]?” Heilbrunn observes correctly that the loudest Republican voices on national security these days are advancing a variety of zany views, taking as evidence Mitt Romney’s empirically-challenged attack on the new START treaty.
In a similar vein, Daniel Larison wonders whether a return to Republican “realism” is even anything to thirst for:
In practice, if the GOP “reclaimed its realist roots” I wonder how much would change for the better. Republican realism sounds good by comparison with what we have had for the last decade, but most actual Republican realists, especially those in elected office, did little or nothing to challenge the endless hyping of foreign threats and the frequent recourse to military intervention abroad in the ’90s… How many realists not affiliated with the Cato Institute expressed serious reservations about NATO expansion into Ukraine and Georgia before the August 2008 war? As sympathetic as I am to many realist arguments, and as much as I appreciate the efforts of the most sober realists to try to steer Republican foreign policy thinking in a constructive direction, until Republicans reject confrontational and aggressive foreign policy goals it will not matter very much if they adopt realist means and rhetoric.
The answer to Larison’s question about NATO expansion is that it was quite unpopular among non-Cato realists. John Lewis Gaddis wrote at the time [.pdf] that “historians — normally so contentious — are in uncharacteristic agreement: with remarkably few exceptions, they see NATO enlargement as ill-conceived, ill-timed, and above all ill-suited to the realities of the post-Cold War world.” He “could recall no other moment…at which there was less support, within the community of historians, for an announced policy position.” That might have been putting things a bit too strongly when it came to realists, but not very much. That is, actual realists, who don’t, by and large, get called to Washington.
This, I think, is the crucial distinction to make. The bottom line here is that there is a big disconnect between people in the Beltway who call themselves realists and actual realists. Ur-realist Kenneth Waltz once described himself as “a fierce critic of American military policy and spending and strategy, at least since the 1970s.” John Mearsheimer points out that realists opposed the Vietnam War almost to a man (except for Henry Kissinger), and that realists opposed the Iraq War almost to a man (except for Henry Kissinger). Since at least the Johnson administration, realists have tended to be dovish relative to the Beltway consensus as it has existed at any point in time, and active dovishness is not permitted in polite company in Washington.
Not only is it a mistake to hearken back to a Glory Day of Republican Realism, it is really a mistake to characterize any existing Beltway faction as “realist.” Belligerent nationalists, Wilsonians, liberal imperialists…all those we have. Realists, not so much.
Prohibition Takes Many Forms
The Safe and Secure Internet Gambling Initiative is running this ad on the web:
Good point, as Cato has noted several times. But let’s see . . . alcohol, internet gambling — can you think of any other area where prohibition hasn’t worked?
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