Archive for April, 2011
Pennsylvania School Choice Bills
Much attention and controversy have been focused in recent months on Pennsylvania Senate Bill 1, which would create a government-funded school voucher program. Less attention, and far less controversy, accompanied the passage yesterday of an expansion of the state’s existing education tax credit program out of the House education committee. The vote was 21 to 4.
Apart from the seemingly more favorable reception it is receiving, the tax credit program has three notable advantages: it is less likely to curtail educational freedom by suffocating participating private schools with regulation (which would defeat the purpose of a school choice program), it does not force taxpayers to support types of education that may violate their convictions, and it encourages direct co-payments by parents toward the cost their children’s education, when they can afford to do so (which is associated in the international and historical research with higher school efficiency and greater responsiveness to parents’ demands).
Worth thinking about.
Appointment of Panetta and Petraeus Signals More of the Same
The report that Leon Panetta will be appointed Secretary of Defense, and Gen. David Petraeus will become the new CIA director, does not come as a huge surprise. But I worry that President Obama’s decision to fill these positions from within his administration signals an unwillingness to rethink U.S. foreign policy. Such a reevaluation is desperately needed.
Leon Panetta brings some experience in national security affairs to DoD, including his stints at CIA and on Capitol Hill, and as a member of the Iraq Study Group. His more relevant experience, however, may be as Director of the Office of Management and Budget in the Clinton administration. Bob Gates effectively shielded the Pentagon from spending cuts, but that merely postponed the reckoning that Panetta will have to confront.
Considerable cuts, beyond even the $400 billion-over-12-year target that President Obama announced earlier this month, will require a fundamental rethinking of the military’s role, something that Gates was unwilling to do. It remains to be seen whether Panetta will tackle this challenge, or whether he will defer to others within the administration.
A new role for the military and the United States would shed unnecessary missions, and relieve some of the burdens on our troops. In all likelihood, such a change must be directed from the Oval Office, not the Pentagon.
The appointment of Petraeus to head the CIA is puzzling. I worry that the appointment of a military officer to lead a civilian agency raises questions about Obama’s faith in senior leaders from within the CIA who might have moved into the top role.
The agency has questioned some of the rosier predictions of impending success in Afghanistan, and I hope that Petraeus’s move to Langley doesn’t result in a change of those candid assessments. More generally, Petraeus has focused nearly all of his energies over the past nine years trying to perfect the U.S. military’s ability to fight wars that most Americans now wisely oppose. His insights into future opportunities and challenges is unclear. We should be putting these wars that sap our nation’s strength and undermine our security in the country’s rearview mirror. Instead, Petraeus appears committed to a long-term nation-building mission in Afghanistan, and others like it.
Wednesday Links
- New research suggests that there has been more monetary and macroeconomic instability since the Federal Reserve’s inception than in the decades preceding it.
- New thinking about the usefulness of government programs will help us from restore fiscal balance and economic well-being in America.
- New geopolitical circumstances should make us wonder: why are we still a part of NATO?
- New Deal-era jurisprudence may soon be overturned as challenges to the Affordable Care Act reach the U.S. Supreme Court.
- New means of funding public roads will increase efficiency by confronting drivers with the costs of using them, and reducing congestion:
- Reminder: If you’re in the DC area, please join us this Friday at 4:00 p.m. Eastern for a special sneak preview of Free or Equal and Q&A with Cato senior fellow Johan Norberg.
The Libertarian Moment?
On NPR, Mara Liasson tells Melissa Block that we’re in a “libertarian moment” in politics:
BLOCK: And Ron Paul appears to be running. Again, he got a lot of devoted followers on the Internet last time during the 2008 bid, not so many votes in the primary. So this time around, is he a significant addition to the Republican field or more of an asterisk?
LIASSON: Well, I don’t think he’s a huge factor in terms of the nomination. In the 2008 GOP primary, he got only about 6 percent of the Republican vote. However, as you said, he does have a devoted following, lots of libertarian-leaning young people. He can raise millions of dollars online in a single day in one of his famous money bombs. So he brings energy to the party, and the Republican Party base seems to have caught up to him on the issues.
The GOP is in a real libertarian moment right now, and Paul has always been all about the debt and the deficit and taxes and spending. You could call him the godfather of the Tea Party.
Of course, Paul may have to split the libertarian Republican vote with former two-term governor Gary Johnson. Johnson also was “a Tea Partier when tea-partying wasn’t cool,” according to the Capitol Report of New Mexico. He vetoed 750 bills in eight years, not counting line-item vetoes. And since today’s libertarian moment goes beyond spending and health care to include rising support for gay marriage and marijuana legalization, Johnson might be better positioned to ride that wave and attract younger and independent voters.
Footnote: Two weeks ago NPR speculated about an Ayn Rand moment building from the financial crisis to the opening of Atlas Shrugged.
Obama’s Economic Policies Create Misery
The public has finally started to give President Obama’s economic policies a big “thumbs down”. This shouldn’t surprise anyone who is familiar with the Misery Index.
While President Obama sings the glories of big government, it is ironic that he has been marked by the curse of government failure. One metric that measures how this curse will affect the President’s performance is the Misery Index (see the accompanying chart).
The Index is calculated by adding the difference between the average inflation rate over a president’s term and the average inflation rate during the last year of the previous president’s term; the difference between the average unemployment rate over a president’s term and the unemployment rate during the last month of the previous president’s term; the change in the 30-year government bond yield during a president’s term; and the difference between the long-term, trend rate of real GDP growth (3.25%) and the real rate of growth during a president’s term.
I have forecast what President Obama’s most likely Misery Index score will be at the end of his current term. This miserable score — one that is relative to George W. Bush’s very weak performance in his second term — is already baked in the cake and can be laid squarely at the feet of President Obama’s own policy errors and government failure. For a president whose agenda is designed to overthrow the Reagan Revolution, the Misery Index should be a sobering reminder that free markets, not big government, generate prosperity.
Tina Brown and the Economics of Recession
Talking about royal weddings on NPR, Tina Brown says that there’s high unemployment in Britain, as there was in 1981, because of Conservative governments’ budget cuts (transcript edited to match broadcast):
Of course, the wedding of Prince Charles and Diana occurred three decades ago, but Brown points out that there are plenty of similarities between the two eras. “2.5 million are out of work right now with the budget slashes and all the economic austerity that’s happening in England,” Brown says. “There were actually the same amount of people exactly out of work at the time of Charles and Diana, when Mrs. Thatcher came in and began her draconian moves.”
I know that Tina Brown is a journalist, not an economist, but surely she’s heard of the recessions of 1979 and 2009, both of which may have helped to usher in a new government pledged to economic reform. It isn’t budget cuts that have increased British unemployment, it’s the recession. The unemployment rate started rising in early 2008 and kept right on rising during the world financial crisis, which featured not budget cuts but massive spending by governments around the world.
Tight on Standards, Loose Grip on Reality
As promised (actually, a week later than promised) I have read the Fordham Institute “Briefing Book” for reauthorizing the No Child Left Behind Act. As expected, it’s big on trumpeting national standards, and squishy on almost everything else. Perhaps most aggravating, though, is how loose it is in characterizing the views of those of us at the Cato Institute, who apparently are part of the big group of education analysts who love the idea of Washington lavishing money on education but are, presumably, too blinkered to want to get results for it:
The local controllers. These folks, led by conservative and libertarian think tanks such as the Heritage Foundation and the Cato Institute, want Uncle Sam, for the most part, to butt out of education policy—but to keep sending money. They see NCLB as an aberrant overreach, an unprecedented (and perhaps unconstitutional) foray into the states’ domain. Many within this faction also favor reform, particularly greater parental choice of schools, but at day’s end their federal policy position resembles that of the system defenders. They want to keep federal dollars flowing, albeit at a much more modest rate than those on the left; but they want to remove the accountability that currently accompanies these monies. They have given up on Uncle Sam as an agent for positive change, period. And they have enormous confidence that communities, states, and parents, unfettered from and unpestered by Washington, will do right by children.
Where, exactly, has someone from Cato written that Uncle Sam should keep dropping ducats on education? Certainly not here, where I call for complete elimination of federal involvement in education save civil rights enforcement, and a return of all federal education funds to taxpayers. You won’t find it here, where Chris Edwards calls for eliminating the U.S. Department of Education and zeroing out all its spending. And you won’t discover it here, where Andrew Coulson and I propose that “NCLB not be reauthorized and that the federal government return to its constitutional bounds by ending its involvement in elementary and secondary education.”
Sadly, reporting the truth doesn’t appear to be as important to Fordham as producing a strawman — some group that’s portrayed as totally irrational, allowing Fordham to show how ”realistic” they are by coming up with relatively reasonable sounding policy proposals. It’s a grating, superficial tactic employed by Fordham that Jay Greene and his gang have long harped on.
The funny thing is, in the end there isn’t anything particularly realistic about Fordham’s proposal. Basically, Fordham would have the federal government force all states to adopt the Common Core standards — while adding science and history standards — to get back money that came from their citizens to begin with, or adopt standards that some state-federal hybrid panel of “experts” deemed “just as rigorous as the Common Core.” This would somehow prevent “an unwarranted intrusion by the federal government in state matters.” Because, of course, it is much less intrusive to have an option of having some federally mandated Frankenstein’s panel tell you if the standards you came up with are as good as the federal standards, or just having the feds set one standard.
Then there’s Fordham’s accountability — er, “transparency” — proposal, which would force states to annually spit out “reams” of data on outcomes “sliced and diced in every way imaginable.” Once the tons of data confetti are dumped, Fordham would rely on public pressure from seeing the mess to force reform. And how would the public force said reform? Don’t worry about it — “realism” dictates that all we need are national curriculum standards, testing, and data, data, data!
So, sadly, Fordham’s “realism” fails where it always seems to fail: In ignoring actual reality. Thanks to the phenomenon of concentrated benefits and diffuse costs that is a basic part of representative government, the people who benefit most directly from specific government policies will be most heavily involved in the politics behind those policies, and will bend them to serve themselves, not the “public good.” In the case of education, the people employed by the schools — the teachers, administrators, bureaucrats, etc. — have the most power, and will gut anything used to hold them accountable, just as they have for decades. And there is nothing — nothing — in the Fordham proposal that will keep this from happening again, no matter how centralized the standards or humongous the data dumps. Indeed, centralized standards provide one-stop shopping for special interests!
Only one thing breaks the concentrated benefits, diffuse costs conundrum, and it is taking government out of the equation and forcing educators to earn the money of customers. But for Fordham and others who, ultimately, seem to want to dictate what every child must learn, that is a bit of realism much too far.
Inside Every Leftist Is a Little Authoritarian Dying to Get Out
I’ve been meaning to write about how ObamaCare’s unelected rationing board — innocuously titled the Independent Payment Advisory Board — is yet another example of the Left leading America down the road to serfdom. (Efforts to limit political speech — innocuously called “campaign finance reform” — are another.)
As Friedrich Hayek explained in The Road to Serfdom (1944), when democracies allow government to direct economic activity, the inevitable failures lead to calls for a more authoritarian form of governance:
Parliaments come to be regarded as ineffective “talking shops,” unable or incompetent to carry out the tasks for which they have been chosen. The conviction grows that if efficient planning is to be done, the direction must be taken “out of politics” and placed in the hands of experts — permanent officials or independent autonomous bodies.
The problem is well known to socialists. It will soon be half a century since the Webbs began to complain of “the increased incapacity of the House of Commons to cope with its work.”
Sound familiar? National Review‘s Rich Lowry picks up on the theme here.
Making this connection got a lot easier the other day when the University of Chicago’s Harold Pollack, a leading advocate of a “public option,” vented his frustrations over at The American Prospect blog about how Congress is likely to defang the Independent Payment Advisory Board. And he ends up just where Hayek predicted:
Despite many reasons for caution — the words George W. Bush foremost among them — I’m becoming more of a believer in an imperial presidency in domestic policy. Congress seems too screwed up and fragmented to address our most pressing problems.
This isn’t how it starts. This is how it snowballs.
Paging Dr. Hayek…
The Ben Bernanke Variety Hour
April 27th begins a new chapter in Federal Reserve history: the Fed joins other major central banks in having a press conference after its monetary policy meetings (the Federal Open Market Committee). Apparently the record lows in public support for the Fed, along with rising gas and food prices, have driven Bernanke to attempt to change the narrative. After all, his appearance on “60 Minutes” did wonders for the Fed’s reputation. I’m excited to hear even more about his childhood in Dillon, South Carolina or his time working at South of the Border. Maybe an enterprising reporter could ask how much menu prices at South of the Border have increased since Bernanke took over the Fed.
Perhaps you’ve noticed that I don’t have high expectations for his press conference. It is probably fair to say that no Federal Reserve Chair has had as much public exposure as Bernanke. Yet with all those public appearances, he has consistently managed to avoid any real discussion about the costs and benefits of the Fed’s actions. Are we likely to hear concern about food and gas prices, and how such are being driven by loose money? Probably not…just more on how increasing world demand is to blame. Just like it was the “global savings glut” that drove interest rates earlier this decade, it is always somebody else’s fault — never the Fed’s. They are capable of only good.
Hopefully Bernanke will at least avoid the Obama line that it is those “speculators” that are behind the increase in energy prices. After all, if we believe the governments of Europe, those evil speculators brought down Greece too.
As per usual, I truly hope I’m wrong here. Bernanke has a real opportunity to be honest and straightforward with the American public. We don’t need another lecture. We need to hear that the Fed isn’t a slave to some imaginary Phillips Curve or that we can’t have inflation with slack in the economy (where was Bernanke in the 1970s?). The real risk is that Bernanke uses the press conference to drown out the many voices of concern and dissent on the FOMC. Which, of course, would be a real irony given all of Bernanke’s talk about “democratizing” the Fed when he first became chair.
President Obama’s Dubious Claims about Incomes of the Top 1% vs. the Bottom 90%
“In the last decade, the average income of the bottom 90 percent of all working Americans actually declined,” Obama said on April 13. “The top 1 percent saw their income rise by an average of more than a quarter of a million dollars each.”
Politi-Fact, partly on the basis of my own research, generously rates the president’s claim as “Half True.”
The truth is that the President’s source, Thomas Piketty and Emmanuel Saez, refer only to pretax, pretransfer income reported on individual tax returns (as opposed to being sheltered inside a corporation or IRA or simply unreported), and they have no data on the bottom 90%. Worst of all, they leave out transfer payments, which amounted to $2.3 trillion last year — 44% as large as all private wages and salaries ($5.2 trillion). The data also excludes refundable tax credits, which added about $170 billion to low and middle incomes in 2009 according to the the Joint Committee on Taxation (the EITC, child credit and Obama’s “making work pay” credit). And the Bureau of Economic Analysis estimates that gross income reported on tax returns is about $1 trillion less than actual income.
As for the top 1%, my research shows that top investors report more capital gains and dividends when those tax rates go down, which is why they paid such a big share of income taxes (up to 40%) in 1997-2000 and 2003-2007. Raise the tax on dividends and capital gains to 23.8%, as Obama hopes to do by 2014, and somebody else would have to pay the taxes now paid by the top 1%. Using income reported to the IRS to measure actual living standards is foolhardy at best.
René Magritte’s War
The Belgian painter René Magritte is famous in part for the painting pictured below.
What’s surprising is how much Magritte can tell us about our war in Libya. To recap where we are in Libya, our military objective is to “protect civilians” in that country. Except there’s this paragraph opening the recent New York Times article on the war:
WASHINGTON — NATO planners say the allies are stepping up attacks on palaces, headquarters, communications centers and other prominent institutions supporting the Libyan government, a shift of targets that is intended to weaken Col. Muammar el-Qaddafi’s grip on power and frustrate his forces in the field.
The Times also runs these quotes from officials in charge of the war:
“Now we are going after his rear echelon,” one NATO official said. “We are going after his ability to command and control his forces — his headquarters, his command posts, his communications — all those things that allow him to coordinate his attacks at the front.”
Military officials privately acknowledge that removing Colonel Qaddafi from power is the desired secondary effect of striking at state television and other symbols of his authoritarian rule. “His people may see the futility of continued resistance,” one Pentagon official said.
Somebody should probably loop in poor White House Press Secretary Jay Carney, who made the mistake just yesterday of saying the following:
“The goal of the mission is clear: protect the civilian population, enforce the no-fly zone, enforce the arms embargo. [It is] certainly not the policy of the coalition, of this administration, to decapitate, if you will, or to effect regime change in Libya by force.”
So let’s work this out. The United States currently has as a policy objective in Libya to remove Muammar Qaddafi from power. Washington is simultaneously using the military to attack “institutions supporting the Libyan government” in order to “weaken Col. Muammar el-Qaddafi’s grip on power,” but our official position is that doing so is unrelated to our policy objective of getting Qaddafi out of power. Does the administration really think we’re that stupid? Perhaps more importantly, is Congress that stupid?
Also, it may be time for a rundown of terms for which we no longer have adequate working definitions. I nominate:
- “war”
- “kinetic military action”
- “protect”
- “civilians”
- “protect civilians”
- “massacre”
- “regime change”
- “target”
Any other nominees?
Is Libertarianism Selfishness?
That’s what Michael Gerson, former speechwriter for President George W. Bush, writes in the Washington Post. I take a different view in my new column at the Encyclopedia Britannica Blog:
Libertarians want to live in what Adam Smith called the Great Society, the complex and productive society made possible by social interaction. We agree with George Soros that “cooperation is as much a part of the system as competition.” In fact, we consider cooperation so essential to human flourishing that we don’t just want to talk about it; we want to create social institutions that make it possible. That is what property rights, limited government, and the rule of law are all about….
The American, and libertarian, belief in freedom is not a “mania,” nor is it “selfishness.” It’s a philosophy of individual rights, the rule of law, and the institutions necessary for social cooperation. Read Locke, Hume, Smith, Tocqueville, Hayek—and yes, Rand—if you seriously believe that the philosophy of freedom can be summed up as “selfishness.”
Much more at the Britannica.
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