Archive for July, 2011
What’s Up Queenie?
Miss Manners has some useful advice today for any American who might encounter the Queen of England.
DEAR MISS MANNERS: As an American, if I meet the Queen of England, am I required to bow to her?
GENTLE READER: Where were you during history class?
Never mind. Here is what you missed:
We Americans fought a revolution against the British crown. As Miss Manners trusts that you will be relieved to hear, we won. Therefore, we do not prostrate ourselves before someone who is not our sovereign — just as the British bow to no sovereign but their own.
But we do not even bow to our own leaders. Although we believe that all human beings are worthy of respect, we do not believe that any one of them is born at a higher level than the rest of us.
Thomas Jefferson caused a stir when, as president, he greeted the British ambassador in slippers and ordinary clothes. Jefferson had been playing on the floor with his grandkids. The Brit left in a huff because Jefferson had not bothered to put on some fancy outfit. Jefferson told him to chill out.
European Political Elite React to Deteriorating Fiscal Outlook with Decisive Moves to…Kill the Messenger
I’m not a big fan of the rating agencies. I’ve warned in TV interviews that they generally wait too long before downgrading profligate governments.
So when the rating agencies finally catch up to everyone else and lower their outlook for failing welfare states such as Greece and Portugal, one would think that this would be seen as a useful – albeit late – warning sign. But European politicians are not very happy about this development. At the risk of mixing metaphors, they want everyone to keep their heads buried in the sand and to continue complimenting the emperor on his new clothes.
Here are some excerpts from a BBC report.
The European Commission has strongly criticised international credit ratings agencies following the downgrade of Portugal by Moody’s. The Commission said the timing of the downgrade was “questionable” and raised the issue of the “appropriateness of behaviour” of the agencies in general. Earlier, Greek Foreign Minister Stavros Lambridinis said the agencies’ actions in the debt crisis had been “madness”. Ratings agencies have downgraded Greece and Portugal many times recently. …German Finance Minister Wolfgang Schaeuble told a news conference that he wanted to “break the oligopoly of the ratings agencies” and limit their influence. …”The timing of Moody’s decision is not only questionable, but also based on absolutely hypothetical scenarios which are not in line at all with implementation,” said Commission spokesman Amadeu Altafaj. “This is an unfortunate episode and it raises once more the issue of the appropriateness of behaviour of credit rating agencies.” Commission President Manuel Barroso added that the move by Moody’s “added another speculative element to the situation”.
This is not the first time this has happened, by the way. Back in January, I mocked the President of the European Council for whining that “bond vigilantes” had the nerve and gall to demand higher interest rates to compensate for the risk of lending money to incontinent governments.
Colleges Bloated with Money? Some of Us Already Knew
Inside Higher Ed today released the results of a very telling survey of college business officers. From IHE’s article on the survey:
About one in six business officers at both public and private nonprofit colleges described the financial health of their respective institutions as “excellent,” and another 57 percent of public-college CFOs and 47 percent of private-college CFOs characterized their respective institutions’ financial health as “good.”
That’s right: Despite the continuing negative effects of our economic malaise, the financial sky is not crashing down on the Ivory Tower — far from it! Perhaps most interesting is this quote from Kent John Chabotar, president of Guilford College and a former CFO at Bowdoin College:
Many of my financial colleagues think that the academic program is over-budgeted and sometimes even bloated, so cuts may seem to them to be restoring the proper balance.
What? “Bloated”? What about the devastating penury schools are supposedly suffering?
To be fair, as Chabotar goes on to note, financial officers have an incentive to say all is well, lest they seem to be less than stellar money managers. But we know — or at least you do if you’ve read “Federal Higher Education Policy and the Profitable Nonprofits” — that there is very good reason to believe colleges are, indeed, flush with cash: Many make big profits — from $2,000 to perhaps as high as $13,000 per student — off of undergrads. And how do they do that? Primarily through taxpayers, who furnish massive subsidies in the form of aid to schools and students. So many academic programs most likely are bloated.
Of course, many schools and higher education associations would likely disagree with that. And if nothing else, we at the Center for Educational Freedom love a debate. That’s why on July 19 we will be hosting a forum to discuss high profits in “nonprofit” higher ed, an event that will feature Vance Fried, author of “Profitable Nonprofits”; M. Peter McPherson, President of the Association of Public and Land-grant Universities; and Grover J. “Russ” Whitehurst, director of the Brown Center on Education Policy at the Brookings Institution. Register here if you want to attend in person, or watch online from the comfort of your own desk.
Will ‘the People’ Fall for It?
Today POLITICO Arena asks:
President Barack Obama is taking a cue from President Bill Clinton by pushing a series of bite-sized policies. Among them: a new fatherhood pledge, graphic tobacco warnings, updated sunscreen requirements, an anti-bullying summit and entertainment discounts for fathers to spend more time with their kids. Can he use this “school uniforms” approach to effectively appear above the daily partisan Washington sniping? And is this “small ball” approach a retreat from the grander “change we can believe in” vision candidate Obama touted in the 2008 campaign?
My response:
The president has two main responsibilities: internationally, to oversee the nation’s foreign policy; domestically, to see that the laws be faithfully executed. For Obama to devote his attention to trivia like this is not only to demean the office of the presidency — recall Clinton’s “boxers or briefs” incident — but to play to the basest instincts of the electorate.
Unfortunately, in a country in which nearly 60 percent of adults don’t know when we declared our independence and a quarter don’t know from what country, Obama’s “small ball” politics may work. This is a president who couldn’t get a budget passed for two years, despite having huge majorities in Congress, yet he’s got time for this. Perhaps H.L. Mencken put it best: “People deserve the government they get, and they deserve to get it good and hard.” I didn’t know Obama was a student of Mencken.
The Fatal Conceit Continues
President Barack Obama recently sat down with the Today Show’s Ann Curry to discuss jobs and private sector hiring. Curry asked him why during a time of “record profits” for corporations they had only spent 2% more toward hiring new workers but 26% percent more on new equipment.
Obama explained how structural economic changes have shifted businesses toward using more equipment and technology, explaining how “businesses have learned to be more efficient with fewer workers” in response to the recession. He provided some examples: “You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.”
Much coverage of the interview falsely claimed that Obama blamed technology, or ATMs for high unemployment. This is simply untrue. He did not claim that technology is driving unemployment, but instead that employment is changing as technology increases the productivity of labor.
The interview did reveal that his alleged solution to the problem is more government control of the economy, administered by a panel of experts: “What we have to do now, and this is what the jobs council is all about, is identifying where the jobs for the future are going to be, how do we make sure that there’s a match between what people are getting trained for and the jobs that exist, how do we make sure that capital is flowing in those places with the greatest opportunity.” This may sound good in theory, yet the question remains: how does he know where the jobs of the future are going to be, and how can he determine which job training will prove most valuable, and how can he know which areas have the greatest opportunity, and how can he know where to send capital?
It is not likely that the President’s Council on Jobs and Competitiveness, made up of about two dozen bright and capable business men and women, will have sufficient knowledge either to determine where capital should flow or where the future jobs will be, or what job training will be best rewarded. Private investors, risking their own capital, cannot consistently predict what markets will succeed or which technologies will flourish. How can we expect a council of political appointees wagering other people’s money to do any better?
Nobel laureate FA Hayek discussed the problems associated with central economic planning in his seminal American Economic Review article, “The Use of Knowledge in Society” and in his book The Fatal Conceit. Hayek argued that the economy is a very complex system, fueled by the knowledge and actions of millions of independent actors. Hayek warned that any plan to centrally control production would be doomed to inevitable failure because central planners lack sufficient information to ensure that supply equals demand in every market in the economy. The abysmal standard of living and collapse of the Soviet Union validated Hayek’s theory of the impossibility of planning something as complex as a country’s economy.
Clearly, Obama is not suggesting anything nearly as extreme as centrally planned production. Nevertheless, President Obama makes his assumptions clear in this interview that he believes this jobs council holds the capacity to gain sufficient knowledge to help guide capital investments and encourage job creation in the areas they identify. Instead of having our President and a few smart individuals making decisions with limited information, we could allow the market mechanism, made up of millions of individual decision markers, to transmit the information and knowledge necessary for market actors to guide capital appropriately.
For President Obama to assume that he and or his council have the knowledge sufficient to make these determinations is a fatal conceit.
NCLB a Barrier, Not an Aid
Sandy Kress, former Bush administration official and architect of NCLB, took issue last Friday with my post criticizing the law. Today, education writer Rishawn Biddle publishes and expands on Kress’ critique. Sandy’s objection was that Idaho, one of the states planning to start ignoring the law, isn’t performing well academically and so “is hardly a poster child for arguing against a federal role.”
As it happens, I wasn’t using Idaho—or any “poster child”—to make the case against against NCLB. I was using the experiences of real children. More specifically, I was using the performance of nationally representative samples of students on the National Assessment of Educational Progress Long Term Trends tests. The LTTs for students near the end of high school are the best gauge we have of the performance of the nation’s public schools over time. The stagnation and decline in those results across subjects are not the only evidence or argument against NCLB, but they are compelling.
Rishawn offers little in the way of argument or evidence to support his own comments, but one of them is nevertheless worth responding to because it represents a common view that is not only wrong but exactly backwards: the notion that NCLB helps to advance the kind of market reforms that actually work. Au contraire.
The state tests NCLB focuses on are all but worthless for comparing states to one another or for determining trends over time, so the law tells us considerably less than we could already discover from the NAEP. NCLB has, however, been an epic, expensive distraction, pulling the efforts of countless activists, policymakers and educators away from the market reforms that work and consuming their time arguing about the details of a policy that never had a sound research base to support it and still does not. Adding insult to injury, NCLB exacerbated the unconstitutional overreach of its earlier form, the ESEA. If NCLB worked better and more efficiently than alternative policies, and had no deleterious side effects, I would be all for amending the Constitution to allow it. It doesn’t.
So no, NCLB is not an aid to meaningful reform. It is a barrier. The sooner we get over it, the better.
‘My Disability Made Me Do It’
James J. McDonald, Jr., a California attorney with the firm of Fisher & Phillips, has long been one of the more incisive critics of the employment provisions of the Americans with Disabilities Act (ADA), in particular the law’s coverage not just of physical handicaps like deafness and paraplegia but also emotional, mental and behavioral disabilities, which often bring with them a high potential for disrupting the workplace. Last month McDonald spoke on this topic at the annual convention of the Society for Human Resource Management (SHRM), the professional organization of the HR field. Here are some highlights from his speech of cases in which employers, he said, were required to accommodate employees:
*A 911 operator whose narcolepsy made him [or her? -- W.O.] fall asleep on the job.
*A county custodian with borderline mental retardation who was twice criminally convicted of stealing items from offices she was cleaning.
*A medical transcriptionist with obsessive-compulsive disorder who repeatedly came to work late, or not at all.
*An employee with bipolar disorder, who, when given a performance improvement plan, threw it across the room and shouted profanities. She later kicked her desk and said “They’ll regret this.”
To find out more about why the language of the ADA has led to such cases, how the Ninth Circuit (joined by the Tenth) has developed legal standards even more protective of misbehaving employees than those proposed by the Equal Employment Opportunity Commission (EEOC), and why McDonald thinks it is (perversely) shrewd for employers to keep themselves in ignorance about some employee disabilities, follow the link. (In this 2010 paper, by the way, McDonald gets into detail on a long list of ADA/misconduct cases, each seemingly more extreme than the last.) It’s worth remembering that the U.S. Supreme Court for a while attempted to interpret the ADA narrowly so as to focus the law’s benefits on traditional disabled groups, only to be slapped down by the George W. Bush-era U.S. Congress, which overrode those decisions (to general applause in the press) and instead instituted ultra-broad definitions of disability for ADA purposes. Earlier on the ADA here, here, here, etc.
The Costs of Mandated Disclosure
Donald Marron reports on a study that shows how severe the costs of disclosing political activity can be.
But that could never happen here! Our politicians are different!
Right.
Christina Romer’s Naïve Keynesianism
President Obama’s former head of the Council of Economic Advisers has taken to the pages of the New York Times to warn us against pursuing “fiscal austerity just now,” particularly not spending cuts.
Christina Romer’s views are Keynesian. She doesn’t use that word, but she is focused on juicing “demand” with optimally-targeted and well-managed government “investments.”
Economics has numerous schools of thought, but Romer’s writing reflects nothing but the most simplistic Keynesian framework. The fact that the huge Keynesian stimulus of recent years that she supported has coincided with the slowest economic recovery since World War II seems to be of little concern to her.
She also doesn’t seem to be interested in how government spending actually works in the real world. She assures us that “government spending on things like basic scientific research, education and infrastructure . . . helps increase future productivity.”
That view has a veneer of economic authenticity, but it leaves many issues unaddressed:
- Most federal spending is on transfers and consumption, not investment. The debt crisis we face is driven mainly by entitlements, which is consumption spending. Romer’s talk of investment spending is a rhetorical bait-and-switch.
- Romer doesn’t distinguish between average and marginal spending. If some federal investment spending has created positive net returns, that doesn’t mean that additional spending would. Governments already spend massive amounts on education, for example, so the marginal return from added spending is probably very low.
- If the government investments that Romer touts are so valuable, then why hasn’t the government done them already? After all, federal, state, and local governments in this country already spend 41 percent of GDP.
- If science, education, and infrastructure investments have the high returns that Romer seems to think they do, then why does the government need to be involved? Private firms seeking higher profits would be all over such investments.
- Romer mentions that the “social returns” on some investments might be higher than purely private returns. However, that doesn’t mean that the government should automatically intervene. For one thing, the government suffers from all kinds of management failures and other pathologies.
- Romer also ignores that the government imposes substantial deadweight losses on the economy when it commandeers the resources it needs for its “investments.”
So my reading assignment for Romer is www.DownsizingGovernment.org so she can get a better understanding of how federal programs actually operate.
And readers interested in all the economics of government spending that Romer doesn’t tell you about can consult Edgar Browning’s excellent book, Stealing From Each Other.
The First in a Long Series
The Washington Post offers today a critical look at independent fundraising and spending in the 2012 campaign.
The article states independent groups are raising money “in response to court decisions that have tossed out many of the old rules governing federal elections, including a century-old ban on political spending by corporations.”
But the century-old ban is on campaign contributions by corporations, and it is intact. Spending on elections was not prohibited to some corporations until much later.
Other spending by corporations, like the money spent by The Washington Post Company to produce the linked story, has never been regulated or prohibited by the federal government.
The article mentions a “shadow campaign” and refers to Watergate. It states “independent groups are poised to spend more money than ever to sway federal elections.” Surely something is amiss here! Or at least the causal reader of the Post might conclude that.
But what is going on? A spokesman for one of the independent groups says they are trying to influence the debt ceiling debate and that as far 2012 goes: “We’re definitely working to shape how the president is perceived, because how he is perceived will have a huge impact on how this issue is resolved.”
It sounds like the group is engaging in political speech on an issue, speech that could have some effect on next year’s election. What is amiss about that? Isn’t the right to engage in such speech a core political right under our Constitution?
The article also argues that independent groups, being independent, may fund speech that may harm a candidate they are trying to help. Candidates, in a sense, have lost some control over their campaigns and their messages.
Of course, absent limits on contributions to candidates and parties, the money going to independent groups might go to…candidates and parties. Liberalizing speech, not suppressing independent groups, might be a good way to prevent groups from airing ads that harm or misrepresent candidates for office. Finally, candidates do have the power to repudiate independent ads.
Expect more news stories like this one over the next 18 months. The cause of campaign finance reform is in desperate straits. Reformers in the media are going to construct a narrative that says: money is destroying democracy in 2012, all because of Citizens United. They hope thereby to set the stage to restore restrictions on campaign finance.
Mitch Daniels and the Federal Money Grab
For much of the nation’s history, policymakers recognized that the federal government’s powers were “few and defined,” as James Madison noted. Issues like education and community development were largely left to the states. Unfortunately, the separation of responsibilities between the federal government and states has been eroded to the point that federal funds now account for approximately a third of total state spending. A consequence is that federal aid to the states has fostered bigger government at all levels.
State policymakers are addicted to federal money. The appeal is obvious: they get to take credit for all the wonderful things they do with money that they didn’t have to tax out of their state’s voters. Thus, it has been interesting to observe Republican governors who willfully fed at the federal trough now pontificate on the dangers of Washington’s spending addiction as potential or declared candidates for president.
Although he ultimately decided against running for president, Indiana Gov. Mitch Daniels has carefully crafted a public image as a voice of reason when it comes to addressing the federal government’s budget problems. When he was flirting with a run for president, Daniels received fawning coverage from various observers for labeling the federal government’s debt the “new red menace.”
One problem with this image is the fact that Gov. Daniels has been a “just another politician” when it comes to grabbing federal dollars. Indeed, Daniels signed an executive order on his first day in office creating a state agency devoted to increasing Indiana’s take from the federal honey pot. As an official with the Indiana state Office of Management and Budget, I can attest that it was the Daniels administration’s policy to find ways to use federal dollars instead of state dollars where possible.
Last week, a local Indianapolis television channel ran an investigation of the state’s Office of Federal Grants and Procurement. Although the agency has cost Indiana taxpayers almost a half-million dollars, the investigation team couldn’t figure out what it has been doing with the money. State legislators that were interviewed didn’t know much about the agency even though they continue to fund it. I admit that I can’t remember dealing with it (other than to be completely disgusted by its existence).
Daniels declined to be interviewed for the story, and instead sent out his deputy chief of staff, Cris Johnston, to take the heat. Johnston’s best defense was that Indiana has improved its ranking when it comes to bringing in federal taxpayer dollars. I suppose that means Daniels’s red menace isn’t such a menace when the federal spigot’s flow is being directed toward his state’s coffers.
I’ll wrap this up by making a suggestion to the journalists out there covering the presidential candidates with a background in state government: did they eschew federal handouts or did they have their hands out? It’s an important question because the next president is going to be facing an epic fiscal mess and we really can’t afford another politician who talks the talk but didn’t walk the walk.
See this Cato essay for more on the importance of fiscal federalism and why the flow of federal funds to the states needs to be shut off.
DSK and the Pernicious ‘Perp Walk’
My column at the Washington Examiner (and Reason.com) this week uses the collapse of the Dominique Strauss-Kahn case to argue against the “perp walk,” which has become a form of pretrial punishment and a way for spotlight-hungry prosecutors to grab attention—whether the ‘perp’ turns out to be guilty or not:
Back in May, when New York law enforcement paraded DSK before the cameras, hands cuffed behind his back, the French were outraged. “Incredibly brutal, violent and cruel,” France’s former justice minister gasped.
Irritating as it might be to admit it, the French have a point. The “perp walk”—in which suspects are ritually displayed to the media, trussed up like a hunter’s kill—has become common practice among prosecutors. But it’s a practice any country devoted to the rule of law should reject.
Of course, DSK isn’t the most sympathetic victim of the perp walk ever, nor, given paramilitary policing and “no knock” raids, is the perp walk the most abusive police/prosecutorial practice out there. But it’s at best a pointless indignity, and at worst a threat to due process—which is why it should be reined in. For Cato work on police tactics and misconduct, go here; and also see Reason’s recent “criminal justice” issue.
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