One of the first things you learn when you start to study the comparative performance of school systems is this: on average, Catholic schools are much more educationally effective and vastly more efficient than state-run schools. And then you learn that their impact goes beyond the three R’s. I wrote a little about these facts a few years ago, while I was with the Mackinac Center for Public Policy, and my Mackinac friends have resurrected the post for Catholic Schools Week. I’ve appended an excerpt below, but you can read the whole thing here.

When state-run public schooling was first championed in Massachusetts in the early 1800s, it was under the banner of “the common school,” and it was touted more for its predicted social benefits than its impact on mathematical or literary skills. The leading common school reformer of the time, Horace Mann, promised, “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.”

Having experienced more than a century-and-a-half of a vigorously expanding public school system, Americans are no longer quite as sanguine about the institution’s capabilities. Nevertheless, there is still a widespread belief that government schools promote the common good in a way independent private schools never could.

Is that belief justified? Scores of researchers have compared the social characteristics and effects of public and private schooling. They have found little evidence of any public-sector advantage. On the contrary, private schools almost always demonstrate comparable or superior contributions to political tolerance, civic knowledge and civic engagement. One group of private schools stands out as particularly effective in this regard: those run by the Catholic Church.

Catholic Schools and the Common Good is a post from Cato @ Liberty - Cato Institute Blog

The president has relentlessly called for a more extensive—and expensive—federal role in education. Here’s just one example:

The human mind is our fundamental resource. A balanced Federal program must go well beyond incentives for investment in plant and equipment. It must include equally determined measures to invest in human beings—both in their basic education and training and in their more advanced preparation…. Without such measures, the Federal Government will not be carrying out its responsibilities for expanding the base of our economic… strength.

And if we spend all those new federal dollars on k-12 education, the president promised that “it will pay rich dividends in the years ahead.”

But here’s the strange part: in that same speech, the president made this seemingly ridiculous claim:

Our progress in education over the last generation has been substantial. We are educating a greater proportion of our youth to a higher degree of competency than any other country on earth.

It’s actually not so ridiculous when you learn that the president who said it was John F. Kennedy, in February of 1961. Back then, we really had been making educational progress.

Aside from the ill-fated National Defense Education Act of 1958, the federal government had made no attempt to improve k-12 academic achievement or attainment in the four decades before JFK… and yet, as he noted, American education did in fact improve during that period.

But within a couple of years of JFK’s assassination, Congress passed the Elementary and Secondary Education Act, now known as the No Child Left Behind Act. And in the four plus decades since, the feds have spent roughly $2 trillion trying to improve outcomes and attainment. Over that course of years, both graduation rates and academic achievement at the end of high school have been flat or declining.

Perhaps it could be argued that JFK couldn’t have known better. There was no history showing him what an expensive failure U.S. federal education spending would turn out to be. But the same cannot be said of President Obama, or of those in Congress who continue to tell the public, and presumably themselves, that fed ed. spending is a useful “investment.”

Today, we can look back at a half-century of failed federal education programs. We can think about how much better off the U.S. economy and our children would be if we hadn’t thrown $2 trillion at a calcified school monopoly that cannot spend money efficiently.

And reflecting on that history, perhaps we’ll find the wisdom not to repeat it.

American Education, From Camelot to Obamaville is a post from Cato @ Liberty - Cato Institute Blog

Diane Archer has a post at the Health Affairs blog arguing that Medicare is more efficient than private insurance.  One can only reach such a conclusion through such sleights of hand as conflating spending with cost, and by ignoring most of Medicare’s administrative costs.

As a pre-buttal, I offer this excerpt from a paper I wrote about a “public option” (emphases generally added and citations omitted):

Is Government More Efficient?

Supporters of a new government program note that private insurers spend resources on a wide range of administrative costs that government programs do not. These include marketing, underwriting, reviewing claims for legitimacy, and profits. The fact that government avoids these expenditures, however, does not necessarily make it more efficient. Many of the administrative activities that private insurers undertake serve to increase the insurers’ efficiency. Avoiding those activities would therefore make a health plan less efficient. Existing government health programs also incur administrative costs that are purely wasteful. In the final analysis, private insurance is more efficient than government insurance.

Administrative Costs

Time magazine’s Joe Klein argues that “the profits made by insurance companies are a good part of what makes health care so expensive in the U.S.and that a public option is needed to keep the insurers honest.” All else being equal, the fact that a government program would not need to turn a profit suggests that it might enjoy a price advantage over for-profit insurers. If so, that price advantage would be slight. According to the Congressional Budget Office, profits account for less than 3 percent of private health insurance premiums. Furthermore, government’s lack of a profit motive may not be an advantage at all. Profits are an important market signal that increase efficiency by encouraging producers to find lower-cost ways of meeting consumers’ needs. The lack of a profit motive could lead a government program to be less efficient than private insurance, not more.

Moreover, all else is not equal. Government programs typically keep administrative expenditures low by avoiding activities like utilization or claims review. Yet avoiding those activities increases overall costs. The CBO writes, “The traditional fee-for-service Medicare program does relatively little to manage benefits, which tends to reduce its administrative costs but may raise its overall spending relative to a more tightly managed approach.”7 Similarly, the Medicare Payment Advisory Commission writes:

[The Centers for Medicare & Medicaid Services] estimates that about $9.8 billion in erroneous payments were made in the fee-for-service program in 2007, a figure more than double what CMS spent for claims processing and review activities. In Medicare Advantage, CMS estimates that erroneous payments equaled $6.8 billion in 2006, or approximately 10.6 percent of payments. . . . The significant size of Medicare’s erroneous payments suggests that the program’s low administrative costs may come at a price.

CMS further estimates that it made $10.4 billion in improper payments in the fee-for-service Medicare program in 2008.

Medicare keeps its measured administrative-cost ratio relatively low by avoiding important administrative activities (which shrinks the numerator) and tolerating vast amounts of wasteful and fraudulent claims (which inflates the denominator). That is a vice, yet advocates of a new government program praise it as a virtue.

Medicare also keeps its administrative expenditures down by conducting almost no quality-improvement activities. Journalist Shannon Brownlee and Obama adviser Ezekiel Emanuel write:

[S]ome administrative costs are not only necessary but beneficial. Following heart-attack or cancer patients to see which interventions work best is an administrative cost, but it’s also invaluable if you want to improve care. Tracking the rate of heart attacks from drugs such as Avandia is key to ensuring safe pharmaceuticals.

According to the CBO, private insurers spend nearly 1 percent of premiums on “medical management.” The fact that Medicare keeps administrative expenditures low by avoiding such quality-improvement activities may likewise result in higher overall costs—in this case by suppressing the quality of care.

Supporters who praise Medicare’s apparently low administrative costs often fail to note that some of those costs are hidden costs that are borne by other federal agencies, and thus fail to appear in the standard 3-percent estimate. These include “parts of salaries for legislators, staff and others working on Medicare, building costs, marketing costs, collection of premiums and taxes, accounting including auditing and fraud issues, etc.”

Also, Medicare’s administrative costs should be understood to include the deadweight loss from the taxes that fund the program. Economists estimate that it can easily cost society $1.30 to raise just $1 in tax revenue, and it may sometimes cost as much as $2.36 That “excess burden” of taxation is a very real cost of administering (i.e., collecting the taxes for) compulsory health insurance programs like Medicare, even though it appears in no government budgets.

Comparing administrative expenditures in the traditional “fee-for-service” Medicare program to private Medicare Advantage plans can somewhat control for these factors. Hacker cites a CBO estimate that administrative costs are 2 percent of expenditures in traditional Medicare versus 11 percent for Medicare Advantage plans. He writes further: “A recent General Accounting Office report found that in 2006, Medicare Advantage plans spent 83.3 percent of their revenue on medical expenses, with 10.1 percent going to nonmedical expenses and 6.6 percent to profits—a 16.7 percent administrative share.”

Yet such comparisons still do not establish that government programs are more efficient than private insurers. The CBO writes of its own estimate: “The higher administrative costs of private plans do not imply that those plans are less efficient than the traditional FFS program. Some of the plans’ administrative expenses are for functions such as utilization management and quality improvement that are designed to increase the efficiency of care delivery.” Moreover, a portion of the Medicare Advantage plans’ administrative costs could reflect factors inherent to government programs rather than private insurance. For example, Congress uses price controls to determine how much to pay Medicare Advantage plans. If Congress sets those prices at supracompetitive levels, as many experts believe is the case, then that may boost Medicare Advantage plans’ profitability beyond what they would earn in a competitive market. Those supracompetitive profits would be a product of the forces that would guide a new government program—that is, Congress, the political system, and price controls—rather than any inherent feature of private insurance.

Economists who have tallied the full administrative burden of government health insurance programs conclude that administrative costs are far higher in government programs than in private insurance. In 1992,University of Pennsylvania economist Patricia Danzon estimated that total administrative costs were more than 45 percent of claims in Canada’s Medicare system, compared to less than 8 percent of claims for private insurance in the United States. Pacific Research Institute economist Ben Zycher writes that a “realistic assumption” about the size of the deadweight burden puts “the true cost of delivering Medicare benefits [at] about 52 percent of Medicare outlays, or between four and five times the net cost of private health insurance.”

Administrative costs can appear quite low if you only count some of them. Medicare hides its higher administrative costs from enrollees and taxpayers, and public-plan supporters rely on the hidden nature of those costs when they argue in favor of a new government program.

Cost Containment vs. Spending Containment  

Advocates of a new government health care program also claim that government contains overall costs better than private insurance. Jacob Hacker writes, “public insurance has a better track record than private insurance when it comes to reining in costs while preserving access. By way of illustration, between 1997 and 2006, health spending per enrollee (for comparable benefits) grew at 4.6 percent a year under Medicare, compared with 7.3 percent a year under private health insurance.” In fact, looking at a broader period, from 1970 to 2006, shows that per-enrollee spending by private insurance grew just 1 percentage point faster per year than Medicare spending, rather than 2.7 percentage points. That still omits the 1966–1969 period, which saw rapid growth in Medicare spending.

More importantly, Hacker’s comparison commits the fallacy of conflating spending and costs. Even if government contains health care spending better than private insurance (which is not at all clear), it could still impose greater overall costs on enrollees and society than private insurance. For example, if a government program refused to pay for lifesaving medical procedures, it would incur considerable nonmonetary costs (i.e., needless suffering and death). Yet it would look better in Hacker’s comparison than a private health plan that saved lives by spending money on those services. Medicare’s inflexibility also imposes costs on enrollees. Medicare took 30 years longer than private insurance to incorporate prescription drug coverage into its basic benefits package. The taxes that finance Medicare impose costs on society in the range of 30 percent of Medicare spending. In contrast, there is no deadweight loss associated with the voluntary purchase of private health insurance.

Hacker nods in the direction of non-spending costs when he writes, “Medicare has maintained high levels of . . . patient access to care.” Yet there are many dimensions of quality other than access to care. It is in those areas that government programs impose their greatest hidden costs, on both publicly and privately insured patients.

The paper goes on to discuss how private insurance bests Medicare on quality, but this excerpt is long enough.  For more on the comparison between private health insurance premiums and per-enrollee Medicare spending, see this blog post, where I conclude, “If [this comparison] were a farm animal, and social scientists farmers, they would have to take it behind the barn and put a bullet in its head.”

In addition to committing the same errors and Hacker and others, Archer fails to note that Medicare Advantage reduces spending in traditional Medicare – thereby treating us to the spectacle of an opponent of competition taking credit for one of competition’s many benefits.

Private Insurance Is More Efficient than Medicare–By Far is a post from Cato @ Liberty - Cato Institute Blog

President Obama wants to raise revenues by reducing tax deductions and other tax breaks, which the administration calls “spending in the tax code.” Donald Marron of the Tax Policy Center argues that “hundreds of billions of dollars of spending are disguised as tax cuts.”

Don is a very good economist, and he is concerned that special interest tax breaks can misallocate resources the same way that spending subsidies do. I agree. But I’m also concerned that tax breaks and spending subsidies have different implications for the size of government, which is where I part ways with Don and the president.

The following Tax Policy Matrix helps sort out which sorts of tax cuts make economic sense when government size is also a consideration.

The government distorts the economy and reduces GDP through both its taxing and spending actions. One reason is that both taxes and spending cause individuals and businesses to change their behaviors and reallocate resources in suboptimal ways. The table has columns for tax and spending distortions. It also has a column for government debt because running deficits today may translate into higher levels of distortionary taxes tomorrow.

The table includes two Starve-the-Beast scenarios. “With Starve-the-Beast” means that tax cuts will reduce government spending to some extent over time. A narrow tax base shot full of loopholes creates allocation distortions, but if starve-the-beast works that sort of tax base also limits the government’s size creating a counterbalancing benefit to GDP.

In the short run, starve-the-beast may or may not work. Bill Niskanen says that it does not, but I think the effectiveness of it changes over time as political culture changes. In the 1980s and 1990s, policymakers took corrective actions when deficits rose, but the revival of Keynesianism in recent years changed the political culture and, for a while, nullified the fear of deficits for many politicians.

In the long run, it seems obvious that the inflow of tax revenues to the government is a hard check on spending because there are financial market limits to government borrowing.

Let’s go through the rows in the table:

Row 1. The government starts off with a balanced budget and with tax and spending systems that cause medium damage.

Row 2. The government cuts taxes $100 by way of a loophole. Tax distortions rise because marginal tax rates are unchanged and we’ve added a new distortion. Higher debt likely pushes up future tax distortions. This appears to be a poor policy choice.

Row 3. The government cuts taxes $100 by way of marginal rate cut. Tax distortions are reduced, which increases economic growth. The downside is higher debt. This may or may be a good policy depending on the quality of the tax cut. If the cut is to a very distortionary part of the tax code—such as the corporate income tax rate—this policy could make sense. One reason is that the deficit increase might end up being quite small because of the positive economic response to the pro-efficiency tax cut.

Row 4. With starve-the-beast operational, a special interest tax cut becomes a bit of a closer call. Tax distortions and debt rise, but government spending falls somewhat, so the net effect on the economy is unclear. However, I think there are considerations here aside from economics. Special interest tax breaks—such as the ethanol tax break—are troubling because they represent a corruption of the law, an affront to the American ideal of “equal justice under law.” So just on that basis, I’m against special interest breaks, and indeed am in favor replacing the current code with a flat tax.

Row 5. A pro-efficiency tax cut is very likely a winner if you assume that starve-the-beast is operational. Tax and spending distortions both fall, although there is a modest increase in debt.

So far we’ve left out the most important fiscal tool available to policymakers—spending cuts to unneeded and damaging programs to reduce government harm to the economy. The best policy choice would be to combine pro-growth tax cuts with spending cuts to harmful programs. That would reduce government distortions on both sides of the budget, and thus unambiguously increase GDP.

In sum, without matching spending cuts, tax cuts may or may not make sense depending on the type of cut and whether reducing Uncle Sam’s diet will force him to slim down in subsequent years. But it is a fiscal policy win-win to match spending cuts with cuts to the most damaging parts of the tax code.

Tax Cuts, Loopholes, and Government Size is a post from Cato @ Liberty - Cato Institute Blog

Citing new Census figures, the New York Times claims that “public school districts spent an average of $10,499 per student on elementary and secondary education in the 2009 fiscal year.” But according to the most recent issue of the Digest of Education Statistics, expenditures haven’t been that low for over a decade. In the last year reported, 2007-08, total expenditures per pupil in average daily attendance were already $12,922 (in 2008-09 dollars). Adjusting for inflation, that’s about $13,500 in today’s dollars. (Looking at spending per student enrolled, rather than per student actually taught, lowers the total figure, but not by that much).

So what gives? How can the Times claim that public school “spending” is $3,000 lower than it actually is?

They simply exclude a huge swath of expenditures in the number that they call “spending,” without telling readers they have done so. Specifically, they ignore spending on things like… buildings. Correct me if I’m wrong, but I don’t think American public schools have returned to Plato’s practice of holding lessons in an olive grove. Until they do, they will use buildings. Buildings cost money. They aren’t erected, for free and fully furnished, from the mind of Zeus.

Not only does this arbitrary and unjustifiable exclusion of capital expenditures from the reported “spending” figures wildly mislead the public about what schools are really costing them, it also misleads the public about the trends in spending. As my colleague Adam Schaeffer reveals in the chart below, spending on physical facilities has increased at a far faster rate than other expenditures (remember those Taj Mahal schools?). So by channeling David Blaine and making capital spending disappear, the Times also misrepresents real spending growth. In so doing, they undermine the public’s and lawmakers’ ability to make sound policy decisions regarding education. If the Times prominently corrects this glaring error I will be utterly shocked.

More Fifth Column than Fourth Estate is a post from Cato @ Liberty - Cato Institute Blog

In a Cato paper released earlier this month, I argued that the glacial pace of America’s economic recovery and its growing public debt juxtaposed against China’s almost uninterrupted double-digit annual economic growth and its role as Congress’s sugar daddy have bred insecurity among U.S. opinion leaders, many of whom now advocate a more strident approach to China, or emulation of its top-down approach.

I cite, among others, Thomas Friedman of the New York Times, who is enamored of autocracy’s capacity to facilitate China’s singularity of purpose to dominate the industries of the future:

One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century. It is not an accident that China is committed to overtaking us in electric cars, solar power, energy efficiency, batteries, nuclear power, and wind power. China’s leaders understand that in a world of exploding populations and rising emerging-market middle classes, demand for clean power and energy efficiency is going to soar. Beijing wants to make sure that it owns that industry and is ordering the policies to do that, including boosting gasoline prices, from the top down.

Friedman’s theme—but less googoo eyed and more all-hands-on-deck!—is echoed in an op-ed by China-expert James McGregor, which ran in yesterday’s Washington Post.  McGregor conveys what he describes as an emerging sentiment within the U.S. business community in China.  That is: the Chinese government is hell bent on creating national economic champions; is using its increasing leverage (as global financier and fastest-growing market) to impose its own interpretations of the global rules of economic engagement in support of its comprehensive industrial policy, and, ultimately; the United States must wake up and rise to the challenge by crafting some top-down industrial policy of its own.

I don’t dispute some of McGregor’s premises.  China’s long process of market liberalization has slowed down, halted, and even reversed in some areas.  Policies are proliferating that favor local companies (particularly state-owned enterprises), hamper the operations of foreign-owned firms, and impede market access for imports.  Indeed, many of these policies are likely the product of industrial planning. 

But McGregor’s conclusion is extreme:

The time has come for a White House-led, public-private, comprehensive examination of American competitiveness against a clear-eyed view of China’s very smart and comprehensive industrial development policies and plans…What technology do we protect? What do we share? What are our commercial strategic imperatives as a nation? How do we retool the U.S. government’s inadequate and outdated trade bureaucracy to provide thoughtful strategic focus and interagency coordination? How do we overcome the fundamental disconnect between our system of scattered bureaucratic responsibilities and almost no national economic planning vs. China’s top-down, disciplined and aggressive national economic development planning machine?

Central planning may be more en vogue in Washington than usual nowadays, but to even come close to reaching his conclusion requires disregarding many facts, which is how McGregor gets there sans tongue in cheek.

First, in an effort to preempt any suggestion that China’s protectionism is nothing exceptional and can be remedied through the World Trade Organization and other channels, McGregor offers this blanket statement: “Chinese policymakers are masters of creative initiatives that slide through the loopholes of WTO and other international trade rules.”  I realize that op-ed writing forces one to economize on words, but that statement, which serves as McGregor’s springboard to socialism, cannot suffice for an analysis of the facts.  One of those facts is that the United States has been successful in compelling changes in China’s protectionist practices in all of the formal WTO disputes it has lodged that have been resolved thus far (6 of 8 formal cases have been resolved).  If China violates the agreed rules of trade, and its actions impair benefits or impose costs on U.S. interests that are too large to ignore, pursuing a WTO case is a legitimate and proven channel of resolution. Chinese protectionism can be addressed without the radical changes McGregor counsels. 

But I think McGregor—sharing the tactics of other in the media and politics—exploits public angst over a rising China to promote his idea as the obvious and only solution to what he sells as a rapidly-metastasizing problem.  McGregor argues that China is aiming to create national champions through subsidies and other preferential policies, while charging foreign companies admission to its market in the form of technology transfer, joint-venturing requirements, and local content rules.  McGregor claims, that this appropriation of foreign technology will be used to “create Chinese ‘indigenous innovations’ that will come back at us globally.”  Ultimately, McGregor fears that “American technology companies could be coerced to plant the seeds of their destruction in the fertile China market.”

It is telling that McGregor doesn’t consider U.S. government expropriation of those companies’ technology assets as planting the seeds of their own destruction.  Indeed, it is nothing short of expropriation when technology that is owned by individual companies in the private sector, making unique decisions to improve their own bottom-lines on behalf of their own shareholders is suddenly subject to the questions McGregor wants answered: What technology do we protect? What do we share? What are our commercial strategic imperatives as a nation?  Those questions, let alone the answers, imply that the U.S. government should have at least de facto ownership and control over these privately-held technology assets.

What is wrong with allowing each of these companies to decide for themselves whether they want to license or transfer some of their technology to Chinese companies, as the price of doing business in China?  Some will, some won’t, but the presupposition that those who do are selling the golden goose is not based on fact.  Let companies decide for themselves how to use their resources, and don’t treat industry as a monolith, as in “What are our commercial strategic imperatives as a nation?” 

Had we tried to answer and implement the answer to that question in the face the Japanese “threat” two decade ago, we’d be bereft of some of the most ingenious technological breakthroughs and the hundreds of industries and thousands of products that “our system of almost no national economic planning” has yielded.

When we peel away the chicken-little rhetoric, when we dispense with neo-Rahm Emanualism (“Never manufacture a good crisis and then let it go to waste”), when cooler heads and analytical minds prevail, the economic question boils down to this: What has been more successful at creating growth, central planning or decentralized dynamism?  For both China and the United States, it has been the latter. 

My bet is that China’s re-embrace of greater central planning will be brief, as it wastes resources, yields few -if any- national champions, and limits innovation.  For similar reasons, U.S. opinion leaders will eschew central planning, as well.

Beware of Americans Proselytizing the Chinese Economic Model is a post from Cato @ Liberty - Cato Institute Blog

On Tuesday, I criticized a new economic modeling paper (“Anti-Lemons”) purporting to show that unfettered education markets are bad and that government can fix them with the right regulations.

Andrew Gillen comes to the study’s defense, and I’m delighted that he’s taken the trouble to reflect on it rather than just saying “I like it.” But there are problems with his analysis. First, he faults me for dismissing the “Anti-Lemons” models for being based on false assumptions, citing Paul Krugman:

I am a strong believer in the importance of models, which are to our minds what spear-throwers were to stone age arms: they greatly extend the power and range of our insight. In particular, I have no sympathy for those people who criticize the unrealistic simplifications of model-builders.

Even if we put aside the fact that Paul Krugman is at times less reliable than the Daily Show website, there is an important difference between assumptions that are “unrealistically simplified” and those that are patently wrong. With the former, your model might still huck its intellectual spear somewhere in the general vicinity of the truth, with the latter, you’re just going to put your eye out.

“Anti-Lemons” is in the put-your-eye-out camp. Among other things, it assumes the productivity of all schools is equal. This is both totally false and highly germane — efficiency varies dramatically among schools, and private schools as a whole are consistently more efficient than government schools (as we will see below). Failing to recognize that reality will lead to incorrect results from the model, and this is just one of the false assumptions the paper adopts (see my previous post for others).

Second, Gillen writes that

going by Coulson’s numbers in figure 2 here, we would expect to find a positive impact of markets over government on achievement in slightly less than 2 out of 3 studies (with insignificant findings making up the majority of the others). If the case for free markets over government schools is really so clear cut (and I lean strongly in this direction), than why isn’t this 3 out of 3?

There are many plausible reasons for this result (lack of statistical power, omitted variable bias, other misspecification errors, etc.), but one is particularly worth raising here: government schools in many parts of the world spend several times as much per pupil as their private sector counterparts. This is true in most developing countries, from which a great deal of the inter-sectoral research hails. And when I looked at statewide data from Arizona in 2006 I found that government schools spend roughly 50 percent more than private schools. While it’s true that government school outcomes tend not to improve much as spending rises, the same cannot be said of private schools.

If this is true, you might ask, then wouldn’t the inter-sectoral research on school efficiency be more stark than the research on achievement (that fails to take spending levels into account)? The answer is yes. In fact, if you examine the efficiency bar in the same figure 2 cited by Gillen above, you will see that every single one of the efficiency comparisons between market and monopoly schools is significant and favors the market schools.

So, not only is the “Anti-Lemons” model useless, it is worse than useless: it seems to mislead even intelligent readers into believing that there is some mystery in the literature that needs to be solved by blindly waiving a spear around.

“Anti-Lemons” is neither Camelot, as I said yesterday, nor is it Sparta as Andrew implied. It’s the kid from Christmas Story who nearly puts his eye out by the cavalier application of a potentially powerful tool.

When they Give You “Anti-Lemons”… is a post from Cato @ Liberty - Cato Institute Blog

On Tuesday I noted that the College Board had released its annual reports on college prices and student aid. At the time I wrote the post I hadn’t yet been able to download the reports, but was planning to provide a rundown of their major findings once I’d read them. I’ve now done the latter, but it turns out that Ben Miller over at the Quick and the ED has already posted a pretty good summary of the most important findings. Go there if you want the highlights. Don’t go there, though, if you want to know what the highlights mean, at least for anyone other than students. For that, you’ll have to read on here….

The big news is that net college prices — what students pay after aid– have actually decreased over the last 15 years. While sticker prices were rising much faster than incomes and inflation, what students were actually paying dropped. The implication of this is so obvious that Mr. Magoo couldn’t mistake it: Student aid, much of which comes through taxpayers, enables schools to charge ever-higher prices with near impunity.

Back to the Quick and the ED. To some degree, Miller sees declining net price as a triumph for federal aid, making college more affordable even as prices explode:

This story should be encouraging for legislators that fought hard to win Pell Grant increases over the last few years. The steepest decreases in net price occur beginning in the 2007-2008 academic year, the same time Congress began passing legislation that boosted the maximum Pell Grant award several times. This at least suggests that the money spent on the program did play some role in lessening the financial burden for students and was not completely eaten up by sticker price increases.

On the flip side, Miller at least acknowledges that:

The net price figure also lessens the pressure on schools to actually take proactive steps to lower their costs. If the price you list isn’t actually what you charge, then why should anyone care what the listed price is and how high it gets? Net price thus serves as a kind of smokescreen that gets colleges at least partially off fo[r] charging an arm and a leg.

So what’s wrong with this analysis? 

Most important is that Miller softpedals the aid effect, suggesting that the main negative consequence of  ever-increasing assistance is that it bleeds off a bit of the pressure for schools to lower costs. But it likely has a much more destructive effect than that, not just curbing efficiency pressures, but enabling schools to constantly charge and spend more.  It’s a likelihood that student-aid defenders try to dispel by citing studies that cover very short periods of time, or that simply pronounce that we don’t know that it happens. That it probably happens, however, has been borne out empirically, and it’s readily ackowledged by prominent higher educators including former Harvard president Derek Bok, former Stanford vice president William F. Massy, and former University of Iowa president Howard Bowen. Indeed, the latter’s “law” couldn’t be more blunt: “Universities will raise all the money they can and spend all the money they raise.”

Miller’s other major failing is that he completely ignores that all this aid has to come from somwhere, and that “somewhere” is largely taxpayers. (OK, first it’s China.) Just to give you a sense of the impact on taxpayers, College Board data show that between the 1998-99 and 2008-09 academic years, total federal aid — including grant money recipients don’t have to pay back, and loans they (sometimes) do — rose from $61.1 billion to $116.8 billion. Add state aid to that, and the total goes from $66.6 billion to $126.2 billion.

And what are some of the major downsides of these forced third-party payments? Miller mentions a few pricing difficulties for students, but makes no mention of the potentially huge negative consequences for the nation: Encouraging lots of people to attend college who simply aren’t prepared for it; cranking out many more degrees than the job market demands; and potentially slowing economic growth by taking funds from productive uses and giving it to efficiency-averse colleges and students. 

The big finding in the latest College Board data, which the Quick and the ED nails, is that net college prices have been going down. The important story, however, is that this is bad news for the country. Unfortunately, the Quick and the Ed misses that almost completely.

Nothing Good about The Higher Ed Pricing Game is a post from Cato @ Liberty - Cato Institute Blog

In an IBD op-ed today, I point out that we’re spending twice as much per pupil as we did in 1970, despite no improvement in achievement at the end of high school and a decline in the graduation rate over that same period.

What difference does that make? If public schools had just managed not to get any less efficient over the past 40 years, we’d be saving $300 billion annually.

Our education monopoly is a luxury we can no longer afford. When the economy was booming, it didn’t matter that it cost us more and more every year for the same or even inferior results. These days, it’s becoming imperative that we find ways for our education system to enjoy the same relentless increases in efficiency that we take for granted in every other field.

This, for instance, would be a good start.

Economic urgency isn’t the only good reason to bring education back within the free enterprise system, but when the school monopoly starts bringing entire states to their financial knees, it’s certainly one we should take seriously.

We Can No Longer Afford an Education Monopoly is a post from Cato @ Liberty - Cato Institute Blog

It seems U.S. education secretary Arne Duncan and British schools secretary Ed Balls disagree on the merits of national standards. While Duncan has said that homogenizing educational standards nationwide is his single most important goal while in office, Balls has just pulled the plug on the U.K.’s 10 year experiment with national reading and math strategies. He told the media:

I think the right thing for us to do now is to move away from what has historically been a rather central view of school improvement through national strategies to something which is essentially being commissioned not from the centre but by schools themselves.

The problem with saying that every 5th grader in the nation should learn the same things at the same time is that all 5th graders are not created equal. Some are better at math than reading. Some the reverse. Some are quick learners across the board. Some are slower. To deny this is ridiculous, but to acknowledge it is to admit that homogenized standards in a system that groups students rigidly by age is educational malpractice.

Even if kids were all identical automatons, national standards wouldn’t drive excellence. It is the incentive structure of the free enterprise system that has driven progress in all the fields that have actually progressed — not externally-imposed standards.

What America needs for an educational renaissance is to release schools and families from the shackles of monopoly, and re-inject the freedom and incentives that kindle innovation and efficiency. Sitting 50 million Jills and Johnnies down on a conveyor belt that drags them all through their studies at the same pace makes no sense.

Duncan Balls is a post from Cato @ Liberty - Cato Institute Blog

As my colleague Michael Cannon discusses below, in today’s WSJ Online, Carl Bialik examines the data on how many Americans do not have health insurance. Discussions like this one will be rehashed repeatedly during the coming health care debate, but they miss the crucial point: the U.S. should not expand government subsidy for health insurance whether the number of insured is 46 million or just 46.

The economics argument for subsidizing health insurance rests on the claim that private insurance markets do not provide fairly priced insurance. This is allegedly because insurers cannot distinguish the good health risks from the bad health risks and thus price insurance at a level only the bad risks are willing to pay.

This claim of “asymmetric information” is incredibly unpersuasive: absent regulation to the contrary, an insurance company can require any medical tests it wants and learn an insurance applicant’s health at least as well as the applicant. It can also condition coverage on relevant behavior, such as not smoking or maintaining a reasonable weight.

The problem is thus that insurance companies can determine all too well who is a good health risk and who is not, so they will price insurance accordingly if the law permits. This strikes many people as unfair, so they want to subsidize insurance for those born with unhealthy genes.

If insurance subsidies had few unintended consequences, this might be a reasonable form of social insurance. The problem is that subsidizing insurance exacerbates moral hazard, the tendency of people with insurance to consume too much health care. This is a crucial reason for rapidly increasing health expenditures.

Policy must therefore accept a trade-off: subsidizing health insurance will increase some people’s perceptions of fairness, but it will make the health care market less efficient.

A reasonable balancing of these two concerns suggests subsidizing insurance for the truly poor, but no more. In fact, the U.S. already does that via Medicaid. The uninsured are mainly people with too much income to qualify for Medicaid, or people eligible but fail to apply. Thus expansion of subsidized insurance to the currently uninsured, whatever their number, is likely to generate substantial inefficiency relative to any increase in “fairness” it creates.

How Many Uninsured? It Does Not Matter is a post from Cato @ Liberty - Cato Institute Blog

We are now facing some of the most sweeping changes health care has seen in decades. Reform is needed, but increasing government control over one-sixth of the economy and over important personal and private decisions — as many of the proposals aim to do — would harm American taxpayers, health care providers, and patients.

This week, the Cato Institute launched Healthcare.Cato.org, which highlights Cato’s contributions to the health care debate. The resources provided on the site provide in-depth analyses of health care issues and reform initiatives, and underscore the ways in which free-market reforms, increased consumer choice, and energized competition — not more government control — improve the quality and cost-efficiency of health care.

Please check back regularly for updates and new resources!

Update: The Cato Institute Conference on Health Care Reform will be Webcast live from 9:00-5:00 PM Wednesday.

Featured speakers:

• Rep. Paul Ryan (R-WI)
• Rep. Michael C. Burgess, M.D. (R-TX)
• Rep. Jason Altmire (D-PA)
• Karen Davenport, Director of Health Policy, Center for American Progress
• Douglas Holtz-Eakin, Former Director, Congressional Budget Office, and Director of Domestic and Economic Policy for the McCain presidential campaign
• Tom G. Donlan, Barron’s
• Karen Tumulty, Time Magazine
• Susan Dentzer, Health Affairs
• John Reichard, Congressional Quarterly

Full schedule of events and Webcast, here.

Cato on Health Care Reform is a post from Cato @ Liberty - Cato Institute Blog

Which uses less energy and emits less pollution: a train, a bus, or a car? Advocates of rail transportation rely on the public’s willingness to take for granted the assumption that trains — whether light rail, subways, or high-speed intercity rail — are the most energy-efficient and cleanest forms of transportation. But there is plenty of evidence that this is far from true.

Rail advocates often reason like this: the average car has 1.1 people in it. Compare the BTUs or carbon emissions per passenger mile with those from a full train, and the train wins hands down.

The problem with such hypothetical examples is that the numbers are always wrong. As a recent study from the University of California (Davis) notes, the load factors are critical.

The average commuter car has 1.1 people, but even during rush hour most of the vehicles on the road are not transporting commuters. When counting all trips, the average is 1.6, and a little higher (1.7) for light trucks (pick ups, full-sized vans, and SUVs).

On the other hand, the trains are rarely full, yet they operate all day long (while your car runs only when it has someone in it who wants to go somewhere). According to the National Transit Database, in 2007 the average American subway car had 25 people in it (against a theoretical capacity of 150); the average light-rail car had 24 people (capacity 170); the average commuter-rail car had 37 people (capacity 165); and the average bus had 11 (capacity 64). In other words, our transit systems operate at about one-sixth of capacity. Even an SUV averaging 1.7 people does better than that.

When Amtrak compares its fuel economy with automobiles (see p. 19), it relies on Department of Energy data that presumes 1.6 people per car (see tables 2.13 for cars and 2.14 for Amtrak). But another Department of Energy report points out that cars in intercity travel tend to be more fully loaded — the average turns out to be 2.4 people.

“Intercity auto trips tend to [have] higher-than-average vehicle occupancy rates,” says the DOE. “On average, they are as energy-efficient as rail intercity trips.” Moreover, the report adds, “if passenger rail competes for modal share by moving to high speed service, its energy efficiency should be reduced somewhat — making overall energy savings even more problematic.”

Projections that high-speed rail will be energy-efficient assume high load factors (in the linked case, 70 percent). But with some of the routes in the Obama high-speed rail plan terminating in such relatively small cities as Eugene, Oregon; Mobile, Alabama; and Portland, Maine, load factors will often be much lower.

Even if a particular rail proposal did save a little energy in year-to-year operations, studies show that the energy cost of constructing rail lines dwarfs any annual savings. The environmental impact statement for a Portland, Oregon light-rail line found it would take 171 years of annual energy savings to repay the energy cost of construction (they built it anyway).

Public transit buses tend to be some the least energy-efficient vehicles around because agencies tend to buy really big buses (why not? The feds pay for them), and they run around empty much of the time. But private intercity buses are some of the most energy efficient vehicles because the private operators have an incentive to fill them up. A study commissioned by the American Bus Association found that intercity buses use little more than a third as much energy per passenger mile as Amtrak. (The source may seem self-serving, but DOE data estimate intercity buses are even more efficient than that–compare table 2.12 with intercity bus passenger miles in this table).

When it comes to energy consumption per passenger mile, the real waste is generated by public transit agencies and Amtrak. Instead of trying to fill seats, they are politically driven to provide service to all taxpayers, regardless of population density or demand. One of Amtrak’s unheralded high-speed (110-mph) rail lines is between Chicago and Detroit, but it carries so few people that Amtrak loses $84 per passenger (compared with an average of $37 for other short-distance corridors).

Meanwhile, transit agencies build light-rail lines to wealthy suburbs with three cars in every garage. With capacities of more than 170, the average light-rail car in Baltimore and Denver carries less than 15 people, while San Jose’s carries 16. For that we need to spend $40 million a mile on track and $3 million per railcar (vs. $300,000 for a bus)?

If we really wanted to save energy, we would privatize transit, privatize Amtrak, and sell highways to private entrepreneurs who would have an incentive to reduce the congestion that wastes nearly 3 billion gallons of fuel each year (p. 1). But of course, the real goal of the rail people is not to save energy but to reshape American lifestyles. They just can’t stand to see people enjoying the freedom of being able to go where they want, when they want to get there.

Which Is Greener? is a post from Cato @ Liberty - Cato Institute Blog

I had an op-ed yesterday in USA Today about President Obama’s proposed new fuel-economy standards. Don’t like ‘em. Unfortunately, an editing snafu over at the newspaper inadvertently left out the fact that there are four models at present that meet the proposed new standard — the 2010 Honda Insight (41 mpg) and the 2010 Ford Fusion Hybrid (39 mpg) were left off the list.

Space prohibited me from making an additional point. Even if there is no rebound effect, my colleague Pat Michaels finds that global temperatures will only be reduced by 0.005 degrees Celsius by 2050 and 0.0078 degrees Celsius by 2100 once you plug those emissions reductions into the computer models used by the IPCC. Of course, proponents contend that U.S. action on fuel efficiency will lead to like action abroad. Well, good luck with that. But even if all of the signatories to the Kyoto Protocol adopted Obama’s proposed fuel-economy standards, global temperatures would be reduced by only 0.038 degrees Celsius by 2050 and 0.071 degrees Celsius by 2100. If you tried to monetarize those benefits, you would be hard pressed to come up with an defensible number of consequence.

So what should be done instead? Nothing. At the risk of sounding politically irrelevant, there is no good case for the government to reduce U.S. gasoline consumption via fuel economy standards or fuel taxes; an argument I made at length in a study I co-authored almost two years ago with my colleague Peter Van Doren.

[Cross-posted at The Corner]

The President’s New Cars is a post from Cato @ Liberty - Cato Institute Blog

A commenter at Joanne Jacobs’ edu-blog wonders “how serious this ‘collapse’ is.” I offered the following response:

How serious of a collapse is it? Total k-12 expenditures in this country were about $630 billion two years ago (see Table 25, Digest of Ed Statistics 2008). The efficiency of our education system is less than half what it was in 1971 (i.e., we spend more than twice as much to get the same results — see Table 181, same source).

So if we’d managed to ensure that education productivity just stagnated, we’d be saving over $300 billion EVERY YEAR. If we’d actually seen productivity improvements in education such as we’ve seen in other fields, we’d be saving at least that much money and enjoying higher student achievement at the same time.

My guess is that most people would consider saving $3 trillion per decade and more fully realizing children’s intellectual potential are both very important.

Another commenter observes that spending has of necessity increased due to the combination of rising salaries and a failure to deploy new technologies to lower costs. This is true to a point, but the total employee/student ratio in public schools has also grown dramatically over the same period. A few years ago I calculated that taxpayers would save more than $100 billion annually if the public schools just went back to the employee/student ratio of 1970. And the savings are still massive even if you account for a roughly 10% increase in teachers for expanded special education services.

Ultimately, though, you have to ask WHY public schools have failed to use technology to lower costs as virtually every other field has successfully done. The answer is that doing so is difficult and so won’t happen without the freedom and powerful systemtic incentives to MAKE it happen. The only system of freedoms and incentives that makes productivity growth the norm is the free enterprise system.

How Serious Is U.S. Ed. Productivity Collapse is a post from Cato @ Liberty - Cato Institute Blog

Despite the recession, globalization continues to exert pressure for beneficial tax reforms. From Tax Notes International today:

Jordanian Finance Minister Bassem al-Salem on April 20 confirmed that the government is working on draft legislation that would cut corporate tax rates drastically, reducing them in some cases by more than half.

Al-Salem said the government will seek to introduce a single 12 percent tax rate for most corporate entities, although companies in the banking, insurance, and mining sectors would pay tax at a rate of 25 percent. The current corporate tax rates range from 15 percent to 35 percent for different profit levels and also differ by business sector.

The draft legislation would also rationalize individual income tax, custom duties, and other taxes to increase efficiency, al-Salem said. Jordan has about 100 different taxes.

Al-Salem said the tax cuts are needed because many countries in the region either don’t have taxes at all or have much lower tax rates than Jordan’s, making them more attractive jurisdictions for investment.

 The full story on taxation and globalization is here.

Globalization and Tax Reform is a post from Cato @ Liberty - Cato Institute Blog

At Capitol News Connection, brought to you each morning by your tax dollars, they reported this morning:

With more than a trillion tax dollars tied up in the Troubled Asset Relief Program and stimulus spending, Congress is trying to figure out how to account for every penny.

Uh-huh. Congress is always on top of our federal dollars.

Coincidentally, just hours after the CNC report, the Government Accountability Office released a report warning about the lack of oversight procedures in the kitchen-sink stimulus bill. And a few days earlier the inspector general for the TARP program reported that Treasury has no real details on how TARP funds are being spent. In fact, IG Neil Barofsky told Congress that there were 20 criminal investigations into possible TARP fraud already underway.

Two months ago Barofsky and the comptroller general had warned of the likelihood of waste in huge new government programs:

Neil Barofsky, the special inspector general for the $700 billion Troubled Asset Relief Program, told a House subcommittee that the government’s experiences in the reconstruction of Iraq, hurricane-relief programs and the 1990s savings-and-loan bailout suggest the rescue program could be ripe for fraud…

Gene Dodaro, acting comptroller general of the U.S., told the subcommittee that a reliance on contractors and a lack of written policies could “increase the risk of wasted government dollars without adequate oversight of contractor performance.”

One of Greg Mankiw’s readers worked on the new Department of Homeland Security and reported recently:

[Y]ou cannot juice up a government agency’s budget by tens of billions (or in the case of the stimulus package, hundreds of billions) and expect them to be able to process the paperwork to contract it out, much less oversee the projects or even choose them with any kind of hope for success. It’s like trying to feed a Pomeranian a 25 lb turkey. It’s madness. It was years before DHS got the situation under control and between the start and when they finally assembled a sufficiently capable team of lawyers, contracting officials, technical experts and resource managers, most of the money was totally wasted.

Linda Bilmes, coauthor with Nobel laureate Joseph Stiglitz of The Three Trillion Dollar War: The True Cost of the Iraq Conflict, analyzes the massive problems in three somewhat smaller government projects — the Iraqi reconstruction effort, Hurricane Katrina reconstruction, and the Big Dig artery construction in Boston — and finds that “in any organization that starts to increase spending very rapidly there are risks of waste, fraud and inefficiency.”

Milton Friedman summed up the basic problem with government waste back in 2002:

When a man spends his own money to buy something for himself, he is very careful about how much he spends and how he spends it. When a man spends his own money to buy something for someone else, he is still very careful about how much he spends, but somewhat less what he spends it on. When a man spends someone else’s money to buy something for himself, he is very careful about what he buys, but doesn’t care at all how much he spends. And when a man spends someone else’s money on someone else, he doesn’t care how much he spends or what he spends it on. And that’s government for you.

Members of Congress can make all the speeches they want about their commitment to ferreting out waste and fraud, but waste and fraud are inevitable in government spending and inevitably large in such massive programs. Some people think that’s fine. At least they’re realistic. But reporters shouldn’t fall for politicians promising to spend unprecedented sums of other people’s money quickly and wisely.

Waste, Fraud, and Stimulus is a post from Cato @ Liberty - Cato Institute Blog

Tax Day: The Nightmare from Which There’s No Waking Up

Cato scholars were busy exposing the burden of the American tax system on Wednesday, the deadline to file 2008 tax returns.

At CNSNews.com, tax analyst Chris Edwards argued that policymakers should give Americans the simple and low-rate tax code they deserve:

The outlook for American taxpayers is pretty grim. The federal tax code is getting more complex, the president is proposing tax hikes on high-earners, businesses, and energy consumers; and huge deficits may create pressure for further increases down the road…

The solution to all these problems is to rip out the income tax and replace it with a low-rate flat tax, as two dozen other nations have done.

At Townhall, Dan Mitchell excoriated the complexity of the current tax code:

Beginning as a simple two-page form in 1913, the Internal Revenue Code has morphed into a complex nightmare that simultaneously hinders compliance by honest people and rewards cheating by Washington insiders and other dishonest people.

But that is just the tip of the iceberg. The tax code also penalizes economic growth, distorts taxpayer behavior, undermines American competitiveness, invites corruption and promotes inefficiency.

Mitchell appeared on MSNBC, arguing that every American will soon see massive tax hikes, despite Washington rhetoric.

Don’t miss the new Cato video that highlights just how troubling the American tax code really is.

U.S. Navy Rescues Captain Held Hostage by Somali Pirates

USA Today reports that the captain of a merchant vessel that was attacked by Somali pirates was freed Monday when Navy SEAL sharpshooters killed the pirates. The episode raises a larger question: How should the United States respond to the growing threat of piracy in the region?

Writing shortly after Capt. Richard Phillips was freed, foreign policy expert Benjamin Friedman explained the reasons behind the increase in piracy:

It’s worth noting the current level of American concern about piracy is overblown. As Peter Van Doren pointed out to me the other day, the right way to think about this problem is that pirates are imposing a tax on shipping in their area. They are a bit like a pseudo-government, as Alexander the Great apparently learned. The tax amounts to $20-40 million a year, which is, as Ken Menkhaus put it in this Washington Post online forum, a “nuisance tax for global shipping.”

The reason ships are being hijacked along the Somali coast is because there are still ships sailing down the Somali coast. Piracy is evidently not a big enough problem to encourage many shippers to use alternative shipping routes. In addition, shippers apparently find it cheaper to pay ransom than to pay insurance for armed guards and deal with the added legal hassle in port. The provision of naval vessels to the region is an attempted subsidy to the shippers, and ultimately consumers of their goods, albeit one governments have traditionally paid. Whether or not that subsidy is cheaper than letting the market actors sort it out remains unclear to me.

Appearing on Russia Today, Friedman discussed the implications of the increased threat and what ships can do to avoid future incidents with Somali pirates.

Since the problems at sea are related to problems on Somali land, what can Western nations do to decrease poverty and lawlessness on the African continent? Dambisa Moyo, author of Dead Aid, argued at a Cato Policy Forum last week that the best way to combat these issues is to halt government-to-government aid, and proposed an “aid-free solution” to development based on the experience of successful African countries.

Obama Lifts Some Travel Bans on Cuba

The Washington Post reports:

President Obama is lifting some restrictions on Cuban Americans’ contact with Cuba and allowing U.S. telecom companies to operate there, opening up the communist island nation to more cellular and satellite service… The decision does not lift the trade embargo on Cuba but eases the prohibitions that have restricted Cuban Americans from visiting their relatives and has limited what they can send back home.

In the new Cato Handbook for Policymakers, Juan Carlos Hidalgo and Ian Vasquez recommend a number of policy initiatives for future relations with Cuba, including ending all trade sanctions on Cuba and allowing U.S. citizens and companies to visit and establish businesses as they see fit; and moving toward the normalization of diplomatic relations with the island nation.

While Obama’s plan is a small step in the right direction, Hidalgo argues in a Cato Daily Podcast that Obama should take further steps to lift the travel ban and open Cuba to all Americans.

Week in Review: Tax Day, Pirates and Cuba is a post from Cato @ Liberty - Cato Institute Blog

Here are a couple of dishes Cato Institute scholars cooked up for Tax Day:

• Writing for National Review Online, Chris Edwards warns against the dangers of rapidly increasing government spending:
  

  When filling out your tax forms, you might want to think for a second about where all that money is going. After federal spending roughly doubled in the Bush years, it is growing by leaps and bounds under President Obama. What’s more, the federal government is increasing the scope of its activities — it is intervening in many areas that used to be left to state and local governments, businesses, charities, and individuals.

  There are now a staggering 1,804 subsidy programs in the federal budget. Hundreds of programs were added this decade, and the recent stimulus bill added even more. The result is that we are in the midst of the largest federal gold rush at taxpayer expense since the 1960s.

• At Townhall, Dan Mitchell rails against the current tax code:
  

  Beginning as a simple two-page form in 1913, the internal revenue code has morphed into a complex nightmare that simultaneously hinders compliance by honest people and rewards cheating by Washington insiders and other dishonest people.

  But that is just the tip of the iceberg. The tax code also penalizes economic growth, distorts taxpayer behavior, undermines American competitiveness, invites corruption and promotes inefficiency.

• At CNSNews.com, Edwards argues that policymakers should give Americans the low and simple tax code that they deserve.

• Also, don’t miss the new Cato video that reveals how troubling the American tax system really is.

New at Cato, Tax Day Edition is a post from Cato @ Liberty - Cato Institute Blog

Well, sort of.  The Obama administration signaled last week their belief that it would be better to have one national fuel efficiency standard than a multiplicity of different state fuel efficiency standards.  Now, we have long maintained that fuel efficiency standards — federal or state — are a bad idea.  Consumers should be free to buy whatever sort of car they want without government economic coercion.  But if we must do violence to consumer sovereignty, better to do so via one national standard rather than via a hodge-podge of differing state standards.

This is the very argument I made late in January over at The New York Times when asked about California’s petition to establish its own fuel efficiency standard as a means of addressing greenhouse gas emissions.  Alas, I was pilloried on the NYT comments board at that time for all sorts of sins against man and nature.  Now it appears that President Obama has come over to the dark side.  Welcome to my world, Mr. President.

Obama Administration Agrees with Cato on Auto Fuel Efficiency is a post from Cato @ Liberty - Cato Institute Blog