Obama Ringing the Pell
As part of his ill-considered credentialing-to-compete initiative, President Obama wants to greatly increase both the size and availablity of Pell Grants. Under his proposed FY 2011 budget, the total pot of Pell aid would rise from $28.2 billion in 2009 to $34.8 billion in 2011; the maximum award would go from $5,350 to $5,710; and the number of students served would rise by around 1 million.
A critical question, of course, is whether increasing Pell will ultimately make college more affordable or self-defeatingly fuel further tuition inflation. The New York Times took that up in yesterday’s Room for Debate blog.
Economist Richard Vedder has long educated people about the inflationary effect of student aid, and does so again with great clarity. It’s higher-ed analyst Art Hauptman, however, whom I think best captures what likely occurs when Pell is combined with all the cheap loans and other aid furnished by Washington, states, and schools themselves:
Read the rest of this post »
Filed under: Education and Child Policy; Finance, Banking & Monetary Policy
Fed Governor Starting to Make Sense
Despite still defending the Fed’s bailouts, Fed Governor Kevin Warsh gave a speech this morning offering a few insights about reforming our financial system that seem to be lost on both Obama and Bernanke.
A few highlights:
The mortgage finance system is owed far stricter scrutiny to gather a fuller appreciation of the causes of the crisis. The government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, for example, were given license and direction to take excessive risks.
One has to hope that both Bernanke and Obama are listening. The silence of the Obama administration on fixing Fannie and Freddie is nothing short of shocking and irresponsible. Any commitment to real reform has to include the GSEs.
Granting new powers to resolve failing firms in the discretionary hands of regulators is unlikely, in the near-term, to drive the market discipline required to avoid the recurrence of financial crises.
…Some newly-empowered and untested regulatory structure is not likely–in and of itself–to be sufficient to tackle institutions that are too-big-to-fail, particularly as memories of the crisis fade. Regulation is too important to be left to regulators alone.
I believe these two points cannot be stated more strongly: what we need is more market discipline, rather than less. Putting the entire weight of our financial system on the backs of our financial regulators is a crisis just waiting to happen. Sadly the direction of both President Obama and Congress seems to be in undermining market monitoring of firms and relying solely on regulators to “get it right”. The very same regulators who were asleep at the wheel prior to the last crisis.
Wednesday Links
- David Boaz debates at The Economist: Is Obama failing? “In many ways, Obama has just doubled down on George W. Bush’s policies of bailouts, takeovers, expanded Fed powers and nationalizations. In a recession he is adding debt, taxes and regulation to the burdens already felt by business.” Readers can vote and join the debate.
- Ever wonder why weather forecasters can get things so wrong?
- Looking for a primer on the causes of the financial crisis? The new Cato Policy Report has answers.
- Podcast: “Citizens United and SpeechNow.org” featuring Steve Simpson of the Institute of Justice.
How to Tell When ObamaCare Is Dead
Democrats have lots of ambitions. One of them is their health care overhaul, which included a lot of “pay-fors” — i.e., spending cuts that would pay for ObamaCare’s new entitlements. But they also want a jobs bill, a “doc fix,” and other things that require new government spending. Those also require pay-fors — unless Democrats are willing to expand further a $1-trillion-plus deficit — and pay-fors are a scarce commodity.
Today, CongressDaily’s Anna Edney reports:
Some, though, are skeptical Democrats would use any of the pay-fors because that would mean officially declaring the reform effort dead.
“I don’t expect any effort to dismantle the reform bill until there’s no pulse,” one lobbyist said.
Right now, ObamaCare is mostly dead. And as we all know, “There’s a big difference between mostly dead and all dead…Mostly dead is slightly alive.”
A good way to tell when ObamaCare is all dead is when Democrats start picking at the carcass for pay-fors.
Filed under: Cato Publications; General; Health, Welfare & Entitlements
Time to Lose the Trade Enforcement Fig Leaf
During his SOTU address last week, the president declared it a national goal to double our exports over the next five years. As my colleague Dan Griswold argues (a point that is echoed by others in this NYT article), such growth is probably unrealistic. But with incomes rising in China, India and throughout the developing world, and with huge amounts of savings accumulated in Asia, strong U.S. export growth in the years ahead should be a given—unless we screw it up with a provocative enforcement regime.
The president said:
If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores. But realizing those benefits also means enforcing those agreements so our trading partners play by the rules.
Ah, the enforcement canard!
One of the more persistent myths about trade is that we don’t adequately enforce our trade agreements, which has given our trade partners license to cheat. And that chronic cheating—dumping, subsidization, currency manipulation, opaque market barriers, and other underhanded practices—the argument goes, explains our trade deficit and anemic job growth.
But lack of enforcement is a myth that was concocted by congressional Democrats (Sander Levin chief among them) as a fig leaf behind which they could abide Big Labor’s wish to terminate the trade agenda. As the Democrats prepared to assume control of Congress in January 2007, better enforcement—along with demands for actionable labor and environmental standards—was used to cast their opposition to trade as conditional, even vaguely appealing to moderate sensibilities. But as is evident in Congress’s enduring refusal to consider the three completed bilateral agreements with Colombia, Panama, and South Korea (which all exceed Democratic demands with respect to labor and the environment), Democratic opposition to trade is not conditional, but systemic.
Tuesday Links
- Obama’s budget and the $1 trillion mistake.
- Justin Logan on the rise of government and central control: “The factor that explains the largest share of the centralism and growth of the American state is war.“
- What we can learn from Hugo Chavez: “The lesson for all of us, north and south of the border, is watch our presidents closely, and check them when they try to slip their constitutional bonds.”
- “Stimulus Means More Meddling in Education” featuring Adam B. Schaeffer.
Monday Links
- Another day, another IPCC-gate.
- Why remaining in Afghanistan and creating a stable government there is not a precondition to keeping America safe. For more, watch the debate on Bloggingheads.
- Jeffrey Miron: “Leave Mideast, end terrorism.”
- Could Iran’s nuclear program be a sacrificial pawn?
- Globalization: A curse or a cure?
- Podcast: “Liberate Bone Marrow Donors” featuring Jeff Rowes of the Institute for Justice.
Weekend Links
- A libertarian primer on the real meaning of the phrase “campaign finance reform.” For more, read John Samples’ book, The Fallacy of Campaign Finance Reform.
- New report shows that Head Start, a sacrosanct (and very expensive) federal education program, doesn’t work. So what should we do about it? Give it more money of course!
- “In his State of the Union address, President Obama proposed spending another $4 billion annually on K–12 public education. He did not mention that state, local, and federal governments already spend well over twice what they did in 1980, or that there has been no discernible improvement in student achievement during that period.” Just sayin’.
- Michael Tanner on Obama’s faith-based boondoggle: “The faith-based initiative was a typical example of Bush-style “big-government” conservatism. It has been co-opted by the Obama administration as another weapon for social engineering.”
State of the Union Fact Check
Cato experts put some of President Obama’s core State of the Union claims to the test. Here’s what they found.
THE STIMULUS
Obama’s claim:
The plan that has made all of this possible, from the tax cuts to the jobs, is the Recovery Act. That’s right — the Recovery Act, also known as the Stimulus Bill. Economists on the left and the right say that this bill has helped saved jobs and avert disaster.
Back in reality: At the outset of the economic downturn, Cato ran an ad in the nation’s largest newspapers in which more than 300 economists (Nobel laureates among them) signed a statement saying a massive government spending package was among the worst available options. Since then, Cato economists have published dozens of op-eds in major news outlets poking holes in big-government solutions to both the financial system crisis and the flagging economy.
CUTTING TAXES
Obama’s claim:
Let me repeat: we cut taxes. We cut taxes for 95 percent of working families. We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college. As a result, millions of Americans had more to spend on gas, and food, and other necessities, all of which helped businesses keep more workers.
Back in reality: Cato Director of Tax Policy Studies Chris Edwards: “When the president says that he has ‘cut taxes’ for 95 percent of Americans, he fails to note that more than 40 percent of Americans pay no federal incomes taxes and the administration has simply increased subsidy checks to this group. Obama’s refundable tax credits are unearned subsidies, not tax cuts.”
Visit Cato’s Tax Policy Page for much more on this.
SPENDING FREEZE
Obama’s claim:
Starting in 2011, we are prepared to freeze government spending for three years.
Back in reality: Edwards: “The president’s proposed spending freeze covers just 13 percent of the total federal budget, and indeed doesn’t limit the fastest growing components such as Medicare.
“A better idea is to cap growth in the entire federal budget including entitlement programs, which was essentially the idea behind the 1980s bipartisan Gramm-Rudman-Hollings law. The freeze also doesn’t cover the massive spending under the stimulus bill, most of which hasn’t occurred yet. Now that the economy is returning to growth, the president should both freeze spending and rescind the remainder of the planned stimulus.”
Plus, here’s why these promised freezes have never worked in the past and a chart illustrating the fallacy of Obama’s spending claims.
JOB CREATION
Obama’s claim:
Because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed. 200,000 work in construction and clean energy. 300,000 are teachers and other education workers. Tens of thousands are cops, firefighters, correctional officers, and first responders. And we are on track to add another one and a half million jobs to this total by the end of the year.
Back in reality: Cato Policy Analyst Tad Dehaven: “Actually, the U.S. economy has lost 2.7 million jobs since the stimulus passed and 3.4 million total since Obama was elected. How he attributes any jobs gains to the stimulus is the fuzziest of fuzzy math. ‘Nuff said.”
Filed under: General; Government and Politics; Tax and Budget Policy
Less Is More in Education Funding
Spend more money on education, the President says? Actually, we should be looking there for savings . . . here are some of the numbers:
State governments spent 35 percent of their general funds on K–12 education in 2007, according to the National Association of State Budget Officers. In contrast, Medicaid — which is continually singled out as a problematic state-budget item, even though most Medicaid funds come from the federal government — accounted for just 17 percent of general-fund expenditures. Combined, state and local governments spend 27 cents of every dollar they collect on public K–12 education system, but only 8 cents on Medicaid.
Filed under: Education and Child Policy; Tax and Budget Policy
Obama’s ‘New’ Industrial Policy
Last night, after the SOTU, Politico Arena asked:
State of the Union: How did he do?
My response:
If you don’t look behind the stirring rhetoric, this was a fine performance — and many of Obama’s supporters will leave it right there. But behind it all is a single theme: People have problems, and government’s job is to solve those problems. Obama and his people, including many in Congress, still don’t get it. The recent elections in Virginia, New Jersey, and Massachusetts were not about government doing more or better. They were not about all the subsidies or jobs programs or green initiatives Obama spoke about tonight. They were about government getting out of the way — about lowering taxes and lifting burdensome regulations so that businesses, large and small, can once again provide the jobs and the prosperity that have been crippled by the kinds of programs Obama was promoting tonight. This was micromanagement from Washington. We need management from Main Street.
Early on in his speech Obama said that many Americans don’t understand “why Washington has been unable or unwilling to solve any of our problems.” Doubtless that’s true. But many more Americans do understand why. And so, as when he said that health care reform was in trouble because he had not explained it more clearly, Obama continues to believe that the problem is with the messenger, not with the message. Fortunately, we have elections in this country. I predict that come November the people will make it clear again that we don’t need yet another round of “industrial policy.” We need less of that, and more of what this country is really about — freedom.
That’s Quite a Multiplier
Via Cato’s Director of Government Affairs, Brandon Arnold, comes this [$] bold claim by the National Journal’s Congress Daily (although, to be fair, they are just quoting the study):
U.S. wheat promotion programs increase sales more than programs for other grains and agricultural products, according to an analysis of wheat export programs released this week.
The study by Cornell University professor Harry Kaiser showed that for every dollar spent on wheat promotion, U.S. producers get $23 back in increased net revenue, Kaiser told U.S. Wheat Associates, which commissioned the study.
With that sort of return on “investment”, the U.S. government should devote all of its revenue to wheat promotion as an ultra-quick revenue raising measure. Right after they’ve bought the swampland in Florida that the U.S. Wheat Associates has to sell them.
Alternatively, since it is such a great deal, perhaps U.S. Wheat Associates should pick up all of the tab for the program, instead of saddling U.S. taxpayers with half the cost.
Monday Links
- The massive impact government spending has on job creation.
- Why climate change spurs whining about cold snaps.
- Beware the “Crusader Temptation”: “Afghanistan has become a target of aggressive pro-war activists in America, including feminists who believe in waging war to improve the status of women.”
- What happens when the only self-identified socialist in the U.S. Senate starts to look moderate when compared to his colleagues?
- Podcast: “Bush’s Budget-Busting Binge,” featuring Chris Edwards.
Trouble in Massachusetts
Yesterday, Cato released a new study, “The Massachusetts Health Plan: Much Pain, Little Gain,” which showed that official estimates overstate the gains in health insurance coverage resulting from a 2006 Massachusetts law by at least 45 percent. The study also finds: supporters understate the law’s cost by nearly 60 percent; government programs are crowding out private insurance; self-reported health improved for some but fell for others; and young adults are responding to the law by avoiding Massachusetts.
Given that the Massachusetts health plan bears a “remarkable resemblance” to the Obama plan, the study should serve as a warning sign to members of Congress, says Michael Cannon, director of health policy studies.
The study has received coverage in Investor’s Business Daily, The Wall Street Journal, The Washington Post, Detroit News, The Washington Times, the Reason Foundation and the Pioneer Institute.
Federal Transportation Follies
The 2009 stimulus bill gave the U.S. Department of Transportation $50 billion to distribute to the states for highways, roads, and bridges. A House bill passed in December would add another $28 billion. According to Washington folklore, spending on infrastructure is always good because it’ll create jobs and spur economic growth. However, three recent examples are a reminder that the government often does a poor job of allocating resources.
First, an Alaska legislative audit concluded that the state should not have spent federal transportation money building a road to the site of the proposed “Bridge to Nowhere,” which was canceled after a national outcry. Alaska kept the federal money originally earmarked for the bridge, and then-Governor Sarah Palin agreed to spend $26 million of it on the road despite the fact there was no bridge.
Second, the Department of Transportation is supposed to exclude “unethical, dishonest, or otherwise irresponsible” parties from receiving federal funds. But according to a report from DOT’s inspector general, the average case took DOT officials “300 days to reach a suspension decision and over 400 days to reach a debarment decision.” For example, Kentucky awarded $24 million in transportation stimulus money to companies with officials under review by the Federal Highway Administration for bribery, theft, and obstruction of justice. The FHA took 10 months to review the companies before ultimately suspending them, but Kentucky had already given the companies the money.
Third, a Tennessee television station analyzed the state’s use of federal transportation stimulus money and found that it “spent an average of $161,500 per job created and that some paving jobs, which were temporary, cost taxpayers more than $1 million each.” The station interviewed a construction company that had been busy during the summer when it had federal money. Now its trucks are idle and the workers it hired have all been laid off.
Randal O’Toole says that “The best test of infrastructure value is whether users are willing to pay for it.” There’s almost no connection between infrastructure projects funded by federal taxpayers and the typically local users. Leaving infrastructure projects to state and local governments to fund would make more of a connection. Privatization, which would utilize tolling and other user fees, would be even better.
Tuesday Links
- Gene Healy on today’s election in Massachusetts: “If Republican Scott Brown wins the Massachusetts special election Tuesday, the Bay State will have its first GOP senator since the era when disco was king. And Brown will have the much-derided Tea Party legions to thank.”
- Why opportunistic politicians need to stop using times of crisis for their own ends and let the next one go to waste.
- George W. Obama? “Bush’s successor—who actually taught constitutional law at the University of Chicago—is continuing much of the Bush-Cheney parallel government and, in some cases, is going much further in disregarding our laws and the international treaties we’ve signed.”
- Can Google beat China? Cato’s Timothy B. Lee tackles the question in The New York Times Online.
- Podcast: “Our America Initiative” featuring former New Mexico Governor Gary Johnson. Johnson discusses out of control government spending, immigration, the Bush years, the drug war, defense policy and more.
Weekend Links
- Jeffrey Miron on Obama’s bank fees: “Bailing out the banks was wrong, but a new tax won’t make it right.”
- What Constitution? If Congress can order you to buy health insurance, why stop there?
- Don’t poke the bear: There is a proposal in the Senate Foreign Relations Committee to rearm the country of Georgia.
- Why the tragedy in Haiti cries out for swift action from private donors and yes, governments.
- Podcast: “Obama and Immigration in 2010” featuring Daniel Griswold.
Helping the Haitians
The tragedy unfolding in Haiti has elicited an outpouring of sympathy, and it is hardly surprising that governments and NGOs from all over the globe are mobilizing resources to aid in recovery. Help is flowing to the shattered island: teams trained in rescue operations, emergency medical services, security personnel, and financial aid. This type of assistance will likely continue for some time.
The U.S. military is also involved. Several Navy and Coast Guard vessels shipped out almost immediately. A few thousand Marines are helping to restore order, and more might soon be on the way. Such a ground presence makes sense, provided that the mission is carefully defined, and the long-term expectations are tempered by a dose of humility. The United States has, after all, intervened repeatedly in Haiti, and it remains the poorest country in the hemisphere. One might even conclude that our interventions have contributed to Haiti’s chronic problems, a consideration which should give pause to those calling for the United States to commit to a long-term project to fix the country.
One can make an argument against sending military assets to deal with such crises. A nation’s military is designed and built for one purpose — to defend the nation — and when it is deployed for missions that do not serve that narrow purpose there is a risk that the institutions will be rendered less capable of responding to genuine threats. I question the wisdom of humanitarian intervention on those grounds in my book, The Power Problem, stipulating, among other things, that the U.S. military should be sent abroad only when vital U.S. interests are at stake.
All that said, President Obama’s decision to swiftly deploy U.S. personnel to Haiti is appropriate on at least two grounds. First, sending troops into harm’s way — and usually into the middle of a civil conflict, as we did in the Balkans and in Iraq – is very different from mobilizing our formidable military assets to ameliorate suffering after a natural disaster. The latter types of interventions are less likely to engender the ire of the people on the losing end (and there always are losers). Humanitarian missions are also less likely to arouse the suspicion of neighbors who might question the intervener’s intentions. Indeed, there was a measurable outpouring of support and goodwill toward the United States after the Bush administration deployed U.S. military personnel in and around Indonesia following the horrific tsunami of late 2004. Genuine humanitarian missions, “armed philanthropy” as MIT’s Barry Posen calls it, are likely to be far less costly than armed regime change/nation-building missions that must contend with insurgents intent on taking their country back from the foreign occupier.
Another important consideration is a country’s interests in its respective region. Humanitarian crises, even those whose effects are confined within a particular country’s borders, often pose a national security threat to neighboring states. What has happened in Haiti over the past 48 hours might meet that criteria, but the White House’s immediate motivations seem purely altruistic. My frustration is that the U.S. policy since the end of the Cold War of actively discouraging other countries from defending themselves ensures that they will have little to offer when a similar natural disaster occurs in their own backyard, which means that the U.S. military is expected to act — even when our own interests are not at stake.
But that is a discussion for another time. The scale of the tragedy in nearby Haiti cries out for swift action, and I am pleased to see that many organizations — both public and private — have stepped forward to help. I wish these efforts well.
Filed under: Foreign Policy and National Security; General
How the Media Are Covering ‘Head Start’s’ Failure
A day after it was released, here’s a roundup of how the mainstream media are covering the HHS study showing that America’s $100 billion plus investment in Head Start is a failure:
[...crickets...]
Nada. Zilch. Rien du tout, mes amis.
That’s based on a Google News search for ["Head Start" study]. The only media organs to touch on this topic so far have been blogs: Jay Greene’s, The Heritage Foundation’s, the Independent Women’s Forum, and the one you’re reading right now.
Okay. There was one exception. According to Google News, one non-blog — with a print version no less — covered this story so far. The NY Times? The Washington Post? Nope: The World, a Christian news magazine. And they actually did their homework, linking to this recent and highly relevant review of the research on pre-K program impacts.
And for those other publications in the MSM still standing at the edge of the pool: the water’s warm folks, c’mon in.
What’s really interesting, though, is that the HHS had the moral fibre to actually issue a press release about this damning study. That showed courage — and a certain panache. I particularly liked this, from HHS Secretary Kathleen Sebelius: “Research clearly shows that Head Start positively impacts the school readiness of low-income children.”
Umm, yes Ms. Secretary, but the same research shows those effects vanish by the end of first grade. I guess that information is on a need-to-not-know basis. The public needs to not know about it or the administration hasn’t got a snowball’s chance in Kauai of getting American tax payers to throw another $100 billion or so at government pre-K, as President Obama is so very keen to do.
Update:
In my original review of the coverage on this story I missed the blog that first broke the story: Early Ed Watch at the New America Foundation. One thing that distinguishes New America’s supporters of big government pre-k programs from those in the Obama administration is that the former have a good grasp of the implications of this study, writing that: “The next few weeks are probably going to be rocky ones for the Head Start community. Results released today from the Impact Study show that children’s gains from participating in Head Start, documented in a 2005 installment of the study, do not last through the end of 1st grade.”
But if the folks at the NAF recognize this reality, that begs an important question: will they now redirect their efforts to the support of programs whose benefits for disadvantaged children actually grow in magnitude the longer kids stay in school, or will they continue to push for programs like Head Start that have been proven costly failures?
Thursday Links
- Nat Hentoff: If you’re looking for reform in Cuba, don’t rest your hopes on Raul Castro.
- Tim Carney, author of Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses gives the inside scoop on why big government is good for big business.
- The Patriot Act: What should go, and what should stay?
- Dear Poor People- “Please remain poor.” Sincerely, Obamacare.
- Podcast: “Obamanomics in Health Care” featuring Tim Carney.
Cato on Facebook
Cato on Twitter
Cato on YouTube
Cato Tweets
