Cato At Liberty

Today, the Democratic staff of Congress’s Joint Economic Committee released a report which seems mainly to be an excuse to keep doing the wrong things.

The basic tenets of the report certainly feel sensible: People with more education tend to have greater skills and earn more, but the ever-inflating price of college saddles people pursuing education with bigger and bigger debts. The solutions? Keep subsidized federal loan rates frozen at 3.4 percent, greatly expand loan forgiveness, and convert private loans into federal loans. Basically, more cheap aid—exactly the wrong thing.

The fundamental problem with the report is the fundamental problem with federal aid in microcosm: It ignores the crippling, self-defeating, unintended consequences of aid. You know: The downsides of federal “help.”

First and foremost, federal aid furnishes jet fuel for tuition inflation, both by allowing people to demand more than they otherwise would, and by enabling schools to raise prices knowing students will be able to pay them. It also encourages millions of people to enroll in college who, for many reasons, have little prospect of finishing. That’s why roughly one out of every two people who enter a postsecondary program don’t finish. Finally, it powers over-credentialing, with about a third of people with bachelor’s degrees in jobs not requiring them, and many jobs that require the degree likely doing so for basic signaling reasons—e.g., the person has some basic stick-to-it-iveness—rather than indicating that they possess useful skills or abilities they obtained in college.

A reasonable reading of the data forces one to conclude that Washington should markedly reduce its presence in college—indeed, get out altogether—rather than perpetuate bad policy. Which is likely why policymakers seem to assiduously avoid reasonable readings—or any readings at all—of important data.

Cross-posted at seethruedu.com

The Congressional Budget Office has fiscally scored the Senate’s immigration bill, S. 744, and found that it will decrease fiscal deficits over the next 20 years—giving a huge boost to reform proponents.  In line with criticisms made by me and others, the CBO departed from orthodoxy and assumed that S. 744 would affect economic growth (i.e., they dynamically scored the bill)—arguing that the economic and fiscal gains from immigration reform are clear.  These findings are broadly consistent with Cato’s findings here.  

The CBO produced two scores of S. 744.  The first was less dynamic, assuming that GDP and the workforce would grow as a result of immigration. Increased numbers of workers will add to GDP, producing growth by definition, and not displacing many other workers.  The second score is more dynamic, taking into account many of the economic effects of immigration reform using an enhanced Solow model.

The less-dynamic CBO score found that immigration reform will reduce the federal deficit by about $197 billion by increased GDP and tax revenues through adding six million people to the workforce by 2023.  Over a period of 20 years, the CBO estimated that this legislation would reduce deficits by about $700 billion—a sizeable decrease.  In what seems to be a specific dig at the 50-year span of the recent Heritage study, the CBO wrote that, “we cannot determine whether enactment of S. 744 would lead to an increase in on-budget deficits … in any of the three 10-year periods starting in 2033.” 

The more dynamic CBO score found that S. 744 would not affect the budget by 2023.  However, because the dynamic economic effects of S. 744 would affect the economy slowly, the CBO predicts a $300 billion decrease in deficits from 2023-2033 greater that the $700 billion reported in the less-dynamic score.

The more-dynamic CBO model predicts $1.197 trillion in reduced deficits over the next 20 years if immigration reform is passed. 

Delving into the details of the CBO’s more-dynamic score, they estimated that S. 744 would increase GDP by 3.3 percent in 2023 and 5.4 percent in 2033, relative to the baseline.  Per capita GNP would lower by .7 percent by 2023 but be higher by .2 percent in 2033.  Wages would be .5 percent higher in 2033 under S. 744. 

The more-dynamic score takes into account these effects from S. 744: 

1. Increased size and employment in the economy.
2. Increased average wages after 2025.
3. Slightly increased unemployment rate through 2020.
4. Increased quantity of capital investment.
5. Increased productivity of labor (due to complementary task specialization).
6. Increased productivity of capital (due to increase in supply of labor and TFP).
7. Higher interest rates.

The CBO took account of some of the main findings in the economic literature about the economic effects of immigration.  For example, the CBO predicts there will be a 12 percent increase in the wages of legalized immigrants.

Conceptually, dynamically scoring legislation is a big step toward rationally judging the costs and benefits of policy changes.  Legislation that changes the size of the economy or the pace of economic growth will affect future tax revenues that will, in turn, affect the fiscal state of the federal government.  CBO scores have been inaccurate over time—many wildly so.  They should never be the final word on the estimated net fiscal costs of immigration reform, but this is the most thorough examination to date. The CBO’s findings broadly confirm Cato’s research that immigration reform will be economically beneficial to immigrants and the country as a whole. 

President Barack Obama has been evidently reluctant to go to war in Syria, but has started down the long and winding road by deciding to provide weapons to the insurgents. Why he is risking involvement in another conflict in another Muslim nation is hard to fathom.

However, the president did act only after former president Bill Clinton warned that Obama could end up looking like a “total wuss” and “a total fool” if the latter did not drag America into war. If there is anyone who should not be giving war-related advice, it is Bill Clinton.

His “splendid little war” in Kosovo left a mess in its wake, including ethnic cleansing by America’s putative allies. Indeed, he always had a curious view of the purpose of war. He once expressed his frustration that he likely would not be considered a great president without prosecuting a major conflict. 

Moreover, why is Clinton of all people accusing another president of looking like a “total wuss” and “a total fool” for hesitating to go to war? After all, as I relate in the American Spectator, he engaged in all manner of personal maneuvering to avoid being drafted to fight in Vietnam. 

That’s fine by me. It was a stupid war in which tens of thousands of fine Americans died as a result of dumb decisions by foolish Washington policymakers. But it is striking how reluctant he was personally to go to war.  Why, some people might consider him to have been a “wuss.”

As I pointed out:

Intervening in Syria is a serious mistake.  The U.S. has no interest at stake that warrants entanglement in another Middle Eastern civil war.  President Ronald Reagan learned that lesson three decades ago and responded appropriately, by getting out fast.

It’s bad enough if President Obama made his decision because he genuinely believes that the U.S. needs to fight another war in another Muslim nation.  It’s far worse if the president acted to ensure that he doesn’t look like a wuss and a fool.  For there’s no bigger wuss and fool than someone who allows Bill Clinton to manipulate him into going to war.

Read the rest here.