Archives: August, 2010

Dear Bill: Why the Distinction Between College and K-12?

At the Techonomy conference last week, Bill Gates declared that going to school would soon be obsolete, and that ”five years from now, on the web, for free, you’ll be able to find the best lectures in the world.” What’s interesting is that Bill was quick to note that he was talking only of higher education. K-12 education should still be tied to physical schools, he is reported to have added.

Certainly there’s a custodial aspect to the education of young children, but there’s no reason that electronic learning options cannot be combined with custodial supervision – and much more affordably than traditional schooling. Homeschooling already consists of hybrids of parent lessons, lessons taught by paid tutors and guest lecturers, web classes, etc. This flexible format could be generalized to serve a much broader range of students. So why not encourage the exploration of these new possibilities at the k-12 level, just as at the higher education level?

What Part of “Nonrepresentative” Don’t Profit-Haters Get?

For the last few days, for-profit colleges and universities have been suffering an even worse hammering than usual, both in the media and their pocketbooks. The proximate cause: a GAO report released Wednesday that has been portrayed as revealing “systemic” and “pervasive” fraud — and otherwise just seamy behavior — by the for-profit sector.

No doubt there is some bad stuff going on in proprietary postsecondary education. But the assault on for-profits reeks of political bullying of the unpopular kid — the kid who’s just different — as well as the never-ending Washington demonization of anyone who honestly pursues a profit. The waving of the bloody GAO report is case-in-point, and one need look no further than the following statement contained on the report’s very first page:

Results of the undercover tests and tuition comparisons cannot be projected to all for-profit colleges.

You mean, GAO investigators went to 15 non-randomly selected schools in six states and Washington, DC, and the results cannot be construed to be representative of the whole sector? And the GAO also, apparently, meant it when it wrote on page two of the report that “we investigated a nonrepresentative selection” of schools? But, then, how could Tom Harkin (D-IA), chair of the Senate Health, Education, Labor and Pensions Committee, have stated in a show-trial hearing that “GAO’s findings make it disturbingly clear that abuses in for-profit recruiting are not limited to a few rogue recruiters or even a few schools with lax oversight”?

Oh, right: Truth doesn’t matter to Harkin — only scoring political points. That not only explains how Harkin could say such a thing, but why he has targeted for-profits rather than seeking truth and purity in all sectors of higher education, including the coolest of the cool kids, public colleges. With dismal program completion rates of their own, and their imposition of huge burdens on taxpayers, you’d think they’d be worth some investigating, too.

I encourage you to read the GAO report, and you’ll see that it in no way supports a blanket condemnation of for-profit higher ed. And it’s not just because its findings can in no reasonable way be extrapolated to the whole of proprietary schooling. It’s also because many of the supposedly terrible things it discovers, while perhaps distasteful, are hardly abhorent, such as telling prospective students that they ”can” — not “will” — earn a lot of money in a profession even if that amount is well above the average. And then there’s the report’s worthless comparisons of tuition at for-profit and nearby public instituions. Once again: public colleges are heavily subsidized by taxpayers, so of course their tuition is lower. And these comparisons were also not randomly selected.

After you’ve read the GAO report, you should take in a new paper from the Center for College Affordability and Productivity, For-Profit Higher Education: Growth, Innovation and Regulation. It might be a bit too fond of the for-profit sector, which like all of higher education lives far too much off the sweat of taxpayers, but it furnishes lots of terrific data and insights about proprietary higher ed to balance out the ongoing truth-eschewing assaults the sector keeps on suffering.  

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

  • You know that California city that recently made national headlines because local government officials were collecting massive six-figure salaries?  It turns out that the city has received millions of dollars in federal subsidies over the past five years.
  • Money-losing Amtrak plans to purchase 130 rail cars for its money-losing trains. Ah, government rail.
  • Voters who are expecting a new Republican congressional majority to downsize government might not want to hold their breath.
  • Federal highway financing and control should be devolved to the states and, even better, the private sector.
  • The latest federal bailout isn’t about “America’s children” as White House demagogues claim. Children shouldn’t trust strangers with candy — or Uncle Sam.

Downsizing the Federal Government is also on Facebook.  Join us here.

School Bailout Is Intergenerational Warfare

Neal McCluskey’s latest post on the “Grigori Rasputin” public school employee bailout caught the attention of the Wall Street Journal this morning. As the House gets set to pass the legislation next week, here’s another under-appreciated angle: it is merciless intergenerational warfare.

Supporters of the bailout like to claim that it’s for the kids. In reality, it will only saddle the next generation with a bigger debt, without actually improving their education so that they are better-equipped to pay it off. After adding millions of extra public school employees and hundreds of billions in extra spending, achievement at the end of high school has remained flat (see the charts in Neal’s post).  

So why perpetuate this litany of failure with another bailout?

The only possible reason is to curry favor with the public school employee unions, who are stalwart supporters of the Democratic Party. This bailout is meant to score political points on the backs of kids’ education and kids’ economic futures.

Anyone who really cared about the next generation would be enacting policies that actually improve educational outcomes and lower the debt. Policies like this, for instance….

Privacy-Protective Incentives and the Corporation

Many privacy advocates take corporate mendacity as a premise. From there, it’s easy to reach the conclusion that companies won’t protect privacy. For these privacy advocates, the fight for privacy is a fight against business.

In a sense, their conclusion about corporate behavior is true. Businesses won’t protect privacy beyond what they perceive consumers to want—doing so would just give away profits. Businesses will protect privacy when it’s a consumer demand they’ve promised to fulfill. Companies and their executives take considerable risks when they fail to meet that demand.

The exceptions are what get noticed, and Prudence Chan is an example for others to learn from. She was the head of Hong Kong cashless payment operator Octopus Holdings Ltd. until she resigned this week. Under her watch, the company sold data about users of the system for marketing purposes. Octopus will forfeit to charity the money it made on the sales. (Should be given to the affected users, but anyway…)

Hong Kong is debating whether its legal privacy protections are sufficient. But privacy officers and executives in companies around the world are looking at this story and considering how they would tolerate losing their jobs, status, and reputations. Their self-interest will drive them to protect privacy as demanded by their customers.

Sure, it might be nice for them to do it out of altruism or kindliness, but the result is the same.

The State of Social Security: Maybe a Little Better, Maybe a Little Worse?

The Social Security Trustees released their annual report yesterday, showing a small improvement in the system’s finances over the long-term.  That’s rather surprising given that the recent recession has reduced the program’s revenues and brought forward the date when the program begins to drain money from the general budget — from 2016 last year to 2015 in the new report.  The Trust Fund exhaustion date is 2037, the same as it was in last year’s report. 

The new health care law is likely to increase the program’s revenues as employers reduce payroll-tax-free health insurance coverage and offset the reduction in employee compensation through higher wages that would be subject to payroll taxes.  This sets up a competition between the health care law–induced increase in Social Security revenues and declines in revenues and increases in outlays for other reasons — a sluggish economy, improving longevity, the addition of another year at the end of the 75-year projection horizon, and changes in economic and demographic data, assumptions, and methods.

The positive revenue effect of the health care law (14 basis points) more than offsets the negative effects of all of the other factors (6 basis points) on the system’s long-range actuarial balance. That yields a total improvement of the program’s actuarial balance from –2.00 percent of taxable payroll to –1.92 percent.  In next year’s report, however, this year’s “legislative” effects may be folded into changes from technical adjustments and incoming data. We may never know whether today’s assumptions on the revenue effects of the health care law are correct or not. 

It could be that those assumptions are too large, especially if Congress postpones the tax on Cadillac health care plans because of pressure from unions. It could also be too small if many employers decide to eliminate health insurance coverage and opt to pay the less costly penalty.  On balance, I’ve concluded that, faced with such wide uncertainty about future outcomes, the Social Security trustees have chosen to be relatively conservative in their estimates of the health care law’s revenue effect. 

Another curious item is that the program’s long-range imbalance increased from $15.1 trillion to $16.1 trillion. However, the report states that “the near-term negative effects on employment of the slightly deeper recession than assumed last year are offset by higher than expected real growth in the average earnings level” (Section D: Projections of Future Financial Status).  As a result, the program’s total (infinite-horizon) imbalance ratio declines from 3.4 percent in 2009 to 3.3 percent today.

Note that a deeper recession and higher unemployment than was assumed last year does not necessarily justify a correspondingly faster recovery, with unchanged long-term equilibrium unemployment and earnings growth rates.  The trustees are discounting the possibility that the unemployment rate may remain higher than was assumed last year and that, therefore, earnings may not rebound any faster compared to last year’s assumptions.  It appears that that incoming data on unemployment and GDP growth played little if any role in informing assumptions about future earnings growth rates. 

Finally, it should be noted that this year there were no public trustees to oversee and modulate the report as it was being produced.

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Maryland Attorney General Sides with Anthony Graber

You may remember the case of Anthony Graber, the Maryland motorcyclist charged with violating the state’s wiretapping statute for recording his traffic stop and posting it on YouTube. I’ve said several times over the last few months that these charges are based on a misreading of the law; minus a “reasonable expectation of privacy,” recording an oral communication does not violate the wiretapping statute.

As it turns out, the Maryland Attorney General agrees.

The Maryland Attorney General has released an opinion advising a state legislator that, contrary to the claims of Harford County State’s Attorney Joseph Cassilly, a traffic stop is probably not an instance where a police officer can claim a reasonable expectation of privacy.

The AG’s opinion provides a thorough survey of Maryland’s and other states’ decisions on the issue, giving three possible interpretations of the wiretap statute as applied to a citizen recording a traffic stop.

First, a court might agree with the theory that police encounters are private conversations, but the AG found that this “seems an unlikely conclusion … particularly when they occur in a public place and involve the exercise of police powers.” That sounds familiar.

Second, a court might conclude that the Maryland statute forbids only the surreptitious recording of a police stop. The opinion deems this an unlikely outcome due to differences between the language of the Maryland law and the wiretapping statutes of Massachusetts and Illinois.

The opinion settles on its third possible outcome, agreeing with what I, Radley Balko, Carlos Miller, the Maryland ACLU, the Maryland courts, other Maryland State’s Attorneys, and the Maryland Attorney General’s previous opinions have said: the Maryland wiretap statute does not permit the prosecution of citizens for recording the actions of public officials in public places.

Graber’s court date is set for October. The AG’s opinion should halt his prosecution and further abuse of the Maryland wiretap statute.