Archives: 06/2011

Vouchers in Education and Health Care Reform

E.D. Kain has a post up here (and here) comparing and contrasting vouchers in education and health care. It’s an interesting post that manages both insight and remarkable oversights in a very short space.

And the insight and oversights are bound up with each other:

I think it’s a consistent position to support both single-payer health care – something many progressives advocate – and single-payer education – something many libertarians advocate…

[Medicare] is a lot like what many school choice advocates want. They want government to foot the bill, but they don’t want them to provide the service, or at least not exclusively. This approach works for Medicare, and it could work for schools also. What we really need is single-payer education – not single-provider education. Anyways, the point is that we think about these programs in somewhat inconsistent ways… Even people advocating single-payer want to be able to go to a private doctor. And yet, these same people are terrified of the government paying for education but not actively providing the schooling.

Kain is right that many school choice advocates want a single-payer, government voucher system. But he’s absolutely wrong to imply the libertarian preference is for a single-payer, government voucher system in education. [Note: I look at ideologies as structures reflecting what people think is valuable, what works and why in politics and society.]

In education, we begin with an almost fully socialized system unlike anything else in American society. So its no surprise that education reform discussions produce ideological confusion.

Vouchers, because they move the means of production out of the hands of the government, into the hands of private providers, and afford the consumer some decision-making powers, are improvements from a perspective that advantages individual liberty. But the single-payer, government funding, and regulation inherent in a voucher program remain massive defects from the libertarian perspective.

Our health care system is crippled by government regulation and single-payer (private employer and government) distortions. But it is not fully socialized or government-funded like our education system. A single-payer government health system would make matters worse from the libertarian perspective.

Think of these policy scenarios on a Left-to-Right ideological scale running from 1 on the far Left to 7 on the far Right, with 4 in the middle. Our standard government-financed, government-run, socialized education system is a 1, as far Left as one can go. Voucherizing the entire system would push it to a 2.

Kain is correct that  ”it’s a consistent position to support both single-payer healthcare … and single-payer education,” because both are completely and comfortably on the Left side of the policy spectrum. Vouchers can’t solve all of our problems in education policy.

CBO’s Long-Term Budget Outlook

The Congressional Budget Office released the latest edition of its annual forecast of where the federal government’s budget is headed. The numbers are new but the message is the same: the budget is on an unsustainable path. According to the CBO’s more politically-realistic “alternative scenario,” federal debt as a share of GDP will hit 109 percent in 2021 and would approach 190 percent in 2035.

For those mistaken souls who believe that merely eliminating “waste, fraud, and abuse” in government programs can solve the problem, the CBO has news for you:

In the Congressional Budget Office’s (CBO’s) long-term projections of spending, growth in noninterest spending as a share of gross domestic product (GDP) is attributable entirely to increases in spending on several large mandatory programs: Social Security, Medicare, Medicaid, and (to a lesser extent) insurance subsidies that will be provided through the health insurance exchanges established by the March 2010 health care legislation. The health care programs are the main drivers of that growth; they are responsible for 80 percent of the total projected rise in spending on those mandatory programs over the next 25 years.

Others believe that “tax cuts for the rich” are the source of the problem. But according to the CBO’s alternative scenario, if the Bush tax cuts are extended and the Alternative Minimum Tax continues to be patched, federal revenues as a share of GDP will still exceed the post-war average by the decade’s end. Under the CBO’s standard baseline, which assumes that those policies will not be continued, federal revenues as a share of GDP will go zooming by the historic average. That might be good for politicians, bureaucrats, and other “tax eaters,” but it wouldn’t be good for the country’s economic welfare.

The problem is clearly spending and the GOP has rightly made spending cuts a key condition to lifting the debt ceiling. The magic number being reported is $2 trillion in cuts. That sounds like a lot of money – and it is – but it’s likely that those cuts are to be achieved over 10 years. According to the CBO’s most recent estimates, the federal government will spend almost $46 trillion over the next 10 years. And as Chris Edwards has been repeatedly warning (see here, here, and here), there’s a possibility that the cuts will be of the “phony” variety.

Are We Building Enough Housing?

One of the primary reasons the labor market remains weak is that construction activity is relatively low, resulting in a reduced demand for construction workers.  My friends in the building industry argue that because housing starts are at historic lows, we are actually not building enough housing.  While I’m open to that as a possibility, and believe it to be the case in select markets, nationally the evidence suggests otherwise.

First of all, the monthly supply of new homes — that is the time that would be required to sell off the current inventory — is still relatively high at just under seven months, as shown in the following figure. Granted this is significantly below the 12 month peak we saw at the beginning of 2009. So without a doubt this number is moving in the right direction, but it still has a little ways to go. I will be far more optmistic about the housing market when we get to around five months’ new supply.

Second, if you compare sales to new housing starts*, which the next graph does, you see that we are back in the range of where these two numbers are largely in historical balance.  Sales are no longer working off the existing inventory, not like we were in 2009.  So while construction activity is low, it is still more than sufficient to meet current levels of demand.  The question for debate is, really, when will demand increase and how much will it increase?  Personally I have a hard time seeing a lot of the speculative demand for housing coming back soon, at least not without further large price declines.  In terms of additional demand coming from delayed household formations, I am confident that builders will be more than able to meet that demand when it comes back — but I also doubt that demand will be large enough to put 2 million unemployed construction workers back to work. 

*(Sales to starts generally falls far below 1.0 for a varietyof reasons, including that some starts do not ever reach completion, and that some are built by the owner and never sold.  It is extremely unusual to see that ratio surpass 1.0, as it did in 2009.)

Why Fed Ed Fails, and Proposals to Stop the Madness

On Monday, we took the word right to Capitol Hill: The federal government has been an abject education failure, and the only acceptable solution to the problem is for Uncle Sam to leave our kids alone.  

At the briefing in which the word was issued, Heritage’s Lindsey Burke and I also examined congressional proposals that could move us closer to the ultimate solution — especially the LEARN and A-PLUS acts — and explained why Washington, even if its interference were authorized by the Constitution, will never make education better by staying involved.

Unfortunately, lots of people couldn’t make the briefing. That’s why we are so happy to be able to present the briefing right here, to view in the comfort of your own computer chair.

Enjoy!

Afghanistan: Do We Stay or Do We Go Now?

In the last three years, the United States has tripled the number of troops in Afghanistan, increased the number of drone strikes in neighboring Pakistan, and killed Osama bin Laden—the highest of high-value targets. President Obama has more than enough victories under his belt to stick to his timeline and substantially draw down the number of troops from Afghanistan.

Still, the pace of America’s withdrawal and the size of its residual combat presence, even after his decision Wednesday, will depend on two things: negotiations with the Taliban and political pressure to stay the course. These two factors will feature prominently in the months ahead, as the administration reconfigures the strategy and objectives for winding down the 10-year campaign.

First, although many Afghans endorse engagement with the Taliban, in Washington, even broaching the subject of talks is divisive. Secretary of State Hillary Clinton confirmed that efforts were under way to negotiate with the Taliban; meanwhile, outgoing Secretary of Defense Robert Gates said he believes the Taliban will not engage in serious talks until they are under extreme military pressure. In a way, both are right: a power-sharing arrangement would provide the best hope for sustainable peace, but no treaty, agreement, or contract is self-reinforcing and thus requires some leverage. Either way, constructive, face-to-face talks with senior Taliban leaders will be an intensive process, and one that diplomats and military officials must be prepared to defend publicly. America is not there yet.

The second force that will temper America’s eagerness to withdraw is the power of domestic political pressure. Defense Secretary Gates, Sen. Lindsay Graham (R-SC), House Intelligence Chairman Mike Rogers (R-AL), and a sizeable contingent of Afghanistan hawks in the media decry anything less than a troop-intensive campaign. They endorse slow-paced, graduated troop cuts subject to conditions on the ground, a policy focused on entities other than those that threaten the United States. Dismantling al Qaeda, an outfit already in disarray, calls for counterterrorism, not state-building. This can be done relatively cheaply and with far fewer troops. Moreover, as seen in Yemen and Somalia, the United States can collect actionable intelligence without a large-scale conventional force on the ground.

Whether it is talking with the Taliban on the one hand, or staying the course on the other, the president has political goals, for which there is no clear strategy, and security progress, for which there is no definitive “victory.” Looking back, however, Obama has achieved some of the goals he set out. “Blueprint for Change,” his 2008 presidential campaign literature, states (pdf):

Obama will fight terrorism and protect America with a comprehensive strategy that finishes the fight in Afghanistan, cracks down on the al Qaeda safe-haven in Pakistan, develops new capabilities and international partnerships, engages the world to dry up support for extremism, and reaffirms American values.

To a certain degree, even these goals are ambitious. Instead, he should focus not on what is politically desirable, but what is within America’s ability to accomplish. In this respect, Obama would do well to revisit his December 2009 speech on the war in Afghanistan, when he said:

We’ve failed to appreciate the connection between our national security and our economy. In the wake of an economic crisis, too many of our neighbors and friends are out of work and struggle to pay the bills. Too many Americans are worried about the future facing our children. Meanwhile, competition within the global economy has grown more fierce. So we can’t simply afford to ignore the price of these wars.

He also said:

Indeed, some call for a more dramatic and open-ended escalation of our war effort—one that would commit us to a nation-building project of up to a decade. I reject this course because it sets goals that are beyond what can be achieved at a reasonable cost, and what we need to achieve to secure our interests…America has no interest in fighting an endless war in Afghanistan.

As U.S. forces eventually take a back seat in Afghanistan, Obama should strongly resist any calls that he has not done enough. Arguably, he has gone above and beyond what would have been a more prudent strategy. Now, it is time to come home.

Cross-posted from The National Interest.

Andrew Sullivan Has No Idea What He’s Talking about, but I Agree with His Conclusion

Even though he’s become more partisan in recent years, I still enjoy an occasional visit to Andrew Sullivan’s blog. But I was disappointed last night when I read one of his posts, in which he discussed whether government spending helps or hurts economic performance. He took the view that a bigger public sector stimulates growth, and criticized those who want to reduce the burden of government spending, snarkily observing that, “The notion that Herbert Hoover was right has become quite a dogged meme on the reality-challenged right.”

Since I’m one of those “reality-challenged” people who prefer smaller government, I obviously disagree with his analysis. But his reference to Hoover set off alarm bells. As I have noted before, Hoover increased the burden of government during his time in office.

But maybe my memory was wrong. So I went to the Historical Tables of the Budget and looked up the annual spending data. As you can see from the chart (click for larger image), it turns out that Hoover increased government spending by 47 percent in just four years. (If you adjust for falling prices, as Russ Roberts did at Cafe Hayek, it turns out that Hoover increased real government spending by more than 50 percent.)

I suppose I could make my own snarky comment about being “reality-challenged,” but Sullivan’s mistake is understandable. The historical analysis and understanding of the Great Depression is woefully inadequate, and millions of people genuinely believe that Hoover was an early version of Ronald Reagan.

I will say, however, that I agree with Sullivan’s conclusion. He closed by saying it would be “bonkers” to replicate Hoover’s policies today. I might have picked a different word, but I fully subscribe to the notion that making government bigger was a mistake then, and it’s a mistake now.

More from McCain on ‘Isolationism’

Over at World Politics Review, Justin Logan and I collaborated on an article about the supposed rise of  ”isolationism” within the GOP.

The charges come mainly from Sen. John McCain, though presidential candidate Tim Pawlenty copped that line yesterday, drawing praise from the editors of The Weekly Standard.

McCain directed his “isolationism” fire late yesterday at West Virginia Sen. Joe Manchin, one of 27 senators who signed a letter to the president calling for a substantial troop reduction in Afghanistan. On the floor of the Senate, Manchin explained his reasoning: “I believe it is time to for us to rebuild America, not Afghanistan.”

According to McCain, Manchin’s comments “characterize the isolationist withdrawal, lack of knowledge of history attitude that seems to be on the rise in America.”

But McCain needs to reconnect with recent history, and contemporary reality. Nation building is a fool’s errand: costly, counterproductive, and unnecessary. We could continue to hunt al Qaeda with far fewer troops in Afghanistan. A smaller presence would provide us with sufficient flexibility to deal with other challenges elsewhere — and help us to put our own house in order. McCain is OK with spending over $100 billion a year in a country with a GDP of around $16 billion, while our economy suffers.

Not surprisingly, most Americans, including many Republicans, reject McCain’s views. And they should. As Justin and I explain in the WPR article:

Foreign policy should not be conducted by polls and focus groups, but in this case the public is right, and the interventionist consensus in Washington is wrong. The threats facing us are not so urgent that we must maintain a vast military presence scattered across the globe and consistently make war in multiple theaters at once. The United States is the most secure great power in history, and if policymakers would act like it, the evidence suggests the public would support them.

In particular, given that our recent overseas military interventions have carried significant costs and delivered very few measurable benefits, it is hardly surprising that Americans are pushing back against the sorts of foreign adventures McCain favors. We don’t know whether the faint rumblings of common sense in the GOP presidential primaries indicate that Beltway elites are finally coming around to our view, but we hope they do. Should that happen, it would be prudence prevailing, not isolationism. (Full text here.)

Why any Republican aspiring to the presidency would follow the advice of a two-time loser like McCain (in 2000 to G.W. Bush, and in 2008 to Barack Obama) is beyond me. It makes even less sense for Democrats to listen to him.