Archives: July, 2011

Will ‘the People’ Fall for It?

Today POLITICO Arena asks:

President Barack Obama is taking a cue from President Bill Clinton by pushing a series of bite-sized policies. Among them: a new fatherhood pledge, graphic tobacco warnings, updated sunscreen requirements, an anti-bullying summit and entertainment discounts for fathers to spend more time with their kids. Can he use this “school uniforms” approach to effectively appear above the daily partisan Washington sniping? And is this “small ball” approach a retreat from the grander “change we can believe in” vision candidate Obama touted in the 2008 campaign?

My response:

The president has two main responsibilities: internationally, to oversee the nation’s foreign policy; domestically, to see that the laws be faithfully executed. For Obama to devote his attention to trivia like this is not only to demean the office of the presidency – recall Clinton’s “boxers or briefs” incident – but to play to the basest instincts of the electorate.

Unfortunately, in a country in which nearly 60 percent of adults don’t know when we declared our independence and a quarter don’t know from what country, Obama’s “small ball” politics may work. This is a president who couldn’t get a budget passed for two years, despite having huge majorities in Congress, yet he’s got time for this. Perhaps H.L. Mencken put it best: “People deserve the government they get, and they deserve to get it good and hard.” I didn’t know Obama was a student of Mencken.

The Fatal Conceit Continues

President Barack Obama recently sat down with the Today Show’s Ann Curry to discuss jobs and private sector hiring.  Curry asked him why during a time of “record profits” for corporations they had only spent 2% more toward hiring new workers but 26% percent more on new equipment.

Obama explained how structural economic changes have shifted businesses toward using more equipment and technology, explaining how “businesses have learned to be more efficient with fewer workers” in response to the recession. He provided some examples: “You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.”

Much coverage of the interview falsely claimed that Obama blamed technology, or ATMs for high unemployment. This is simply untrue. He did not claim that technology is driving unemployment, but instead that employment is changing as technology increases the productivity of labor.

The interview did reveal that his alleged solution to the problem is more government control of the economy, administered by a panel of experts: “What we have to do now, and this is what the jobs council is all about, is identifying where the jobs for the future are going to be, how do we make sure that there’s a match between what people are getting trained for and the jobs that exist, how do we make sure that capital is flowing in those places with the greatest opportunity.” This may sound good in theory, yet the question remains: how does he know where the jobs of the future are going to be, and how can he determine which job training will prove most valuable, and how can he know which areas have the greatest opportunity, and how can he know where to send capital?

It is not likely that the President’s Council on Jobs and Competitiveness, made up of about two dozen bright and capable business men and women, will have sufficient knowledge either to determine where capital should flow or where the future jobs will be, or what job training will be best rewarded. Private investors, risking their own capital, cannot consistently predict what markets will succeed or which technologies will flourish. How can we expect a council of political appointees wagering other people’s money to do any better?

Nobel laureate FA Hayek discussed the problems associated with central economic planning in his seminal American Economic Review article, “The Use of Knowledge in Society” and in his book The Fatal Conceit. Hayek argued that the economy is a very complex system, fueled by the knowledge and actions of millions of independent actors. Hayek warned that any plan to centrally control production would be doomed to inevitable failure because central planners lack sufficient information to ensure that supply equals demand in every market in the economy. The abysmal standard of living and collapse of the Soviet Union validated Hayek’s theory of the impossibility of planning something as complex as a country’s economy.

Clearly, Obama is not suggesting anything nearly as extreme as centrally planned production. Nevertheless, President Obama makes his assumptions clear in this interview that he believes this jobs council holds the capacity to gain sufficient knowledge to help guide capital investments and encourage job creation in the areas they identify. Instead of having our President and a few smart individuals making decisions with limited information, we could allow the market mechanism, made up of millions of individual decision markers, to transmit the information and knowledge necessary for market actors to guide capital appropriately.

For President Obama to assume that he and or his council have the knowledge sufficient to make these determinations is a fatal conceit.

NCLB a Barrier, Not an Aid

Sandy Kress, former Bush administration official and architect of NCLB, took issue last Friday with my post criticizing the law. Today, education writer Rishawn Biddle publishes and expands on Kress’ critique. Sandy’s objection was that Idaho, one of the states planning to start ignoring the law, isn’t performing well academically and so “is hardly a poster child for arguing against a federal role.”

As it happens, I wasn’t using Idaho—or any “poster child”—to make the case against against NCLB. I was using the experiences of real children. More specifically, I was using the performance of nationally representative samples of students on the National Assessment of Educational Progress Long Term Trends tests. The LTTs for students near the end of high school are the best gauge we have of the performance of the nation’s public schools over time. The stagnation and decline in those results across subjects are not the only evidence or argument against NCLB, but they are compelling.

Rishawn offers little in the way of argument or evidence to support his own comments, but one of them is nevertheless worth responding to because it represents a common view that is not only wrong but exactly backwards: the notion that NCLB helps to advance the kind of market reforms that actually work. Au contraire.

The state tests NCLB focuses on are all but worthless for comparing states to one another or for determining trends over time, so the law tells us considerably less than we could already discover from the NAEP.  NCLB has, however, been an epic, expensive distraction, pulling the efforts of countless activists, policymakers and educators away from the market reforms that work and consuming their time arguing about the details of a policy that never had a sound research base to support it and still does not. Adding insult to injury, NCLB exacerbated the unconstitutional overreach of its earlier form, the ESEA. If NCLB worked better and more efficiently than alternative policies, and had no deleterious side effects, I would be all for amending the Constitution to allow it. It doesn’t.

So no, NCLB is not an aid to meaningful reform. It is a barrier. The sooner we get over it, the better.

‘My Disability Made Me Do It’

James J. McDonald, Jr., a California attorney with the firm of Fisher & Phillips, has long been one of the more incisive critics of the employment provisions of the Americans with Disabilities Act (ADA), in particular the law’s coverage not just of physical handicaps like deafness and paraplegia but also emotional, mental and behavioral disabilities, which often bring with them a high potential for disrupting the workplace. Last month McDonald spoke on this topic at the annual convention of the Society for Human Resource Management (SHRM), the professional organization of the HR field. Here are some highlights from his speech of cases in which employers, he said, were required to accommodate employees:

*A 911 operator whose narcolepsy made him [or her? – W.O.] fall asleep on the job.

*A county custodian with borderline mental retardation who was twice criminally convicted of stealing items from offices she was cleaning.

*A medical transcriptionist with obsessive-compulsive disorder who repeatedly came to work late, or not at all.

*An employee with bipolar disorder, who, when given a performance improvement plan, threw it across the room and shouted profanities. She later kicked her desk and said “They’ll regret this.”

To find out more about why the language of the ADA has led to such cases, how the Ninth Circuit (joined by the Tenth) has developed legal standards even more protective of misbehaving employees than those proposed by the Equal Employment Opportunity Commission (EEOC), and why McDonald thinks it is (perversely) shrewd for employers to keep themselves in ignorance about some employee disabilities, follow the link. (In this 2010 paper, by the way, McDonald gets into detail on a long list of ADA/misconduct cases, each seemingly more extreme than the last.) It’s worth remembering that the U.S. Supreme Court for a while attempted to interpret the ADA narrowly so as to focus the law’s benefits on traditional disabled groups, only to be slapped down by the George W. Bush-era U.S. Congress, which overrode those decisions (to general applause in the press) and instead instituted ultra-broad definitions of disability for ADA purposes. Earlier on the ADA here, here, here, etc.

Christina Romer’s Naïve Keynesianism

President Obama’s former head of the Council of Economic Advisers has taken to the pages of the New York Times to warn us against pursuing “fiscal austerity just now,” particularly not spending cuts.

Christina Romer’s views are Keynesian. She doesn’t use that word, but she is focused on juicing “demand” with optimally-targeted and well-managed government “investments.”

Economics has numerous schools of thought, but Romer’s writing reflects nothing but the most simplistic Keynesian framework. The fact that the huge Keynesian stimulus of recent years that she supported has coincided with the slowest economic recovery since World War II seems to be of little concern to her.

She also doesn’t seem to be interested in how government spending actually works in the real world. She assures us that “government spending on things like basic scientific research, education and infrastructure … helps increase future productivity.”

That view has a veneer of economic authenticity, but it leaves many issues unaddressed:

  • Most federal spending is on transfers and consumption, not investment. The debt crisis we face is driven mainly by entitlements, which is consumption spending. Romer’s talk of investment spending is a rhetorical bait-and-switch.
  • Romer doesn’t distinguish between average and marginal spending. If some federal investment spending has created positive net returns, that doesn’t mean that additional spending would. Governments already spend massive amounts on education, for example, so the marginal return from added spending is probably very low.
  • If the government investments that Romer touts are so valuable, then why hasn’t the government done them already? After all, federal, state, and local governments in this country already spend 41 percent of GDP.
  • If science, education, and infrastructure investments have the high returns that Romer seems to think they do, then why does the government need to be involved? Private firms seeking higher profits would be all over such investments.
  • Romer mentions that the “social returns” on some investments might be higher than purely private returns. However, that doesn’t mean that the government should automatically intervene. For one thing, the government suffers from all kinds of management failures and other pathologies.
  • Romer also ignores that the government imposes substantial deadweight losses on the economy when it commandeers the resources it needs for its “investments.”

So my reading assignment for Romer is www.DownsizingGovernment.org so she can get a better understanding of how federal programs actually operate.

And readers interested in all the economics of government spending that Romer doesn’t tell you about can consult Edgar Browning’s excellent book, Stealing From Each Other.

The First in a Long Series

The Washington Post offers today a critical look at independent fundraising and spending in the 2012 campaign.

The article states independent groups are raising money “in response to court decisions that have tossed out many of the old rules governing federal elections, including a century-old ban on political spending by corporations.”

But the century-old ban is on campaign contributions by corporations, and it is intact. Spending on elections was not prohibited to some corporations until much later.

Other spending by corporations, like the money spent by The Washington Post Company to produce the linked story, has never been regulated or prohibited by the federal government.

The article mentions a “shadow campaign” and refers to Watergate. It states “independent groups are poised to spend more money than ever to sway federal elections.” Surely something is amiss here! Or at least the causal reader of the Post might conclude that.

But what is going on? A spokesman for one of the independent groups says they are trying to influence the debt ceiling debate and that as far 2012 goes: “We’re definitely working to shape how the president is perceived, because how he is perceived will have a huge impact on how this issue is resolved.”

It sounds like the group is engaging in political speech on an issue, speech that could have some effect on next year’s election. What is amiss about that? Isn’t the right to engage in such speech a core political right under our Constitution?

The article also argues that independent groups, being independent, may fund speech that may harm a candidate they are trying to help. Candidates, in a sense, have lost some control over their campaigns and their messages.

Of course, absent limits on contributions to candidates and parties, the money going to independent groups might go to…candidates and parties. Liberalizing speech, not suppressing independent groups, might be a good way to prevent groups from airing ads that harm or misrepresent candidates for office. Finally, candidates do have the power to repudiate independent ads.

Expect more news stories like this one over the next 18 months. The cause of campaign finance reform is in desperate straits. Reformers in the media are going to construct a narrative that says: money is destroying democracy in 2012, all because of Citizens United. They hope thereby to set the stage to restore restrictions on campaign finance.