Archives: 03/2012

Paul Ryan’s Spending Plan

House Budget Committee chairman Paul Ryan (R-WI) has introduced his annual budget blueprint. The plan will likely pass the House but won’t become law this year.

However, the plan signals the direction that House Republicans want to go in budget battles with the Democrats this year, and it also shows the likely thrust of policy under a possible Republican president next year.

Here are a few highlights:

  • Total federal outlays would fall from $3,624 billion this year to $3,530 billion next year. Those figures are $24 billion less than under President Obama’s budget this year and $187 billion next year.
  • Of the $187 billion savings compared to Obama next year, $38 billion would come from discretionary programs, $146 billion from so-called entitlements, and $3 billion from interest costs.
  • Ryan’s proposed spending in 2022 of $4,888 billion would be a modest 13 percent less than Obama’s proposed spending that year. That’s a useful statistic to remember when you read the inevitable stories about how Ryan would slash, burn, and pillage the government safety net.
  • Indeed, Ryan’s proposed increase in federal spending from $3,624 billion this year to $4,888 by 2022 represents fairly robust annual average growth of three percent.
  • As a share of GDP, the Ryan budget would trim outlays from 23.4 percent this year to 19.8 percent by 2022. That reduction would simply get spending back to around the normal historical level. And note that spending would still be higher than the 18.2 percent achieved in the last two years under President Clinton.
  • Ryan would repeal the 2010 health care law and reform Medicare by transitioning to a consumer-choice model. Those changes are expected to reduce annual outlays in 2022 by $258 billion.
  • Perhaps a more important proposal is the block-granting of Medicaid and other entitlement programs such as food stamps. Those Ryan reforms would save $313 billion annually by 2022.
  • Converting entitlements to block grants would allow the federal government to clamp down on federal costs while giving the states strong incentives to improve program efficiency.
  • The Ryan budget does not propose Social Security reform. Paul Ryan favors major reforms to this program, but he apparently thinks that reforming health care and other entitlements is a higher priority right now.
  • Aside from a few obvious targets—such as high-speed rail and the 2010 health care law—the Ryan budget shies away from abolishing specific programs, agencies, and departments.
  • Too often the Ryan budget proposes to fix broken programs when the proper reform would be elimination. Ryan proposes to “consolidate” federal job-training programs, for example, but these programs have a history of failure over the last five decades. Furthermore, job training is not a proper federal role within the U.S. constitutional structure.

In sum, Ryan’s proposals would make modest reforms to the giant federal welfare state. By Washington standards the Ryan plan is bold, and Paul Ryan certainly deserves his reputation as the sharpest and most energetic budget reformer on Capitol Hill.

However, there is too much happy talk in the Ryan plan about how failed big-government programs can be made to work better, and not enough focus on terminating activities that are properly state, local, and private in nature.

P.S. I think my budget-cutting plan is a better one.

Why Are There No Googles or Apples in Education?

Invent a better way to search the Web and you can conquer the world in a few years. Make better tools for communicating and accessing the Web and it’s the same story. But come up with a better way to teach reading or math and … nada. Excellence routinely “scales up” in every field except education. Why?

Read on … “Education’s Missing Apple: The Free Enterprise Solution?”

The Egg on the EU’s Face

The European politicians love to talk about the “huge” benefits of membership in the European Union. It is certainly true that the “single” market between the EU member states has brought tangible benefits, but those have been declining in importance as technological change made access to services and capital cheaper and easier, and trade liberalization progressed world-wide. Moreover, as the Brussels-based EU bureaucracy expanded, economic liberalization gave way to regulation that helped to strangle European growth (see the graph below). Consider the latest absurdity to emerge from Brussels—a poultry regulation, which aimed to increase the comfort of the egg-laying chickens, but resulted in a drastic cut in egg production and a 100% increase in the price of eggs.

The EU bureaucracy may not appreciate the problem of unintended consequences, but ordinary Europeans are beginning to realize that the EU no longer is what it used to be—a byword for prosperity and stability. In the Czech Republic, for example, a record number of citizens do not trust the EU (63 percent) and the EU Parliament (70 percent). If the EU elite persist in killing jobs and growth, it may bring about the ultimate unintended consequence—the break up of the EU.

Gingrich Campaign Responds: Newt Counsels States to ‘Resist’ Implementation of ObamaCare

Newt Gingrich’s presidential campaign has responded to my post, “Gingrich Adviser Urges States to Implement ObamaCare,” in which I responded to David Merritt’s Daily Caller op-ed calling on states to create ObamaCare’s health insurance Exchanges. According to Gingrich campaign spokesman Joe DeSantis:

Mr. Merritt is still an advisor to Speaker Gingrich, but he was not writing this article as a representative of the campaign. Newt receives advice from a large number of people. That does not mean he always agrees with the advice he is given. In this case of states implementing ObamaCare as a precaution, he explicitly disagrees with Mr. Merritt. He believes states need to resist the implementation of the law because it is a threat to our freedom.

That’s welcome news. There’s probably nothing that would give a bigger boost to the repeal effort than for states to refuse to create health insurance Exchanges.

Now that we’ve got the Heritage Foundation and Newt Gingrich on board, perhaps Mitt Romney, Rick Santorum, and Ron Paul could emphasize to state officials the importance of not implementing ObamaCare.

Should the Small Business Administration Be Abolished?

That’s the question being debated at the Wall Street Journal’s website. Representing the pro-abolition position is Cato adjunct scholar Veronique de Rugy. Veronique and I wrote an essay for Downsizing Government that makes the case for terminating the Small Business Administration.

Veronique ably explains why the federal government should not be meddling in the credit market, so I won’t restate her arguments. However, a statement made by her pro-SBA opponent is worth noting:

The SBA played a key role in arguing for policies to force the nation’s biggest banks to resume lending to small businesses after the financial crisis hit in 2008.

I bolded “force” because it’s a telling word choice. As George Washington put it:

Government is not reason. It is not eloquence. Government is force; like fire it is a dangerous servant – and a fearful master.

Advocates for government intervention are seemingly indifferent to the dangers of allowing a relatively small number of individuals to collectively play God. In this case, politicians in Washington – of which probably only a tiny subset knows anything about economics or finance – have decreed that taxpayers shall back loans made to particularly-sized businesses. Even if the result is a net economic positive – and it’s not – granting such power to one large entity should give pause to those Americans who value their freedom.

I mention this because as Veronique notes, “politicians have successfully sold the SBA as a program to help small business—a widely held belief that’s almost as sacrosanct as baseball, motherhood and apple pie.” For that reason, some self-described proponents of a smaller federal government have a soft spot for the SBA. However, when one pulls back the curtain, what he or she will find is just another politicized bureaucracy that exists to enrich special interests and bolster the status of our federal masters.

This One Is of the Charts

Education professor Sherman Dorn imagines foul play and education policy maven Matthew Ladner is withholding judgment for the time being. Ladner recently made use of some of my charts of the public school productivity collapse, and Dorn has taken issue with one of them, depicted below [from my February 2011 testimony to the House Education and the Workforce Committee].

Actually, the earlier version of the chart Ladner used really did have some incorrect data in the first decade of the spending series [yes, even people who worked at Microsoft sometimes mess up cut and paste], but the corrected February 2011 version also shows the roughly tripling in cost to which Dorn objected, so he would presumably still hold to those objections. Here they are:

First, once I looked at Table 182 from the 2009 Digest of Educational Statistics, it became clear that the cost figure increases (supposedly the total cost of a K-12 education taken by multiplying per-pupil costs by 13) are false. If you look at the columns in the linked data (Table 182), the per-pupil costs when adjusted for inflation approximately double rather than triple as asserted in this figure. Second, there is no possible source for the approximate “0%” line from NAEP long-term trends data, unless there is an additional calculation unexplained by Coulson.

As described in its legend and title, this chart presents the “running 13-yr  (K-12) total spending per pupil” to arrive at the “cost of a k-12 public education” in constant, inflation-adjusted 2010 dollars. For those unfamiliar with the concept of a running total, here’s Wikipedia’s explanation. So for a student graduating in 2009, the running total cost of k-12 education is the sum of average per-pupil spending in 2009 and the preceding 12 years. It is, put another way, the average cost of having sent a child through the public school system, from k through 12. Dorn’s notion that a running total can be calculated by simply multiplying a number by a constant is mistaken, and that seems to be the source of his confusion.

For the class of 2009, the running total adds up to a little over $151,000, which is the final data point making up the blue spending line above. The rest of that line is made up of the corresponding running totals for the preceding years—each one the sum of spending for that year and its preceding 12 years (interpolating missing year data, as noted in the legend).

As for the academic achievement data series, the chart indicates that they represent the “percent change in the performance of 17-year-olds” on the “NAEP Long Term Trends” tests. I’m not sure what difficulty Dorn has with this, since calculating the percent change from an old value to a new one is straightforward. For example, the Long Term Trends NAEP reading score for 17-year-olds in 2008 was 286, and the corresponding score in the first year tested was 285. So the percent change to year 2008 = (286 - 285) / 285 = 0.0035 = 0.35 percent. That is the last data point in the green series in the chart above.

If he’d bothered to ask, I would have been just as happy to explain this to Dorn privately as I am to do so publicly.