Archives: 05/2012

Social Security ‘Calculator’

One of the first things I did upon joining Cato in 2004 was to develop a Social Security benefit calculator. That work would later contribute to my book on the outcomes of different Social Security reform proposals.

The Social Security Administration used to have a benefit calculator on its website, but it was cumbersome to use. Now the SSA has a portal that enables you to view your personalized earnings and benefits information. This is in lieu of the paper statement that was recently suspended for those younger than age 60.

For the SSA calculator, you can register here (after answering some identifying questions) and look at the benefits that the system is promising to give you (lots)—and then compare them to what you really can expect to receive (not so much, and even less the younger you are).

Topics:

No Thanks to Aid, Africa Is Getting Better

In spite of our humble efforts, the arguments concerning the efficacy of foreign aid go on. The aficionados of the debate are no doubt aware of the latest controversy involving Columbia University Professor Jeffrey Sachs’ Millennium Villages Project (MVP). In 2006, Sachs convinced wealthy donors – from the United Nations and the government of Japan to Goldman Sachs and Pepsico – to sponsor economic development in 14 villages in 10 African countries. If aid in those villages worked, Sachs theorized, the program could be scaled upwards and vindicate those who advocate in favor of large foreign aid transfers from wealthy countries to poor ones.

Unfortunately for Sachs, some of MVP’s previous claims about the beneficial effect of aid on human wellbeing in the millennium villages have been called into question. The latest installment in this saga involves the MVP’s claim that “the average rate of reduction of mortality in children younger than 5 years of age was three-times faster in Millennium Village sites than in the most recent 10-year national rural trends (7.8% vs. 2.6%).” World Bank research, however, found that “under-5 mortality has fallen at just 5.9% per year at MVP sites, which is slower than the 6.4% average annual decline in under-5 child mortality in the MVP countries nationwide.”

Whatever the actual decline in the Millennium villages, note the remarkable reduction in the mortality of children under the age of 5 (per 1000 live births) in selected African countries. As I noted elsewhere, Africa has just experienced a decade of robust economic growth fueled by economic reforms and high commodity prices. That, evidence suggests, may be better at explaining the fall in child mortality than foreign aid.

Adult Supervision

Some politicians say that banks need more regulation because JPMorgan Chase lost $2 billion, about 2 percent of its annual revenue.

Meanwhile, the federal government will have a deficit of about $1.3 trillion this year, more than half its annual revenue (and about a third of its annual spending).

Is there some sort of regulation that might remedy that?

Scott Walker and Public-Sector Unions

Today POLITICO Arena asks:

Did foes of Scott Walker make a bad bet on the recall?

My response:

We’ll know soon enough whether foes of Scott Walker made a bad bet on the recall, but either way, Wisconsin made a bad bet years ago in initiating America’s public-sector union movement.

The incentives thus established – with concentrated benefits for state employees and dispersed costs for taxpayers – have made it all too easy for politicians to cave in to union demands, resulting over time in government workers with benefits far exceeding anything a rational market would afford – or those who pay for the benefits (taxpayers) can afford. Not surprisingly, therefore, states with strong public-sector unions – California, Illinois, New York – are today in economic disarray.

Bad enough that private-sector unions make businesses less competitive, the remedy for which is moving to right-to-work states or abroad. States can’t move. But their businesses and citizens can – and they do. Witness California over the past decade, and New York for several decades. Scott Walker has done us all a favor by crystallizing the issues facing so many states today.

California Knows How to Party… $16 Billlion Too Lavishly

Californians may be forgiven for expectorating coffee over their morning newspapers today, as they learn that their state deficit is not $9 billion, as Governor Brown’s administration had predicted, but rather $16 billion. Oops.

Further increasing the breakfast table choking hazard is the Governor’s “solution”: raise taxes. Gov. Brown is pushing a fall ballot initiative that would raise both sales and income taxes. He argues that this is preferable to cutting spending on things like public schooling on the grounds that schools have already been slashed to the bone. But have they? Actually, no. California’s per pupil spending has nearly doubled over the past forty odd years, in real inflation-adjusted dollars, and remains near its all-time high.

What did California get for that massive spending increase? Not a great deal if the SAT performance of its college-bound high school students is any guide. And, as I pointed out in this op-ed, it’s a pretty reasonable guide.

But while raising taxes has consistently failed to improve educational performance, cutting them actually works—via tax-credit school choice programs that give families an easier choice between public and private schools. Florida’s education tax credit program, for instance, has been shown to improve the achievement of students who stay in public schools, to improve the achievement of students who accept scholarships and attend private schools, and to save taxpayers millions of dollars a year. If expanded on a mass scale in a large state like California, it would save billions of dollars a year.

So what’ll it be, Californians? Fiscal and education policy sobriety, or the Governor’s hair-of-the-dog continued big government partying?

Romney Needs Spending Cutters

The Washington Times today discusses whether Mitt Romney’s political and policy team is looking too much like George W. Bush’s team. The reporter quotes me in his article:

Chris Edwards, director of tax policy studies at the Cato Institute, a libertarian-leaning think tank, offered glowing reviews of Mr. Romney’s troika of advisers—Mr. Hubbard, Mr. Mankiw and Kevin Hassett, another former member of the Bush team—on issues of taxation and economic policy.

“These are brilliant economists,” Mr. Edwards said before cautioning that Mr. Romney shouldn’t look to Mr. Bush’s team on the spending side.

“A key failing of Bush was that he spent far too much money. Bush’s Office of Management and Budget chiefs, like Joshua Bolten, were not spending cutters. Indeed, they were believers in big government like Bush was,” he said.

“So,” he said, “Romney needs spending-cutting experts to complement these tax experts. Our giant $1 trillion deficits and huge Obama spending increases will be the key thing Romney needs to tackle if he is elected.”

“So he needs experts on how to cut, privatize and downsize federal departments like Housing and Urban Development, Energy and Education. If elected, he needs a hard-line spending-cutting OMB chief. He needs Cabinet secretaries who believe in cutting their own departments.”

Survey: Which States Are Small-Business-Friendly?

As Tad has noted, Thumbtack.com in cooperation with the excellent Kauffman Foundation of Kansas City has produced this attractive, clickable map of the 50 states displaying the results of a survey of small-business friendliness. It’s worth checking out your state’s standing, as well as that of states with which it competes for new business. To a large extent the findings come in just about where one would expect:

  • California plus the Northeast (aside from New Hampshire) are the most unfriendly overall. Add in the trio of Midwest industrial states (Illinois, Michigan, Ohio) plus Washington and Hawaii and you get the full list of seriously unfriendly states, with “D+” or worse grades.
  • The list of best states also includes few surprises: Texas, Oklahoma, Idaho, Utah, Virginia and several other Southern states.
  • Virginia (grade of A) far outdistances Maryland (C-), notwithstanding the views of Washington Post business writers who often chide the Old Dominion for not emulating the economic policies of its neighbor to the north.
  • Other states, even in the Northeast, tend to do OK in one or two areas—New Jersey and Vermont avoid piling costs onto new hiring, Connecticut and Illinois are not entirely hopeless on zoning, and so forth. The exception is California: it’s awful on everything.

There are also some data available on the city level.

Tad and Econlog’s David Henderson pick up on the following remarkable sentence from the study:

Small businesses care almost twice as much about licensing regulations as they do about tax rates when rating the business-friendliness of their state or local government.

Everyone knows high taxes depress business activity; it is libertarians who go on to offer a critique of licensure laws, and never has it seemed so relevant.