Topic: General

Watching the “Lack of Competition” Meme

Ars Technica — a wonderful publication with brief, informative, and interesting pieces on technology — is showing a little sloppliness in covering the broadband competition issue. The question whether there is sufficient competition in the provision of broadband Internet service underlies the debate about “net neutrality” — whether there should be public utility regulation of broadband.

Discussing FTC chair Deborah Majoras’ speech at the PFF Aspen Summit, an Ars reporter casually observes, “[M]arket forces really do not exist when it comes to broadband.” That’s at least overstatement. A little more caution would be good given the centrality of the issue.

To show the existence of a duopoly (which is not inherently a competition-free situation), the report links to an earlier Ars piece interpreting a study as showing “not much” competition between DSL and cable. But that conclusion goes only to price competition. And it’s a little overstated, too.

The actual study, from a group called Kagan Research, seems to show that DSL is the low-cost option (and getting lower), while cable is the high-bandwidth option (getting higher in bandwidth while dropping in cost more slowly). That diminishes head-to-head price(-only) competition because each is focused on a different niche. But they’re still in competition.

The Kagan Research analyst concludes: “Eventually, cable will probably have make [sic] some reductions to cater to the lower end of the consumer market simply to get more customers.” So the study author believes more direct price competition is coming.

That’s some distance from “market forces really do not exist when it comes to broadband.” There is some price and quality competition among the major broadband platforms. Substitutes (such as getting broadband at work and getting information and entertainment offline) play a role in the competition question. And several competitors wait in the wings, to become viable through improvements in technology, new investment, or bad behavior by the current platforms.

I hasten to add that I am not satisfied with the current level of competition. I would like it to be more intense along all fronts and in all regions.

Exporters as Hostage-takers?

I subscribe to a useful digest of farm policy news called FarmPolicy. It’s a great little news service for those interested in agricultural issues.

Today in FarmPolicy, my attention and pique were raised by an article that included a statement from Sen. Ken Salazar (D-Co), who said that farming should be an integral part of national security. According to Salazar:

I would hate to think of a day where the United States of America becomes hostage to other countries (that export food to the U.S.), in a way that we are held hostage over our energy needs

I know of only two other countries that pursue a policy of total self-sufficiency in food(which seems to be what the senator is advocating): North Korea and Zimbabwe.

And we all know how well that’s going…

If you are interested in agricultural policy, Cato will be holding a forum next week to discuss the new Farm Bill. The forum will feature the secretary of agriculture, Mike Johanns, as well as Cal Dooley of the Food Products Association and Robert Thompson, one of America’s most respected experts on U.S. farm policy. Please join us.

Happy Birthday, Welfare Reform

Ten years ago today, Bill Clinton signed welfare reform into law. As we look back on the results of those 10 years, it’s worth reflecting on just how wrong the critics were.

At the time the bill was signed, the welfare rights lobby warned that “wages will go down, families will fracture, millions of children will be made more miserable than ever.” One frequently cited study predicted that more than a million children would be thrown into poverty. 

Rep. Jim McDermott wasn’t satisfied with that prediction — he raised the estimate to 2.5 million starving children. Welfare advocates painted vivid pictures of families sleeping on grates in our cities, widespread starvation, and worse.

The New York Times claimed “the effect on our cities will be devastating.” Sen. Frank Lautenberg  (D-NJ) predicted “Hungry and homeless children” would be walking our streets “begging for money, begging for food, even…engaging in prostitution.”  The Nation warned bluntly, “people will die, businesses will close, infant mortality will soar.”

If one listened to the welfare lobbies, you would have expected to be stepping over bodies in the streets every time you left your house.

Now, with 10 years of experience, we can see that those claims were about as correct as claims of weapons of mass destruction in Iraq. Welfare rolls are down. Roughly 2.5 million families have left the program, a 57 percent decline. Undoubtedly, some of this was due to a growing economy, especially in the late 1990s, but welfare rolls remain down despite the post-9/11 economic slowdown.

At the same time, poverty rates today are below the rates before welfare reform was enacted. Child poverty rates declined from more than 20 percent in 1996 to 17.8 percent today. Roughly 1.6 million children were lifted out of poverty. Perhaps even more impressively, the poverty rate among black children has fallen at the fastest rate since figures have been recorded. 

Dependent single mothers, the group most heavily affected by welfare reform, account heavily for this decline. Since the enactment of welfare reform, the poverty rate for female-headed families with children has fallen from 46 to 28.4 percent. The decline in poverty among female-headed households has been greater than for any other demographic group.

Most of those who left welfare found work, and the vast majority of them work full-time.  It is true that most first jobs found by those leaving welfare are entry-level positions — on average, they earn about $16,000 per year. That’s not much, but for many it leaves them better off than they were before. Moreover, studies show that as these former welfare recipients increase their work experience, their earnings and benefits increase. And, for better or worse, many continue to receive other forms of government assistance.

Surveys of former welfare recipients indicate that they believe their quality of life has improved since leaving welfare. And they are optimistic about the future. A majority of former welfare recipients believe that their lives will be even better in one to five years. Many of the former recipients actually praise welfare reform as a stimulus for their beginning to look for work and as an opportunity for a fresh start, and a chance to make things better for themselves and their children. Both the women and their children appear to benefit psychologically from the dignity of working.

Certainly, I’ve had my own criticisms of welfare reform. It didn’t go far enough toward making people truly independent of government. It is too prescriptive, setting too many detailed rules for states to follow. The recent reauthorization of the reform added a worthless $1.7 billion program to encourage marriage. And, Congress has failed to build on welfare reform to restructure other federal anti-poverty programs.

Still, by almost any measure you can think of, it is clear that the critics of welfare reform were quite simply wrong.

That’s worth keeping in mind when those same Chicken Littles raise similar scare stories about the proposed reform of other government programs, from Medicare and Medicaid to Social Security. Once again, we are hearing that any changes, reductions, or “privatization” of these programs will lead to widespread poverty, suffering, and other disasters. For example, they claim that allowing younger workers to privately invest a portion of their Social Security taxes through personal accounts will leave seniors eating cat food. But given their track record, maybe we should be a little bit skeptical the next time they predict the sky is falling.

Striking While the Irony Is Hot

The New Jersey Courier-Post has come out in favor of parental choice in education, and was criticized for doing so on its own op-ed page today. The critic, one John R. Flynn, argues that the Courier-Post failed to provide enough support for its position. Ironically, he provides no support for his own opposition to school choice. Naturally, I felt it my civic duty to point that out in a letter to the editor:

School Choice Critic Uninformed

In his August 21st commentary, John Flynn criticized the Courier-Post for providing, in his view, insufficient evidence for its support of school vouchers. How ironic.

Mr. Flynn voices “serious questions” about the feasibility of public and private school choice programs, but seems not to have seriously looked for the answers. He is apparently unaware that such programs are well established and successfully operating in a host of countries. The Netherlands has had school choice since 1917. Nearly three quarters of its students are now enrolled in private schools and the Dutch outperform American children in every subject at every grade. School choice programs also exist, in various forms, in Chile, Australia, Sweden, and Denmark, among other nations.

If critics spent less time wringing their hands and more time informing themselves about the international success of school choice, they would do a great service to American families.

New at Cato Unbound: Douglas Massey on Seeing Mexican Immigration Clearly

In today’s edition of Cato Unbound, Douglass S. Massey, the Henry G. Bryant Professor of Sociology and Public Affairs and co-director of the Mexican Migration Project at Princeton University, writes

Mexican immigrants are routinely portrayed as a tidal wave of human beings fleeing an impoverished, disorganized nation who are desperate to settle in the United States, where they will overwhelm our culture, displace our language, mooch our social services, and undermine our national security… This profile, however, bears no discernable relationship to the reality that I know as a social scientist.

Massey, drawing on his decades of research on Mexican migration, argues each element of this picture is false, and has exacerbated the problems of Mexico-U.S. immigration.

Last year Cato published Massey’s study, “Backfire at the Border: Why Enforcement without Legalization Cannot Stop Illegal Immigration.”

Educational Toleration

NPR reports on a new Florida law that requires the teaching of American history in the schools and sets up some rules for how it should be taught. At the beginning of the report I was amused by the description of the impetus for the law:

Mike Fasano was a state Senator from New Port Richey, Florida, just north of Tampa. After visiting some schools he learned that students often didn’t know the name of their town’s mayor, the name of the state’s lieutenant governor, or even the difference between the Florida legislature and the U.S. Congress.

The name of the lieutenant governor? Let’s see … kids who can’t vote can’t name a public official who has no power. And that’s a problem? But OK, they should know the difference between the legislature and the Congress. And so:

To help remedy that, Fasano proposed a bill recently signed into law that requires Florida schools to teach the history of the United States from the period of discovery to the present. Nothing controversial about that. The clause that alarmed historians was the one that seemed to suggest that any discussions of controversial events that were open to different interpretations would be off-limits.

Indeed, the bill does say:

American history shall be viewed as factual, not as constructed, shall be viewed as knowable, teachable, and testable, and shall be defined as the creation of a new nation based largely on the universal principles stated in the Declaration of Independence.

And that has stirred controversy. Teachers and educrats and a Washington lobbyist for historians (!) all complain that history is not just “facts,” that interpretation is essential for understanding what happened. And of course they’re right. The first problem is that millions of things happened every day in 400 years of American history (note that “400 years” assumes that American history began with the arrival of European settlers). You can’t tell kids every one of those things, so already you’re picking and choosing among facts, based on some theory or assumption about what’s important.

And then of course history is full of controversies: Did the British treat the colonists unfairly? Did the colonists treat the Indians unfairly? Were the costs of the American Revolution worth it? Were the Founders hypocrites to proclaim their devotion to liberty while holding slaves? And so on and so on, right up to the dropping of the atomic bomb, the debacle of Vietnam, and the contemporary questions of whether either Bill Clinton or George W. Bush was the worst president in American history.

But the mere listing of a few historical controversies illustrates the difficulty of deciding on a “right” answer. Whose interpretation should be taught to all students in government schools? Should we tell students that Jefferson was a hero or a hypocrite? That the 600,000 deaths in the Civil War were or were not worth it? That the bombing of Hiroshima was a war crime or a necessary measure to save even more lives? That FDR saved capitalism or transformed a federal republic into a centralized welfare state?

There are no right answers to these questions. (Well, there are, but apparently not everyone sees them.) So the teaching of history becomes a political struggle: Which faction will get to impose its view on millions of children?

The way to avoid political fights like these is to depoliticize them. Take away the power for anyone to impose his or her views on all the children. People used to expect the state to impose one religion on the whole society. When, nevertheless, people came to hold differing religious beliefs, Europe went through the Wars of Religion. And out of those conflicts came a new understanding: religious toleration and the separation of church and state. Let everyone worship as he chooses, and let no one impose religion on those with different beliefs.

The separation of school and state would accomplish the same thing in education: No more political fights over school prayer, the Pledge of Allegiance, gay teachers, evolution, dress codes, sex education, or historical interpretation. Let every family choose schools that reflect their own values or otherwise best meet their educational needs. And if we can’t achieve separation, we could at least adopt toleration: Let all parents send their children to schools they choose, without financial penalty.

Yet More Government Waste

Sen. Chuck Grassley, chairman of the Finance Committee, is asking Medicare/Medicaid administrator Mark McClellan why two senior Medicare investigators spend up to two months each year “on travel to popular vacation destinations.” Grassley wants to know, “What did American taxpayers and Medicare beneficiaries get for the travels of Rollow and Jencks?”

Good for him. As I suggested in another recent item, it’s better for Grassley and the Finance Committee to be exercising their oversight of federal programs than to run amok through American society, investigating the Red Cross, American University, the Nature Conservancy, and other charities and nonprofits. A top Grassley aide has met 500 times with nonprofit officials as part of his investigations and hearing preparations.

So better to remember that the role of the United States Senate Committee on Finance is not to regulate American society, but to oversee the finances of the federal government. In that light, the investigations into wasteful spending at Medicare and the Legal Services Corporation are to be welcomed.

Still, you have to consider: The budget for Legal Services is about $326 million, and the allegedly wasteful spending probably amounts to a few million dollars. In the case of Medicare, Grassley is complaining about $75,000 in travel expenses. Total spending on Medicare will rise by $52 billion this year, to $382 billion. Medicaid will cost taxpayers another $200 billion in FY2007. The federal deficit is projected to total $1.76 trillion over the coming decade. And the government’s total fiscal imbalance, as calculated by Kent Smetters and Cato’s Jagadeesh Gokhale, is now $63 trillion.

When the Senate Finance Committee investigates $75,000 in suspicious travel at Medicare or doubled meal expenses at Legal Services, it is engaging in sleight of hand. Like a magician who draws your attention to his right hand while he moves things around with his left, the committee is trying to divert our attention from the fact that it is ignoring these massive problems while it gets favorable headlines for penny-ante stunts.