Does Sweden’s Voucher Program Need Stricter Regulation?

Slate recently published a badly misinformed piece about Sweden’s voucher program, which I addressed here. One of the other responses to the Slate piece was written by Swedish economist Tino Sanandaji for NRO. Sanandaji did an excellent job of showing that the voucher program cannot plausibly explain Sweden’s test score decline and usefully explored some of the more likely causes.

Though I agree with much of what Sanandaji wrote, his piece occasionally endorses heavier regulation of the program for reasons that are either not apparent or inconsistent with the evidence. For instance, he rightly observes that the Swedish government requires universities to accept high school grades as a key admissions criterion but does not permit them to take into account differential grading practices across high schools. This, he notes, puts significant external pressure on high schools to inflate grades. But despite acknowledging this, he later refers to “other problems caused by the [voucher/school choice] reform … such as grade inflation,” implying that this “corruption” is “caused by the lack of [state] control.”

And yet the evidence he presents points to the opposite conclusion: that grade inflation is particularly problematic in Sweden because of imprudent government intrusion into university admissions policy. Consider as a contrast the case of the United States, where universities are free to take high schools’ grading practices into account during admissions. We still have differential grade inflation across high schools, but it is less of a concern because universities can adjust for it. As the head of admissions at Brandeis University has observed, “It’s really not that hard [for colleges] to evaluate a school bearing in mind the differences in grading and weighting processes they employ.” In the absence of government meddling, high schools cannot secure admission to good colleges for their students simply by giving them all A’s.

Still more puzzling is Sanandaji’s criticism that “some private schools broke the rules to cherry-pick students.” This is curious because Sanandaji defends free markets on a number of other occasions, and a hallmark of free markets is that they rely on mutually voluntary exchange. So, naturally, schools in a relatively free marketplace want to enroll students they think they can successfully serve, just as families seek schools they believe can successfully serve them.

This does not mean that all private schools in a relatively free market will seek to serve only high-scoring or well-behaved students. In the United States, where the vast majority of private schools are free to admit students based on any criteria they like, many exist specifically to serve difficult-to-educate students that the typical public school is not well-equipped to teach. A study conducted in the mid-1990s found that public school districts were sending hundreds of thousands of students to the private sector for just that reason. Do some other private schools focus on serving high-performing students? Of course. But the largest share seem to place little or no emphasis on students’ prior academic performance, based on survey data from Arizona that I analyzed several years ago.

Expanding Educational Opportunity in the Bay State

One of the central promises of educational choice is expanding equality of opportunity.  When students are assigned to schools based on where they live, access to higher-performing schools depends on a family’s ability to afford a home in a more expensive community. This disparity between higher- and lower-income families persists even in academically high-performing states like Massachusetts.

Though the Bay State consistently ranks among the very top performers on the National Assessment of Educational Progress (NAEP) and is internationally competitive in math and science, these aggregate scores obscure the reality that performance varies considerably across districts, particularly along socio-economic lines.

In wealthier towns and cities like Dover and Weston, where the median household income is $184,646 and $180,815 respectively, students perform well. On the 2013 state assessment (the MCAS), 99 percent of Dover-Sherborn Regional High School students scored ‘proficient’ or ‘advanced’ in math, and 100 percent scored ‘proficient’ or ‘advanced’ in English. Likewise, 97 percent of Weston High School students scored ‘proficient’ or ‘advanced’ in math and 99 percent scored proficient or advanced in English. 

By contrast, students from lower-income communities like Chelsea and New Bedford, where the median household income is $43,155 and $37,493 respectively, often do not perform nearly as well. On the most recent MCAS, only 61 percent of Chelsea High School students scored ‘proficient’ or ‘advanced’ in math and 77 percent scored ‘proficient’ or ‘advanced’ in English. So too, only 49 percent of New Bedford High School students scored ‘proficient’ or ‘advanced’ in math, and 76 percent scored ‘proficient’ or ‘advanced’ in English. 

This pattern is repeated across the commonwealth – in the 10 poorest cities and towns in Massachusetts, only 40.6 percent of students scored ‘proficient’ or ‘advanced’ on the MCAS score compared to a statewide average of 65.1 percent. In 2013 the percentage of low-income students who scored ‘proficient’ or ‘advanced’ in English or math in all grades was approximately 33 points below the percentage for higher-income students.

One might assume that the differences in performance across income groups reflect disparate funding levels, yet there is scant evidence that increased school resources lead to increased student performance. Indeed, after adjusting for inflation, K-12 spending in the United States has tripled since 1970, but NAEP scores have remained essentially flat.

Was the Halbig Decision Political?

Writing in the Washington Post about the D.C. Circuit’s decision in Halbig v. Burwell, E. J. Dionne Jr. bemoans 

a conservative judiciary that will use any argument it can muster to win ideological victories that elude their side in the elected branches of our government.

There are several problems with his argument. First, of course, the argument accepted by two judges on the D.C. Circuit is pretty strong: the IRS can’t rewrite a law just because because the law isn’t working out so well.

Second, it’s not so clear that it’s conservatives who couldn’t “win ideological victories … in the elected branches of our government.” Democrats in Congress and other ACA supporters wanted states to establish exchanges, so they wrote the law with subsidies for state exchanges. (See also this original paper by Michael Cannon and Jonathan Adler, especially pp. 142ff.) But because of widespread opposition to the law, many states chose not to set up exchanges. That is, supporters of the law were unable to “win ideological victories … in the elected branches of our government,” so they turned to the unelected bureaucracy to rewrite the law, and now they want the courts to uphold their end run around the legislative process.

Third, I wonder if E. J. Dionne Jr. really wants a judiciary that rolls over for the political branches, whether legislative or executive. Does he believe that the Warren Court should not have struck down school segregation, which was clearly the will of the people’s elected representatives–and no doubt the people–in Kansas, as well as in South Carolina and Virginia, whose similar cases were combined with Brown? Does he believe that the Supreme Court was wrong to strike down Virginia’s law against interracial marriage in 1967? The Texas law outlawing sodomy in 2003? Does he regret the Supreme Court’s reining in of the Bush administration’s claimed powers in several terrorism cases? Or the court’s 2013 rulings on gay marriage?

Probably not. And that’s why we should judge judicial decisions on the basis of their adherence to the law and the Constitution, not on political grounds. Three cheers for judges who uphold the rule of law without fear or favor and without political intent.

Who Is Transit for?

Rail advocates often call me “anti-transit,” probably because it is easier to call people names than to answer rational arguments. I’ve always responded that I’m just against wasteful transit. But looking at the finances and ridership of transit systems around the country, it’s hard not to conclude that all government transit is wasteful transit.

Nationally, after adjusting for inflation, the APTA transit fact book shows that annual taxpayer subsidies to transit operations have grown from $1.6 billion in 1970 to $24.0 billion in 2012, yet per capita ridership among America’s urban residents has declined from 49 to 44 trips per year. A lot of that money ends up going to unionized transit workers, but the scary thing is that these workers have some of the best pension and health care plans in the world that are mostly unfunded–which means that transit subsidies will have to increase in the future even if no one rides it at all.

Capital and maintenance subsidies are nearly as great as operating subsidies, largely due to the industry’s fascination with costly rail transit. In 2012, while taxpayers spent $24 billion subsidizing transit operations, they also spent nearly $10 billion on maintenance, and more than $7 billion on capital improvements. In 2012, 25 percent of operating subsidies went to rail transit, but 56 percent of maintenance and 90 percent of capital improvements were spent on rails.

Who, other than rail contractors, union members, and other transit agency employees, is enjoying the benefits of all of these subsidies? To answer this question, I went to the Census Bureau’s American Community Survey page and downloaded table B08519, which shows how people get to work by income class, for states and metropolitan areas.

Corporate Tax Inversions Made Simple

Numerous responses to my article in the New York Times yesterday about corporate tax inversions indicated a lack of understanding. Related articles by Levin, Johnston, and Huang similarly suggested that further enlightenment is needed.

The following chart should simplify the issue for NYT readers, columnists, and policymakers.

All data from KPMG. Global average is for 134 countries.

CITR

South Carolina Police Are Ready To Crack Down on Uber

Earlier this month UberX, Uber’s rideshare service, launched in four cities in South Carolina. Residents of Charleston, Greenville, Columbia, and Myrtle Beach are free to download Uber’s app and request a ride from a driver using his or her own vehicle. However, police across South Carolina are planning on taking action against UberX drivers, who they believe are violating regulations.

According to the South Carolina Office of Regulatory Staff, Uber is illegally operating in the Palmetto State without state or local business licenses.

The Nerve, a project of the South Carolina Policy Council, reported that police officers in Greenville and Columbia could issue UberX drivers warnings and citations at their discretion.

Myrtle Beach officials claim that Uber is not licensed to work in the city, and Myrtle Beach police have said that they plan to cite UberX drivers for operating without a business license, which Myrtle Beach officials claim each driver needs. Uber believes that it does not need a business license because it is connecting passengers and drivers via its app and not providing rides.

From WPDE NewsChannel 15:

So why doesn’t Uber just get a business license? Taylor Bennett, an Uber spokesperson said they don’t think they need one.

A Needlessly Confrontational Trade Policy Pitch

Thanks to an ad campaign by a U.S. agriculture group, Washington, DC, commuters—especially those who work on Capitol Hill—have been learning about Japan and the Trans-Pacific Partnership.  The agribusiness lobby group called “Keep Food Affordable” has covered one DC metro station with ads complaining about Japan’s effort to maintain some of its tariffs in the TPP negotiations. 

No Special Treatment for Japan

It’s rare to see public advertising about trade policy.  This is true even in the unique DC market where commuters encounter pitches for other strange things like fighter jets, tax reform, and museums dedicated to remembering genocide. 

When trade policy does make it into advertising space, it’s almost always bad.  Election campaigns and advocacy groups use emotionally charged language to push protectionist policies: ‘China is poisoning us,’ ‘international organizations are stealing our country,’ ‘small town life is fading,’ ‘baby seals are dying,’ etc.