Trade Negotiations Can Be Painful to Watch

In an ideal world, governments would recognize the benefits of trade liberalization, and eliminate domestic tariffs on their own.  In the real world, though, much of the tariff reduction process comes through international agreements between countries, which go something like this: We will agree to lower our tariffs if you agree to lower yours.  Most people recognize that this is a silly way to do things, but in the end it leads to lower tariffs and it’s the only way to do so within existing political constraints, so we go along with it.

But it can be really painful to watch in action.  Here’s an article in the FT about the U.S.-EU trade talks:

The US has accused the EU of abandoning a pledge to remove all tariffs applied to goods traded across the Atlantic, in the first substantive row to hit landmark trade negotiations between the two economies.

The EU and US last year launched a push to reach a Trans-Atlantic Trade and Investment Partnership billed as the world’s largest regional trade negotiation covering economies comprising almost half of the global economy.

Much of the focus of the discussions has been on bringing regulations in line to encourage more trade and on reducing other non-tariff barriers. But both sides had also pledged to seek to remove all tariffs on transatlantic trade, and in a sign of the difficult discussions to come the US has accused the EU of backing away from that goal.

In discussions this week in Brussels, EU officials have told their US counterparts that they plan to allow US beef, chicken and pork into the EU only under a quota system. The move amounts to a stick in the eye of US negotiators who face powerful agricultural lobbies at home and a Congress that is appearing ever more sceptical about the value of trade agreements.

It also follows a concerted effort by Karel De Gucht, the EU trade commissioner, to label the US’s original tariff offers tabled last month as less ambitious than the EU’s. The EU’s original offer would eliminate tariffs on 96 per cent of goods traded across the Atlantic while the US offer promised to wipe out tariffs on 88 per cent of goods.

US officials insist they plan to negotiate their offer upward and remain committed to the goal of eliminating all tariffs. However, EU officials, they say, have told their US counterparts that they will not eliminate tariffs on beef, chicken or pork and instead subject them to a sliding system of tariff-rate quotas.

At the end of all this, my hope is that most U.S. and EU tariffs will be eliminated.  But watching everyone haggle about it, and demonstrate so much reluctance to do what is clearly in their interest, is not much fun.

Educational Choice IS Accountability

There’s been a lot of confusion over what constitutes “accountability” in education lately. In response, representatives of the Cato Institute, Heritage Foundation, Friedman Foundation, Heartland Institute, and the Center for Education Reform have issued a joint open letter explaining why the best form of accountability is directly to parents.

To some, accountability means government-imposed standards and testing, like the Common Core State Standards, which advocates believe will ensure that every child receives at least a minimally acceptable education. Although well-intentioned, their faith is misplaced and their prescription is inimical to the most promising development in American education: parental choice.

True accountability comes not from top-down regulations but from parents financially empowered to exit schools that fail to meet their child’s needs. Parental choice, coupled with freedom for educators, creates the incentives and opportunities that spur quality. The compelled conformity fostered by centralized standards and tests stifles the very diversity that gives consumer choice its value.

This confusion about accountability is not limited just to tests. It even extends to personnel management. An example of this confusion comes to us today from a Republican legislator in Tennesee:

Rep. David Alexander, R-Winchester, a voucher critic, has filed an amendment that would tweak Gov. Bill Haslam’s voucher bill by requiring private schools that take public scholarship dollars to use the controversial Tennessee Evaluator Acceleration Model [TEAM] to grade its teachers.

The reason government schools need such heavy-handed evaluation systems is because tenure and union contracts make it nearly impossible to fire a teacher. According to the National Center for Education Statistics’ “School and Staffing Survey,” during the 2010-11 school year, only 1.9 percent of Tennessee teachers were dismissed or did not have their contracts renewed due to poor performance, up from 1.1 percent in 2007-08.

By contrast, private schools have greater flexibility than government schools over hiring, firing, and evaluating teachers. They’re also held directly accountable to parents, so there is market pressure not to retain teachers who perform poorly.

Moreover, the legislator’s argument that the government should force its evaluation system on private entities because they are accepting students who are publicly subsidized is patently absurd. It’s like arguing that all employees at grocery stores that accept food stamps or hospitals that accept Medicaid must be evaluated according to the same metrics as DMV employees.

State and local governments have the prerogative to devise whatever accountability measures they deem necessary to operate their schools and manage their employees. Private schools should continue to enjoy the freedom to set their own goals and to determine how best to measure their own performance and we should empower parents to choose the school that best meets their children’s needs.

Now You Can Draw Meaningful Time Trends from the SAT. Here’s How…

Over the years, countless reporters and even policy analysts have attempted to draw conclusions from changes in state SAT scores over time. That’s a mistake. Fluctuations in the SAT participation rate (the percentage of students actually taking the test), and in other state and student factors, are known to affect the scores.

But what if we could control for those confounding factors? As it happens, a pair of very sharp education statisticians (Mark Dynarski and Philip Gleason) revealed a way of doing just this—and of validating their results—back in 1993. In a new technical paper I’ve released this week, I extend and improve on their methods and apply them to a much larger range of years. The result is a set of adjusted SAT scores for every state reaching back to 1972. Vetted against scores from NAEP tests that are representative of the entire student populations of each state (but that only reach back to the 1990s), these adjusted SAT scores offer reasonable estimates of actual changes in states’ average level of SAT performance.

The paper linked above reveals only the methods by which these adjusted SAT scores can be computed, but next week Cato will publish a new policy paper and Web page presenting 100 charts—two for each state—illustraing the results. How has your state’s academic performance changed over the past two generations? Stay tuned to find out…

Update: Here’s the new paper and charts!

Sweden, Spending Restraint, and the Benefits of Obeying Fiscal Policy’s Golden Rule

When I first started working on fiscal policy in the 1980s, I never thought I would consider Sweden any sort of role model.

It was the quintessential cradle-to-grave welfare state, much loved on the left as an example for America to follow.

But Sweden suffered a severe economic shock in the early 1990s and policy makers were forced to rethink big government.

They’ve since implemented some positive reforms in the area of fiscal policy, along with other changes to liberalize the economy.

I’m particularly impressed that Swedish leaders imposed some genuine fiscal restraint.

Here’s a chart, based on IMF data, showing that the country enjoyed a nine-year period where the burden of government spending grew by an average of 1.9 percent per year.

Swedish Fiscal Restraint

From a libertarian perspective, that’s obviously not very impressive, particularly since the public sector was consuming about two-thirds of economic output at the start of the period.

But by the standards of European politicians, 1.9 percent annual growth was relatively frugal.

And since Mitchell’s Golden Rule merely requires that government grow slower than the private sector, Sweden did make progress.

Real progress. It turns out that a little bit of spending discipline can pay big dividends if it can be sustained for a few years.

This second chart shows that the overall burden of the public sector (left axis) fell dramatically, dropping from more than 67 percent of GDP to 52 percent of economic output.

Swedish Spending+Deficit as % of GDP

By the way, the biggest amount of progress occurred between 1994 and 1998, when spending grew by just 0.27 percent per year. That’s almost as good as what Germany achieved over a four-year period last decade.

New NWF Report “Mascot Madness: How Climate Change Is Hurting School Spirit”—They’re Kidding, Right?

The latest from the National Wildlife Federation has to rank among the most absurd global warming reports I have encountered.  And, after 30 years of encountering all sorts of wacky warming hype, this is saying a lot.

This NWF doozey is entitled “Mascot Madness: How Climate Change is Hurting School Spirit” and was timed so as to try to take advantage of the pre-coverage of the upcoming March Madness—the popular annual NCAA college basketball tournament. Apparently linking climate change to negative impacts on sports is a new green tactic.

The NWF’s premise is that human-caused global warming is threatening the natural version of school mascots, and, in some cases, causing them to be dissociated from the region that includes the university that they represent, presumably dampening “school spirit.”

The NWF offered up its solution to this vexing problem:

• Passing effective laws that reduce carbon pollution and other air pollutants that drive climate change and endanger the health of our communities and wildlife.

• Investing in clean, wildlife-friendly, renewable energy sources to replace our dangerous dependence on dirty fossil fuels.

• Practicing “climate-smart conservation” by taking climate change into account in our wildlife and natural resource management efforts.

Of course.

Even if it were true that anthropogenic climate change could be scientifically linked to changes in the location and/or health of the various school mascot species—which it almost certainly can’t—how this impacts “school spirit” is completely beyond me.

If the real-world situation that the mascots find themselves in is reflected in school spirit, can you imagine the level of dejection in the fan base of say the San Diego State Aztecs, the University of Southern California Trojans, the University of Calgary Dinos, or the Indiana University-Purdue University Fort Wayne Mastodons? It is a wonder that a single seat is filled for home games.

And as to the relationship between the natural territory of the mascot and the degree of rah-rahness, consider what must be the struggle facing the booster clubs behind the UC Irvine Anteaters, the Pittsburg (Kansas) State Gorillas, the Youngstown State Penguins, or the University of Missouri-Kansas City Kangaroos. Global warming’s impact is small beans compared to this kind of territorial displacement!

The NWF draws special attention to the worrisome case of the rivalry between the University of Michigan Wolverines and the Ohio State Buckeyes, fretting that climate change is driving the wolverine out of the state of Michigan while simultaneously driving the buckeye tree into Michigan (and out of Ohio).

But, according to this webpage from the University of Michigan athletic association, how the University’s mascot became the Wolverines is a matter of some debate. Interestingly, the page goes on to note that an actual wolverine has never been captured in the state of Michigan, and the first verified sighting of one didn’t occur until 2004!

And a quick peak at the USDA Plant Guide indicates that distribution of the Ohio buckeye tree shows that while the tree may extend is natural boundary northward in a warming climate, there is still plenty of territory south of Ohio to keep the tree in the state for a long time to come.  So, everyone (including the NWF) can rest assured that climate change will not serve to lessen the Michigan/Ohio state rivalry.

In keeping with the ringing the global warming alarm bells, I am a bit surprised that the NWF didn’t compile a companion report titled “Mascot Madness: How Climate Change is Boosting School Spirit to Unhealthy Levels.” In that report, they could have featured the Miami Hurricanes, the University of British Columbia-Okanagan Heat, the Geneva College Golden Tornadoes, the Southeastern Oklahoma Savage Storm, and, of course, the most obvious of all, the Dartmouth College Big Greens.

Lessons from the New Transit Data

The American Public Transportation Association (APTA) argues that a 0.7 percent increase in annual transit ridership in 2013 is proof that Americans want more “investments” in transit–by which the group means more federal funding. However, a close look at the actual data reveals something entirely different.

It turns out that all of the increase in transit ridership took place in New York City. New York City subway and bus ridership grew by 120 million trips in 2013; nationally, transit ridership grew by just 115 million trips. Add in New York commuter trains (Long Island Railroad and Metro North) and New York City transit ridership grew by 123 million trips, which means transit in the rest of the nation declined by 8 million trips. As the New York Times observes, the growth in New York City transit ridership resulted from “falling unemployment,” not major capital improvements. 

Meanwhile, light-rail and bus ridership both declined in Portland, which is often considered the model for new transit investments. Light-rail ridership grew in Dallas by about 300,000 trips, but bus ridership declined by 1.7 million trips. Charlotte light rail gained 27,000 new rides in 2013, but Charlotte buses lost 476,000 rides. Declines in bus ridership offset part or all of the gains in rail ridership in Chicago, Denver, Salt Lake City, and other cities. Rail ridership declined in Albuquerque, Baltimore, Minneapolis, Sacramento, and on the San Francisco BART system, among other places. 

APTA wants people to believe that transit is an increasingly important form of transportation. In fact, it is increasingly irrelevant. Although urban driving experienced a downward blip after the 2008 crash, it is now rising again, while transit outside of New York City is declining. Source: Urban driving data from Federal Highway Administration, urban population from the Census Bureau, and transit numbers from APTA. Transit PM = transit passenger miles.

Rail and bus ridership have grown in Seattle and a few other cities, but the point is that construction of expensive transit projects with federal funds is not guaranteed to boost transit ridership. In many cases, overall transit ridership declines because the high costs of running the rail systems forces transit agencies to cut bus service.

APTA wants more federal funding because many of its associate members are rail contractors who depend on federal grants to build obsolete transit systems. Light-rail lines being planned or built today cost an average of more than $100 million per mile, while some cities have built new four-lane freeways for $10 million to $20 million per mile, and each of those freeway lanes will move far more people per day than a light-rail line. 

Congress will be reconsidering federal funding for highways and transit this year, and APTA wants as much money as possible diverted to transit. President Obama has proposed a 250 percent increase in deficit spending on transportation, most of which would go to transit.

Transit only carries about 1 percent of urban travel, yet it already receives more than 20 percent of federal surface transportation dollars. Since most of those federal dollars come out of gas taxes, auto drivers are being forced to subsidize rail contractors, often to the detriment of low-income transit riders whose bus services are cut in order to pay for rail lines into high-income neighborhoods.

The real problem with our transportation system is not a shortage of funds, but too much money being spent in the wrong places. New York City transit was the only major transit system in the country that covered more than half its operating costs out of fares in 2012; the average elsewhere was less than 30 percent. Funding transportation out of user fees, such as mileage-based user fees and transit fares, would give transportation agencies incentives to spend the money where it is needed by transport users, not where it will create the most pork for politicians. 

The SAT Commits Suicide

The College Board announced this week that it is dropping the more arcane words and more advanced mathematics from its SAT test, among other changes. This, however noble its intentions, seems counterproductive and institutionally suicidal.

The purpose of the SAT is to help predict success in college. It does this in the same way as every other test: by distinguishing between those who know the tested content and those who do not. Not surprisingly, most modern tests are designed using something called “Item Discrimination Analysis.” That unfortunately-named technique has nothing to do with racism or classism. It is simply a mathematical formula. What it does is measure, for every question, the difference between the percentage of high-performers who got the question right and the percentage of low-performers who got it right. In general, the higher this “Discrimination Index” (DI) rises, the more useful the question is and therefore the more likely it is to be retained.

The problem with the College Board’s announced revisions is that they seem likely to eliminate questions with high DI values in favor of others with lower DI values. You might guess that reducing the SAT’s ability to distinguish between high and low performers would inhibit its ability to predict college success. But you don’t have to guess, because there’s already at least one recent study that looked at this question. What the authors found is that the DI value of SAT mathematics questions is usually the strongest contributor to the test’s ability to predict college success—by a wide margin.

There’s a good chance that the College Board is aware of this study since two of its three authors work for the College Board and the Board hosts a presentation about the study on its own website.

The Board’s changes are intended to make the SAT more fair. In practice, they seem likely to make it less useful. And as its usefulness diminishes, so will the number of colleges using it. If this proves to be the case—and we’ll know for sure in just a few years—the College Board will have succeeded in doing something that its critics have been unable to accomplish despite decades of effort: killing the SAT.