Stern Shouldn’t Be Taking any Bows…

In an essay to be released later today by the City Journal, Manhattan Institute senior fellow and school voucher supporter Sol Stern argues that recent free market reforms have failed to transform American education, and suggests that choice advocates should refocus on curriculum standards.

The central problem with Stern’s argument is that there have been no recent free market reforms in American education.

As economist John Merrifield, myself, and others have been at pains to point out over the past decade, contemporary U.S. “school choice” reforms lack some or all of the essential characteristics of free markets, and as such cannot be expected to perform like markets. Stern fails to realize this because of a demonstrably poor understanding of what a market is.

Stern’s mistaken notions about markets are starkly revealed when he declares that: “the country’s 1,500 ed schools represent an almost perfect system of choice, markets, and competition.” In reality, ed schools exist to serve the artificial and legally mandated requirement for public school job applicants with state accredited teachers’ college degrees. In the vast majority of states, even states with so-called “alternative certification” programs, anyone who teaches in a public school must have (or be pursuing) a government-approved degree in education. But because the public school system is protected from competition by its monopoly on $13,000 of tax funding per pupil per year, it has no systemic incentive to hire people with skills proven to accelerate learning. Ed school professors know that, and so fill their students’ heads with whatever philosophical, political, and pedagogical views they find most agreeable.

Furthermore, as Marie Gryphon pointed out in Giving Kids the Chaff: How to Find and Keep the Teachers We Need, public school systems often hire less qualified applicants over more qualified applicants. All this is why, as Stern acknowledges, the instruction offered in ed schools is so roundly derided. To mistake this massively distorted, monopoly-driven labor market as “an almost perfect [market] system” reveals a remarkably poor grasp of markets.

Among other things, markets require: prices determined by supply and demand, private ownership of businesses, low or no barriers to the creation of new businesses, few or no barriers to workers entering the profession, minimal regulation, the ability of owners and investors to profit from their efforts, unfettered consumer choice, and payment by consumers rather than a third party. Furthermore, to see any significant market forces, there must be large scale demand – millions of potential customers.

Apple would not have invested millions of dollars developing the first iPod, or dramatically increasing its capacity in recent years, if its customer base had been capped at 22,500 people – as Milwaukee’s voucher program is capped. To expect results such as we see in our vast market economy from tiny and hobbled existing school choice programs is like expecting an electric train set to match the power of a diesel locomotive. And abandoning real market reforms because these toy trains have failed to match some people’s unrealistic expectations is foolish on its face and disastrous public policy.

We will see dramatic progress in the field of education that matches the progress in the rest of our economy only when our school system enjoys all the essential features of that economy. For that to happen, existing school choice programs will have to be dramatically expanded and liberalized, or new programs, such as Cato’s own Public Education Tax Credit plan, will have to be implemented.

As Milton used to say, “there’s no such thing as a free lunch.” Want market results? Make a market.

To Hell With the Facts, We’re Still in This Thing!

Readers will no doubt be relieved that the new US National Intelligence Estimate on Iran has done nothing to dampen literary-critic-cum-Giuliani-foreign-policy-adviser Norman Podhoretz’s enthusiasm for starting another Middle Eastern war.

The Munich analogy and Winston Churchill make prominent appearances. No word, per Podhoretz’s prior comments on what went wrong after Vietnam, on whether gay people are to blame for the NIE.

Will Hungary Join the Flat Tax Club?

Tax-news.com is reporting that Hungary’s governing coalition is considering a flat tax. Tax competition is probably the only reason why this conversation is taking place. The current government, after all, has a dismal fiscal record of higher taxes and higher spending. But four of Hungary’s bordering nations already have flat tax systems, meaning that the competitive pressure for reform must be growing more intense as time passes:

The office of Hungarian Prime Minster Ferenc Gyurcsany has confirmed that the government intends to reduce the tax burden by 0.5% of gross domestic product over the next two years. … Gyurcsany told Euromoney that the convergence plan allowed some room for tax cuts and for the overall tax burden to be cut to 37.6% of GDP by 2010. … [T]he governing coalition has begun to debate a number of tax proposals with the aim of sharpening the country’s tax competitiveness. According to the business daily Vilaggazdasag, four tax packages were under discussion by the governing Socialist Party and its junior coalition partner Free Democrats last Friday: one would cut the ‘tax wedge’ on labour from 29% to about 20%, but increase the top rate of VAT by 2% to 24% and abolish tax allowances; the second would reform the personal income tax system, applying the principle of ‘super grossing’; the third would reduce the tax burden on corporations; and the fourth would introduce a flat tax on personal incomes and/or corporate incomes and VAT.

Conservatism Revealed

What does it say about the Republican Party when the leading fusionist conservative in the field - Mitt Romney, darling of National Review and erstwhile heir to Ronald Reagan - runs and wins a campaign arguing that the federal government is responsible for all of the ills facing the U.S. auto industry, that the taxpayer should pony up the corporate welfare checks going to Detroit and increase them by a factor of five, that the federal government can and should move heaven and earth to save “every job” at risk in this economy, and that economic recovery is best achieved by a sit-down involving auto industry CEOs, labor bosses, and government agents armed with Harvard MBAs to produce a well-coordinated strategic economic plan? That is, what explains the emergence of economic fascism (in a non-pejorative sense) in the Grand Old Party at the expense of free market capitalism?

I have no answer. But it certainly explains the increasing migration of libertarians voters to the Democratic Party. They may be no better, but at least the Dems offer libertarians something in social and foreign policy circles that the Republicans don’t.

Romney Revealed

Mitt Romney’s victory in Michigan’s Republican primary last night throws the GOP race for president wide open. But it should also end once and for all the idea that Romney is the heir to Reagan-style conservatism.

For some reason, Romney has been able to claim the Reagan mantle despite his support for:

  • A health care plan virtually indistinguishable for the one proposed by Hillary Clinton;
  • Support for No Child Left Behind, calls for increased federal education spending, and a proposal to have the federal government give a laptop computer to every schoolchild in America;
  • Calls for increased farm price supports;
  • Support for the Medicare prescription drug benefit; and
  • An undistinguished record on taxes and spending as Massachusetts governor, earning a C on Cato’s governor’s report card, and including support for $500 million in increased fees and corporate taxes.

But in Michigan, Romney pulled out all the big government stops with a call for $20 billion in corporate welfare to revive the state’s struggling auto industry. Romney, who called his proposal “a work-out, not a bail-out,” also promised that as president he would develop “a national policy to help automakers.”

George W. Bush once said, “When somebody hurts, government has got to move.” Mitt Romney echoes that, “A lot of Washington politicians are aware of it, aware of the pain, but they haven’t done anything about it. I will.”

Ronald Reagan must be spinning in his grave.