More than a Glancing Blow

The Organization for Economic Cooperation and Development has just released its “Education at a Glance” report for 2007, but before glancing at it Americans might want to sit down.

We already know, from a variety of international testing programs (e.g. TIMSS, PISA), that U.S. students fall further behind their international peers the longer they stay in school (.pdf). We’re close to average among wealthy nations in the 4th grade, below that average by the 8th grade, and near the bottom of the heap by the end of high school. Apologists for the status quo sometimes claim that this is because many other nations track their students into vocational and academic programs, and supposedly do not test those in the vocational tracks. “Education at a Glance 2007” shows that isn’t so. Test data for vocational students are available, and show that vocational track students in other wealthy nations actually outperform the overall U.S. average.

Nor do any of the other common excuses for our poor performance hold up. At the elementary and secondary level, the United States spends more than all but two countries (Luxembourg and Switzerland – tax havens, both). Though the United States was once a world leader in the fraction of our student population that completes college, we have been caught and surpassed in that regard. With 34% of our students going on to graduate from college in 2005, we now fall below the average of the OECD, and in 13th place overall.

The reason we now lag in this area is not hard to fathom: We are tied for the highest college dropout rate in the whole of the OECD, 46 percent. The problem is not that our colleges are inaccessible, it is that our elementary and high schools have failed to prepare students for college. They can get in. They just can’t cut it once they’re there.

At the college level, we have consumer choice and competition between public and private providers, and our college system is still the envy of the world, according to the OECD’s “At a Glance” report. At the K-12 level, we have a monopoly in which most students are automatically assigned to government-run schools. The first works, the second doesn’t. The policy ramifications should be pretty obvious to anyone who actually cares about educational outcomes.

Hillary, Dubya ♥ Universal Coverage

Neither appears to have been persuaded by the principles of the Anti-Universal Coverage Club. Here’s my short take on HillaryCare II. And according to USA Today:

Clinton unveiled her plan as Health and Human Services Secretary Mike Leavitt said President Bush wants to achieve universal health care before he leaves office.

Leavitt told the USA TODAY editorial board that Bush will veto a Democratic plan emerging from Congress that would add $35 billion in taxpayer subsidies to the Children’s Health Insurance Program over five years. In doing so, Leavitt said, Bush will urge Congress to join him in seeking coverage for all Americans.

“He’d like to see the larger debate begin,” Leavitt said. “The very best opportunity we have may well be in the next 15 months.”

Maybe Dubya will steal the issue from Democrats, much like he stole Medicare prescription drugs. Heck, with Republicans like this, who needs Democrats?

Experimental Video on Lowering the Corporate Tax Rate

Andy Quinlan of the Center for Freedom and Prosperity is exploring how videos can be used to advance economic liberty. For his first attempt, he asked me to be a guinea pig, so I have the dubious honor of narrating this video on America’s uncompetitive corporate tax system.

We want some feedback. If you have a chance to watch the video, let me know 1) whether you think the length (almost 9-1/2 minutes) is too long or too short, 2) whether there is too much or too little humor, 3) whether the graphs, charts and other footage match the narration, and 4) whether the case for a lower corporate rate is made in a cogent and cohesive fashion. I’ve already been told that “Celtic” is not pronounced correctly, so no need to pile on regarding that mistake. Andy also knows that he needs to improve the lighting for his second video, so no need to comment on that either. Thanks in advance for any suggestions.

If You Want To Be Loved, Try Being a Swede

No matter what we do, it seems like the world wants to hug us. We build a welfare state and the world loves it.  Try to reduce it, like the present government, and Roger Cohen in the New York Times says it’s funky.

But, ok, it is funky, moderately funky. The four center-right parties that make up the Swedish government since a year ago are influenced by market-liberal ideas from authors and think tanks, and some of the ministers wrote those books themselves. Three of the parties have fairly influential libertarian factions, and the leader of the fourth has said that he has Ayn Rand’s Atlas Shrugged on his bedside table. So expect more tax cuts, privatisation of state companies, an entrenched school voucher system, more private providers and competition in health care and a strong emphasis on deregulation and free trade.

But don’t expect labor market deregulation. When the trade unions organize 80 percent of the workers you don’t pick a fight. And don’t expect a real reduction in public spending. When everybody lives on everybody else’s expense, no one wants to be the first to try to quit. 

Above all, the government will act moderately. The biggest coalition party is actually called “the moderates”, and its ideology is called liberal-conservative – where liberal means liberal (it always confuses Americans), but conservative means that you shouldn’t be too serious, rapid or radical about your liberal ideals.

So in the end, the government will just tip the balance in an intact Swedish middle way between Anglo-Saxon and Continental. Open up and deregulate (after all, this is the country where the social democrats praise free trade) but also tax and spend (after all, this is the country where the new center-right prime minister says that “We don’t want to take away anything, we just want to add.”)

Hillary Clinton’s Health Plan

Democratic presidential candidate Hillary Rodham Clinton unveiled a sweeping health care proposal Monday that would require everyone to carry health insurance and offer federal subsidies to help reduce the cost of coverage. Cato scholar Michael D. Tanner responds: “Here we go again. HillaryCare is back, and its apparent that Sen. Clinton has learned little since the American people overwhelmingly rejected her last attempt to overhaul the U.S. health care system. Once again her plan, which would cost $110 billion per year in new taxes, calls for greater government control over American health care. If her plan were to pass this time, it would mean higher taxes, lost jobs, less patient choice, and poorer quality health care.”

“SCHIP Is Not Eroding Private Health Coverage”

So claims Jared Bernstein of the left-leaning Economic Policy Institute. 

Bernstein is an ambitious fellow, picking this fight with the Bush administration.  And the Congressional Budget Office.  And the Robert Wood Johnson Foundation.  And that notorious right-winger Jonathan Gruber.

Summarizing data from the Urban Institute on the State Children’s Health Insurance Program, Bernstein shows a near-complete misunderstanding of the dynamics of crowd-out:

Most SCHIP enrollees (72%) were not covered by private coverage six months before enrollment in the public program.  Another 14% lost coverage within a six month period prior to SCHIP enrollment, due to a lost job, an employer dropping coverage, or change in family structure that led to the child’s coverage being dropped (as in a divorce, separation, or death of covered spouse). 

This leaves only 14% of SCHIP cases that substituted the public program for private coverage.  But the Urban Institute’s study points out that more than half of these cases (8%) cited an inability to afford private coverage as the reason for shifting over to SCHIP.  That is, the cost of the family premium through their job was prohibitively high.

Bernstein appears to be under the impression that crowd-out occurs only when someone enrolls in a public program on the very day that person dropped private coverage.  In fact, crowd-out also occurs:

  • When workers (or their employers) drop coverage in response to the worker becoming eligible for a public program – even if the worker doesn’t enroll until seven months later;
  • When eligibility for a public program encourages workers to leave a job with health benefits for a job that pays higher cash wages;
  • When workers’ eligibility for a public program encourages employers to drop health benefits entirely, or encourages employers to increase the “employee portion” of the premium so that eligible workers will decline that benefit.

Most importantly, crowd-out does not require (and empirical studies of crowd-out do not assume) that the same people who drop private insurance are enrolling in public programs.  If a Medicaid or SCHIP expansion increases the cost of private insurance, and that leads someone to drop their private coverage and go without, that too is crowd-out.

Americans Shifting to Zero-Income Tax States

A story in the Kansas City Star reveals that millions of Americans are moving to states without income taxes. Not surprisingly, politicians and revenue bureaucrats from high-tax states are monitoring escaping taxpayers in hopes of retaining the ability to seize a portion of their income:

No-income-tax states such as Florida, Nevada and Texas are looking increasingly attractive to people getting ready for retirement. …But before you move to a tax haven, it’s important to pay attention to the fine print of how to move. It’s easy to make seemingly minor mistakes that can trigger a painful audit — and a hefty bill — from the high-tax jurisdiction you thought you had left behind. …Some relatively high-tax states are increasingly cracking down on individuals who claim to have moved out of state, but still maintain strong connections to their former homes. Massachusetts plans to hire additional tax examiners in the next few months, some of whom will be assigned to a special “domicile unit” as part of its tax-audit program. … state income tax rates can run as high as 10.3 percent in California and 8.97 percent in New Jersey. Besides Florida, Nevada and Texas, other states with no state income tax for individuals include Washington, Alaska, South Dakota and Wyoming. New Hampshire and Tennessee don’t have a broad wage-based income tax but do tax interest and dividends. …from April 2000 through June 2006, there was a net migration of 2.3 million people moving from states with income taxes to states with no income taxes, an average of more than 1,000 people moving per day, says Richard Vedder, an economics professor at Ohio University in Athens, Ohio, based on an analysis of census data.