The IBD Calls for More Central Planning

The Investors’ Business Daily newspaper is viewed as “exceptionally pro-economic individualism” with an editorial page that is “especially pro-capitalist.” But there is at least one issue on which the paper’s stance would be more at home in a politburo meeting than a capitalist publication: the federal No Child Left Behind law.

An editorial in yesterday’s edition opens with the assertion that the law is “far from perfect,” but that its “no-excuses approach to school accountability is worth keeping.” The NCLB’s ”most fundamental flaw”, according to the IBD, is “the lack of credible national benchmarks for school performance. Without these, no reform has much of a chance.”

When I regained consciousness after reading that, I had to double-check that I was indeed reading the IBD and not the IBRP.

The editors of Investors’ Business Daily are telling us that Washington must set output targets for the education industry and that, without them, no reform can succeed. They would not make that recommendation for any other industry.

It seems that the IBD’s editors have bought into the myth that education is somehow different from all other human endeavors, and therefore not able to benefit from the market forces that have been responsible for the economic miracle of the last 200 years. Nothing could be further from the truth. As I summarized in my talk at our NCLB forum yesterday, there is overwhelming evidence that choice and financial responsibility for families, coupled with freedom, competition, and the profit motive for schools, produce by far the best educational outcomes on both an individual and a social level.

The research shows that markets are not only better at raising achievement overall, but also at diminishing the racial and socio-economic achievement gaps that have been created, to a significant degree, by the existing top-down monopoly system.

The IBD is right that accountability is crucially important in education as in every other human exchange. But simulated bureaucratic “accountability” has proven grossly inferior to real market accountability. Being able to leave bad schools and move to good ones at will is the only kind of accountability that produces real and sustained results.

The IBD’s editors not only should know this, they already do know this with respect to the rest of the economy. They need only recognize the fact that education and educators are part of the same reality that is discussed on the news pages of their own publication.

NCLB: The Bad, the Worse, and the Ugly

Want to know how the No Child Left Behind Act has actually affected overall student achievement and the gaps between students of different races and socio-economic backgrounds? Want a guided insider tour of the political sausage factory that produced it and the political calculus that allowed it to pass in the first place? Look no further than the podcasts that are available here.

They’re enough to make H.L. Mencken look like a political optimist.

Just one highlight, uttered by former House majority leader Dick Armey, who voted against national education standards under President Clinton but for the NCLB under President Bush: “My NCLB vote, perhaps more than any other one thing, was the reason I left Congress…. If I couldn’t be myself and vote my conscience, why stay?”

According to Armey, opposition to national education standards under Clinton and support for them under Bush were driven overwhelmingly by political considerations that had nothing to do with the evidence of what works. That’s not surprising, of course, but it’s one thing for pundits to opine about it and quite another to have a key player openly acknowledge it.

There are a lot of other interesting bits throughout the podcasts, including an appearance by Rep. Pete Hoekstra (R-Mich.) pre-announcing legislation that he will formally reveal next week that would give control over federal education spending to the states. Perhaps not an ideal solution (the feds should not be involved in the first place, according to the Constitution), but it would be better than any other serious legislative proposal I’ve seen.

Swedish Pension Reform

Sweden is widely considered a cradle-to-grave welfare state, but that is somewhat misleading. The burden of government is significant, to be sure, but there have been some impressive market-oriented reforms. Sweden, for instance, has eliminated its death tax and implemented school choice.

Perhaps most surprising, Sweden has partially privatized its Social Security system. The amount going into private accounts is small — just 2.5 percent of earnings, so the system is not nearly as good as Chile’s, but it is much better than the American system.

In addition to small private accounts, Sweden also has created a direct link between taxes paid and benefits received. This shift to a “notional” defined contribution system represents a significant departure from traditional Social Security systems, which are akin to defined benefit schemes containing widespread redistribution.

The Wall Street Journal reports that the Swedish reform is inspiring other nations to move in a similar direction:

By pegging public pensions to individual earnings and overall life-expectancy rates, Sweden has given its citizens incentives to be more productive and retire later — and sidestepped the political paralysis that has stymied change elsewhere.

Some Eastern European nations have already ditched their struggling post-Communist systems and gone Swedish. Steps taken in countries as diverse as Brazil and Russia boast some Swedish elements. A World Bank book based on the Swedish model has been translated into Chinese.

…[C]alculating payouts according to salaries and aging projections gives [the Swedish system] the flexibility to accommodate revenue and population shifts. If the economy does poorly, the thinking goes, future pension payments will go down. And the longer people in a particular age group are projected to live, the smaller their pension payouts will be.

…The bottom line of the Swedish model: Most people will have to work harder to reap the kinds of pensions their grandparents could take for granted. “It puts the cost of aging onto the individual, rather than onto society,” says Sarah Brooks, an Ohio State University political-science professor who has studied the plan.

‘Terror Porn’

The Homeland Security budget has become a business-as-usual way for politicians to steer tax dollars to contributors and supporters. But even though the budget is being allocated using traditional pork-barrel methods, the arguments for more homeland security spending are based on exaggerated claims that the money is necessary to thwart terrorism.

Veronique de Rugy, an American Enterprise Institute scholar and Cato adjunct, call these claims ”terror porn.” ABC News’ John Stossel quoted de Rugy as part of a recent report:

[T]he bureaucracy hypes terrorism to justify its pork. “Terror porn” is what economist Veronique de Rugy calls it. Why “porn”? “Because porn sells, [and] terrorism sells even better,” she says. “It’s great for politicians. They can campaign on the fact that they are protecting us. They also can campaign on the fact that they’re bringing more money to their states.”

Lots of small towns do get absurd grants for homeland security. Lake County, Tenn., a rural county with only 8,000 people, got nearly $200,000 in homeland-security money. …”I don’t know that terrorists will come, but I don’t know they won’t come,” Lake County Mayor Macie Roberson told us, smiling.

At least he didn’t do what Columbus, Ohio did: spend it on bulletproof vests for police dogs.

Inordinate fear of terrorism leads to more than just wasteful spending. Stossel also cites a study estimating that 1,000 people have died because they avoided air travel and instead relied on a much riskier mode of travel:

Of course, terrorism is a real threat. But fear kills people, too. A University of Michigan study found that an additional 1,000 Americans died in car accidents in the three months after Sept. 11, because they were afraid to fly. We need to keep risk in perspective.

New at Cato Unbound: Brian Doherty on the Past and Prospects of Libertarianism

The release of Reason senior editor Brian Doherty’s Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement — the first comprehensive history of its kind — provides a fitting occasion for libertarian reflection. How did libertarians get to where they are today? Where are they going? How should they proceed? Drawing on his book, Doherty kicks off the new issue of Cato Unbound with a lead essay reflecting on the miracle that libertarians are politically and culturally relevant at all, while promoting a continued laissez faire attitude to libertarian strategy.

To showcase the high art of libertarian in-fighting, we’ve gathered a panel of libertarian luminaries including: Cato Unbound’s own Brink Lindsey, author of the controversial “Liberaltarians” essay in the New Republic; George Mason’s most famous blogger-polymath, New York Times Economic Scene columnist Tyler Cowen; Cato’s globe-trotting ambassador for liberty Tom G. Palmer, who was writing libertarian political theory as a zygote; and Atlantic columnist, former Reason editor in chief, and author of The Substance of Style, Virginia Postrel. Stay tuned over the next two weeks as our very special conversation on the future of libertarianism unfolds.

Paging Dr. Smith…

In the Economix column of today’s New York Times, David Leonhardt commits health policy heresy:

there is no question that the country would be better off if everyone were covered. But the gaps in insurance aren’t the only problem with the medical system. They are not even the biggest problem.

You’ll have to read the column to learn what Leonhardt thinks The Biggest Problem is. But he points out that the market is moving to fix that problem without government direction.

Personally, I’m not sure that a government mandate is necessary to get hospitals to report quality data. (Malpractice insurers, are you listening?) But Leonhardt documents well how the Invisible Hand works even in health care.

European Politicians Continue Push for New Tax Powers

The tax burden in most European nations already is stifling growth and undermining competitiveness. Yet many European politicians – as well as the European Commission bureaucracy in Brussels – think that there should be a new pan-European tax. Currently, the European Union’s budget is financed by contributions from member states. This is bad enough, especially since it finances the highly protectionist and inefficient system of farm subsidies, but European politicians and bureaucrats doubtlessly would concoct even worse ways of spending money if they had their own tax. The EU Observer reports:

The commissioner argues that any new “own resources system” – where Brussels raises money directly – should be “simple and very transparent.” … One way of changing the EU’s financial system – supported by some in the European Parliament – would be introducing its own tax to replace member states’ donations. The idea came up several times after the bitter budgetary talks both in 2005 and previously in 1999, with for example senior French centre-right MEP Alain Lamassoure suggesting that the EU could levy a tax on SMS and email messages.