Government Makes Things Worse, Not Better

In this column, John Stossel eviscerates David Brooks, the ostensibly conservative columnist for the New York Times. Brooks has argued for big new government initiatives to boost human capital. Stossel correctly explains, though, that Brooks wants to expand failed government programs when the right approach is to move in the other direction:

David Brooks is a bright guy, so I wonder how he can blame the free market for failing in this way. He continues, “Despite all the incentives, 30 percent of kids drop out of high school and the college graduation rate has been flat for a generation.” Excuse me, but why is that the market’s fault? Government dominates education in America. K-12 education is a coercive, often rigidly unionized government virtual monopoly that fights every attempt to experiment with free-market competition. Brooks writes that Hamiltonians like him “think government should help people get the tools they need to compete.” But when has government ever been good at that? He claims the state can “increase the quality of human capital” by, for example, providing “Quality preschool [to] help young children from … disorganized homes. … ” Really? What is the chance that it would be “quality” preschool if government runs it? Even the acclaimed Head Start has not been shown to have any lasting effect on academic performance. …When I asked Brooks why a government that performed as ineptly as FEMA did after Hurricane Katrina will be better at running preschools, he said, “Some lives are so screwed up, it’s hard to make them worse.” Government coercion almost always makes things worse. It discourages individual effort, and sucks capital away from more productive uses. …America became an economic power despite, not because of, Hamiltonian intervention. Hong Kong and much of East Asia went from abject poverty to affluence in a few decades not because their governments gave people “tools they need to compete” – they didn’t – but because they exercised limited powers.

Jurisdictional Competition is the Only Hope for Europe’s Taxpayers

A new report from the European Commission shows that the tax burden continues to climb. The only silver lining to this dark cloud is that tax competition is forcing politicians to lower corporate rates and to consider lowering tax rates on labor. A Dow Jones report notes that Eastern European nations are having a good effect since their low-rate tax systems are forcing reforms elsewhere in Europe:

Eurostat said the E.U.’s tax burden remained below the high of 41.0% reached in 1999. The tax burden last increased in 2003. Taxes on work rose to 35.2% from 35.1% in the E.U., and to 36.8% from 36.2% in the euro zone. Eurostat said the decline in labor taxes that began at the turn of the century had come to a halt “despite a wide consensus on the desirability of reducing labor taxes.” E.U. governments have agreed that persuading more Europeans to work is essential if the bloc is to remain economically competitive with the U.S. and Asia. Cutting taxes on work is seen as a vital step in that direction. Eurostat said that although taxes on work remained below the 2000 high of 36.5%, they are “much higher…than in the other main industrialized economies.” …there is growing evidence of tax competition between E.U. members that is pushing tax rates down. In general, new E.U. members from eastern Europe have lower top rates of income and corporation tax. Fearing that companies may move production to the new members, some older members of the E.U. have begun to cut corporation tax rates, including Germany and the U.K..

Is Efficient Government A Good Thing?

One of the behind-the-scenes initiatives of President Bush’s budget staff the past six years has been something called the Program Assessment Ratings Tool (PART) analysis. It’s an effort to measure the “effectiveness” and “efficiency” of nearly 1,000 federal programs. Each program is graded on how well it achieves its “goals,” with marks ranging from “effective” (the equivalent of an A grade) to “ineffective” (the equivalent of an F grade).

In Tuesday’s Investor’s Business Daily op-ed section, Ernest Christian and Gary Robbins take a look at the results to date of the effort:

Congress is about to wave its wand over nearly $1 trillion of additional “discretionary” spending that will, among other things, perpetuate or increase funding for nearly 500 expenditure programs that are not even “moderately effective,” according to the Office of Management and Budget. This includes more than 200 expenditure programs that have failing grades of D or F.

By our calculations, the OMB study, called Program Assessment Ratings Tool (PART), further reveals that on average more than half of all federal expenditure programs are falling about 50% short of their stated goals.

This means that out of every dollar spent, 50 cents may possibly be accomplishing something worthwhile, but the remaining 50 cents might as well have been poured down a rat hole. In these cases alone, the cost of government incompetence is over $250 billion per year.

The list of programs with the lowest grades might make any supporter of limited government point wildly and say, “Told you so!” This rogue’s gallery includes the Department of Housing and Urban Development’s pork-filled Community Development Block Grants, the Department of Education’s Even Start literacy program, and Amtrak.

But what about the ones that received the equivalent of an A or B grade – those programs that are “effective” or “moderately effective”? That list includes homeless assistance grants, agricultural export subsidies, Indian housing loan guarantees, the non-insured crop assistance program, and corporate welfare programs like the Trade and Development Agency which subsidizes overseas demand for the products of various corporations.

The main activity these programs are really “efficient” at is spending your money in new and interesting ways on things they shouldn’t be spending your money on in the first place.

Take the non-insured crop assistance program, for instance. This program subsidizes farmers who aren’t holding a federal crop insurance policy in the event of a crop-damaging natural disaster. What did it do to earn the honor of being listed as “moderately effective”? It became very good at increasing the number of crops eligible for subsidies.

Sure, knowing when the government is losing money to fraud or mismanagment is important. But it makes more sense to determine whether these programs should exist at all before deciding what they should be “efficient” at doing. Besides, an efficient but unjustified wealth-redistribution program might actually be worse than an inefficient one. The former will likely be better at finding innovative ways of expanding the scope of its operations.

Slapping the “efficiency” label on certain federal programs is a bit like putting lipstick on a pig. You can dress up Leviathan, but it’s still Leviathan.

Chocolate Chutzpah

Americans love their chocolate. So it’s no surprise that one of the most-read pages currently on the New York Times’ website is Monday’s op-ed decrying a proposal to change federal regulations on what can be legally labeled “chocolate.”

Under Food and Drug Administration regulations, “chocolate” must contain crushed cacao beans and may contain a short list of other ingredients, including spices, nuts, sweeteners, and dairy products. Confections that do not comply with those regulations cannot carry the “chocolate” label.

Some candymakers have petitioned the FDA to expand the list of allowable additives to include various fats. If that happens, chocolatiers could substitute cheaper vegetable oils for expensive cocoa butter — the fat in cacao beans that provides chocolate’s melt-in-your-mouth texture. By substituting away from cocoa butter, confectioners would lower their production costs,  which would lead to greater profit margins or, if the candymakers compete on price, lower chocolate’s price to consumers.

To be clear, chocolatiers can already make this substitution, but the resulting product cannot legally be called “chocolate.” A rose by any other name may smell as sweet, but “chocolate-like candy” apparently doesn’t sell as well as “chocolate.”

That brings us to the NYT op-ed, penned by Mort Rosenblum. He laments:

The proposal would widen the gap between good and awful. Industrial food companies could sell their waxy [confections] for less. But purveyors of the real thing have no corners to cut. While discerning chocoholics will fork over whatever it takes, those who can’t pay will never know chocolate.

As a chocophile, I sympathize with Rosenblum’s opinion of the would-be chocolates. But his lament is difficult to square with chocolate’s history, its current market trend, and basic economics.

When edible chocolate first appeared in the mid-19th century, the high price of cacao made it an endulgence for only the wealthy. Fortunately, the confection became more affordable a few decades later when chocolate makers started mixing in cheaper additives. The most important of those was milk, first popularized by the Swiss entrepreneur Daniel Peter (with help from a powdered milk maker named Henri Nestlé). In the United States, Milton Hershey experimented with the same idea, resulting in his affordable and popular ”great American chocolate bar.” Some Rosenblum predecessor likely complained that the added milk and sugar meant that consumers “will never know chocolate,” but it’s difficult to see Peter’s and Hershey’s creations as anything but a benefit to the consumer.

Nor did milk chocolate lead consumers to turn away from “real” chocolate. Until Monday’s NYT op-ed, recent news coverage on the chocolate industry has trumpeted the strong market trend toward premium chocolate. With plenty of Hershey’s, Whitman’s, and Russell Stover’s on the market, Americans nonetheless are buying more See’s, Godiva, and Lindt’s, and are searching for chocolate bars with higher and higher cacao content. And the large chocolate manufacturers are responding to the demand for premium chocolate.

From an economic perspective, this makes perfect sense. Consumers shift from a product to its substitute because they find the substitute preferable. In the case of the would-be chocolates, consumers would shift away from “real” chocolates because they prefer either the price or the taste of the new confections. Rosenblum makes clear his opinion that “real” chocolate is far better tasting, so only consumers with a strong concern about price would make the switch. Those consumers would not fail to “know chocolate” — they just would be unwilling to pay its price. Meanwhile, people who do prefer “real” chocolate — people who happily pay chocolate’s current price — will go on paying that price to enjoy the food of the gods.

A concern that Rosenblum’s op-ed could have raised is that consumers may be misled as to the nature of the candy bar they are purchasing if the “chocolate” regulation is amended as proposed. But even that concern seems hollow. As noted above, premium chocolates are currently en vogue, and the chocolate bars in the checkout lines at my Trader Joe’s boldly advertise their cacao content (some topping 85%). If the federal government were to change the chocolate regulations, quality chocolatiers would quickly respond with labels telling consumers that their chocolates contain no “foreign fats.”

Rosenblum’s op-ed is a fun and informative read, but the alarm it raises is, well, hard to swallow.

And now, I think I’ll head across the street to the CVS and grab a Ritter Sport bar.

Andrew Sullivan Joins the Anti-Universal Coverage Club

…in this post, where he also critiques Michael Moore’s SiCKO.  Sullivan writes:

[A]llowing individuals to own their own health insurance and carry it from job to job would be a more meaningful reform [than the Romney healthcare initiative] - and univeralism can be over-rated. On this, I’m in agreement with this National Review editorial.

Read the entire post.

Politics and Pricing

There are two ways to price products:

The market way, used for thousands of products for hundreds of years, and

the government way, used for certain politically favored products, such as milk, since the 1930s.

This is 2007. Don’t policymakers have enough experience yet to understand that one of these methods is simple, effective, and efficient, while the other is unfair, wasteful, and bureaucratic?

Liberals, Conservatives, and Free Speech

Libertarians sometimes say that they are “liberal on free speech but conservative on economic freedom,” or that “liberals believe in free speech and personal freedom, while conservatives believe in economic freedom.” That proposition got another test in the Supreme Court yesterday. Conservatives and liberals split sharply on two free-speech cases.

And let’s see … in two 5-4 decisions, the Court’s conservative majority struck down some of the McCain-Feingold law’s restrictions on campaign speech and upheld a high-school principal’s right to suspend a student for displaying a “Bong Hits 4 Jesus” banner. Liberals disagreed in both cases.

So the liberals strongly defend a student’s right to engage in nonsensical speech that might be perceived as pro-drug, but they approve a ban on speech criticizing political candidates in the 60 days before an election.

Now I’m for free speech in both these cases. But if you had to choose, which is more important–the right of a high-school student to display silly signs at school-sponsored events, or the right of citizen groups to criticize politicians at the time voters are paying attention? Political speech is at the core of the First Amendment, and conservatives are more inclined to protect it than are liberals. That’s a sad reflection on today’s liberals.

The liberal attitude toward speech is also on display on the front pages of our leading liberal newspapers. A banner headline in the Washington Post reads “5-4 Supreme Court Weakens Curbs on Pre-Election TV Ads/Ruling on McCain-Feingold Law Opens Door for Interest Groups in ‘o8.” This long headline mentions “TV Ads” and “Interest Groups” but never uses the words “speech” or “First Amendment.” But the sidebar on the high-school case is headed “Restrictions on Student Speech Upheld.” For that issue, a straightforward understanding that speech is involved. And the New York Times website leads with “Justices Loosen Ad Restrictions in Campaign Finance Law,” while the sidebar on the school case reads, “Vote against Banner Shows Divide on Speech in Schools.” Though I should note that the old-fashioned, tree-destroying version of the Times does have a subhead reading “Political Speech Rights.”

Maybe libertarians should try to describe their philosophy by saying “libertarians believe in the free speech that liberals used to believe in, and the economic freedom that conservatives used to believe in.”