On Fed Ed, A Little Less Horrible Is Still Awfully Bad

This morning NPR published an interview with Sen. Lamar Alexander (R-TN), the presumptive next chair of the Senate Health, Education, Labor and Pensions Committee. Unfortunately, if you were hoping the new GOP Senate would move decisively in the right direction on education, you may be disappointed. While the interview suggests we could see a moderate move in the right direction at the k-12 level, there is little reason for hope in higher or early childhood education.

For elementary and secondary education Alexander certainly says the right thing – the states should be in charge – and it is better that federal funds be block granted with few rules attached than delivered via numerous, micromanaged streams. So he is moving in the right direction when he says under a Republican plan, “Tennessee, Texas or New York would decide what the academic standards would be, what the curriculum would be, what to do about failing schools and how to evaluate teachers.” His general inclination is also right when he says he wants to “give states the option — not mandate — to take federal dollars and let those dollars follow children to the schools they attend.” Empowering parents beats simply feeding government monopoly schools.

Unfortunately, moving somewhat in the right direction isn’t the same as doing the clearly right thing. The Constitution does not allow federal funding of education (outside of D.C. and federal installations), nor does the record indicate that federal funding is educationally effective. The feds should therefore get out of education, including abandoning plans to provide private school choice, which if voucherized would eventually deliver stultifying federal rules and regulations to private schools nationwide.

Alas, things only go downhill in the interview after tackling k-12.

On higher education, as I feared, Alexander gives no indication he will do what must be done to address colossal waste and crippling price inflation: significantly reduce student aid. Indeed, what he seems most intent on doing is simplifying the Federal Application for Federal Student Aid, which makes sense from a paperwork-reduction standpoint but might actually lead to more aid flowing from Washington as more people complete aid applications. At least, though, Alexander recognizes the danger of the federal government trying to rate all of the nation’s postsecondary institutions, ranging from “Nashville Auto-Diesel College…[to] Harvard.”

And then there is pre-kindergarten. Again, Alexander rightly warns about federal micromanagement, but he seems to fully accept that Washington should be spending tens-of-billions of dollars on pre-k. Indeed, he states that, “The question is not whether early childhood education is a good idea. It’s how best to encourage it.” But the question absolutely is – or at least should be – whether early childhood education is a good idea. As the Cato Policy Analysis published last month by George Mason University professor David J. Armor made abundantly clear, the pre-k research simply does not support the conclusion that early childhood programs work, and talking like it is a settled issue does not make it so.

Based on this one interview, the good news is that Senate Republicans might try to make horrible federal education policy a little bit better. The bad news is that something made a little less horrible is still awfully bad.

When Liberty Knocked Down the Berlin Wall

It’s easy to be pessimistic about the future of liberty.  Yet sometimes freedom advances with extraordinary speed.  Like 25 years ago in Europe.

As 1989 dawned communism had ruled what was the Russian Empire reborn for seven decades.  The system failed to fulfill its promise of human liberation, but survived with the backing of secret police, gulags, and the Red Army.

Then in an instant it all was swept away.  On November 9, 1989, the Berlin Wall was open.  One of the most dramatic symbols of human tyranny was gone. 

Tens of thousands of East Germans were imprisoned for “Republikflucht,” or attempting to flee the East German paradise.  Some 1000 people died trying to escape East Germany, about 200 from Berlin.

As 1989 dawned there was obvious unrest in what Ronald Reagan had called the Evil Empire.  Hope was rising, but no one could forget that previous popular demands for freedom always had been crushed by Soviet tanks. 

In 1989 Hungary led the way.  Plans were made for multiparty elections.  The Communist Party dissolved.  When the new leadership tore down Hungary’s wall with the West the Iron Curtain had a huge hole.

Poland’s communist regime made a deal with a revived Solidarity Union and held free elections.  The liberal tide rose in Czechoslovakia, sweeping away the hardline leadership installed to squelch the Prague Spring of 1968.

The East German regime remained tough.  Frustrated East Germans began escaping through Hungary, with its open border. 

Protests spread, causing the communist leadership to temporize.  On November 4 a million people gathered in East Berlin. 

On November 9 visibly struggling Politburo member Guenter Schabowski declared that East Germans would be free to travel to the West “immediately.”  Border guards desperately sought guidance as tens of thousands of people gathered demanding to be let through. Just before midnight the security forces stood aside. 

Geo-Engineering the Climate? A Geo-Bad Idea.

The front page of yesterday’s New York Times included the beginning of a long article about geoengineering—in this case, as it applies to purposeful activities aimed at changing the earth’s climate at a large scale. Why on earth would anyone even think of doing something like that? Why to avoid catastrophic global warming, of course!

Thankfully, most signs point to only a modest global temperature increase resulting from our fossil fuel usage—a rise that will be readily adapted to and which actually may work out to be more beneficial than detrimental. Thankfully, we say, because geoengineering schemes seem like really bad ideas full of nasty consequences (unintentional and otherwise) and we are glad that no one is seriously entertaining them.

Most folks who spend much time critically thinking about geoengineering the climate arrive at the same conclusion.

Why Transparency Is Important

The benefits of transparency are hard to explain. Bit by bit, we’re improving public oversight of government, I’ve been heard to say, implying more libertarian-friendly outcomes—never quite sure that I’m getting my message through.

Now comes a comment on transparency that articulates its importance better than I ever could. It’s Obamacare architect Jonathan Gruber describing how lacking transparency allowed the president’s signature health care regulation to pass.

A gaffe in Washington is when somebody tells the truth. Thanks to this one, more people may understand how non-transparent government undercuts their freedoms. Insisting on government transparency can protect them.

The GOP vs. The BCA

The Congressional Budget Office estimates that the costs of the Pentagon’s current plans will total nearly $3.8 trillion over the next seven years, $308 billion more than is permitted by the 2011 Budget Control Act (BCA).

That $3.8 trillion represents the Pentagon’s base budget, not the entirety of federal spending on national security. It does not include, for example, nuclear weapons spending in the Department of Energy; nor the Departments of Homeland Security and Veterans Affairs; nor overseas operations in Afghanistan, and the campaign against ISIS in Iraq and Syria. But I digress.

If spending exceeds the BCA caps, CBO observes, the Pentagon will be forced to “make sharp additional cuts to the size of its forces, curtail the development and purchase of weapons, reduce the extent of its operations and training, or implement some combination of those three actions.”

A more likely scenario, however, is that the new Republican-controlled Congress will adjust or eliminate the BCA spending caps. According to The Daily Beast, Sen. John McCain’s “first order of business as chairman of the Senate Armed Services Committee will be to end the budget rule known as sequestration, which requires the U.S. military to cut its budget across the board.”

If McCain succeeds, military spending advocates can be expected to push through dramatic increases in the Pentagon’s budget. Indeed, if House Budget Committee Chairman Rep. Paul Ryan’s FY15 budget is any indication, the Pentagon would receive over the next seven years nearly $100 billion more than it has requested.

How would Republicans pay for such increases? Many would prefer to find the money by cutting non-defense discretionary spending, or by reforming entitlement programs. But it’s difficult to envision Democrats agreeing to such proposals, especially if the Pentagon is the primary beneficiary. Others, including Sen. Lindsey Graham, are open to the idea of raising tax revenue by closing loopholes and eliminating deductions. But most Republicans remain allergic to tax increases, and they are likely to confront a bipartisan coalition of outside groups that has adamantly opposed past efforts to circumvent the BCA in order to fund higher Pentagon budgets. The easiest path is, as usual, debt. Thus, expect another Ryan-Murray style “cave-in” that puts additional Pentagon spending on the country’s credit card.

Despite all that talk during the mid-term election campaigns of President Obama’s reckless deficits, Washington’s willingness to spend the people’s money – including money the people don’t yet have – is a bipartisan affliction.

The only hope, it seems, is to stick to the current spending caps, imperfect though they may be. The BCA caps are not the wisest way to curb military spending, but they are all we have.  

Nominal Earnings Growth and Money Illusion (Real Wages Are Rising)

Wall Street Journal columnist E.S. Browning presents a graph titled “Wages Still Soft …  hourly wage gains have been sluggish.”   It shows the percentage change in average hourly earnings from a year earlier.  That rate of change slowed from about 3.5 percent in early 2009 to 1.5 percent in late 2012 before rising to 2.2-2.4 percent in recent months.   The upside, in Browning’s view, is that “wage gains still aren’t big enough to push inflation higher.”  In reality, wage gains never push inflation higher, but inflation can certainly push real wages lower.

The trouble with Browning’s graph is that it shows only changes in nominal earnings – unadjusted for the huge drop in inflation after July 2008 when the year-to-year increase in consumer prices reached 5.5 percent in July 2008 (up from 1.9 percent in August of 2007).  Nominal wage gains miss the real story.

In the graph shown below, I adjust the same hourly earnings figures for inflation by using the PCE deflator.  Note that real earnings rose rapidly when inflation dropped to zero or less in 2009 – when Browning’s chart begins.  But employers could not afford to pay rising wages when their prices were falling, so employment collapsed.

Measured in 2009 dollars, real average hourly earnings for production and nonsupervisory workers have been rising slowly but surely for two years – from $18.55 in October 2012 to $18.95 in October 2014, or 1.1 percent a year.  That’s not so terrible considering the slow pace of growth of GDP and productivity.

Despite hazardous chatter from the likes of Paul Krugman and Larry Summers about U.S. inflation being too low, the truth is that low inflation has been raising U.S. real wages even as confused politicians and journalists erroneously bemoan slow growth in nominal wages.

Krugman vs. Krugman on Statutory Interpretation

To follow-up on my colleague Walter Olson’s earlier post on the Paul Krugman piece on King v. Burwell, what struck me was Krugman’s flexible approach to statutory interpretation.

Here he is in today’s piece:

Last week the court shocked many observers by saying that it was willing to hear a case claiming that the wording of one clause in the Affordable Care Act sets drastic limits on subsidies to Americans who buy health insurance. It’s a ridiculous claim; not only is it clear from everything else in the act that there was no intention to set such limits, you can ask the people who drafted the law what they intended, and it wasn’t what the plaintiffs claim. …

 if you look at the specific language authorizing those subsidies, it could be taken — by an incredibly hostile reader — to say that they’re available only to Americans using state-run exchanges, not to those using the federal exchanges.

As I said, everything else in the act makes it clear that this was not the drafters’ intention, and in any case you can ask them directly, and they’ll tell you that this was nothing but sloppy language. …

So, don’t worry so much about the specific language; instead, look at the drafters’ intent and the surrounding context. Got it.

On the other hand, here’s Krugman from January of 2013, writing about the idea of a platinum coin:

Enter the platinum coin. There’s a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector’s items — but that’s not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all.

So in this situation, you should stick to the “letter of the law,” and not worry so much about the drafters’ intent.

Hmm, how to reconcile those two Krugman assertions about the proper approach to statutory interpretation?  That’s a tough one.  Wait, I got it!  We’ll call this the Krugman canon of construction: “Interpret statutes in whatever way makes them consistent with your policy preferences.”