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February 19, 2013 9:52AM

One Nation, Under‐​Informed

Universal PreK Advocates Cherry Pick Studies

Nation writer Rick Perlstein suffered paroxysms last week over my dismissal of the evidence for universal pre-K, which he defended as “Nobel Prize-winning research.” Perlstein is mistaken. Though James Heckman, a leading preschool advocate, is indeed a Nobel laureate, he was awarded the prize for brilliant but unrelated work on statistical methods.

Far from being “Nobel Prize-winning,” the empirical case for universal government pre-K collapses under mild scrutiny. The central claim, as voiced by President Obama in his SOTU speech, is that “every dollar we invest in high-quality early childhood education can save more than seven dollars later on.” This sweeping statement does not in fact refer to the typical  return from federal or state pre-K programs. It refers to the findings from a single intensive 1960s early childhood experiment  that served 58 children in Ypsilanti, Michigan—the High/Scope Perry preschool program. Out of the literally hundreds of preschool studies conducted in the past half-century, the Perry results are not representative and have never been reproduced on a national or even a state level. In fact, an earnest experimental effort to reproduce them for just a few hundred children at eight locations failed despite an annual investment of $32,000 per child, adjusted for inflation—far more than the President currently contemplates spending.

The president’s case for universal government pre-K singles out the unusually large positive effects of one tiny study—sometimes two or three—from scores of others that show little benefit, no benefit, or even significant harm to participating students. That sea of inferior results, moreover, is drawn in large part from …the federally-funded pre-K efforts of the past 47 years. Indeed the largest, best designed, most recent studies of federal pre-K efforts were published by the Obama administration itself: the Head Start Impact Studies. These studies find little or no net lasting benefit to federal pre-K. The Obama administration was apparently so worried about these findings that the most recent study was released on the Friday before Christmas—despite a publication date on its title page of October 2012.

What we have here, in other words, is a monumental act of cherry picking rather than an example of scientifically grounded policymaking.

February 18, 2013 2:34PM

Defending Cato from Paul Krugman’s Inaccurate Assertions

Writing for the New York Times, Paul Krugman has a new column promoting more government spending and additional government regulation. That's a dog-bites-man revelation and hardly noteworthy, of course, but in this case he takes a swipe at the Cato Institute.

The financial crisis of 2008 and its painful aftermath...were a huge slap in the face for free-market fundamentalists. ...analysts at right-wing think tanks like...the Cato Institute...insisted that deregulated financial markets were doing just fine, and dismissed warnings about a housing bubble as liberal whining. Then the nonexistent bubble burst, and the financial system proved dangerously fragile; only huge government bailouts prevented a total collapse.

Upon reading this, my first reaction was a perverse form of admiration. After all, Krugman explicitly advocated for a housing bubble back in 2002, so it takes a lot of chutzpah to attack other people for the consequences of that bubble.

But let's set that aside and examine the accusation that folks at Cato had a Pollyanna view of monetary and regulatory policy. In other words, did Cato think that "deregulated markets were doing just fine"?

Hardly. If Krugman had bothered to spend even five minutes perusing the Cato website, he would have found hundreds of items by scholars such as Steve Hanke, Gerald O'Driscoll, Bert Ely, and others about misguided government regulatory and monetary policy. He could have perused the remarks of speakers at Cato's annual monetary conferences. He could have looked at issues of the Cato Journal. Or our biennial Handbooks on Policy.

The tiniest bit of due diligence would have revealed that Cato was not a fan of Federal Reserve policy and we did not think that financial markets were deregulated. Indeed, Cato scholars last decade were relentlessly critical of monetary policy, Fannie Mae, Freddie Mac, Community Reinvestment Act, and other forms of government intervention.

Heck, I imagine that Krugman would have accused Cato of relentless and foolish pessimism had he reviewed our work  in 2006 or 2007.

I will confess that Cato people didn't predict when the bubble would peak and when it would burst. If we had that type of knowledge, we'd all be billionaires. But since Krugman is still generating income by writing columns and doing appearances, I think it's safe to assume that he didn't have any special ability to time the market either.

Krugman also implies that Cato is guilty of historical revisionism.

...many on the right have chosen to rewrite history. Back then, they thought things were great, and their only complaint was that the government was getting in the way of even more mortgage lending; now they claim that government policies, somehow dictated by liberals even though the G.O.P. controlled both Congress and the White House, were promoting excessive borrowing and causing all the problems.

I've already pointed out that Cato was critical of government intervention before and during the bubble, so we obviously did not want government tilting the playing field in favor of home mortgages.

It's also worth nothing that Cato has been dogmatically in favor of tax reform that would eliminate preferences for owner-occupied housing. That was our position 20 years ago. That was our position 10 years ago. And it's our position today.

I also can't help but comment on Krugman's assertion that GOP control of government last decade somehow was inconsistent with statist government policy. One obvious example would be the 2004 Bush Administration regulations that dramatically boosted the affordable lending requirements for Fannie Mae and Freddie Mac, which surely played a role in driving the orgy of subprime lending.

And that's just the tip of the iceberg. The burden of government spending almost doubled during the Bush years, the federal government accumulated more power, and the regulatory state expanded. No wonder economic freedom contracted under Bush after expanding under Clinton.

But I'm digressing. Let's return to Krugman's screed. He doesn't single out Cato, but presumably he has us in mind when he criticizes those who reject Keynesian stimulus theory.

...right-wing economic analysts insisted that deficit spending would destroy jobs, because government borrowing would divert funds that would otherwise have gone into business investment, and also insisted that this borrowing would send interest rates soaring. The right thing, they claimed, was to balance the budget, even in a depressed economy.

Actually, I hope he's not thinking about us. We argue for a smaller burden of government spending, not a balanced budget. And we haven't made any assertions about higher interest rates. We instead point out that excessive government spending undermines growth by undermining incentives for productive behavior and misallocating labor and capital.

But we are critics of Keynesianism for reasons I explain in this video. And if you look at current economic performance, it's certainly difficult to make the argument that Obama's so-called stimulus was a success.

Media Name: zombie.jpg

But Krugman will argue that the government should have squandered even more money. Heck, he even asserted that the 9-11 attacks were a form of stimulus and has argued that it would be pro-growth if we faced the threat of an alien invasion.

In closing, I will agree with Krugman that there's too much "zombie" economics in Washington. But I'll let readers decide who's guilty of mindlessly staggering in the wrong direction.

February 18, 2013 2:23PM

Farcical Concept of the Day

The tip-off that this item from the LSE review of books was not going to go well was in the introductory matter:

But what are think tanks? Who funds them?

The book under review is Think Tanks In America, by Thomas Medvetz. I don't know that it shares the flaws of its LSE review.

It would be preferable, I suppose, for people to look into the funding of think tanks, given the commonly exercised alternative: assuming wrongly how many think tanks are funded. But whatever the case, funding information is only useful in ad hominem, that is, the illogical argumentation practice of attacking the speaker rather than the speaker's point. It works adequately well in popular media.

But I found comedy gold in the write-up where it observed how think tanks have "helped undermine the relevance of autonomously produced social scientific knowledge." That's right. Social scientific knowledge not developed in think tanks produces itself! Universities, apparently, are empty vessels into which social science pours itself the way a rain gauge catches water.

Of course, there is no such neutrality in universities or any other source of social science research and commentary. If a person in such an institution believes him- or herself to be on terra firma, that is fine. But if you think the university, or any other single type of institution, has things locked up---well, Ptolemy, meet Copernicus. We all circle the truth in different orbits.

I have this in mind because I spoke with students this weekend at the International Students for Liberty Conference about the role of think tanks, including my own. Unlike universities, which often falsely claim neutrality, we have an ideology that we apply to the problems of the day. It's important to examine and re-examine whether your ideology is valid and whether you are applying it well. But people who deny using ideology are unclear about their premises and underlying philosophy--or hiding them.

At least I thought so until I learned about the existence of "autonomously produced social scientific knowledge"!

Addendum: After I'd written, but prior to publication of, this post, Professor Medvetz emailed me responding to the Tweet I expanded on here.

"Please understand that the term autonomy has a precise and specific technical meaning in this context (one that I did not invent), and that it's quite distinct from the everyday meaning you're attributing to it. Next time, consider looking up the term's meaning."

For good measure, he counseled me, "if you ever hear a mathematician refer to an irrational number, be aware that he's not suggesting that the number in question is lacking in good sense or sound judgment."

I have looked for a meaning of "autonomously" that makes the phrase non-farcical and haven't found one, even in sources that cite the distinct meaning of "irrational" in mathematics. But clearly Professor Medvetz intends something different than what the word means in plain English. Take this post as "Farcical Expression of the Day" rather than "Farcical Concept of the Day." Perhaps this illustrates another dimension of the academy's insularity--in language instead of ideology.

February 18, 2013 9:20AM

Readings for Presidents’ Day

As government workers -- though only about a third of private-sector office workers -- get a day off for Presidents' Day, I thought I'd offer some reading about presidents.

First, my own tribute to our first president, the man who led America in war and peace and who gave up power to make us a republic:

Give the last word to Washington’s great adversary, King George III. The king asked his American painter, Benjamin West, what Washington would do after winning independence. West replied, “They say he will return to his farm.”

“If he does that,” the incredulous monarch said, “he will be the greatest man in the world.”

Then, of course, Gene Healy's book The Cult of the Presidency, which argues that 200 years after Washington, "presidential candidates talk as if they’re running for a job that’s a combination of guardian angel, shaman, and supreme warlord of the earth.” Buy it today, at a 50 percent discount!

Gene updated that argument with a short ebook, False Idol: Barack Obama and the Continuing Cult of the Presidency. As they say, start reading in minutes!

And then you can read my short response to Politico's question, who were the best and worst presidents? I noted:

Presidential scholars love presidents who expand the size, scope and power of government. Thus they put the Roosevelts at the top of the list. And they rate Woodrow Wilson – the anti-Madisonian president who gave us the entirely unnecessary World War I, which led to communism, National Socialism, World War II, and the Cold War –8th. Now there’s a record for President Obama to aspire to! Create a century of war and terrorism, and you can move up from 15th to 8th.

Hmmm, maybe it would be better to just read a biography of George Washington.

 

February 15, 2013 3:21PM

Local Media Fuels Anti‐​Sequestration Cuts Hysteria

The media's harboring of a pro-government spending bias isn’t exactly news. But an article in Politico is notable because it illustrates the tendency for local newsrooms to push human interest stories that emphasize the pain of spending cuts.

According to the article, it’s pervasive: 

Journalists from Florida to Washington state told POLITICO that their editors are hungry for stories that turn bureaucratic doublespeak about automatic cuts into a human story of real-world pain---from layoffs to cutbacks in treasured hometown programs. 

Ask Sen. Bill Nelson of Florida, who got hit with a question about the Blue Angels during a Jacksonville TV station segment of locals upset that the famed flying aerobatic team may be grounded and 30 air shows canceled if sequester takes effect. The Democrat insisted the cuts won’t happen as long as “reasonable people” figure out a solution. “It’s a Navy town,” he later told POLITICO. “I knew a question was coming up, so I didn’t wait for it.” 

The appetite in local newsrooms for that kind of story is widespread, local reporters say.

Not surprisingly, special interests have been more than willing to assist reporters in spreading the doom and gloom:


Of course, so much media coverage hasn’t just appeared out of nowhere. It’s standard journalism practice beyond the Beltway to turn the Washington story into a local one. But with sequestration, key interest groups have opened their own wallets to help tell the story. 

The Aerospace Industries Association has spent nearly $2 million over the past 18 months trying to get the word out to stop the spending cuts, including holding media events around the country and commissioning studies on state and local impacts that are known to pique the interest of reporters and editors. 

According to officials at the defense contracting industry’s leading trade group, more than 8,000 print, online and broadcast local news stories last year---many in markets with the most to lose from the cuts, including California, Texas, Florida, Ohio, Alabama and around the Washington Beltway---either quoted the group or referenced its data. 

Francis Sheller, AIA’s vice president for communications, said his office also receives between 15 and 30 unsolicited requests every day from local reporters often seeking details of how sequestration cuts could impact their specific communities. “If we didn’t appeal to the local journalists’ interests,” he said, “then we wouldn’t be noticed.”

People occasionally email me and ask “why is it so hard for the politicians in Washington to cut spending?” The Politico article shows why. Members of Congress who would otherwise like to cut spending know that they’re going to take a beating from the media and special interests. Few politicians are willing to take that heat. Fewer still can even articulate why spending cuts and smaller government are good. 

Indeed, Republicans have by and large acted as if the sequestration cuts are a plague to be avoided. Mitt Romney and Paul Ryan campaigned against them. And now the GOP is actually trying to pin the blame for sequestration on President Obama. 

From The Hill: 

On Wednesday, Speaker John Boehner (R-Ohio) pointedly referred to "the president's sequester" while speaking with reporters on Capitol Hill. “And the president laid out no plan to eliminate the sequester and the harmful cuts that will come of it," Boehner said. 

Thank you for trying to cut spending, Mr. President!

February 15, 2013 3:08PM

More Internet Sales Taxes – and Your Privacy Compromised

Yesterday, Senator Mike Enzi (R-Wyo.) and 19 cosponsors introduced a bill to promote the collection of taxes on Internet sales. I can't recall seeing a bill so universally condemned in the libertarian, free-market, anti-tax, and pro-innovation communities. The National Taxpayers Union issued a press release, a "myths & facts" one-pager, and wrote it up on their blog for good measure. Here's the Heartland Institute's press release. The Competitive Enterprise Institute calls it a raw deal. R Street seems to hate this bill with a burning passion. Our sweethearts at NetChoice went with a Valentine's theme.

[Update: The Center for Freedom and Prosperity also does not like this bill.]

[Update 2: Americans for Tax Reform does not like Internet sales taxes.]

I think differently from these groups. Oh no, I don't think it's a good idea to let state and local tax authorities impose complex taxes on businesses around the country just because they sell online. Doing so would cause Internet sales taxes to soar because tax authorities would be able to impose taxes on people who can't vote them out of office.

But I think it's important not to forget the consequences for privacy if Congress were to approve interstate tax collection like this.

Dig down into the bill and you start to see what it takes for states and localities to tax products sent into their states by remote sellers.

For purposes of [collecting taxes], the location to which a remote sale is sourced refers to the location where the item sold is received by the purchaser, based on the location indicated by instructions for delivery that the purchaser furnishes to the seller. When no delivery location is specified, the remote sale is sourced to the customer's address that is either known to the seller or, if not known, obtained by the seller during the consummation of the transaction, including the address of the customer's payment instrument if no other address is available.

That means that sellers all over the country would have to turn the addresses of the people they sell to over to state tax authorities. You could design a system to minimize the privacy problems here, but not eliminate them—especially when the time comes for the officials in one state to audit the sales in another.

Let's say a seller of naughty toys were audited by the tax authority in another state. To prove that it has remitted all the taxes due in that state, it woud have to turn over, at the least, data reflecting the amount of its sales by geographical location. There are something like 30,000 state and local jurisdictions with authority to impose sales and use taxes, more than 7,500 of which have already adopted this kind of tax. If not ZIP+4, then the actual address of recipients would have to be turned over. Could they turn over non-identifying summaries? The point of an audit is to check the honesty and accuracy of summary filings, so the answer is no.

So state tax authorities would get troves of data about online purchases delivered into their state. The standard misuses apply. It might be transferred to other organs of government, legally or not, for investigation and examination. Curious state bureaucrats might look up the purchasing habits of ex-spouses, famous names, and political figures. The list goes on and on.

Destination-based taxation is complicated and privacy-invasive. Source-based taxation---local states taxing local sellers---is eminently simple and straightforward by comparison. ("How much did you sell? You owe the local sales tax on it.") The problem with that---as tax authorities see things---is that taxpayers have a say in the rates they pay. That keeps taxes somewhat in check.

More Internet sales taxes at the price of further compromise to privacy? Count me as a condemnor of the misnamed "Marketplace Fairness Act."

February 15, 2013 3:00PM

Early Education Scholar Takes Universal Pre‑K Advocates to School

Grover "Russ" Whitehurst of the Brookings Institution has spent decades studying early childhood education. Last month he offered a review of the evidence on the federal "Head Start" program targeted at low-income children and another on universal government Pre-K programs.

Like most people who have chosen to work in this field, he is keen to find ways of improving educational outcomes for all children, and of helping disadvantaged children to catch up with their peers. Like only a very few, this goal has not lowered his standards of evidence. If there is a convincing rebuttal to Whitehurst's essays, I haven't seen it. And given the evidence as it exists today, I don't expect to see such a rebuttal anytime soon.