Monday, November 27, 2017

School Choice: The Untold Story

Alanna Clark still remembers the feeling of third grade. She remembers feeling mortified when it came time to read aloud in class, the other students reading with ease while she struggled to grasp each word. Little Alanna had a reading disability, and it was causing her to lose confidence and fall behind in class. Her mom desperately tried to get help from the school... but the problems persisted. She feared that Alanna was heading down the same path as her older sister, who fell behind in her early years, kept getting moved up grade after grade despite her struggles, and eventually failed out of community college... Alanna’s mom finally decided to enroll Alanna in a school choice lottery -- where the winning students would be allowed to attend a school other than their local public school. Alanna won the lottery and soon transferred to a charter school, and since then has made tremendous progress. Now in tenth grade, Alanna is poised, confident, and dreams of heading to Johns Hopkins to one day become a surgeon.

Denisha Merriweather used to think she’d be nothing more than a high school dropout. D’s and F’s were the norm for her, and it was embarrassing, and angering. She became disruptive in class, and then started getting into fights... School was a nightmare for her. Then, in sixth grade, Denisha began living with her godmother, who saw the writing on the wall and wished she could send Denisha to this excellent Christian school she knew of, right in their area. But it was no use -- as they couldn’t afford to pay the tuition. Then a friend told them about a school choice program available in their area, where low-income students were given a scholarship to help offset the cost of private education. This gave Denisha just the break she needed to attend the top-notch school, and the environment was drastically different for her. Her grades and self-confidence rose, and she began to believe in herself. She worked hard and graduated with honors, and today Denisha is a proud college graduate, the first in her family. She credits her state’s school choice program with giving her the opportunity she needed to succeed: “It allowed me to have dreams I didn’t know I could have.”

In her first visit to a public school since becoming our new Secretary of Education, Betsy DeVos was met head-on by an angry group of protesters, who physically blocked her from entering the school. “Go back!” yelled one protester, before another upped the ante, shouting “Shame! Shame! Shame!” The strongest chant, and the most damning, seemed to be “Stop DeVos, and fund black futures! Stop DeVos, and fund black futures!”

Listening to the protests that morning you would’ve thought that Satan himself had stopped by for a visit.

The pure outrage at Betsy DeVos on display that day -- and throughout the nation at the time -- got me thinking... what was it about Betsy DeVos, school choice champion, that had everyone so dead-set against her?... Looking through the media’s coverage of her, it didn’t take me long to see why.

I googled the term “Betsy DeVos” to find the top articles on her from the time she was first nominated as Secretary of Education up through the day of the protest above. Reading the media’s early coverage of Betsy DeVos -- namely, how she was introduced to the general public -- I found that many of the top articles described DeVos as a super-rich Republican, whose policies would strip funding from America’s public schools. A majority of the articles at some point characterized her as being a cruel person, especially towards children. Here’s a look at some of the descriptions of her:
  • “diverting resources from the young people who most need them”
  • “diverting money away from vulnerable students and into the pockets of the rich”
  • “no consideration of the severe harm done to traditional public schools”
  • “she has made a career trying to destroy neighborhood public schools”
  • and my favorite: “Betsy DeVos is coming for your children”

In contrast with that demonry, you would never know from the media accounts that this same person once started a foundation specifically to give low-income children greater access to quality education options. And that this foundation has given financial aid to more than 400,000 low-income families to allow them to take their children out of schools where they weren’t getting a good enough education, and put them into schools they felt would be better for them.1 Out of 50 different articles on Betsy DeVos, only 1 of them mentioned any of this.

As for the children left attending traditional public schools, the articles said that DeVos’ policies would “devastate”, “severely harm”, “break”, or even “destroy” public schools. This sounds horrifying, and can only lead readers to believe that school choice will mean awful things for the educations of public school students... Yet, in not one article was there any discussion of how public school student achievement has actually been affected by school choice in the past.

Many of the top articles also seemed to imply that DeVos’ school choice policies would particularly hurt poor and/or minority students. Here are some examples:
  • “these schemes do nothing to help our most-vulnerable students while they ignore or exacerbate glaring opportunity gaps”
  • “would pull resources from struggling public schools”
  • “lower-income students were effectively segregated into poorer-performing schools”
  • “civil rights groups like the NAACP have expressed concern that low-income children and children of color suffer when oversight is scaled back”
  • “the NAACP has demanded a moratorium on charter expansion nationally”
  • “Betsy DeVos and other Republican lawmakers do not value quality education for black and brown children”

Yet, while many of the articles mentioned DeVos’ support of charter schools and voucher programs, not a single article pointed out that charter schools and voucher programs are mainly serving poor and minority students.2 Nor did any of the articles mention how well these programs have worked for poor and minority students.

Given the well-known achievement gaps that exist along lines of race/ethnicity and household income, the fact that school choice is being utilized by so many students who are underperforming their peers -- and whether or not it is working for them -- seem like pretty important aspects of the story to be left out of the news coverage entirely.3

So, it isn’t surprising that so many people are up-in-arms over Betsy DeVos, given how detestable the media made her seem... and given the fact that so much of the story of school choice has been left untold.

In the Upton/Druid Heights neighborhood in inner-city Baltimore, graduation parties are thrown for kids graduating 5th grade. Because, as one school director puts it, there’s no guarantee these kids will even survive childhood to get the chance to celebrate higher achievements. “It’s not just, ‘Oh my kid isn’t going to college.’ It’s ‘Will my child even be around, even be alive, to have those milestones?’”

43% of the kids in this neighborhood say they witness physical violence one to three times a week, and 40% of them know someone with a gun. 1 in 3 children said they knew someone under the age of 19 who was killed by violence.

For these children -- surrounded by violence, and faced with far too many examples of lives cut short, either by death or by drugs and crime -- getting a better education or a better school experience is not just a nice-to-have. It may be a matter of life and death. And it’s the best chance many of these kids have of making something of themselves, of gaining confidence and getting inspired to reach for what they want and achieve it! We owe it to these kids to think of school choice in terms of the impact it’s having for them academically.

For years now, some families have been choosing to take their kids out of traditional public schools and enroll them in nearby charter schools instead -- an option open to them through school choice. A recent national study, conducted by a leading research organization in education, tracked the progress of individual charter school students over time and compared it to the progress of public school students with the same demographics and same starting point academically. The study found that charter schools have had a positive impact on academic achievement for the following students:
  • Students living in poverty, on average, gained an additional 3-4 weeks of learning per year in both reading and math, compared to public school students also living in poverty
  • Black students gained an additional 3 weeks of learning per year, in both subjects
  • Black students living in poverty gained an additional 6-7 weeks of learning per year, in both subjects
  • Hispanic students living in poverty gained an additional 3-4 weeks of learning per year, in both subjects
  • Hispanic English Language Learners gained an additional 8-10 weeks of learning per year, in both subjects

These are remarkable gains for hundreds of thousands of poor and minority children across the country. And these gains aren’t even the extent of what charters are doing for some kids. Right in our backyard (and right by those protesters, funny enough), students in D.C. charters gained an astonishing 3½ and 5 months of learning per year in both reading and math.

In DeVos’ home state of Michigan, the average charter student gained an additional 2 months of learning per year in both reading and math, after starting far behind their peers in both subjects.

Voucher programs, too, have been studied as to their impact on student achievement. In certain states, vouchers are available to help low-income students attend private/religious schools instead of their local public schools, by covering a portion of the private school tuition. It’s paid for with the tax dollars that would’ve gone toward funding their education in public school.

Just last year, researchers published a “systematic review of systematic reviews” of voucher programs. Not the most exciting thing I’ve ever read, but it did give a clear consensus: vouchers generally produce modest achievement gains, or neither gains nor losses, for participating students. One review summed it up this way: “Voucher studies, generally of high quality, indicate a slightly positive impact, particularly for African American students.”

More recently, studies have found negative achievement effects for participants of voucher programs in Ohio, Indiana, and Louisiana -- which are some of the first negative studies to come out on vouchers.

Not every student who participates in school choice will be better off for it. Like all choices in life, we don’t always make the right one. But if there’s one thing to take away from the studies on school choice, it’s that many minority students living in poverty have made real strides academically. And I’m sure their parents are thankful that they had a choice in the matter.

Going back now to the central argument against school choice -- that it drains money from the public schools, damaging them and hurting the kids who remain there -- there now have been plenty of instances of school choice having been implemented over the past few decades, in many different areas in the country. So I spent some time looking for evidence that school choice has been hurting public school students academically.

According to an article published last year, 11 different studies have measured changes in public school student achievement following the establishment or growth of charter schools in the area. Only 1 of the 11 studies (which looked at a single school district) found any negative effects of charters on public school student test scores. In 10 out of the 11 studies (comprising 6 major cities, 5 states, and a nationwide sample), they found no negative effects of charters on public school student achievement. And in the majority of studies, charter expansion was found in some cases to have a positive effect on public school student achievement.

The author summed it up this way: “Most of the research implies that charter schools do no harm to students in district schools, and may even promote improved outcomes for all students.”

Some voucher programs, too, have been found to improve the performance of the public schools mostly closely associated with them. As one economics professor put it, “Competition improves the performance of the public schools most closely threatened, for want of a better word, by the voucher program.”

In addition, I haven’t found any evidence that any public school curriculum has been negatively affected by charters/vouchers/school choice (such as the loss of an arts program) -- though I certainly could be missing something out there. I actually found one public school district that reinstated music and arts programs in most of its elementary schools in response to charter schools.

I did stumble onto this report though, in which numerous public school superintendents said that charter school expansion in their district contributed to them closing one or more public schools (due to budget impacts). And from what I’ve read, school closure can certainly have a negative effect on the academic achievement of students who are displaced.

But given the expansion of school choice across the country, for decades now, if it really were “devastating” or “disastrous” for public schools -- taking away critical funding, and causing the best/most motivated students to leave -- I would think there’d be more evidence of public school test scores having gone down as a result of school choice. From what I’ve seen, there seems to be more evidence that school choice has improved public school student performance than diminished it.

That said, I do know there’s much more to education than test scores. And I know I haven’t addressed a lot of the negative impacts that school choice has had on public schools and school teachers. All I’m saying is, if school choice is helping at-risk children achieve real gains in their test scores, all while having a neutral, or even positive, effect on public school student test scores... there is something to be said for that.

And what it says, about the real effects of school choice on our children, is the opposite of the story the media told us about evil Republican Betsy DeVos.

There is an important debate to be had about school choice in America. Just as we shouldn’t promote school choice in disregard of its impacts on public education, we shouldn’t dismiss it without acknowledging its real benefits to so many children in need. To do either would be a disservice to the lives and futures of too many young Americans.

Angelo Jones “would’ve been gun-toting in two years”, says his mom, if he hadn’t changed schools. Angelo, afflicted with ADHD, would routinely get into fist fights and shouting matches at his former school (where such altercations among the students were all too common). Angelo was falling further and further behind academically, when his mom -- a single mother of two -- decided to enroll him in a school choice lottery. She ended up winning a spot for Angelo at the Davis Leadership Academy charter school -- and just by changing schools, Angelo’s entire educational experience was transformed. Angelo’s family credits the charter school’s zero-tolerance discipline policy for teaching Angelo how to be respectful, and focused on his schoolwork. And they credit the school’s particular attention to African-American history and culture for inspiring and motivating Angelo. Now, far from gun-toting, Angelo pledges to someday inspire others and help bring about advancement within their communities -- to which his mother can only respond, with tears of pride in her eyes, “How’d I get so lucky?”

1. “Betsy DeVos founded [the American Federation for Children] to provide better education options for lower-income children throughout America. I’m very proud of what the AFC has achieved, particularly at the state level. More than 400,000 lower-income families have been empowered with financial support to take their children out of schools where they thought the kids were not getting an adequate education, and put them into schools that they thought were better.” -- Senator Joe Lieberman, at Betsy DeVos’ Senate confirmation hearing

2. A recent national study on charter schools found that 53% of students in charter schools are living in poverty, and 56% are either black or Hispanic (see page 16). And a 2016 review of school voucher programs says “The U.S. programs all are limited to students with incomes near or below the cut-off for the federal lunch program… The overwhelming majority of voucher participants in the U.S. are either African American or Hispanic.”

3. The same national charter school study found that the average charter student’s starting test scores are below the 50th percentile in both reading and math (see page 21).

Monday, November 30, 2015

In Defense of Ben Carson

A cousin of mine recently told me that he “can’t stand Ben Carson” because “as Politifact points out, honesty is a challenge.”

So I hopped onto Politifact’s Ben Carson page, and sure enough, the picture was clear: Ben Carson hardly ever tells the truth. Right at the top of the page is a histogram showing that the vast majority of his statements were found to be False, Mostly False, or Pants on Fire...and not one statement was found to be True!

A quick glance at the site makes it look like Ben Carson has never spoken the truth in his life. The reality is that Politifact’s assessment here is purely a product of which statements were selected for analysis, and more importantly how these statements were evaluated.

So I decided to look into some of the statements that Politifact found to be False, and I gotta say — each of these ratings is very questionable:
  1. “German citizens were disarmed by their government in the late 1930’s,” which allowed the Nazis to “carry out their evil intentions with relatively little resistance.” - Ben Carson [rated False by Politifact]

  2. In their writeup, Politifact acknowledges that the Nazis’ 1938 gun laws specifically prevented Jews from owning guns, ammunition, and “stabbing weapons” — and that even before these laws were put into place, the Nazis had been raiding Jewish homes and seizing weapons.

    So why then does Politifact rate Carson’s statement as False? Because he said that “German citizens” were disarmed, when in reality German citizens as a whole were not disarmed — just the Jews. But Carson didn’t say that all German citizens were disarmed — he said German citizens, which includes Jews.

    Politifact also concludes that it wasn’t the seizing of guns that allowed the Nazis to “carry out their evil intentions with relatively little resistance”, because many non-Jewish citizens did have guns and could have used them to fight the Nazis if they had wanted to. But the Nazis certainly did encounter relatively little resistance compared to what they would’ve faced had their victims been armed.

    So Carson’s statement here is 100% true, yet Politifact didn’t even call it Half True, or Mostly False — they called it flat-out False.

  3. Ben Carson says he “didn’t have an involvement with” nutritional supplement company Mannatech. [rated false by Politifact]

  4. Politifact rates this statement False because it “suggests he has no ties to Mannatech whatsoever.” They point out that Carson has in fact delivered paid speeches for Mannatech, and has promoted their products on numerous occasions.

    But during the debate when Carson said that he “didn’t have an involvement with” Mannatech, he went on to explain that he did do some paid speeches for them, and he actually endorsed their product right then and there: “Do I take the product? Yes, I think it’s a good product.”

    Politifact says the statement here is false because it suggests there are no ties between Carson and Mannatech, when in fact Carson admitted some of those ties directly after making the statement. It’s unfair for Politifact to narrow in on Carson’s “didn’t have an involvement with Mannatech” comment and judge it as if he hadn’t gone on to clarify what he meant.

  5. Ben Carson says his tax plan wouldn’t leave the federal government with a $1.1 trillion hole. [rated False by Politifact]

  6. By calling this claim false, Politifact is saying that Carson’s tax plan would in fact leave the federal government with a $1.1 trillion deficit.

    Politifact came to this conclusion by applying Carson’s proposed 15% income tax to this year’s expected taxable income, leaving a federal revenue of $2.6 trillion. Then they subtracted this year’s projected federal spending ($3.7 trillion) to arrive at a $1.1 trillion deficit.

    But it’s not a valid analysis to apply future tax rates to the current taxable income in order to predict what federal revenue will be in the future. Lowering the tax rates would give people more of an incentive to work and to create businesses, which could lead to more economic activity and more taxable income. Time and time again, reduced tax rates have led to higher tax revenue for the federal government. So it’s not valid for Politifact to just assume that Carson’s tax plan would mean $600 billion less in revenue.

    In addition, Carson has said that his new income tax rate would be “phased in over time”. The very vagueness of this makes it impossible to say with certainty how tax revenues would be affected.

    Politifact also assumes that Carson’s tax plan would bring in zero dollars in capital gains taxes, excise taxes, and customs duties — even though Carson hasn’t called for an end to any of these taxes. These taxes alone bring in over $150 billion in revenue annually.

    For all of these reasons, it’s a major stretch for Politifact to conclude that Carson’s tax plan would in fact leave the federal government with a $1.1 trillion deficit.

Throw on top of this the recent fraudulent Politico piece on Carson and West Point, and it’s clear to me that there’s a deliberate effort underway to paint Ben Carson as a liar.

The American people will ultimately have to decide whether Dr. Carson is trustworthy enough to win their vote. Yet something’s telling me he has less to worry about in this regard than, say, Hillary Clinton does — a recent survey found the three words most associated with her to be “liar”, “dishonest”, and “untrustworthy”.

Tuesday, December 31, 2013

Perspectives On Welfare

I think we'd all agree that Debra is in a rotten, uncalled-for situation; we just might disagree as to the cause of it.

Slate Magazine correspondent Katy Waldman interviewed Debra from D.C. to find out how she would cope with the recent cuts to the food stamps program — cuts that reduced Debra's intake from $203 to $135 a month. Debra said that her and her daughter's already-meager diet would be "much worse" with the cuts. The interview, titled "Meat is the First Thing to Go: What it's like to have your food stamps cut", is presented in such as a way as to blame the "largest cuts in the history of our country's food stamps program" for Debra's ongoing hardship. I contend that the root of the problem is the fact that such programs penalize finding a job.

Debra, a single mother and disabled veteran, is currently unemployed and receiving food stamps, rental assistance, Social Security, and VA compensation. She uses these benefits to provide not only for herself but also for her 21-year-old daughter, who is also unemployed.

When Debra was asked point-blank whether she has considered getting a job, her answer was clear-cut and very revealing: "Yes, I've thought about it... But my food stamps, rent, VA compensation, and social security would be affected. I'd have to make a lot of money to overcome all the reductions, something like $15 to $20 an hour." In other words, Debra has done the math and determined that if she were to take a full-time job that pays anywhere up to $15 an hour, she would lose more in benefits than she would gain in compensation. So she'd make more money by not working than she would by working even for $15 an hour, or around $30,000 a year. This means that if Debra were to take just about any of the jobs that she's currently qualified for, she'd have to get by on even less than she makes now!

Debra's 21-year-old daughter faces similar incentives. According to Debra, her daughter "wants to help and get a job, but it's a catch-22. I'm on rent assistance, and if she gets a job, my rent goes up and my food stamp money goes down." Pointing out that her daughter "can't apply for her own benefits until she's 22" seems to suggest that applying for benefits is her very plan — and can you blame her?

Our country's food stamps program is called the Supplemental Nutrition Assistance Program, or SNAP. This program, which by its name seems to have been intended merely to assist people by supplementing their incomes, is in reality part of a collection of benefits that has become a way of life for Debra, her daughter, and many others.

People respond to incentives, especially to short-term ones. In a system of benefits where recipients are effectively punished for choosing to work, many will choose to remain unemployed. And that's why this system is perverse; the right financial decision for recipients in the short term deprives them of the work experience that would improve their prospects for the future.

Unemployed recipients, lacking the opportunities for advancement that come with being employed, are liable to feel stuck in a lifestyle of subsistence and dependence. When Debra was asked whether she sees a way out of her situation, she said, "I've been on food stamps for two years. It is really tight. And right now, no, I don't see a way out. Unless I get a job that really pays a lot of money, but that's what everyone is looking for. There's a way to do it but I don't know what it is."

Fortunately, there are ways to help those in need without counteracting their natural incentive to work. For one, benefits programs could be reconstituted: anyone who loses their job could be given a fixed amount of money, regardless of when, or if, they return to work; and able-bodied people could be required to work or participate in a job training program in order to receive food stamps. There's also private charity, which Debra and her daughter receive through their church, food banks, and Meals on Wheels. Debra herself is charitable, regularly volunteering to help the mentally ill. Americans are the most charitable people in the world.1 And because the amount of charity a person receives isn't based on whether he's employed, private charity doesn't discourage people from seeking a better way of life.

Any extension or expansion of benefits programs that penalize recipients for working will result in more and more people choosing to remain unemployed, leaving them less qualified for quality jobs and likely in need of additional assistance, and thus continuing the vicious cycle of dependence.

1. Charities Aid Foundation. "World Giving Index 2013: A global view of giving trends."

Sunday, September 30, 2012

The Medicare Debate, Part II

It barely made a blip on the news, so you may not have heard that the U.S. credit rating was just downgraded again for the fourth time in the past fourteen months. Downgrades are dangerous because they signal to other countries that the U.S. is now a riskier place to invest in, and this raises our cost of borrowing money. But the bigger problem for Americans is the reason for the downgrades: our government is less likely to pay its debts, and is therefore less likely to honor its commitments to people who are counting on government assistance in their senior years.

One of our biggest obligations is Medicare. It's the third-most expensive federal program ($560 billion spent in 2011, or about $3000 per working-age adult1), and due to the wave of retiring baby boomers its cost is expected to nearly double within a generation.2 Our current path is unsustainable — and will result in millions of people shelling out more for their medical care than they've been planning on.

So what do we do about it? The status quo approach is to cut costs by reducing pay for doctors who treat Medicare patients...but this would also reduce the quality of care (see my last post). VP candidate Paul Ryan has an alternative plan, one that's been both attacked and championed by people who probably don't really understand it. (I know — I was one of them.) But now that I've read his plan, here's what you need to know:

Nothing changes for anyone currently 55 or older.

For everyone else, when you become eligible for Medicare you will choose your own health insurance plan. You can choose the traditional fee-for-service option (the way it is now, where government reimburses doctors directly), or you can select from among a variety of private insurance plans within the new Medicare Exchange.

Every year, each insurer in the Exchange will declare the price that they must be paid in premiums in order for them to cover enrollees' medical costs. Medicare then pays for all or some of your premiums depending on your income and the price of your plan.

The "benchmark" that determines how much Medicare pays for is the price of the baseline plan, which is either traditional fee-for-service or the second-cheapest private plan, whichever is cheaper. But what's not clear is what "benchmark" means — that is, if you choose the baseline plan, are your premiums fully covered or not? What is clear is that of the people who select the baseline plan, Medicaid-eligible seniors will have no out-of-pocket expenses, other low-income seniors will receive additional assistance, and high-income seniors will have to pay a share of their premiums.

If you choose a plan that's more expensive than the baseline, you'll have to cover the difference. Choose a plan cheaper than the baseline and you'll receive a rebate for the difference.

Each insurer in the Exchange must abide by two ground rules. First, they have to cover at least the actuarial equivalent of the fee-for-service benefits package. This means that while each plan will provide different coverage, every plan's coverage will be at least as valuable as traditional Medicare and you'll know upfront what's included in your plan. Second, they have to accept all applicants regardless of any high-risk/pre-existing conditions. Medicare will support this provision by paying for the increase in premiums that's necessary for high-risk individuals and by regularly transferring money from plans with more low-risk seniors to plans with more high-risk seniors.

The vision here is to have companies compete for customers by thinking of creative and efficient ways to cover medical expenses for less than it costs Medicare to do so today. If this plan fails and the anticipated cost reductions don't pan out, there's a provision to cap Medicare expenditure growth at nominal GDP growth plus 0.5 percent. This means that if insurance prices rise faster than that upper growth rate, some seniors (Medicaid-eligibles excluded) would have to cover the spillover costs. Whatever the merits, this is a more truthful way of dealing with ballooning costs than trying in vain to hide the problem from seniors by paying doctors less.

No plan will magically wipe away the underlying problem of having an increasingly strapped government provide for an aging population...but applying the tried-and-true principles of competition and personal choice/responsibility is a step in the right direction.

1. There were 183.9 million U.S. adults ages 20-64 in 2009.
2. Peter G. Peterson Foundation. "Budget Explainer: Medicare."

Tuesday, August 28, 2012

The Medicare Debate, Part I

Turn on your TV and I bet you'll hear one of the Presidential candidates claim that if we elect the other guy, Medicare patients are bound to suffer. You'll hear Romney allege that Obama took $700 billion out of Medicare to pay for Obamacare.

It's true: Obamacare comes with a $716 billion reduction in government's Medicare expenditures over the next 10 years. The majority of these cuts will reduce how much doctors and insurance companies will be reimbursed for the care that they provide/fund.

But there's a perception out there that since these cuts are made to providers, they won't affect patients. A recent Reuters article "Top Six Myths about Medicare" says that the cuts to providers are "mostly meaningless to patients." In National Journal's "10 Things You Need To Know About The Medicare Debate", Thing #1 reads: "President Obama's cuts to Medicare do not affect any benefits." And a Washington Post analysis says "there's one area these cuts don't touch: Medicare benefits."

One of the most important medical benefits people have is the ability to be seen by a doctor when in need. Arbitrarily cutting pay for doctors could certainly impact this benefit.

If a doctor's pay per patient is reduced, he'd need to cram in more patients per day in order to earn as much as before. This trend would leave fewer available doctors for people with urgent medical needs. Some doctors would look to avoid Medicare patients altogether. A 2010 American Medical Association survey of doctors attests to this.

The broader issue here is the unwillingness of some to consider or even acknowledge the existence of unintended consequences of government intervention. And if we can disagree about the effects of this one small aspect of Obamacare, imagine what other unforeseen consequences lie within its 2,700 pages.

In my next post I'll analyze Paul Ryan's proposal for Medicare. I skimmed it the other day and it's more complicated than either side would have you believe.

Sunday, June 10, 2012

Making Money

The piercing tone from his clock radio is his signal to stumble out of bed, collect himself, and get ready to face another day at work. Shower, breakfast, coffee, commute. He plans the day ahead, then spends it working hard — making tradeoffs, meeting deadlines, and trying to find some value in those unavoidable meetings. He closes up shop and drives home, eager to finally spend some time with the people who mean the most to him. And at the end of it all he lands in bed, ready or not to hit repeat.

The more money he makes during his days — and the more he’s made throughout his life — the more likely he is to hear politicians clamor for him to pay his fair share back to society. Senate hopeful Elizabeth Warren recently sounded off about the need for the most successful businessmen to pay their fair share in taxes, declaring, “You built a factory and turned it into something terrific, or a great idea? God bless, keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Putting aside the fact that high earners already do pay a large share of their earnings in taxes, Warren’s point and those like it overlook the reality that a person making money is in itself a benefit to society.

The vast majority of people who make money do so only because they’ve delivered goods or services of comparable value. Both parties — employer and employee — benefit from the exchange, and each side’s gain ultimately extends to society at large. An employee’s ability to meet his employer’s needs leaves the employer free to focus on growing the business in order to tackle the needs of potential new customers. This dynamic helps those folks whose needs will now be met as well as those who will be hired to fill new positions in the growing business. In addition, the wealth amassed over the course of a person’s career won’t just be spent on yachts and palaces but also invested back into the economy, spurring the growth of existing businesses and the creation of new ones. As John F. Kennedy famously put it, “a rising tide lifts all boats.”

The wealthiest among us are in this way already contributing the most to society, and those contributions have little to do with taxes.

During a 2010 financial reform event in Illinois, President Obama said, “I do think at a certain point you’ve made enough money.”

I say you can’t get enough of a good thing.

Wednesday, July 27, 2011

Boehner's Flaw

In discussing his latest debt ceiling plans, House Speaker John Boehner said yesterday, "Remember one of the principles here: we are not going to increase the debt limit by anything more than what we're willing to cut spending." Specifically he's proposing to raise the debt ceiling by $1 trillion ($1T) and to reduce future spending by around $1T. The concept sounds reassuring at first, but in practice it wouldn't come close to solving the problem we face.

The debt ceiling exists to limit the amount of debt we can carry. Our debt grows when our federal government spends more than it receives in taxes and has to borrow money to cover the difference. For each of the past 3 years the government has spent about $1.5T that it didn't have, and our debt grew by that much each year.

Boehner's proposal is to raise the debt ceiling by $1T and to cut spending by $1T over the next 10 years. That would mean cutting spending by only $0.1T each year, which would reduce next year's deficit from $1.5T to $1.4T. Well if we only raised the ceiling by $1T, those cuts wouldn't even get us through 1 year without us hitting the ceiling again, at which point Congress could just apply Boehner's principle again...and then again, and again, essentially just paving the way for more astronomical deficits.

The real flaw here is in comparing the amount of spending cuts to the amount we raise the debt ceiling. The right thing to do is to compare the amount of spending cuts to our projected deficits. If we're about to annually spend $1.5T we don't have, we need to cut $1.5T in spending per year! Accomplish that, and there would be no need to raise the debt ceiling.