Subsidizing the Failure of Education

Economics teaches us the following:  When you subsidize something, you get more of it.  We've been subsidizing failing government schools for decades.  Why would anyone expect different results by throwing more money at failure.

 

Performance is correlated with competition.  We should issue vouchers and let free market schools, both non-profit and for-profit, compete in the free marketplace.  That's a more effective way of sorting out the winners and losers among educational methods and policies.

Redistribution Doesn't Reduce Causes of Poverty

Harvard University Professor Jeffrey Miron: "The poverty rate declined significantly between 1959 and 1964 as the overall economy grew, but this was before the launch of President Lyndon Johnson's War on Poverty (and therefore before the enactment of Medicaid and Medicare, two of the largest anti-poverty programs in existence today)..."

Miron continues: "Between 1966 and 2009, the poverty rate fluctuated with the business cycle but showed little downward trend, even as anti-poverty spending grew by a factor of six in real terms. In other words, our anti-poverty programs have been implemented at enormous and ever-increasing cost — and it is not clear that they have done much to reduce the rate of poverty."

Politicians Made Healthcare Expensive

Healthcare was very affordable for my middle class parents during the 1960s when I was young.  There was minimal government intervention in the free market for healthcare in those days.  Service was great, and prices were reasonable.

 

Fast forward to the present.  Politicians meddle in virtually every aspect of healthcare, regulating procedures, mandating coverages, specifying paperwork, subsidizing care, and restricting interstate competition for insurers.  Healthcare has become enormously expensive.  Any question why?  Because free market healthcare has been made illegal by politicians.  The more they meddle, the higher the cost.

 

The other major market with large-scale political interference is education.  I now leave it as an exercise to the reader to explain inflation in education costs.

A Defense of Capitalism

There is no "manna from heaven" in any economic system. Imperfections are everywhere. But capitalism is the system that optimizes aggregate standard of living through free choice and market accountability. Any deviation from pure free market enterprise is a drag on productivity and living standards.

Things are screwed up precisely because government interfered in the natural functioning of the free market. The Federal Reserve over-stimulated. Freddie and Fannie influenced the mortgage and housing markets in unnatural ways. Politicians forced lenders to loan money to people who shouldn't have qualified. Bubble, bubble. Homebuyers and Wall Street financiers were happy to play along.

It was fun while it lasted, as people were making money, and politicians were bragging about their programs and regulations. Greenspan was a hero for supposedly saving the economy. Yeah, right. Capitalists realize the economy would grow faster and work better through market mechanisms of accountability. No bailouts, subsidies, regulatory burdens, nor heavy taxation. Let companies and workers be accountable for their own performance. That's capitalism. Instead, we have a government that punishes success and rewards failure.

The Progressive Obsession with Lording over Us

Below is a version of Donald J. Boudreaux's response to a NY Times book review that I modified to reflect my personal view on progressive elitism and authoritarianism. It differs slightly from the original authored by Mr. Boudreaux, but he articulates it very well.

A popular theme among progressives is that they, in contrast to their mindless Cro-Magnon opposites, overflow with ideas. Progressives see their theories and insights as highly intellectual and enlightened.

But these ideas are almost exclusively about how other people should live their lives. These are ideas about how one group of people (the politically successful) should engineer everyone else’s contracts, social relations, diets, habits, and even moral sentiments.

Put differently, modern progressive ideas are about replacing an unimaginably large multitude of diverse and competing ideas – each one individually chosen, practiced, assessed, and modified in light of what F.A. Hayek called “the particular circumstances of time and place” – with a relatively paltry set of ‘Big Ideas’ that are politically selected, centrally imposed, and enforced not by the natural give, take, and compromise of the everyday interactions of millions of people but, rather, by the simple notion that those with the power of government are anointed to lord over the rest of us.

The Electric Tea Party Acid Test

A two-dimensional ideological analysis and perspective that offers some interesting observations:
- Tea Party ideology is similar to that of 1960s era hippies.
- The Tea Party movement represents a reverse image of the FDR/Obama camp.
- Hippies were anti-establishment individualists who didn’t like LBJ, the Democrats, or “Great Society” programs.

The Electric Tea Party Acid Test

For my libertarian friends, note the author's claimed difference between anarchists and libertarians in terms of a constructed (learned, indoctrinated, etc) vs. innate (natural, unchanging) belief system. Anarchy requires a belief that people's thinking can be altered. Limited government libertarianism accepts people's thinking as it is.

Also, note how similar the author claims (non-anarchist) libertarians are to Tea Party members and hippies, but how different both are from anarchists.

Analysis of Academic Success and Parenting

The authors of the book Freakonomics analyzed statistical datasets to determine how various parenting methods and other factors are correlated with a child's academic success.  They feel most parenting advice is based more on opinion than data.  The Freakonomics authors looked at statistical correlation, which, as they note, is not the same as causality.  Ketchup is correlated with hamburgers, but ketchup doesn't cause hamburgers.

Factors correlated with academic success:

• Highly educated parents
• High socioeconomic status of parents
• Mother was age 30 or older when first child born
• Child did not have low birth weight
• Parents speak English at home
• Child was not adopted
• Parents involved in PTA
• Many books at home (But it doesn't matter if the books are ever read.)

Factors uncorrelated with academic success:

• Family is intact
• Parents recently moved to a better neighborhood
• Non-working mother
• Attended Head Start
• Parents take child to museums
• Spanking
• Child watches TV a lot
• Parents read to child regularly

The authors note as an overgeneralization that it's more what parents ARE, not what they DO, that is correlated with better academic performance.  Smart parents with good jobs who speak English and value education are more likely to raise well-educated children regardless of marital status, neighborhood, whether mom works, how much TV the kids watch, or how much the parents read to kids or take them to museums.

The Freakonomics authors also looked at the effect of charter schools.  They determined that children who apply to a charter school perform better academically, whether they get accepted to the school or not, than children who don't apply to a charter school.  It's apparently a reflection of the parents' educational values, rather than the specific school, that matters most.

Growth in Government Spending & Debt Fueled "Recovery"

In Why the Depression is Ongoing, we see charts showing the huge growth in government spending due to the Great Society welfare state programs. We also see that any economic "recovery" being claimed in the mainstream media news sources is due mostly to government spending with borrowed money.

It's The Social Programs, Not Military, That's Bankrupting Us

Gee, where do you think politicians started the US down the road to bankruptcy?

Five Decades of Federal Spending

The chart below shows federal spending in three component parts over the last five decades.

Government Burdens on Business

John Stossel read my statement about tax code complexity on his tax special this week on the Fox Business Channel. He had invited me to appear on the TV show, but I didn't want to travel to NYC. My statement is at the very beginning of the clip.

John Stossel Show - Inconvenient Taxes! (Part 3/5)
John Stossel on the Fox Business Channel

Tea Party Movement Member Demographics

Who are Tea Party members?

 

Tea Party protesters are extraordinary, not ordinary

 

74 percent are Republicans or independent voters leaning Republican;
16 percent are Democrats or independent voters leaning Democratic;
5 percent are solidly independent;
45 percent are men;
55 percent are women;
88 percent are white;
77 percent voted for Sen. John McCain in 2008;
15 percent voted for President Barack Obama

Did FDR Save Capitalism?

Fans of Franklin D. Rooselvelt claim that big government was needed during the Great Depression to save capitalism. That's analogous to the fire department setting your house ablaze, then claiming they saved half of it.

The economy of the late 1920s had its share of speculation, market bubbles, and other problems, as economies have had since the dawn of civilization. But let's see what the Hoover and FDR governments did about it:

They started a trade war with Smoot-Hawley (Hoover), raised the lowest income tax rate from 0.5% to 4%, raised the highest income tax rate from 25% to 63% (Hoover) then 79% (FDR), raised the corporate tax from 11% to 15%, added a 27% tax on undistributed profits, raised numerous excise taxes, raised the inheritance/estate tax from 20% to 70%, instituted a new 2% employer/employee payroll tax, and much, much more. The effect of the economy was crushing.

The Fed manipulated the money, causing deflation, then later imposed increased reserve requirements on banks leading to lower lending. FDR screwed up markets through his disastrous agricultural policies and subsidies, and his government-imposed industry cartels. FDR also gave unions way too much power and forced up wages, making unemployment worse. Other policies forced up prices, which is the opposite of what's needed in a downturn.

And don't forget the mindlessly idiotic pig slaughter, which has parallels to Cash for Clunkers. Destroy things to artificially create demand. Let's pay half of Americans to dig holes with spoons, and the other half to fill in the holes with spoons. Full employment! Zero productivity! Totally progressive!

All those GOVERNMENT actions are big downers for the economy. Thus the government came in to fix a major problem resulting from their idiotic attempts to fix a much smaller problem. Then we're supposed to believe we needed them. Hah! This is a classic case of a government manufactured crisis.

The Nobel Peace Prize

This years Nobel Peace Prize was awarded to a teleprompter.

The New American Dream

Any able-bodied American can get good quality food, shelter, healthcare, and pocket money, without ever working, all at taxpayer expense. 

What a country!

The Great Depression and Now

There's a recent WSJ article, Taxes, Depression, and Our Current Troubles, which has some interesting parallels between now and the 1930s.  Excerpts and my commentary:

In 1930-31, during the Hoover administration and in the midst of an economic collapse, there was a very slight increase in tax rates on personal income at both the lowest and highest brackets. The corporate tax rate was also slightly increased to 12% from 11%. But beginning in 1932 the lowest personal income tax rate was raised to 4% from less than one-half of 1% while the highest rate was raised to 63% from 25%. (That's not a misprint!) The corporate rate was raised to 13.75% from 12%. All sorts of Federal excise taxes too numerous to list were raised as well. The highest inheritance tax rate was also raised in 1932 to 45% from 20% and the gift tax was reinstituted with the highest rate set at 33.5%.

But FDR did even worse:

But the tax hikes didn't stop there. In 1934, during the Roosevelt administration, the highest estate tax rate was raised to 60% from 45% and raised again to 70% in 1935. The highest gift tax rate was raised to 45% in 1934 from 33.5% in 1933 and raised again to 52.5% in 1935. The highest corporate tax rate was raised to 15% in 1936 with a surtax on undistributed profits up to 27%. In 1936 the highest personal income tax rate was raised yet again to 79% from 63%—a stifling 216% increase in four years. Finally, in 1937 a 1% employer and a 1% employee tax was placed on all wages up to $3,000.

States added to the huge tax increases.  The economic effects had to be crushing. 

From elsewhere, I looked at the 1929 stock market crash.  The market dropped from 381 (Sept 3) to 198 (Nov 13). It then recovered to 294 (Apr 17).  Thus, what happened in 1929 proper is comparable to what we've just been through.  It was only later that Hoover got things really rolling (down to 41 by 1932).  That was after he raised taxes, including higher taxes on goods due to Smoot-Hawley.  Taxing is economic friction, exactly what you don't want during an economic downturn.

So if Hoover did so wrong, which I believe he did, why do my "progressive" friends think FDR was right to do the same thing?