Recommended: The Case Against the Fiscal Stimulus

Harvard professor of Economics Jeffrey Miron has written an interesting paper: The Case Against the Fiscal Stimulus.  He argues that not only has the stimulus been fairly ineffective, it was bound to be fairly ineffective because it is an inefficient policy tool for the sort of fiscal problems we face.  Its a little dry and academic in tone, but well worth reading and thinking about.

Recommended: Requiem for the Pelosi Democrats

John Funds has an interesting article in the Oct 30, 2010 Wall Street Journal.  He has interviewed Senator Brian Baird, who is retiring from the Senate in disgust this year, and reports on this interview in a article entitled Requiem for the Pelosi Democrats  Since he is retiring, Senator Baird has nothing to lose, and is remarkably frank about what he thinks is wrong with the Senate, both with his party (the Democrats) and the opposition (Republicans). It makes for interesting reading.

Recommended: A Referendum on the Redeemer

Shelby Steele has an Op Ed piece Referendum on the Redeemer in today's Wall Street Journal that has an interesting and different take on President Obama in particular and the Democratic Party in general. Steele argues that Barak Obama is the first president we have had thus far who grew up in and was shaped by the 1960's counterculture period, a period that grew to see America as greedy and imperialist, and American's ideals as flawed and destructive. As a result, Steele argues, President Obama is not so much trying to lead the country as trying to redeem it.

I haven't really done Steele's argument justice in this short description - it is worth reading and thinking about the whole article.  But it does produce a different perspective on what has been happening over the past two years.

About the Constitutionality of the separation of Church and State

Having had a couple of years of liberal craziness, we are now apparently about to get a few years of conservative craziness.  A number of the ultra-conservative set apparently haven’t really read the Constitution, though they walk around flaunting copies of it.

For example:

• In a speech in April of this year Sarah Palin said "Lest anyone try to convince you that God should be separated from the state, our founding fathers, they were believers. And George Washington, he saw faith in God as basic to life."
• Sharron Angle, a Republican candidate for Nevada Senate, has stated repeatedly that a separation of church and state is an "unconstitutional doctrine."
•  Dan Severson, Republican candidate for Missouri secretary of state, said last week: "Quite often you hear people say, 'What about separation of church and state?' There is no such thing. I mean it just does not exist, and it does not exist in America for a purpose, because we are a Christian nation."
•  Republican House candidate Glen Urquhart of Delaware also questioned the separation of church and state, suggesting the phrase came from Adolph Hitler.
•  GOP Rep. Ron Paul of Texas wrote in an essay in 2003: "The notion of a rigid separation between church and state has no basis in either the text of the Constitution or the writings of our Founding Fathers."

Just to refresh their memories, here is the text of the First Amendment to the Constitution:

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”

And as for what the Founding Fathers really meant, here is what Thomas Jefferson wrote in one of his letters:

“Believing with you that religion is a matter which lies solely between man and his god, [the people, in the 1st Amendment,] declared that their legislature should make no law respecting an establishment of religion, or prohibiting the free exercise thereof, thus building a wall of separation between church and state.”

For those in climate change denial

There seems to still be a substantial number of people who don't believe the earth's climate has been changing dramatically.  I suppose that includes the 40% plus of Americans who also believe the earth is only some 6000 years old, and perhaps a few of the Flat-Earth Society members as well.

It is certainly true that some of the climate change scientists have muddied the waters in the past year by intemperate emails, but in fact the evidence for dramatic climate change is pretty convincing to anyone who hasn't an ideological need to deny it.  NASA has a pretty good one-page summary of the evidence on the NASA Climate Change :Evidence site.

Credit where credit is due.....

House Speaker Nancy Pelosi (D - Ca.) complained to the media the other day that the Democrats "weren't getting credit for what they had done".  On the contrary, I think the Democrats are indeed getting the credit for what they have done, and that is why they are apparently going to lose 45-50 House seats in this upcoming election.

Ms.Pelosi promised in her maiden speech as Speaker of the House that "there will be no more deficit spending". Since then, she and her party have generated at least $5 TRILLION in new deficit spending.  She and her party certainly get the credit for that.

We have a friend visiting us who runs a small business that employs lots of part-time young people in the summer. The new health care bill seems to require that she provide health care for all of them. If true, she is probably out of business, and a lot of teenagers won't have a job with her next summer. Our friend certainly gives Nancy Pelosi credit for that.

There is little in recent history to suggest that the Republicans will do any better at controlling spending and reducing the size of government than the Democrats have done, but they could hardly do worse. 

The end of astronomy's golden age??

Here is an interesting chart from NASA:

It shows the astronomy satellites in space -- the satellites that have brought us such a wealth of new information about our universe in the past few years.  The dotted line just before 2011 is where we are now.  Notice something? Most of these programs reach end of life in the next year or two and there are precious few new programs coming on line to replace them.  Hubble (at the bottom of the chart) will be replaced (hopefully) by the new James Webb telescope (at the top of the chart), and there are a couple of new follow-on satellites in the works, but nothing like the array we have in space right now.

That is too bad. I suppose in a cash-strapped economy, where we MUST cut government spending, NASA will take a big hit.  But I can think of a lot of other government activities that are far less important than pure science, and far less likely to spark the sort of science-driven innovation that could recover American jobs..

Recommended: Tea Party to the Rescue How the GOP was saved from Bush and the establishment.

Peggy Noonan has an interesting piece in Friday's Wall Street journal - Tea Party to the Rescue: How the GOP was saved from Bush and the establishment. She argues that the Tea Party woke up the comfortable, aging, misty-eyed Republican Party, and put some purpose and backbone back into it - all those Republicans who went to Washington in the Reagan era, all fired up to do some good, and then over the years BECAME Washington and forgot why they were there. An interesting piece.

Recommended: The Sam Harris / Andrew Sullivan debate about religion

Sam Harris, the author of The End of Faith, and more recently The Moral Landscape, and Andrew Sullivan, author of The Conservative Soul and the blog The Daily Dish, have a wonderful on-line debate about faith and religion at Beliefnet,com. You can read it beginning here.

This is an intellectually stimulating, civilized, rational debate, unlike most of what passes these days for discussion about religion. Highly recommended.

Dysfunctional Middle Schools

I have in the past few months heard perhaps a dozen hair-raising stories about how children, especially girls, have been treated in public middle schools. And the national news in the past year has had a steady stream of stories about child suicides traceable to brutal middle school bullying. Clearly our public middle schools are highly dysfunctional.

The problem, as near as I can tell, is that overworked and overstressed teachers are simply not plugged into the “Lord of the Flies” culture of brutality that evolves in middle school in the absence of sensitive adult supervision. Children, quite frankly, are savages unless they are taught otherwise, unless they are “socialized” and “civilized” by an adult culture. And too often middle school children are without effective adult supervision, not only on the playground and after school, but even in the classroom and at home.

I suppose this is to be expected in a public school system constrained by teacher unions, overworked by Federal No Child Left Behind mandates and tests, financially driven toward larger class sizes, and burdened by “mainstreamed” special needs students and students passed from previous grades even though they are not up to grade level in their skills. Unfortunately the system seems to be geared toward the convenience and job security of the adults, not the well-being of the students. As someone once asked me, where is the union that represents the students?

What would help this? First of all, I would propose that we do away with middle schools. Children would remain in elementary school until 9th grade, with a homeroom teacher who moves with the class over at least several years, if not their entire elementary school experience, so that the teacher knows every student and their parents intimately, and sees every student every day.

Second, class sizes of 30-40 students are just too large. In my experience as a teacher, class sizes beyond perhaps 20 students are simply too large – beyond that size children begin to fall through the cracks. Beyond about 20-24 students, it is simply not possible for a teacher to get an accurate reading of every student’s emotional state every day, and that is what is needed with young children.

Third, the educational system from the principle down to the lowest teacher ALL have to work to establish a culture of respect among the students. That means (a) modeling that behavior as adults, (b) treating students with real respect, and (c) ALWAYS and IMMEDIATELY interrupting disrespectful behavior or language among the students. This only works if the entire staff support each other in this endeavor – no “playing favorites” among the students. In my experience, it takes two or three years of consistent effort to get this culture established, but then the students themselves begin to enforce it among themselves and it gets easier.

Fourth, the educational system has to train the parents in this approach as well. I am appalled at how often parents are at least unaware of the bullying and meanness of their children toward other children, and at worst complicit in this attitude. Parents need to be taught (because they probably were not taught themselves in school) to teach AND MODEL respect for others. They need to be taught that the success of their own children in the wider adult world will depend on whether or not these children learn essential social skills, and that these skills need to be learned and reinforced at home as well as at school.

There are lots of things wrong with our educational system, but this brutal middle school bullying and shunning is among the worst of the problems, scarring too many of our children for life. It needs to be stopped!

Recommended: Fools Rush in Where Europe Rushes Out

Jonah Goldbergn has an interesting piece in today's LA Times entitled Fools Rush in Where Europe Rushes Out. He wonders, as I have, why the Democrats are in such a hurry to remake America in the European model (massive welfare and pensions, massive government involvement in everything) when the Europeans themselves are all trying to dig themselves out from under all the problems this overspending and over-promising has produced for them. Good question.

Recommended: The Vision of the Anointed

Thomas Sowell, sometime economics professor at Cornell, Amherst and UCLA, and now a senior fellow at Stanford’s Hoover Institute, writes clear, penetrating, practical, readable books about economics and society. In a earlier post I recommend his 2008 book Economic Facts and Fallacies, which follows his usual line of testing common public beliefs against real data (common public beliefs usually lose!).

His 1995 book The Vision of the Anointed: Self-congratulation as a Basis for Social Policy (see book list in sidebar for details) is particularly relevant in todays’ world, when the Washington elite have decided to spend trillions of our taxpayer dollars to solve our problems. Sowell’s argument is that the ruling elite, not only of America, but of Western Europe as well, all share a more-or-less common world view, in which it is the task of the “anointed” leaders to identify “crisis” and enact huge and expensive government programs to solve them. From the stimulus plan to the bank bailouts to the auto bailouts to the health bill, that is what we have just seen from this administration. What is remarkable about this world view is that it is highly resistant to real data about results.

Sowell identifies four typical stages: (1) The “crisis”, wisely discerned by the elite even though the masses (that's us) are clueless, (2) the “solution”, a massive government program of some sort, (3) the result – more often than not leading to all sorts of unintended and detrimental effects, and (4) the response, in which the elite explain to the masses why it is that their wise policy really was right even though the results were disastrous.

One thinks immediately of the stimulus plan, which was sold on the promise that unemployment would peak below 8% and then quickly drop, while in fact it has hovered around 10% for months now. Now of course (stage 4) we are being told that “things would have been worse without it”. Or, perhaps the "No Child Left Behind" act, which has done absolutely nothing to lift America from 27th place (almost last) among developed nations in student scores in basic subjects.

Sowell, as is his custom, tests beliefs against real data. For example, many in Washington like to argue that President Reagan’s “tax cuts for the rich” cost the government billions in missed tax revenues (an argument being revived today as Congress considers extending the Bush tax cuts). As he points out, in fact government receipts rose from $599 billion in Reagan’s first year of office to $909 billion in his last year of office, the highest they had even been. The anointed, of course, are not deterred from their ideological beliefs by inconvenient data.

He also points out that being wrong – even massively wrong - doesn’t seem to affect the credibility of the elites among their own. Take, for example, The Club of Rome (economic growth will grind to a halt around the world in the latter part of the 20th century), or Paul Erlich (The Population bomb – hundreds of millions will starve in the 1970’s and 1980’s), or John Kenneth Galbraith (The New Industrial State – big corporations are immune from the marketplace and will never become insolvent).

All in all, this is an important book to read at a time when Washington insiders are spending trillions of dollars of (largely borrowed) money to “solve” our problems.

Cutting Medicare and Medicaid future liabilities

The previous post discussed possible changes in Social Security, which consumes the largest share of the $3.760 billion of expected government spending in 2012. The next largest share, just behind Social Security, is Medicare and Medicaid, at about $775 billion. Almost 60 percent of Medicare is financed like Social Security, by contributions from employees and their employers. This share will decline as the cost of health care keeps increasing and more people become eligible for Medicare.

But while Medicare and Medicaid current costs are about the same as Social Security’s costs, Medicare’s FUTURE liabilities are far worse. At more than $89 TRILLION Medicare's total unfunded liability is more than five times larger than that of Social Security. In fact, the Medicare prescription drug benefit the Bush administration enacted in 2006 (Part D) alone adds some $17 trillion to the projected Medicare shortfall, about as much as the entire current unfunded liability of Social Security. And despite the political hype, the best current estimates are that Obamacare actually added at least another $1-2 trillion to the future Medicare liabilities.

Unlike Social Security, where relatively modest changes can keep the system solvent, there are no simple solutions to the Medicare and Medicaid problem.

There are no simple solutions primarily because the current Medicare system has thoroughly distorted the market in the medical field, with all sorts of drug companies, medical suppliers, hospitals and doctors “gaming” the system to maximize profit and/or work around bureaucratic idiocies, and because Medicare has fostered all sorts of unrealistic public expectations about the level of health care people ought to get essentially for free from the government. In the end, the medical field is subject to the same market forces as any other field.

This Democratic Congress tried to make the health care bill look ”revenue neutral” by assuming long-delayed cuts in doctor’s Medicare fees would be implemented – cuts that now amount to about 30%. But doctors already lose money on many Medicare patients, and if their fees are cut another 30% many (perhaps most) will do what any business would do with a money-losing line of services – they will simply stop taking Medicare patients!

The way the system is set up, Medicare patients have absolutely no incentive to “shop around” for their medical care. Indeed, most have no idea at all what their real medical costs are (especially since Medicare statements consist of highly inflated fees “reduced” to the Medicare rates - who can tell what the real price was?). So of course everyone wants the best, the newest, the most expensive treatment , whether or not it is the most effective, let alone cost-effective treatment. It’s like having a credit card that someone else is paying for – why show any restraint?

I’m inclined to think that the only real solution is to scrap the entire system and start over from scratch. There certainly is a valid case to be made in a first world society for subsidized care for the elderly, in which the extraordinary medical costs that may hit the elderly are shared more equitably across the population. On the other hand, is it really sensible for Medicare to spend tens or hundreds of thousands of dollars on medical costs in the last three or four weeks of a terminally-ill patient’s life? Wouldn’t good hospice care be more reasonable, far less expensive, and perhaps even more comforting to the patient and their family?

In the end, there are market realities. Some things we simply can’t afford, no matter how much we would like them. Some things (such as doctors and nurses) are in short supply and have to be rationed, whether we like it or not. The current Medicare system has so distorted the medical market that we might even be better off without any government program. Yes, without Medicare some people wouldn’t get the treatments they need (but some don’t get it now). But if we retirees actually had to pay for our own medical services, or at least pay a good portion of the costs, we would be forced to shop around a lot more carefully, and doctors, hospital, drug companies and medical supply houses would therefore have a strong incentive to cut their costs and prices.

In any case, it a clear that we as a nation simply can’t afford the absurd costs that the current Medicare system will pile up in the coming years. We can either choose to rework the system into a more rational one now, or wait for it all to fail catastrophically in a decade or two.

Cutting Social Security future liabilities

Of the $3.760 billion of expected government spending in 2012, the largest share, $762 billion, or about 20 percent, will go to Social Security. But Social Security benefits are financed by contributions by employers and employees that, until this year, exceeded benefit payments. The Social Security Board of Trustees expects contributions to again support benefits in 2012 through 2014. After that, as the population ages, contributions will not be enough and the system will have find money elsewhere. Currently the unfunded Social Security future liability is estimated to be about $18 TRILLION, substantially larger than the nation's entire current national debt (which is about $13 trillion).

Of course Social Security has been putting surplus money into the Social Security Trust Fund for decades, and currently the Trust Fund holds about $2.5 trillion. If that were real money, Social Security wouldn’t have a problem for decades, but unfortunately Congress, under both parties, has been raiding the trust fund regularly for years to pay for politically popular programs, replacing the money with Treasury IOUs. So all Social Security really has in the trust fund is $2.5 trillion in paper IOUs. And so how do we cash in the IOUs? By taxing people more now in and in the future. So in effect, the result is the same as if the Trust Fund had no money at all.

So what would it take to make Social Security solvent for the foreseeable future?

According to the Congressional Budget Office, if the Social Security payroll tax was applied to all income, Social Security would be solvent for the next 75 years. Right now, because of the cap on income subject to Social Security payroll taxes, someone who earns $106,800 a year pays the same amount into Social Security taxes as a billionaire. Raising the income cap gradually over the next 5-10 years would essentially solve the problem.

There is, of course, a lot of opposition to such a proposal, but none of the opponents have suggested a credible alternate means of cutting the portion of the future deficit attributable to Social Security. In the end, there is no free lunch – if we want Social Security we have to pay for it somehow.

Defense Cuts

As one begins to think about where the nation might make sensible budget cuts to get the deficit under control again, the report issued in June by the Sustainable Defense Task Force (which can be read here) is a good starting point for reductions in the defense budget. The task force is by no means proposing that we weaken the nation's defenses, just that we put our money where it does the most good and drop some of the gold-plated weapons programs that really don't have a use anymore now that the Cold War is gone. For example, the F-35 fighter is now projected to cost between $89 million and $200 million PER AIRPLANE just to acquire (range depends on options installed), not to mention the enormous maintenance costs of such a complex system. And this advanced fighter is needed to oppose what enemy?????

Of course these cuts will be vigorously opposed by politicians who would lose jobs in their districts - and defense contractors have wisely put pieces of their most lucrative programs in as many Congressional districts as possible for just this reason.

Dealing with the deficit

As I have noted before, and as many others have also noted with alarm, the U.S. Federal deficit is the "elephant in the room" that all politicians in both parties are trying to ignore. Yet it is a very serious problem, and will take serious (and probably unpopular) moves to get it under control. This graph, based on the Congressional Budget Office's own calculations, which are conservative, because Congress makes them include all sorts of unlikely "savings" in their projections, lays out the problem starkly. The "outlays" line is headed to the roof under the present administration's current budget plans:

Thus far few politicians have offered serious proposals. Rep. Paul Ryan is about the only exception (see his proposals here), but thus far the only response from his colleagues on either side of the aisle has been to ridicule his proposal, not to suggest alternatives.

The Brookings Institute and the New America Foundation have jointly issued a new report outlining a strategy for getting our deficit back down to a manageable level (about 60% of the country's gross domestic product) within the next decade and a half. You can read the whole report here. It won't be popular - quite naturally it requires severe cuts in government spending and higher taxes, and since Social Security and Medicare/Medicaid entitlement programs are by far the largest part of the problem, it will certainly involve unpopular cuts in those programs. And it certainly won't be anything the Obama administration will ever support, committed as they are to increasing the size of government rather than cutting it.

Nonetheless, it is time - indeed, far past time - to begin to have a serious national and political debate about what to do about this problem.

Recommended:I Can Afford Higher Taxes. But They’ll Make Me Work Less.

There is an interesting article entitled I Can Afford Higher Taxes. But They’ll Make Me Work Less in today's New York Times. Yes, the rich can afford more taxes, and it certainly is an appealing, and frequently used, political cliche, especially among liberals, to promise to soak the rich. But there are consequences.

Much of what politicians do makes no sense economically. Minimum wages kill off low-skill jobs. Rent controls create housing scarcities. Higher taxes throttle investment. Subsidies create dependencies. Prohibitions and sanctions create wealthy smugglers. It doesn't take a rocket scientist to understand these things, but it does take a little real-world economic sense. I can't tell if politicians are just ignorant of economics, or if they really don't care so long as their promises get them re-elected.

Recommended: The Paralysis of the State

David Brooks has an interesting Op Ed in today's New York Times, The Paralysis of the State. He asks the interesting question of why it is that government (local, state and federal) can't afford these days the projects that the nation really needs. In past decades government managed to build dams, highways, bridges, and other important infrastructure that supported our economic growth - yet today it is increasingly difficult to finance such projects. Why?

His answer is worth thinking about.

Recommended: The Irony of Manifest Destiny

William Pfaff's new book The Irony of Manifest Destiny is well worth reading, if not comforting (see book list in sidebar for details). A couple of relevant quotations:

The common Western assumption about history is that it moves toward an intelligible conclusion,a belief derived from Western religious eschatology...... In the case of the theory, common to liberals as well as many conservatives, of universal progress toward democracy, the presumption made is that the seeming self-evident superiority of democracy makes it the natural end point of history. A foreign policy of military intervention to speed progress toward this inevitable outcome logically follows. Liberalism in the American sense nearly always sees the increasing complexity and interdependence of modern society, and the advance of technology, science and human knowledge, as evidence of positive change in the moral (and political) nature of humans -- an assumption for which there is no evidence.

and

The proposition that the United States can or should devote the next fifteen,or fifty, years to"making" modem nations of Afghanistan or Pakistan, by means of a massive introduction into these countries of American officials, advisers,and teachers, as well as soldiers to suppress military uprisings or resistance to such an effort, at first proposed by the G.W. Bush administration, seems to me not ignoble, but simply breathtakingly ignorant, impractical, indifferent to historical experience and the political limits on nations, and contrary to the will as well as the interests of the peoples involved.

As you can see, he doesn't pull his punches. Yet I find his arguments well researched and thoroughly persuasive.

That Obamacare "gotcha"

Several people have asked for more information about the IRS $600 reporting requirement mentioned in the previous post. It is discussed in more detail here. I see that Republicans have repeal of this item high on their proposed agenda if they win control of the House this November. I'm not thrilled about the Republicans these days, but I would vote them in just to kill this sort of stupidity, and hope that they don't replace it with some similar stupidity elsewhere.