Wealthy School Districts, Lousy Schools
If you want good schools, spending a lot of money is no guarantee. That's true whether you're talking about aggregate spending numbers, or a more personal concern--the amount of your mortgage. Here's something I wrote on the topic last year.

California Dreamin': Delusions About School Performance can Hurt Families in the Pocketbook

December 10, 2008

If the three most important words in real estate are “location, location, location,” the most important question for families might be “How good are the schools?”

Think about how many families you know who paid as much or even more than they could afford to buy a house because they believe the house is in a neighborhood with good schools.

The poor performance of many high-poverty schools is well known. But in a recently released book titled “Not As Good as You Think: Why the Middle Class Needs School Choice,” the San Francisco-based conservative think tank Pacific Research Institute (www.pacificresearch.org) warns that middle and upper-class suburbanites might need to reconsider whether their outstanding schools are in fact outstanding.

Authors Lance T. Izumi, Vicki E. Murray and Rachel S. Chaney focus their attention on California schools, but their work is valuable to anyone interested in real estate or education.

The single largest section of the book describes the academic state of what the authors call “underperforming” schools. First they identified “nonpoor schools,” or schools in which less than one-third of students participate in the school lunch program. Then in a crude but powerful test, they identified as underperforming any school that “had over 50 percent of students below proficiency in at least one grade level” on the state’s English or mathematics exam.

The result is “The Upscale Real Estate Guide to Underperforming Schools,” a pull-out feature of the book that lists 284 “underperforming” public schools, some with rather upscale demographic profiles.

Nearly all the schools on the list have a ZIP code in which the median home value is more than $300,000. More than half have a value above $500,000. One even has a median value of $1.63 million. Clearly, many people pay lot of money for the opportunity to send their children to these schools.

The book contains narrative descriptions of famous and wealthy communities in which these schools reside. They include Silicon Valley; Burbank (home to NBC); Huntington Beach (known as “Surf City USA”) and several towns in wine-producing Sonoma County.

We read, for example, that the San Francisco Bay area city of San Mateo is home to Hillsdale High, which boasts a ZIP code where the median home price is $867,000. Not even 8 percent of students are in the federal lunch program, yet only 40 percent of 11th-grade students are proficient in English. More troubling, performance on that test drops 27 points between the ninth and 11th grades.

The underperforming schools are found throughout the state, in both the more expensive coastal cites and the less expensive interior ones.

Political allegiances make no differences. Underperforming schools are found in “red” areas such as Orange County, in Southern California. They are also in the famously “blue”—and famously wealthy—San Francisco Bay area. By the way, those schools are not in poorer Oakland, but in prosperous Marin County, where George W. Bush lost twice, both times by a landslide.

Some schools on the list are in cities that host the state’s leading institutions of higher education, including Berkeley, San Diego, and Santa Cruz. Carlsbad and Chino are among the cities in which close to a quarter of the population has a graduate degree. In other words, these are not communities of struggling-to-survive families with minimal education.

In an illustration of the schizophrenic nature of school ratings, some of the schools on the underperforming list have been dubbed by the state as a “California Distinguished School.” One example is the Richard Gahr High School in Los Angeles County. Only 47 percent of ninth-grade students there are proficient in English. And don’t blame immigrants: only 6.5 percent of the students are “English-language learners.”

As with any study, there are some limitations to this book. The narratives read too much like a travel guide at times, even if they do show that famous cities can have weak schools. One sharp feature of the narratives is the interspersing of positive parent-written school reviews from the web site Great Schools (www.greatschools.net). The proximity of warm words and cold, hard, facts is jarring.

I wish the book had put the real estate prices into perspective. California’s real estate prices are legendary, and I found nothing in the book to compare the home values of the selected districts to the state.

The online version of the book repeatedly mentions the “Upscale Real Estate Guide.” I had to rely on a web search to find it, however. As it turns out, a blogger had a link to the guide as a separate document, which is back on the Pacific Research site.

The book has other large sections that I haven’t touched upon here, so there is much for policymakers and citizens alike to consider. The costs, both emotional and financial, that homeowners incur by getting into “good schools” may cause them to overestimate actual school performance. That can lead to a complacency that is harmful to us all, especially the children.

Labels: K-12 education

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Tax Day 2008.
It's the ugliest day of the year, isn't it? Pay your taxes for all those counterproductive, wasteful federal and state programs--and a handful of useful things, too.

But the burden of government is not confined to what happens when you write a check. There's also the time required to gather forms, assemble papers and take on other tasks. For example, it took an hour out of my day last week to drive to my tax-preparer's office to pick up the forms.

By the way, here's one (often mentioned) way to make our tax burden sensible: do away with withholding. Make everyone write quarterly checks, or even a yearly one, for their taxes.

Did you know that you work until late April every year just to pay your taxes? This year, April 23 is "Tax Freedom Day," says the Tax Foundation.

If you need a pick-me-up, try out their blog post tax humor.

No, I didn't find it that funny, either.

Labels: Taxes

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If we remove schools from the culture wars, maybe we'll find better schools

Since this next item came out on Christmas Eve, it was rather topical on its date of publication. Nothing much has changed since then, however.

December 24, 2007

One reason why children don’t know as much as they should may be that we expect public schools to do too much—or at least do things they aren’t suited for.

We expect schools to teach science, math, and literature. But we also want them to promote social cohesion and national unity.

The National Education Association says “A pure voucher system would only encourage economic, racial, ethnic, and religious stratification in our society. America’s success has been built on our ability to unify our diverse populations.” The group People for the American Way agrees, saying “public education is the cornerstone of a democratic society.”

Meanwhile, some conservative groups such as the Eagle Forum assert that public schools have lost their way by venturing into multiculturalism and undermining parental authority.

Regardless of their specific position on questions of the day, then, various groups of different stripes agree that promoting social unity is a key role of schools.

But Does it Work?
Do schools in fact serve a cultural as well as an academic purpose? The notion that our public schools are an essential factor in creating an essential unity in this country was challenged earlier this year by Neal McCluskey, a policy analyst at the Cato Institute (www.cato.org). McCluskey’s report, "Why We Fight: How Public Schools Cause Social Conflict,” offers a catalog of school-centered social conflicts that stretches back more than 160 years.

McCluskey’s report has three main components. The first is a catalog of cultural disputes during the 2005-06 school year. The second reaches back to the American founding and moves toward the present to discuss reformers and controversies. The third section argues that economic and freedom, not public schools, has brought social integration.

McCluskey clustered the events of 2005-06 into eight “national flashpoints.” Intelligent design was the turning point for school board elections in and Kansas and Ohio. Freedom of expression, or the perennial dispute between students’ desire to speak out on political issues and administrators’ interest in keeping social peace, was a second. The remaining flashpoints were race, book banning, multiculturalism, sex education, homosexuality, and religion.

The segment on American history shows that these controversies are timeless. A community is divided over whether schools should have bilingual education or practice immersion. Is this a scene from 2005? Could be, but it’s not. Actually, it’s from the 1880s, when ethnic Germans in Illinois and Wisconsin vigorously opposed a plan for compulsory education that would have mandated English-only instruction.

The desire to see religious views represented—or removed—from schools is nothing new, either. Violent confrontation wracked Philadelphia in 1844. The dispute? Should the Catholic Bible or the Protestant one be used to teach reading?

Government was instrumental in perpetuating slavery, and Jim Crow laws regarding education continued the legacy, until Brown v. Board of Education was decided in 1954. One response to the shameful legacy of slavery, the forced busing of children for racial purposes, has been met with grumbling among blacks and whites alike, if not worse. In the 1970s, the mayor of Boston compared the dispute over busing there to the atmosphere of Belfast, Ireland. So much for schools being a source of unity.

Government=Politics
The lesson behind these examples? When the schools are run by government—and that’s what we mean when we talk about “public schools,”—differences in opinion will inevitably be political. Government officials make the decisions about school speech, religion, and other subjects on behalf of students and the taxpayers who fund the schools. How can politics not be involved?

Politics means disagreements, and disagreements over education can get especially nasty. The political debate over education can heat up for several reasons, which might be summed up as “That’s my money;” and “This is my country,” and “That’s my child.”

“That’s my money” refers to the taxes that one pays to schools. Many people will some decision of the school that they don’t like, and object to how the money is spent. That’s true of any unit of government.

“This is my country” refers to the desire to see one’s views on value questions reflected in public policy. As long as a unit of government is in the business of endorsing a particular view of sexuality, for example, people are going to pay attention to that unit of government. In this case, it’s the schools.

“That’s my child” is of course the most personal concern and provides the strongest of motivations. Opting out of a local school district can incur substantial costs, leaving plenty of motivation to fight.

McCluskey argues that school choice is the only solution to social disputes, and that the pursuit of commerce can promote social integration. I tend to agree with him. A one-size-fits-all system has not brought about social peace. Benjamin Rush, one of the founders of America, proposed that states aim to produce a “more homogenous” population through a system of government schools. That strikes me, and I suspect people of various political stripes, as a profoundly unattractive idea.

Voluntary associations such as churches and synagogues, neighborhood associations, business groups, trade unions and fraternal organizations, on the other hand, promote social bonds without the entanglements of government. McCluskey adds that commercial interchange among various groups promotes these other bonds.

If we abandon the idea that the political process is the best way to determine curriculums and run schools, perhaps we’ll have enough energy to make sure that Johnny can read after all.

Labels: K-12 education, Legal-Ledger

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Boosting Public Parks through Private Parties

Springtime is underway, which means that visits to local, state and federal parks will soon increase. One way improve their condition is to make more use of the private sector, as I described in this column from last year.

Funding public parks through private incentives

August 6, 2007

It's summertime, which means that a lot of people are enjoying public lands, including state parks. The dire financial woes of national parks is well known, but state parks are not immune to trouble. The state-government-focused news service Stateline.org says, "Insufficient state funding and rising costs have left some state park systems struggling to make ends meet."

So what should park systems do? Some have responded to having less by doing less. They've cut back on maintenance and offer fewer hours of service. Some non-profit groups and legislators, meanwhile, want to promote hiking trails and other outdoor amenities by hiking sales tax rates.

But is there any other way of addressing the needs of parks? According to the folks at PERC, the Property and Environment Research Center (www.perc.org), states need to push their park systems to be entrepreneurial and self-supporting, embracing private-public partnerships, voluntarism, and differential pricing. It's an approach that has detractors. It is also one that should be used whenever possible.

A report published in October 2006, "State Parks' Progress Toward Self-Sufficiency," surveyed 30 parks systems across the country. PERC found that states are turning to "expanded user fees, concession contracts, 'friends' groups, corporate sponsorships, and endowment funds."

Raising entrance fees to parking lots, camp grounds, and other park features is one option. A variation on that model is differential pricing, just like movie theaters or restaurants. Camp on the weekend during the high season, and you pay more.

State are also turning to contracts with private vendors to run food stands, lodging and reservation services, golf courses, and other features that may have been operated in the past by government employees. The state receives a portion of the proceeds, while the vendor assumes the financial risk and burden of being the employer.

"Friends" groups, meanwhile, are useful for raising money, adding another stream of user fees. Delaware drew upon the Delaware Community Foundation to establish a trust fund to help finance state park operations.

Friends also provide labor for maintenance tasks. In New Jersey, for example, volunteer groups provide the labor equivalent of 55 full-time employees.

Some states take advantage of the natural assets of the parks to support their park systems. Maine sells drinking water to the Poland Springs Bottling Company. Drink a bottle of Poland Springs, and support Maine parks. If you're looking for a ski destination this winter, head to Vermont. Its parks are nearly entirely self-supporting, aided by the state's practice of leasing land for ski resorts.

There are several benefits of running parks more like a business. One is that it puts parks more in touch with the desires of its visitors.

In an entrepreneurial model, park revenues return to the park system, or even the individual park, rather than go into the state general fund. This way, park managers have personal incentives to listen to park users. The responsive managers have a better handle on the wants and needs of their customers than do staffers working in offices far away in the state capital.

Health care and education take up the bulk of most states' budgets, and parks can easily get crowded out. The demand for health care and education dollars isn't going to subside anytime soon, leaving parks out as a poor cousin.

User fees raise hackles, of course. One argument is that citizens should not be charged to use a public asset. That's a plausible argument. Yet in a variety of situations, "public" doesn't mean "free of charge." Think of municipal-owned golf courses, events at public arenas, and even late fees or rental fees at the public library.

Another argument is that user fees require citizens to pay again for parks already purchased. Yet that ignores the cost of ongoing maintenance. Every homeowner knows that the acquisition price is only one element of the cost of ownership.

Applying the rules of business will also offend those people who object to commerce in parks, or commerce period. For many of us, part of the enjoyment of being in a park is getting away from the world of money and commerce. Still others take it further and believe that letting someone make a buck through offering park services is offensive on its face, a near sacrilege.

Yet as economics 101 reminds us, the world is filled with scarcity: unlimited wants and limited means of fulfilling those wants. The exchange of dollars for services—in this case, access to recreational opportunities—is one way of responding to that situation. Making parks more entrepreneurial can make sure that these vital treasures aren't neglected in the circus of the budget process.

Labels: Legal-Ledger, privatization

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State and Local Regulations Drive up Cost of Housing

Yet another chapter in a book that could be titled "There's no such thing as a free lunch." This theme: regulations meant to control the size, appearance, location, design and construction of housing also drive up the price of housing--sometimes dramatically.

Housing Policy Perils

Seattle: 44 percent of housing prices driven by regulations
February 25, 2008


Any student in Econ 101 can tell you the two words that determine the price of any item: "supply" and "demand." Two other words, however, are almost as important: "government" and "regulation."

Regulations allegedly bring benefits, such as improvements in product safety. But they also add costs to the things we buy, including our housing. Laws that govern who can build a house, where they can build, what they can build, and how they build it all figure into the cost of housing.

It's easy to overlook or underestimate the affects of regulations. Theo Eicher, a professor of economics at the University of Washington in Seattle, looked at the relationship between regulation and housing prices. Though his report focuses on five cities in Washington, it has lessons for people in cities everywhere.

Eicher’s report, "Growth Management, Land Use Regulations, and Housing Prices," is available on the university’s web site.

To study the relationship between housing prices and regulations, Eicher used a database compiled by the Wharton School of Business at the University of Pennsylvania. The database covers 2,730 cities nationwide and includes 70 variables for each city, each having some effect on the supply of housing. The variables fall into three categories: urban growth boundaries, density requirements, and construction delays caused by regulations. Some of them are binary (either the regulation exists or it doesn’t), while others are on a scale (very little, very much and so forth.) Eicher used the common technique of regression analysis to analyze the data.

Findings

Of the five cities in Washington, the effect of regulation was most significant in Seattle. Inflation accounts for some of the increase in housing prices. But after that, 80 percent of the increase in the median housing price between 1989 and 2006 was due to government land-use regulations. In 2006, the median price was a staggering $447,000, and 44 percent of that was due to government regulations. Eicher discovered similar though not as dramatic results in Tacoma, Vancouver, Everett and Kent. Statewide regulations were important in all cities. City regulations were much more costly in Seattle than in the other cities. In Seattle, then, city regulations compounded the cost of state regulations.

The data tables in Eicher’s report have some interesting points for Minnesotans. Hawaii is the state with the costliest land-use regulations. Minnesota ranks 17th, meaning that only 16 other states have greater restrictions. It is slightly more restrictive than Wisconsin (19) but much more restrictive than South Dakota (47), and more so than any Midwestern state. The fact that Minnesota is a regional outlier shows up in the rankings of cities as well. Of the top 50 major metropolitan areas, the Twin Cities rank as the 22nd most expensive, higher than any other Midwestern city. (Milwaukee is 25; Chicago is 29; St. Louis is 45 and Kansas City is 47.)

Implications

Cities, states, and regional governments impose a variety of requirements on the use of land. Portland, Oregon (rank: 24) uses an urban growth boundary, as does Minnesota’s Metropolitan Council. Other regulations include comprehensive plans; restrictions on so-called McMansions; set-aside requirements for natural habitats; impact fees for new housing; design review boards; and so forth.

Each regulation on the development and use of land is implemented with specific goals: combating sprawl; preserving the character of an area; preserving the natural environment from change; or providing for green space. New restrictions are being proposed all the time, including those responding to global warming, promoting mass transit and other ostensibly worthy goals.

Each restriction has a cost. Statewide and regional rules tie the hands of local officials. As Eicher demonstrates, regulations have financial costs that affect the affordability of housing. True to his calling as an economist, he lays out the numbers and leaves the decision of what to do with them to others. “This analysis,” he writes, “does not address whether more regulations are better or worse.”

So the political scientist, the policy analyst and the citizen all must ask “are we better or worse off as a result of these regulations?”

It depends on who you are, and where you sit. If you can afford expensive housing, you may think that these regulations are good: They keep out the riff-raff and (through green space regulations) promote a visually appealing environment. If you’re already a homeowner, restrictions on the supply of housing make your house more valuable. If you can’t afford expensive housing, these regulations aren’t so useful.

As with laws and regulation generally, not all the effects of land use controls are visible. We can see the impact fees being added to the city budget. We can see the parks and green space that they fund. We can count the number of people who attend a public meeting. Hey, democracy in action!

But there are many important things going on that we can’t see: Some people are denied the opportunity to purchase a house because society has, through government, increased the cost of housing. (Since apartments substitute for houses, it’s likely that there is an effect on rents, too.)

Regulations are established through the political process. As Eicher points out, they have real-world consequences.

Labels: housing, Legal-Ledger

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Minnesota is #1 for Charter Schools
Here’s a #1 ranking that Minnesota can be proud of. According to an annual report card report card published by the Center for Education Reform, Minnesota has the strongest charter school laws of any state. That is, charter schools are more secure here, and have a better chance of having an effect on education than anywhere in any other state.

Under the center’s framework, a strong law is one that makes it relatively easy to start and operate a charter school, and have fiscal and legal independence from school districts. Incredibly, in some states charter school applicants must first secure the permission of the local school district within whose boundaries they will operate. That’s like making Burger King ask for permission to set up a store inside a McDonalds.

Minnesota gets credit for, among other things:

• Giving charters legal and fiscal independence;
  
• Not imposing a cap on the number of charters;
  
• Allowing a variety of organizations to approve and oversee charters (in addition, of course, to the state department of education).

Despite the fact that the national charter school movement started in Minnesota, charter schools still face opposition from vested interests. In the Winter 2008 edition of Education Next, Ember Reichgott Junge describes how her support of charter schools was one factor in her loss to Keith Ellison in the Fifth District primary.

Labels: Charter schools

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No Prices, No Progress
Single payer makes health care simple, advocates tell us. How cute and charming. And nonsensical--to try to operate without prices.

When I read that under a proposal that draws at least some interest from Minnesota’s Rep. Keith Ellison, "Physicians and other health care staff are reimbursed within 30 days of service ..." my first thought was "And what price do they get reimbursed at?"

Before I clicked through to the original article, I thought “Perhaps it’s some made up price.”

And so I continued reading “ … and that reimbursement would be mandated to be at current pay grade.”

Pay grade? Perhaps Mr. Segal, legislative aide to Rep. John Conyers (D-Mich.) is referring to the Diagnostic Rate Groups (DRGs) used by Medicare. Great. If there’s any government program that is more convoluted and complicated than the internal revenue code, it’s Medicare and its DRGs. Yeah, right. More price-setting by government.

What we have in single-payer systems … or at least any single-payer system that incorporates enough of the population to have market power … is an attempt to allocate resources without prices. When you don’t use prices, you end up—when government is the purchaser—using politics. And with that comes rationing, political favoritism, misplaced priorities (bridges to nowhere), and a host of other ills.

This isn’t to say that that American health care policy is great. It isn’t. Government has too much power. So do corporate HR departments, and “non-profit” hospitals that operate in a quasi-monopolistic environment.

Can the status quo endure for long? I don’t think so. We’re going to complete the government takeover of health care, in which case politics will decide who gets treated, how diseases are treated, and so forth. Or we’re going to make a greater use of prices, in which people actually ask for the price of a treatment, medical providers actually have real prices, and trusted third parties help people decide among options.

For further reading on the topic, I’d recommend three resources. One is The Cure: How Capitalism Can Save American Health Care and Who Killed Health Care? are two great books. Who Killed Health Care? sketches out how the medical industry will have to adapt to greater use of market forces to fulfill its potential. Another resource is the web site State House Call, which focuses on state-level efforts to bring either greater political control or greater freedom to health care.

(First posted at Look True North)

Labels: Health care

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Show Us Our Money
With the new year well underway, it's time to start thinking of ... yep, April 15.

So how well is your state and local government spending your hard-earned tax dollars? Not always well.

Fortunately, a new coalition has developed to let people see what's going on across the states. It's called Show Me the Spending.

Minnesota has enacted a law letting residents search for information on state grants and contracts valued at over $25,000. (It's scheduled to go online in 2008.) Missouri's governor has issued an executive order creating the Missouri Accountability Portal.

Other states with a publicly accessible database include Kansas, Nebraska, and Texas. An obvious omission is Michigan

If the legislature is going to take more of your money, it ought at least make it easy for you to find out how they're spending it. (permalink)

The "Decline" of the Middle Class
The populist card is getting played a lot these days. Just to show how terrible things aren't, the crying is about the middle class.

As George Bullard reminds us, though, one reason for the decline of the middle class is the growth of the upper class: People are, to borrow a line from a 70s TV show, "moving on up."

Labels: Economics

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Writing for Pay and Pleasure.
It's been noted in the blogosphere, often by economists, that people give away something valuable (their time) when they write free of charge on the web.

Now, sometimes you pay nothing because, face it, you get nothing in return. But some blog authors do give readers something of value: information, insight, edification, and so forth. And blog authors get in return self-promotion, the ability to speak out, a forum of constructing rough drafts, a place to talk out loud and get feedback through comments.

If you remember your Econ 101, there's something called the production possibility frontier. It's a representation of trade-offs. The classic case is guns versus butter. In the writing world, it's writing for free versus writing for pay.

Some of us don't have that trade-off, writing all the time for pleasure rather than pay. I've certainly done my share of writing for pleasure, though that has waned a lot this year as I have devoted more time to customers who pay not only for writing, but for behind-the-scenes plate-spinning.

So consider this post a replacement for the Merry Christmas post, the year-in-review post, and New Year's Resolution post.

Keep writing, keep reading, and keep engaged in life, whether that includes policy and politics or not. (permalink)

Who Should Control Your Health Care? You or Politicians?

One of the hottest issues of the day is health care. The following commercial is encouraging to anyone who believes in sensible state policy. Why? It's a demonstration that people who understand that markets work are fighting against the lure of government-run health care.






Did I just say "lure of government-run health care?" When you consider the service provide by many government agencies, you have to wonder.

Granted, some private companies in the health care sector leave much to be desired. One reason: they're sheltered from competitive forces through government policies that encourage consolidation and favor everyone but individuals have control over individual lives.

The alternative to government-run health care isn't the status quo. It's the same thing that we use to rely on improvements in most areas of life: consumer control and sovereignty.

The video points out that in Canada, government rations the delivery of health care. Truth be told, there's always going to be rationing in health care--just as there is rationing in the delivery of cars, electronics, food, housing ... just about anything you can name.

In a free society, the price of a good or service serves a rationing function. "Yeah, I'd like that Mustang, but I think I'll stick with my 12-year old Civic." The fact that something is related to health doesn't mean that we should do away with the price mechanism, along with competition among service providers.

If you want to do something about the fact that health care is sometimes--not always--a matter of life and death, the answer is not to turn it completely over to the dictates of planners, but to offer monetary subsidies to the poorest of the poor. For example, we have government hand out food stamps--not force everyone to purchase food through a government-run grocery store.

Let prices work!

For more on the subject, see the National Center for Policy Analysis, Consumers for Health Care Choices, and State House Call.

Labels: Health care

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On Immigration
I'm sometimes amazed at how much attention "them foreigners" get. A large number of people--I have long since forgotten how many--think, for example, that aid to foreign countries is a significant portion of the U.S. federal budget. It's not.

The concern about foreigners has of course been on the national scene this year due to the various questions surrounding the treatment of illegal aliens. What follows is a column on the subject that I wrote for the Saint Paul Legal Ledger back in July. There's only so many things one can say in a short column. One thing that I started to mention there was that many of the alleged problems caused by immigration--even of the illegal sort--can be addressed apart from how we resolve the illegals question.

The original publication is dead-tree only, so the links are not live.

Immigration debate creates strange bedfellows

It's easy to stick labels on people and organizations: Democrat and Republican, liberal and conservative, blue and red. But as the recent debate on immigration shows, labels aren’t always helpful guides.

Both the Cato Institute (www.cato.org) and The Heritage Foundation (www.heritage.org) can be called conservative organizations. Both are critical of expanding the size and scope of the federal government. Both are in favor of devolving federal power to the states. On President George Bush's immigration plan, they both …actually, they both have offered different responses.

The Heritage Foundation found little to like about Bush's ideas. It called the proposed guest worker program "a bureaucratic nightmare."
In another rupture of an allegedly solid coalition, the foundation’s chief expert on welfare policy, Robert Rector, tangled with the putatively conservative White House over the bill. Rector emphasized the social cost of immigration. For example, he wrote that "the cost of amnesty alone will be $2.6 trillion once the amnesty recipients reach retirement age."

The Cato Institute, on the other hand, took a more sanguine view. Daniel Griswold, a trade policy expert, explicitly called for some sort of guest-worker program. He further argued that "Despite the claims by critics of immigration reform, America is not being 'flooded' with immigrants." Rather, he said, "A higher share of U.S. residents was foreign-born in every decade from 1860 through 1920 than is today."

High-skilled labor gets a lot of love. But are the poorly skilled workers a drain on the economy? Do they impose significant cost on the welfare system (as Rector has argued), or steal jobs from Americans?

Griswold argued that even low-skilled illegal immigrants are a net plus to the economy, and points to Labor Department numbers to buttress his claim. Our workforce, he said, is getting better educated, which generally leads to higher productivity and thus higher wages. That’s all good, but it also means that fewer people will be interested in the low-skilled jobs that will still be around. Labor-saving devices can go only so far.

The standard (perhaps clichéd) argument for encouraging such immigrants is that they "do jobs Americans don’t do," which suggests that Americans are simply lazy.

But as a nation, we’ve upscaled and supersized our housing, automobiles, and everything else. Why wouldn’t people, especially those who have the education to take on higher-skilled jobs, think any differently about employment? Each generation sets its sights higher than previous ones. To meet the need for low-skilled labor, then, Griswold endorses a guest-worker program.

Joining Cato in endorsing the basics of the now-failed immigration plan is an odd collection of groups that as a matter of course favor an increased role for government, putting them at odds with Cato in many instances.

Citizens for Tax Justice (www.democracyinaction.org), for example, describes itself as "wiring the progressive movement." In a recent newsletter, it said there is "no rational reason to fear that immigrants will drain the federal government's resources." It pointed to a report from the Congressional Budget Office suggesting that the bill will shrink the federal budget deficit.

Another group of the left, the Century Foundation (www.tcf.org), also disagrees with Heritage and sides with Cato. Bernard Wasow wrote that in the debate between whether "an increase in supply of unskilled immigrants should drive down the relative wage of the unskilled" and "optimists, who say the evidence is lacking," the optimists are right.

He points to California, the ideal state in which to test the proposition that low-skilled workers depress the wages of the native born. Citing the work of University of California scholar Giovanni Peri, Wasow says that since 1990, wages have gone up in the state because of immigration, not despite it. The more highly educated have benefited more than the low-skilled workers—supporting the claims of some immigration critics—but both groups have enjoyed rising incomes.

Economic impact is only one element of the immigration debate, however. There’s the question of multiculturalism versus assimilation and national security, to start with. Even though guest-worker programs may make sense economically, the cultural clashes found in Germany, which makes extensive use of guest workers, may give us reasons to pause before embarking on a similar path.

One thing’s for sure: You can expect some more odd-bedfellow politics on the question of immigration.

Labels: Legal-Ledger

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Educational Choice in Minnesota
Minnesota is among the leaders in school choice in the country, though that's not saying much.

Charter schools flourish, and the state has both a tax credit and a tax deduction program for education expenses.

A new report from the House Research department describes the two different tax plans.

Minnesota has both a tax credit and a tax deduction provision. A tax credit, of course, is better for the taxpayer than a tax deduction. The former reduces your tax obligation dollar-for-dollar, while the latter works only on the margins.

(For example, a $1,000 tax credit reduces your tax obligation by $1,000. A $1,000 deduction reduces the obligation of the person with a tax rate of 5 percent by, roughly speaking, $50. Big difference!)

Minnesota being Minnesota, the plans are "progressive." The tax credit is available only for those with lower incomes; those households with an income above a threshold must make do with the tax deduction.

But the deduction has this going for it: it can be applied towards private school tuition. The credit cannot.

The deduction is not "refundable," meaning that you must actually have a tax burden to qualify for it. That's a blow to low-income families, who would be helped the most by any measure to allow for payments to private schools.

In either case, the tax provisions are modest: the average credit was $269 in 2005; the average deduction was $73.

One useful part of the House Research brief is a listing of similar provisions in other states.

Labels: K-12 education

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The Moral Case for School Choice.
There are many reasons for enacting school choice. Improving educational achievement and saving money are two of the big ones. But Richard John Neuhaus points us to another one that doesn't get as much play as it should: Enacting choice is the moral thing to do.

He points to an earlier essay by John Coons, who writes:

Shifting educational authority from government to parents is a policy that rests upon basic beliefs about the dignity of the person, the rights of children, and the sanctity of the family ....

Coons argues that school choice is often touted in largely economic terms: School choice will produce better-educated children who will in turn serve us well in a competitive world economy. The danger, he sees, is that we could in theory produce spectacular academic results by retaining the government-control model.

Now, Coons is writing in 1992, before school choice programs got off the ground (at least much off the ground), so his ignorance of the proven benefits of choice can be forgiven, even if it is a bit jarring.

Still, he's onto something. Even if, by some odd twist of fate, a civil servant somewhere came up with a magic cure for public schools that still squashed parental choice, it would be lacking. "Choice," he says, "needs to be loved for its own sake, or at least for a reason more noble than its capacity to make life better for the producers."

Among the reasons for the moral superiority of choice:

The current property-based system is filled with economic and racial injustices and religious strife. Meanwhile, it limits the ability of parents to exercise their free speech rights: "Children are the books written by the poor."

Lack of school choice, further, robs the poor of dignity by reducing them to a passive status in their children's education: Shut up, the school professionals say, because we will determine where which school your child attends, and what happens there.

Neuhaus, by the way, introduces the topic by pointing to the concerns of middle-class parents:

The reality is that most parents in America are, wisely or not, more or less satisfied with the government schools that their children attend. They may have a twinge of conscience about their selfishness, but the teachers-union propaganda about vouchers taking money away from their own schools is powerfully effective. And, they understandably ask, whether caring about your own first is really selfishness or the exercise of parental responsibility. The brutal fact is that twinges of conscience can be easily stifled when they come up against self-interest.

What to say in response? One fact is that those schools are not nearly as good as those parents believe. Another sad fact for school reformers is that there's a great misunderstanding and ignorance of how markets can improve education.

(Thanks to Chad at FratersLibertas for the pointer to Neuhaus).

Labels: K-12 education

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The Dark Side of Ethanol
Has ethanol jumped the shark? I hope so. Here's an article I recently wrote on the subject.

October 8, 2007

Popular yes, but there is a dark side to ethanol

What would you call a public policy that raises the price of food and other products for Americans, degrades the natural environment, enriches a few well-connected companies, fails to live up to its promises, and threatens half a billion people with starvation?

Rather popular, for one thing.

Since 2001, ethanol production has nearly tripled and the number of ethanol plants has more than doubled.

How has this come about? As it turns out ethanol is not merely a good idea — it’s the law.

And it’s bi-partisan. Members of Congress love it, and presidential candidates who wish to win in the Iowa caucuses learn to love it. In the Midwest, at the state level, Wisconsin Gov. Jim Doyle, a Democrat, and Gov. Tim Pawlenty, a Republican, cheer it on. Minnesota, in fact, requires that all gasoline sold in the state contain 10 percent ethanol, and Gov. Pawlenty would like to double that mandate by 2013.

The federal Energy Policy Act of 2005 calls for 7.5 billion gallons to be on the market by 2012, compared with 3.5 billion gallons in 2004.

In addition, ethanol refineries, touted as engines of economic development, get tax credits, making some previously unprofitable operations worthwhile. Meanwhile, more energy-efficient imported ethanol (mostly from Brazil) faces a stiff 50-plus-cent-a-gallon tax.

Negative Implications

The Ethanol-Agricultural-Political Complex, if I may coin a term, has lately been losing some of its luster. On September 24, the New York Times reported that the ethanol boom “may be fading” in a glut. Production has expanded beyond distribution capacity.

On October 1, the Wall Street Journal reported that some ethanol plants are being “squeezed to the point of bankruptcy.” The price of a gallon of ethanol has dropped from $2.50 from the end of 2006 to $1.50 now. Of course, the Iowa presidential caucuses are coming up, which could, in the current environment, lead to promises of a federal bailout.

Besides the costs to taxpayers, there are a number of other problems with ethanol besides its current bubble-induced slump.

C. Ford Runge and Benjamin Senauer described many of these problems in a recent article in Foreign Affairs magazine, a publication of the Washington, D.C.-based Council on Foreign Relations. (Runge is a professor of applied economics and law and director of the Center for International Food and Agricultural Policy at the University of Minnesota. Senauer is professor of applied economics and co-director of the Food Industry Center there.)

Ethanol production could consume half of the corn production in the United States. The result would be rising food prices, not only for corn but for foods that use corn for feed: beef, chicken, pork, eggs and milk to start with. In addition, farmers may forgo planting other crops such as wheat, sending wheat prices up.

Runge and Senauer wrote: “In a study of global food security we conducted in 2003, we projected that given the rates of economic and population growth, the number of hungry people throughout the world would decline by 23 percent … so long as agricultural productivity improved enough to keep the relative price of food constant. But if, all other things being equal, the prices of staple foods increased because of demand for biofuels … the number of food-insecure people in the world would rise by over 16 million for every percentage increase in the real prices of staple foods. That means that 1.2 billion people could be chronically hungry by 2025.”

Rushing to action

Why, despite these negative consequences and limitations of ethanol, is ethanol popular among public officials?

The first is the imperative to do something. It’s hard to see a problem, real or perceived, and take a hands-off approach. Instability in the Middle East, global warming, and the depopulation of much of rural America are among the reasons one might cite to “do something” to promote ethanol.

A related reason is that it’s hard to see secondary and tertiary effects. It’s easy to say “Look at this! We’re reducing the consumption of gas by X billion gallons.” It’s more difficult to keep in mind the ripple effects, such as those on food.

Failing to think economically is another factor. Sure, it’s easy to say “let’s stick it to those oil tyrants by growing our own fuel.” But if we decrease our purchases from say, Saudi Arabia, the Saudis can easily sell their oil to someone else.

There’s also the desire among public officials to be Greener than Thou. While specific environmental policies may be controversial, there’s a widespread desire to be “green.” So “grow our own fuel” sounds like a smart thing.

Don’t forget economic populism. It’s easy to say “So we’re propping up Farmer Joe. Better him that some foreign country.” Forget for a moment that Archer-Daniels-Midland and other large companies will benefit the most.

Finally, there’s the financial encouragement. I put this last because far too often pundits and activists resort to crude materialism: Mr. Jones supports policy Y only because he receives money from industry Z. Ms. Smith thinks A is a good policy because she is employed by government agency 1-2-3. It’s true that money often follows conviction, but conviction also follows money: Lobbyists don’t only buy friends — they reward sympathizers.

Some, including Gov. Pawlenty, staunchly defend ethanol welfare on the grounds that the energy sector is already heavily subsidized. Perhaps it is. But we ought to remember that extending the number of subsidies brings new distortions and problems.

Labels: Ethanol, Legal-Ledger

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