Universal Pre-K Dumb-Down

30 Friday Oct 2015

Posted by Nuetzel in Education, Welfare State

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Bernie Sanders, Child Development, Cradle to Grave Socialism, Ezra Klein, Federal funding, Fertility Decisions, Head Start, Hillary Clinton, Negative Incentives, Pre-Kindergarten Education, Pre-School For All, Socialization, Subsidies, Tennessee Pre-K Study, Universal Pre-K, Vox, Welfare State

Can the middle class be sold on federal pre-kindergarten dependency? Is pre-K always beneficial to children? All children? One of many issues agitating the “government-must-do-something” crowd is universal pre-kindergarten. It’s a favorite topic of the Socialist-Democrat Bernie Sanders and, more recently, it became a campaign promise from the Democrat-Socialist Hillary Clinton. It’s typical of the freebies these two presidential candidates are compelled to promise their base. While federal funding of universal pre-K is often billed as way to assist low-income working families, the subsidies proposed are not well-targeted: Clinton’s proposal calls for pre-K subsidies for middle-class families as well. A “Pre-School For All” proposal by President Obama in 2013 required $75 billion in funding. These kinds of broad-based transfer payments aren’t cheap.

In addition to the expense, it’s not clear that pre-K schooling is beneficial to all children. In Vox, Ezra Klein describes a recent study on the efficacy of a pre-K program in Tennessee (hat tip: John Crawford). The selection of children for the pre-K and control groups was randomized by virtue of a “lottery” for admission in regions experiencing excess demand. Here is Klein’s description of the results:

“At the end of pre-K, the results look pretty much as you would expect: Teachers rates [sic] the children who went through pre-K as ‘being better prepared for kindergarten work, as having better behaviors related to learning in the classroom and as having more positive peer relations.’

The problem is those results dissipate by the end of kindergarten — by then, the group that attended pre-K is no better off than the group that didn’t — and then begin to reverse by the end of first grade. By the end of second grade, the children who attended the pre-K program are scoring lower on both behavioral and academic measures than the children who didn’t.“

Klein cites two other “high-quality” studies (one by Head Start) that are consistent with the findings in Tennessee. He also notes some weaknesses of earlier studies suggesting that pre-K provides developmental benefits.

Some prominent advocates of pre-K insist that there are long-term benefits that the recent studies fail to capture. If so, it is hard to square that belief with such negative results after three years. I suspect that there are significant developmental rewards for children who spend their days with family members or even family friends, and I am skeptical that improved socialization can be gained from full-time attendance at a public facility. Perhaps some children benefit, but clearly not all.

None of this is to suggest that low-income parents would not benefit economically from additional subsidies for early education. To the extent that the parents are able to earn more income, the entire household will benefit and perhaps even society will benefit. But this is a social safety net issue at its base, not a broad-based social need. Ideally, one’s prospects for income should have a strong bearing on fertility decisions. Individual families should not expect others to bear the costs. And as for the safety net, let’s face it, great parts of it would be unnecessary in the absence of the negative work and family incentives inherent in many transfer programs. Neutralizing the costs of raising children compounds the bad incentives.

Like so many other statist misadventures, the populist appeal of universal pre-K is a desire for a freebie at the expense of others. The politicians Sanders, Clinton and Obama understand that, and they recognize it as another pillar of support for the great federal highway of cradle-to-grave serfdom.

Bernie Sanders Wants To Deal… Your Property

18 Sunday Oct 2015

Posted by Nuetzel in Socialism, The Road To Serfdom

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Angus Deaton, Bernie Sanders, Chelsea German, Dierdre McCloskey, Fixed Pie Fallacy, Free Stuff, Gary Burtless, Hillary Clinton, HumanProgress.org, Scandinavia, Socialism, Student Loans, The Brookings Institution, The Great Escape

Bernie Sanders is very sincere in his beliefs, and yet he is profoundly ignorant regarding economic growth in the U.S. and the futility of socialism as form of economic organization. Chelsea German, at the HumanProgress blog, presents some simple facts that contradict a few of the Senator’s favorite assertions. In “Senator Sanders and the Fixed Pie Fallacy“, German quotes a line that Sanders has been using for at least 41 years: “The rich are getting richer and the poor are getting poorer.” Granted, his first utterance of that expression might have been in a recession, but aside from those relatively brief episodes, he’s been wrong for the duration. Apparently, Sanders cannot fathom the widespread gains made possible by capitalism and economic growth. Only a “fixed pie” (or worse) would necessarily imply that gains must come at the expense of others, as he seems to believe. (H.T. to Ken DeVaughn on the brilliant gif above.)

One chart in German’s post shows that after-tax income grew in every quintile of the U.S. income distribution from 1979 (pre-recession) to 2010 (post-recession). The chart is taken from CBO data used by Gary Burtless in a piece published by Brookings. Sanders should have a look. However, it’s also important to note that people generally don’t remain in the same strata of the distribution over time. A second chart, from Angus Deaton’s “The Great Escape“, shows that U.S. poverty rates have generally declined over time. Finally, German shows that with a few interruption, GDP has grown over time. All of these facts might be something of a surprise to Sanders. German quotes the great Deirdre McCloskey:

“The rich got richer, true. But millions more have gas heating, cars, smallpox vaccinations, indoor plumbing, cheap travel, rights for women, lower child mortality, adequate nutrition, taller bodies, doubled life expectancy, schooling for their kids, newspapers, a vote, a shot at university, and respect.“

Sanders showcases his lack of familiarity with economic principles almost every time he opens his mouth, or his Twitter account. He recently opined that rates of interest on student loans should be lower than rates on loans for autos and mortgages. Of course, both auto loans and mortgages are secured by valuable collateral and have much lower default rates. It’s a good thing for Sanders that he didn’t pursue a career in lending.

Recently, Hillary Clinton has been unable to restrain herself from chasing Sanders off the rhetorical cliff. Clinton is offering the public lots of “free stuff“, like Sanders, in a transparent attempt to buy votes with promises of future largess. Neither candidate has offered a credible plan for funding their promises. Higher taxes on “Wall Street” and other top earners are the supposed answer, but those measures would be woefully inadequate. Look out, middle class!

By the way, another recent Brookings study shows that increasing the top marginal income tax rate, a policy of which Sanders would approve, would do little to reduce the degree of income inequality.

Of course, Sanders seems just as unfamiliar with the great failures of socialism over the past century as he is with the successes of capitalism in eliminating poverty. He thinks the U.S. should adopt the socialist policies in Scandanavia, but the truth is that socialism has served to inhibit the continued success of capitalism in those countries (also see here). Perhaps that’s why Denmark is scaling back its redistributionist policies.

The Left, including Bernie Sanders, are burdened by a naive utopianism so powerful that they can rationalize the confiscation of private property to support their personal preferences and those of the political class. The aristocratic Left, like Hillary, differ only in the power they hold to influence policy. Perhaps a few suffer from a strong sense of guilt regarding their own circumstances. No, not Hillary. But both Bernie and Hillary are guilty of gross social and economic misdiagnosis. Politicians, heal thyselves!

Bernie Sanders: Just a Regular Looter

17 Thursday Sep 2015

Posted by Nuetzel in Free markets, Poverty, Socialism

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Bernie Sanders, Capital-Labor Substitution, Citizens United, Donald Trump, Economic illiteracy, Ed Krayewski, Energy Policy, Feel the Bern, infrastructure, Kevin D. Williamson, Minimum Wage, Police Brutality, Poverty, Racial exclusion, Socialism, Universal Health Care, War on Drugs

Economic illiteracy is getting to be a central theme in the early stages of the 2016 presidential race. The two candidates with whom the public and media are most fascinated at the moment are Bernie Sanders and Donald Trump. Both are veritable case studies in delusional economic reasoning. I have already devoted two posts to Trump, the current frontrunner for the Republican nomination (both posts appear at the link in reverse order). At the time of the second of those posts, I recall hoping desperately that someone or something would rescue my blog from him. I have managed, since then, to resist devoting more attention to his campaign. In this post, I’ll focus on Senator Bernie Sanders of Vermont, currently the top rival to Hillary Clinton for the Democrat nomination.

It’s ironic that Sanders, a self-proclaimed socialist, shares several areas of acute economic illiteracy with Donald Trump. There is a strong similarity between Sanders and Trump on foreign trade (and both candidates are pro-Second Amendment). Like Trump, Sanders demonstrates no understanding of the reasons for trade, as Kevin Williamson notes:

“The incessant reliance on xenophobic (and largely untrue) tropes holding that the current economic woes of the United States are the result of scheming foreigners, especially the wicked Chinese, “stealing our jobs” and victimizing his class allies…. He describes the normalization of trade relations with China as “catastrophic” — Sanders and Jesse Helms both voted against the Clinton-backed China-trade legislation — and heaps scorn on every other trade-liberalization pact. That economic interactions with foreigners are inherently hurtful and exploitative is central to his view of how the world works.“

Sanders lacks an understanding of trade’s real function: allowing consumers and businesses to freely engage in mutually beneficial exchanges with partners abroad, and vice versa. Trade thereby allows our total consumption and standard of living to expand. It is not based on “beating” your partners, as Sanders imagines. It is cooperative behavior.

Opposition to free trade nearly always boils down to one thing: avoiding competition. That goes for businesses seeking to protect or gain some degree of monopoly power and for unions wishing to keep wages, benefits and work rules elevated above levels that can otherwise be justified by productivity. The result is that consumers pay higher prices, have access to fewer goods and less variety, and have a lower standard of living. It is no accident that trade wars deepened the severity of the Great Depression domestically and globally. But Sanders, like Trump, has failed to learn from the historical record.

Another area of Sanders’ deep economic ignorance is his position on wage controls. He advocates a mandatory $15 federal minimum wage with no recognition of the potential damage of such a change. Kevin Williamson has this to say:

“Prices [and wages] in markets are not arbitrary — they are reflections of how real people actually value certain goods and services in the real world. Arbitrarily changing the dollar numbers attached to those preferences does not change the underlying reality any more than trimming Cleveland off a map of the United States actually makes Cleveland disappear.“

The minimum wage was the subject of a recent post on Sacred Cow Chips. A higher minimum is a favorite policy of well-meaning leftists and social justice warriors, but they fail to address the realities that the least-skilled suffer adverse employment effects, that a higher minimum wage hastens the substitution of capital for unskilled labor, and that the policy often benefits non-primary workers from middle and upper-income households. It’s a lousy way to help the impoverished. Moreover, minimum wages were originally conceived as a tool of racial exclusion and in all likelihood still act that way. Most of the research supporting minimum wage increases focuses on short-run effects or on sectors that are less capital-intensive. Findings about long-run effects are much more negative (see here, too). It’s a given that Sanders understands none of this.

Other elements of Sanders’ platform are essentially freebies for all: universal health care (see the first link from this Bing search), free college tuition for all, and expanded social security benefits. And of course there is a promise to rebuild our crumbling infrastructure, taking full advantage of the myth that our infrastructure is so decrepit that it must be replaced now. All of these ideas are costly, to say the least, and there is nothing adequate in Sanders’ platform to pay for them. He’ll raise taxes on the 1%, he says. Just watch the capital fly away. Ed Krayewski of Reason discusses Sander’s rich promises and the lack of resources to pay for them in “Bernie Sanders, the 18 Trillion Dollar Man“:

“The Wall Street Journal spoke with an economist at the liberal Center on Budget and Policy Priorities, who acknowledged taxes would have to go up for the middle class too to pay for Sanders programs.“

Middle class tax hikes would undoubtedly be accompanied by a lot more public debt, and ultimately inflation. Freebies for whom? As Krayewski says, Sanders “wants taxpayers to ‘feel the Bern’“.

In fairness, Sanders suggests that some of the needed revenue can be diverted from military spending. Possibly, but the military budget has already been reduced significantly, and it is not clear that much fat remains for Sanders to cut. There will certainly be demands for greater military spending given the significant threats we are likely to face from rogue states.

Sanders’ promise to transform our energy system is another one that will come with high costs. What Sanders imagines is a widespread fallacy that green energy can be produced at little cost. However, we know that renewables carry relatively high distributed costs and their contributions to load are intermittent, requiring base load backup from more traditional sources like fossil fuels or nuclear energy. Like President Obama, Sanders would impose new costs on fossil fuels, but the poor will suffer the most without offsetting assistance. And subsidies are also required to incent greater adoption of expensive alternatives like home solar and electric vehicles. Sanders would authorize this massive diversion of resources for the purpose of mitigating a risk based on carbon-forcing climate models with consistent track records of poor accuracy.

If free speech is your hot button, then Sanders’ promise to “overturn” Citizen’s United won’t make you happy. Why should an association of individuals, like a union or a corporation, be denied the right to use pooled resources for the purpose of expressing views that are important to their mission? Sanders is proposing an outright abridgment of liberty. From the first Kevin Williamson link above:

“… criminalizing things is very much on Bernie’s agenda, beginning with the criminalization of political dissent. At every event he swears to introduce a constitutional amendment reversing Supreme Court decisions that affirmed the free-speech protections of people and organizations filming documentaries, organizing Web campaigns, and airing television commercials in the hopes of influencing elections or public attitudes toward public issues.“

It is hard to take issue with Sanders’ call for an end to police brutality without a clear sense of his attitude toward law enforcement. I believe all fair-minded people wish for zero police brutality, but critics often minimize the difficulty of police work. No doubt there are gray areas in the practice of law enforcement; some police officers take their powers too far, which cannot be condoned. If institutional reforms can help, so much the better. But the police must be given the latitude to do a difficult job without fear of unreasonable legal reprisal.

On a related note, Sanders advocates an end to the war on drugs, a reform that I wholeheartedly support. Go you Bernie!

Finally, here is a more general illustration of Bernie Sanders’ backward views on economics. It is a Sanders quote I repeat from the second Kevin Willamson link above:

“You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country. I don’t think the media appreciates the kind of stress that ordinary Americans are working on.“

Sanders’ complaint about the plethora of choices in consumer goods fails to recognize that they reflect real differences in consumer preferences, as well as an economy dynamic enough to provide for those preferences. Far from causing hunger and poverty, that dynamism has lifted standards of living over the years across the entire income distribution, even among the lowest income groups, to levels that would astonish our forebears. And it created the wealth that enables our society to make substantial transfers of resources to low income groups. Unfortunately, those very transfer programs are rife with incentives that encourage continued dependency. Other government interventions such as the minimum wage have diminished opportunities for work for individuals with little experience and skills. Meanwhile, regulation and high business and personal taxes undermine the continued growth and dynamism of the economy that could otherwise lift more families out of dependency. Sanders would do better to study the history of socialism in practice, and to look in his own socialist mirror to identify the reasons for persistently high levels of poverty.

Statists and Stasis: The Dismal Solutions of Anti-Capitalists

26 Wednesday Aug 2015

Posted by Nuetzel in Capitalism, Markets, Socialism, Tyranny

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A. Barton Hinkle, Administered Prices, Anti-Capitalism, Asymmetric Information, Bernie Sanders, central planning, Chris Edwards, Coercive Power, Coyote Blog, Dead Weight Loss, External Effects, Foundation for Economic Education, Fred Foldvary, Jonathan Newman, Mercatus Center, Progressivism, Reason, Robert P. Murphy, Socially useless, Statism and Stasis, The Freeman, Warren Meyer

The anti-capitalist Left is quick to condemn private businesses of unfair practices and even unethical behavior. In their estimation, certain prices are not just and profits are somehow undeserved rewards to private property, risk-taking and entrepreneurial sweat. They somehow imagine that meeting market demands is an easy matter, or worse, that market demands are not “socially useful”. Few have ever attempted to run a business, or if they have, they were unsuccessful and resent it. They also cannot grasp the social function served by private markets, to which we owe our standard of living and much of our culture.

What alternatives do these deep thinkers suggest? A socialist utopia? Jonathan Newman discusses the many practical problems presented by socialism and why it always fails to achieve success comparable to societies that rely on free markets. Newman’s treatment covers the inability of administered pricing to convey accurate information and effective incentives, the waste induced by queuing, neglect of comparative advantage, waste induced by production quotas, retarded innovation and technological development, and a deeply embedded stasis in the face of changing conditions. Little wonder that poverty is a consequence.

Warren Meyer at Coyote Blog has written of the stasis seemingly promoted by the progressives. They are quite protective of the status quo. Ironically, and quite rightly, Meyer calls them “deeply conservative”, too conservative to accept the dynamism of a capitalistic society. From Meyer:

“Progressives want comfort and certainty. They want to lock things down the way they are. They want to know that such and such job will be there tomorrow and next decade, and will always pay at least X amount. Which is why, in the end, progressives are all statists, because only a government with totalitarian powers can bring the order and certainty and control of individual decision-making that they crave..

Progressive elements in this country have always tried to freeze commerce, to lock this country’s economy down in its then-current patterns. Progressives in the late 19th century were terrified the American economy was shifting from agriculture to industry. They wanted to stop this, to cement in place patterns where 80-90% of Americans worked on farms.“

Freezing the diffusion of technology and often the state of technology itself is a consequence of socialist policy. And technology may well be the enemy of the Left in another sense: An interesting twist is provided by Fred Foldvary of the Mercatus Center in “Government Intervention Is Becoming Obsolete“. He writes that technology is undermining all of the usual economic rationales for intervention: asymmetric information, external effects, public goods, and monopoly. The article is brief, but he refers the reader to more extensive treatments.

A good example of socialism’s perverse appeal is the rhetoric of Senator Bernie Sanders, now a candidate for the Democrat Presidential nomination. Sanders has criticized the “the dizzying (and socially useless) number of products in the deodorant category….” At Reason.com, A. Barton Hinkle wondered what Sanders might consider the appropriate number of deodorant choices in our society. Would he wish to dictate a limited number as a matter of policy? And what other “socially useless” choices might he choose to limit in his failure to grasp that these choices reflect the incredible health and vibrancy of a market economy. Here’s Hinkle:

“… central planners think they can allocate economic resources better than the unguided hand of individual free choice. Like any good scientific experiment, this one is easily replicated, and has been time and again. See, for example, Venezuela, which has now run out of toilet paper, tampons, and other basic necessities because some people there think they should make all the choices for other people. And yet for many, the repeated lesson still has not sunk in. In an unintentionally hilarious essay about Cuba not so long ago, one writer noted that “the people are hungry here. There are severe food shortages. I do not understand why a tropical island would lack fruits and vegetables . . . and my only assumption is that maybe they have to export it all.”

Never forget that government can only pursue policy objectives via coercive power. I don’t think socialists have forgotten at all. Without the power to coerce, nothing proposed or done by the state can be accomplished and enforced. This is the course that progressive, anti-capitalists must follow to achieve their collectivist vision. But Chris Edwards reminds us that “Coercion Is Bad Economics” with the following points about government:

When it “uses coercion, its actions are based on guesswork.“
Its “actions often destroy value because they [arbitrarily] create winners and losers.“
Its “activities fail to create value because the funding comes from a compulsory source: taxes.”
Its “programs often fail to generate value because the taxes to support them create “deadweight losses” or economic damage.“

By arranging voluntary, mutually beneficial trades, market forces avoid all of these problems. As Robert P Murphy explains in The Freeman, “Capitalists Have a Better Plan“.

The anti-capitalists do not hesitate to saddle private businesses with confiscatory tax and regulatory burdens in the name of their own vision of society. Want to live in a bleak world of decline? Then here’s your prescription, courtesy of the anti-capitalist Left: regulate heavily, monitor transactions, impose wage and price controls, dismantle markets, tax at punitive levels, confiscate property, censor “offensive” speech, extend dependence on the state, absorb private savings and crowd out private investment with government borrowing, and inflate the money stock. Smells like a crappy “utopia”.