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Posts Tagged ‘Education’

“So many bad ideas, so little time.”

That’s my attitude about Hillary Clinton. She proposes misguided policies at such a rapid rate that I feel like I’m having to spend too much of each day trying to correct all the economic mistakes that emanate from her and her campaign.

For the fifth time over the last seven days (see other examples here, here, here, and here), I feel obliged to do it again.

Our topic is her proposal to increase handouts, subsidies, and bailouts for colleges and universities.

Here’s a brief interview I just did on the topic. Our discussion had to be abruptly ended because of what the industry calls a “hard break,” but I got out my main points that 1) subsidies benefit college bureaucracies rather than students and 2) that Hillary’s ostensible reforms will make things worse.

By the way, I can’t resist chuckling about the main assertion put forth by Alan Colmes. He thought it would be effective to point out that some of the handouts started under President George W. Bush.

But so what?!? The fact that a bad policy originated under a Republican before being expanded by a Democrat doesn’t somehow turn a pig’s ear into a silk purse.

Also, just in case you’re curious about what I was planning to say when the interview was cut off. I was going to point out that I agreed with Alan about President Bush’s role, but I was going to say that was additional evidence (given Bush’s overall statist record while president) against what Hillary is proposing.

And then, my additional point was going to be that it’s a very bad idea to allow loan forgiveness just for former students who become bureaucrats (i.e., go into “public service”). For Heaven’s sake, people who get government jobs already are getting far higher compensation than taxpayers in the private sector. Needless to say, it’s not a good idea to make a life of bureaucratic indolence even more attractive.

But let’s return to the bigger issue of why it’s misguided to have bailouts, subsidies, and handouts for higher education. If you want the opinions of a real expert on this issue, Charlie Sykes has a column on the topic in the Wall Street Journal.

Hillary Clinton’s plan for higher education is simple: a massive bailout wrapped in the promise of free tuition and relief from student loans. It’s a proposal that seems specifically designed to further inflate the higher-education bubble, while relieving the college-industrial complex of any pressure to reform. …College today costs too much, takes too long and offers dubious value to too many students. For decades, the price of a degree has risen much faster than the rate of inflation. …schools are spending more than ever on administration, promotions, athletics and noninstructional student services. The New England Center for Investigative Reporting and the American Institutes for Research found that between 1987 and 2012, colleges added 517,636 administrators and professional employees, creating a ratio at public colleges of two non-academic staffers for every full-time, tenure-track faculty member.

The current system has been bad news for students, who – thanks to subsidy-induced increases in tuition and fees – have been trapped on a treadmill.

Mr Sykes elaborates.

If the student finances the bill with loans, it’s more like buying a Lamborghini on credit—and then driving it off a cliff. Total student-loan debt has hit $1.3 trillion, according to the Federal Reserve, exceeding both the nation’s credit-card debt and its auto loans. Two-thirds of students now borrow to pay for their education, up from 45% in 1993, according to a New York Times analysis of federal data. At the end of 2014 the average student-loan borrower owed $26,700,according to analysts at the New York Fed, while 4% owed $100,000 or more.

More giveaways from government may seem like a good idea for students, but that’s only made possible by instead hurting taxpayers.

And students almost surely will suffer as well when you consider the indirect effects of this intervention.

Forgiving student debt or providing “free” tuition, with no new accountability measures, will only worsen today’s problems for future generations. The multibillion-dollar bailout Mrs. Clinton has proposed would only shift the costs of higher education to taxpayers, many of whom have not had the benefit of college. The Democratic nominee’s plan would also encourage more students to make poor educational choices by creating the illusion that college is free.

By the way, it’s very important to note that taxpayers are getting a rotten deal.

We’ve had lots more spending in recent decades, but no actual improvement in education.

Over the past five decades, billions in state and federal subsidies have contributed significantly to the exploding cost of higher education by making it easier for colleges to justify outrageous amenities. “Free” tuition will only further distort the incentives. …there is little evidence that additional spending has enhanced the value of the college degree. In a 2014 academic study of collegiate spending, economists Robert E. Martin and R. Carter Hill noted that research universities had cumulatively spent more than half a trillion dollars from 1987 to 2005. “There should be evidence of higher quality at these investment levels,” they wrote. Instead, “completion rates declined, grade inflation increased, students spend less time studying, adult numeracy/literacy rates declined, and critical thinking skills did not improve.”

Amen.

Indeed, this is exactly what we’ve seen in K-12 education.

Someone (more clever than me) needs to come up with the collegiate equivalent of this famous chart from the late Andrew Coulson.

We already know that the United States spends more per student on K-12 education than any other nation and gets mediocre results . That’s probably mostly due to the inefficient monopoly structure of elementary and secondary education.

The problems at the collegiate level are third-party payer and the inevitable negative effects of bureaucratic bloat and inefficiency.

The bottom line is that Hillary is right when she says higher-education spending is an investment. The problem is that she likes making investments that generate negative returns.

P.S. You won’t be surprised to learn that Paul Krugman also approves of investments with negative returns.

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Normally, leftists get upset if there’s a big industry that charges high prices, engages in lots of featherbedding, and manipulates the political system for handouts.

But for some reason, when the industry is higher education, folks like Hillary Clinton think the answer is to shower colleges and universities with ever-greater subsidies.

She says the subsidies are for students, but I point out in this interview that the real beneficiaries are the schools that simply boost tuition and fees to capture any increase in student loans.

And I also pointed out that the colleges and universities don’t even use the money wisely.

Instead, they build bureaucratic empires with ever-larger numbers of administrators while money devoted to the classroom shrinks.

Sort of a pay-more-get-less business model.

Though that only works when there are government subsidies to enable the inefficiency and bloat.

But don’t take my word for it. According to a study published by the National Bureau of Economic Research (h/t: James Pethokoukis), tuition subsidies get captured by colleges and universities.

With all factors present, net tuition increases from $6,100 to $12,559 [and] the demand shocks — which consist mostly of changes in financial aid — account for the lion’s share of the higher tuition. …These results accord strongly with the Bennett hypothesis, which asserts that colleges respond to expansions of financial aid by increasing tuition. In fact, the tuition response completely crowds out any additional enrollment that the financial aid expansion would otherwise induce, resulting instead in an enrollment decline… Furthermore, the students who do enroll take out $6,876 in loans compared to $4,663 in the initial steady state. The college, in turn, uses these funds to finance an increase of investment expenditures from $21,550 to $27,338… Lastly, the model predicts that demand shocks in isolation generate a surge in the default rate from 17% to 32%. Essentially, demand shocks lead to higher college costs and more debt, and in the absence of higher labor market returns, more loan default inevitably occurs. …Our model also suggests that financial aid increases tuition at the bottom of the tuition distribution more so than it does at the top.

By the way, I closed the above interview by stating that I want to make colleges and universities at least partially liable if students don’t pay back their loans because that will create a better incentive structure.

Two scholars from the American Enterprise Institute addressed this issue in an article for National Review.

Just as government-subsidized easy money fueled a real-estate bubble in the 1990s and 2000s, boosting house prices while promoting unwise borrowing and lending, today government-subsidized easy money is fueling an education bubble — boosting tuition rates and reducing students’ incentives to choose education options smartly. …Like the brokers who caused the subprime-mortgage crisis, colleges push naïve students to take on debt regardless of their ability to repay, because colleges bear no cost when graduates default. A true solution requires a new financing system where colleges retain “skin in the game.”

The authors point out that default and delinquency are very common, but they point out that this is merely a symptom of a system with screwed-up incentives.

The high delinquency rate is a symptom of a wider problem — a broken higher-education system. Colleges are paid tuition regardless of whether their alumni succeed. They face little incentive to control costs when those costs can be passed on to students who fund them with government-guaranteed loans that are available regardless of the students’ ability to repay.

It’s not just whether they have an incentive to control costs. The current approach gives them carte blanche to waste money and jack up tuition and fees.

Between 1975 and 2015, the real cost of attending a private college increased by 171 percent while the real cost of public universities rose by 150 percent. If the tuition, room and board, and other fees at a four-year private college in 1975 were projected forward to 2015, adjusting for the average inflation rate, the cost of college in 2015 would have been $16,213. Instead, the actual cost in 2015 was $43,921. A large share of rising college costs can be attributed to expanded administration, new non-educational services, athletic programs, and government regulation. Colleges have economized by switching to part-time adjunct faculty. The American Association of University Professors estimates that roughly 3 out of 4 college courses are taught by adjuncts.

Amen. This is what I mean by the pay-more-get-less business model.

The solution, of course, it to make fat and lazy college administrators have to worry that their budgets will shrink if they continue to jack up tuition while providing sub-par education.

The key to controlling costs and student-debt burdens is to require colleges themselves to have “skin in the game” so they have strong incentives not only to provide a good education, but also to safeguard the financial solvency of their graduates. …With “skin in the game,” colleges will face pressure to control unnecessary costs and limit student indebtedness. Colleges will redouble their efforts to ensure that students graduate with the skills necessary to succeed in the job market. Resources will no longer be freely available for unnecessary non-educational university spending.

The bottom line is that bad things happen when the visible foot of the government supplants the invisible hand of the market.

That’s what I basically was trying to say in the interview when I made the crack about a reverse Midas touch whenever there is government intervention.

The solution, of course, is to phase out the subsidies that have created the problem.

But (just as is the case with healthcare) that’s a challenge because of the inefficiency that is now built into the system. Consumers will be worried that tuition and fees will remain high, which will mean higher out-of-pockets costs for college.

So while I understand why politicians will be reluctant to address the issue, the longer they wait, the worse the problem will become.

P.S. This video from Learn Liberty, featuring Professor Daniel Lin, is a great (albeit depressing) introduction to the issue of how government handouts lead to higher tuition.

P.P.S. Is there a “bubble” in higher education? While government intervention and handouts definitely have enabled needlessly high tuition, I’ve explained that those high prices will probably be permanent so long as the subsidies continue.

P.P.P.S. Unsurprisingly, Paul Krugman doesn’t understand the issue.

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While there are many things I admire about Scandinavian nations, I’ve never understood why leftists such as Bernie Sanders think they are great role models.

Not only are income levels and living standards higher in the United States, but the data show that Americans of Swedish origin in America have much higher incomes than the Swedes who still live in Sweden. And the same is true for other Nordic nations.

The Nordics-to-Nordics comparisons seem especially persuasive because they’re based on apples-to-apples data. What other explanation can there be, after all, if the same people earn more and produce more when government is smaller?

The same point seems appropriate when examining how people of Chinese origin earn very high incomes in Hong Kong, Singapore, Taiwan, and the United States (all places with reasonably high levels of economic liberty), but are relatively poor in China (where there is still far too much government control over economic affairs).

Again, what possible explanation is there other than the degree of economic freedom?

Let’s now look at two other examples of how leftist arguments fall apart when using apples-to-apples comparisons.

A few years ago, there was a major political fight in Wisconsin over the power of unionized government bureaucracies. State policy makers eventually succeeded in curtailing union privileges.

Some commentators groused that this would make Wisconsin more like non-union Texas. And the Lone Star States was not a good role model for educating children, according to Paul Krugman.

This led David Burge (a.k.a., Iowahawk) to take a close look at the numbers to see which state actually did a better job of educating students. And when you compare apples to apples, it turns out that Longhorns rule and Badgers drool.

…white students in Texas perform better than white students in Wisconsin, black students in Texas perform better than black students in Wisconsin, Hispanic students in Texas perform better than Hispanic students in Wisconsin. In 18 separate ethnicity-controlled comparisons, the only one where Wisconsin students performed better than their peers in Texas was 4th grade science for Hispanic students (statistically insignificant), and this was reversed by 8th grade. Further, Texas students exceeded the national average for their ethnic cohort in all 18 comparisons; Wisconsinites were below the national average in 8… Not only did white Texas students outperform white Wisconsin students, the gap between white students and minority students in Texas was much less than the gap between white and minority students in Wisconsin. In other words, students are better off in Texas schools than in Wisconsin schools – especially minority students.

This is what I call a devastating debunking.

Though Krugman routinely invites mockery, and I’ve enjoyed exposing his disingenuous, sloppy, and dishonest use of data on issues such as Obamanomics, California jobs, American fiscal policy, Greek economics, U.S. and U.K. austerity, German fiscal policy, Estonian economics, British fiscal policy, inflation, European austerity, the financial crisis, and the Heritage Foundation.

Gee, with all these examples, I wonder if there’s a pattern?

Our second example showing the value of apples-to-apples comparisons deals with gun control.

Writing for PJ Media, Clayton Cramer compares murder rates in adjoining American states and Canadian provinces. he starts by acknowledging that a generic US-v.-Canada comparison might lead people to think gun rights are somehow a factor in more deaths.

…for Canada as a whole, murder rates are still considerably lower than for the United States as a whole. For 2011, Canada had 1.73 homicides per 100,000 people; the United States had 4.8 murders and non-negligent homicides per 100,000 people.

But he then makes comparisons that suggest guns are not a relevant factor.

…look at murder rates for Canadian provinces and compare them to their immediate American state neighbors. When you do that, you discover some very curious differences that show gun availability must be either a very minor factor in determining murder rates, or if it is a major factor, it is overwhelmed by factors that are vastly more important.

Gun ownership is easy and widespread in Idaho, for instance, but murder rates are lower than in many otherwise similar Canadian provinces.

I live in Idaho.  In 2011, our murder rate was 2.3 per 100,000 people.  We have almost no gun-control laws here. You need a permit to carry concealed in cities, but nearly anyone who may legally own a firearm and is over 21 can get that permit.  We are subject to the federal background check on firearms, but otherwise there are no restrictions. Do you want a machine gun? And yes, I mean a real machine gun, not a semiautomatic AR-15. There is the federal paperwork required, but the state imposes no licensing of its own.  I have friends with completely legal full-automatic Thompson submachine guns. Surely with such lax gun-control laws, our murder rate must be much higher than our Canadian counterparts’ rate. But this is not the case: I was surprised to find that not only Nunavut (21.01) and the Northwest Territories (6.87) in Canada had much higher murder rates than Idaho, but even Nova Scotia (2.33), Manitoba (4.24), Saskatchewan (3.59), and Alberta (2.88) had higher murder rates.

The same is true for other states (all with laws that favor gun ownership) that border Canada.

What about Minnesota? It had 1.4 murders per 100,000 in 2011, lower than not only all those prairie provinces, but even lower than Canada as a whole.  Montana had 2.8 murders per 100,000, still better than four Canadian provinces and one Canadian territory.  When you get to North Dakota, another one of these American states with far less gun control than Canada, the murder rate is 3.5 per 100,000, still lower than Manitoba, Saskatchewan, the Northwest Territories, and Nunavut.  And let me emphasize that Minnesota, Montana, and North Dakota, like Idaho, are all shall-issue concealed-weapon permit states: nearly any adult without a felony conviction or a domestic violence misdemeanor conviction can obtain a concealed weapon permit with little or no effort.

The takeaway from this evidence (as well as other evidence I have shared) is that availability of guns doesn’t cause murders.

Other factors dominate.

P.S. Regarding the gun control data shared above, some leftists might be tempted to somehow argue that American states with cold weather somehow are less prone to violence. That doesn’t make sense since the Canadian provinces presumably are even colder. Moreover, that argument conflicts with this bit of satire comparing murder rates in chilly Chicago and steamy Houston.

P.P.S. In his role as Iowahawk, David Burge has produced some great political satire, including extortion by Obama’s teleprompter, the bible according to Obama, mockery of the Obama campaign’s life-of-Julia moocher, and (my favorite) the video about a government-designed car.

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I’ve put together a collection of political cartoons that show government as a bloated, clumsy, and sometimes malicious person.

This isn’t because of any special animus, but rather because the unintended consequences of government intervention are almost always harmful.

Consider the issue of higher education. Politicians start with the warm and fuzzy notion that it would be good to help more people go to college. So they create loans and grants to help them pay for tuition.

Sounds nice and noble, right? And just think of the votes that can be harvested from grateful parents!

So is this a win-win situation for both politicians and students? Well, let’s look at the real-world results.

As explained in this video, there’s a lot of evidence that these loans and grants are the reason that higher education is now far more expensive (just as there is powerful data showing that subsidies lead to higher costs in other areas as well).

And additional research is confirming this concern. A new study by Professor Grey Gordon of Indiana University and Professor Aaron Hedlund of the University of Missouri finds that government subsidies for higher education wind up benefiting colleges and universities and hurting students.

Here are the key findings.

We develop a quantitative model of higher education to test explanations for the steep rise in college tuition between 1987 and 2010. …We measure how much changes in underlying costs, reforms to the Federal Student Loan Program (FSLP), and changes in the college earnings premium have caused tuition to increase. All these changes combined generate a 106% rise in net tuition between 1987 and 2010, which more than accounts for the 78% increase seen in the data. Changes in the FSLP alone generate a 102% tuition increase.

Robby Soave of Reason reports on the new research.

…skyrocketing college tuition costs are the result of all-too-generous student loan policies. The study, authored by Grey Gordon and Aaron Hedlund, used a computer model to measure the effects of various economic forces on college costs. According to the model, no factor had more to do with rising tuition prices than loan subsidies. “Looking at individual factors, we find that expansions in borrowing limits drive 40% of the tuition jump and represent the single most important factor,” wrote the study’s authors. In fact, the “Bennett hypothesis”—the idea, first proposed by President Ronald Reagan’s Education Secretary William Bennett, that increasing student aid encourages colleges to jack up prices—fully explains all the tuition increases between 1987 and 2010, according to the study. …A recent study by the New York Federal Reserve reached a similar, albeit less dramatic, conclusion regarding the link between loans and tuition.

Regarding the study from the N.Y. Fed, here’s Robby’s report on that research.

The bottom line is that politicians want us to believe that subsidies are needed because college is getting more expensive. But what’s really happening is that college is getting more costly because of the subsidies!

Now let’s move to a separate question. We know that colleges and universities are getting a big windfall as a result of students loans and other subsidies. So how are they spending the money?

Not very well, according to researchers.

And that’s probably because much of this money is mostly being wasted on more bureaucracy. Here’s a chart showing trends in recent years.

Even more depressing, the research also shows that all this spending doesn’t improve human capital, so there’s a negative impact on overall economic performance.

P.S. Politicians who complain about “cuts” in spending for higher education are either dishonest or ignorant.

P.P.S. Speaking of which, Hillary Clinton’s plan for higher education is a recipe to enable even higher costs for colleges and universities.

P.P.P.S. Some folks hope that there’s a soon-to-pop bubble in higher education, which means that tuition will soon become more affordable. But I’m worried that higher education is more like health care rather than housing, which means that prices will climb even higher over time.

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Over the past few years, Hillary Clinton has taken advantage of several opportunities to demonstrate that she doesn’t understand economics.

Though that’s not a problem. I have friends who routinely demonstrate their economic ignorance by saying things that don’t make sense.

The problem is that Hillary may actually wind up in a position of power. So there’s a danger that the entire nation could be victimized because of her disregard of the laws of supply and demand.

Let’s look at a fresh example. The New York Times has a story about Ms. Clinton’s latest effort to bribe people with their own money.

Hillary Rodham Clinton on Monday will propose major new spending by the federal government that would help undergraduates pay tuition at public colleges without needing loans. …her proposals…would cost $350 billion over 10 years…about $175 billion in grants would go to states that guarantee that students would not have to take out loans to cover tuition at four-year public colleges and universities.

To make matters worse, some of this money would be used to bribe states into additional spending (sort of the higher-education version of Obamacare’s Medicaid scam).

In return for the money, states would have to end budget cuts to increase spending over time on higher education, while also working to slow the growth of tuition, though the plan does not require states to cap it.

And to make matters even worsier (yes, that’s a made-up word, but it seems appropriate), there’s a big tax increase to finance Ms. Clinton’s new scheme.

Mrs. Clinton would pay for the plan by capping the value of itemized deductions that wealthy families can take on their tax returns.

I don’t like distortionary tax preferences, but loopholes should be eliminated as part of a shift to a low-rate flat tax, not to finance the vote-buying schemes of the crowd in Washington.

But let’s set aside the concerns about fiscal policy and focus on what Clinton’s plan would mean for higher education.

And we’ll start with a thought experiment. Imagine you sold cars and the government decided to give people lots of money to buy your products. In the world of economics, this causes the “demand curve” to shift to the right.

Now answer a simple question: Would car prices under this policy (a) increase, or (b) decrease?

The obvious answer is (a). That’s certainly what has happened in the healthcare sector because of programs such as Medicare and Medicaid. That also happened in housing last decade thanks to bad monetary policy and corrupt Fannie Mae and Freddie Mac subsidies.

Moreover, there’s lots of evidence that the same thing already has happened with higher education. And now there’s new research that reaches the same conclusion.

As pointed out by the Wall Street Journal, recent scholarly data confirms that colleges and universities jack up prices to capture the additional subsidies.

Politicians…their solutions—cheap loans and taxpayer cash—end up increasing the cost of a degree. The latest evidence that schools jack up tuition to absorb federal money comes in a new report from the Federal Reserve Bank of New York. …The Fed researchers looked at how colleges responded when Congress bumped up per pupil aid limits between 2006 and 2008. Sure enough, students took out more loans, but universities gobbled up most of the money. Ohio University economist Richard Vedder connected these dots a decade ago, estimating in 2006 that every dollar of grant aid raised tuition 35 cents. He now looks prescient. The New York Fed study found that for every new dollar a college receives in Direct Subsidized Loans, a school raises its price by 65 cents. For every dollar in Pell Grants, a college raises tuition by 55 cents. This is one reason tuition has outpaced inflation every year for decades, while the average borrower now finishes college owing more than $28,000.

So what’s the bottom line? What will happen if Hillary Clinton expands subsidies to higher education?

Simple, more government subsidies will mean more wasteful inefficiency and higher costs.

Administrative bloat, reduced faculty loads and Shangri La dorms… College will continue to be expensive as long as government aid amounts to a wealth transfer to universities.

In other words, Ms. Clinton’s plan will double down on the policies (described in this video) that already have made college needlessly expensive.

All she’s doing is shifting more of the cost onto the backs of taxpayers.

Fortunately, there is a solution to this mess. Simply get the federal government out of the education business. This would reverse the bad policies that have caused colleges and universities to become more expensive and less efficient.

Sadly, this ideal approach probably won’t be adopted anytime soon.

But that doesn’t mean progress is impossible. Washington may actually move policy a bit in the right direction. And Elizabeth Warren (yes, that Elizabeth Warren) may even play a constructive role.

As reported by the Wonkblog section of the Washington Post, there’s growing interest in a plan to make colleges and universities partly responsible when students default on loans.

A coalition of liberal and conservative lawmakers is promoting a plan on Capitol Hill that would force colleges to pay up when their students default. If schools share the risk of borrowing or have some “skin in the game,” policymakers figure they would work harder to keep costs down….Senate Democrats, led by Elizabeth Warren (D-Mass.) and Jack Reed (D-R.I.), introduced legislation in 2013 requiring schools with default rates above 15 percent to reimburse the government 5 percent of the total defaulted debt. The higher the default rate, the higher the penalty. …Congressional Republicans are renewing the call for schools to share the risk of borrowing, as are presidential hopefuls Wisconsin Gov. Scott Walker and Ben Carson. The policy is being considered as a part of the re-authorization of the Higher Education Act.

The story even has some very sensible economic analysis about how third-party payer should be blamed for rising prices.

As it stands, there is little incentive for colleges to keep costs under control. As long as there is a supply of students and federal financial aid, both for-profit and nonprofit schools can charge high prices and encourage people to take out loans to cover the cost. If schools had a financial stake in every student’s ability to repay loans, they might be less inclined to saddle students with debt in the first place—or they might lower costs altogether.

Gee, what a shocking thought. If people have to play with their own money rather than taxpayer money, they suddenly behave more responsibly!

P.S. We should also remember that there is such a thing as too much “investment” in higher education.

P.P.S. Third-party payer in higher education also shows how government money can corrupt private institutions. Though any effort to stamp out such corruption should apply equally to government schools as well.

P.P.P.S. Now for the most important news. The Beltway Bandits are now Eastern National Champions of 55+ AAA softball, winning five straight games in Raleigh, NC, this past weekend.

We’ll play in Las Vegas for a national title in late September.

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Our friends who believe in big government have this funny habit of self-exempting themselves from the bad policies that they impose on the rest of the population.

Statists are very opposed to so-called tax havens, for instance, because they don’t want there to be any constraints on the ability of governments to impose higher tax burdens. Yet it’s quite common to discover that these folks who want higher taxes for you and me have decided to protect their income and assets by utilizing low-tax jurisdictions.

Another example is that leftists are big advocates of one-size-fits-all, substandard government schools and they vociferously fight against school choice proposals that would help low-income families obtain better opportunities for their kids.

Yet these fans of monopoly government schools routinely make sure their children are in private schools. President Obama is the most high-profile example of this form of hypocrisy.

And so is his Secretary of Education.

The Wall Street Journal opines on this example of rank hypocrisy.

Arne Duncanthe Education Secretary continues to fight vouchers for private schools. So it’s worth noting that he has decided to send his own children to a private school in Chicago. …where tuition runs about $30,000 a year. That’s also where Barack and Michelle Obama sent their children before moving to Washington and sending Sasha and Malia to the tony Sidwell Friends. Mr. Duncan’s choice is all the more striking since he used to run the Chicago public schools.

I suppose you have to give Duncan credit for wanting good things for his kids, and he obviously had first-hand knowledge that the government schools in Chicago aren’t very good.

What’s nauseating, though, is how he doesn’t want poor families to have similar options.

He…stood aside in 2009 when Illinois Sen. Dick Durbin managed to kill the Opportunity Scholarship Program in Washington until Speaker John Boehner and the Republican Congress revived it. The Education Secretary was also a muted voice when the Obama Justice Department filed a lawsuit aimed at scuttling Louisiana’s innovative voucher program. And he was silent again when the Colorado Supreme Court recently invoked a leftover of 19th-century bigotry—its anti-Catholic Blaine amendment—to stop students from receiving vouchers for private schools.

By the way, you probably won’t be surprised to learn that another prominent Chicago leftist also has rejected government schools for his own children.

Here are some blurbs from a 2011 report in the Washington Post.

Chicago Mayor Rahm Emanuel…has decided to send his children to a private school… Emanuel…served in the White House as President Obama’s chief of staff… The decision where to send your children to school is certainly a personal one, even for public officials. But it is worth publicly noting what public officials…choose to do with their own children when given the chance.

What’s really worth publicly noting is that these politicians don’t want other families to have any escape options from failed government schools.

That’s what makes them hypocrites.

Even more important, that’s what makes them immoral. Sort of like modern-day equivalents of George Wallace, standing in the schoolhouse door to deny opportunity to the less fortunate.

And why do politicians behave so reprehensibly? For the simple reason that they want to curry favor with the unions that represent teachers.

Which makes this excerpt from a Chicago Tribune story especially remarkable. It seems that teachers from Chicago’s government schools also want better options for their own kids.

…a Thomas B. Fordham Institute study found that 39 percent of CPS teachers sent their own kids to private schools.

Sauce for the goose obviously isn’t sauce for the gander.

P.S. On the issue of government schools, I suppose we can paraphrase Winston Churchill and note that never have so many paid so much to achieve so little.

P.P.S. There’s also a strong argument that government schools are a form of child abuse because of bizarre political correctness.

P.P.P.S. Shifting from the immoral to the inane, I probably shouldn’t move to Pennsylvania. At least not if I want to keep my current license plate.

Why? Because bureaucrats in the Keystone State are on the lookout for plates with…gasp!…anti-government messages.

In addition to outright vulgarity and racism, some states prohibit messages on vanity license plates that can be viewed as “anti-government.” In Pennsylvania, for example, where five state employees in Harrisburg get to decide what’s allowed on vanity plates…“ENDFED,” a reference to libertarian-led efforts to shut down the Federal Reserve Bank, is…on the do-not-license list.

I’m not sure why expressing an opinion on monetary policy is considered vulgar or offensive.

But if that’s what Pennsylvania bureaucrats think, then I hope they don’t know about my video on the Federal Reserve. Between that and my seditious license plate, they’d probably arrest me just for simply driving through the state!

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What’s the most effective way of screwing up a sector of the economy? Since I’m a fiscal policy economist, I’m tempted to say that bad tax policy is the fastest way of causing damage. And France might be my top example.

But other forms of government intervention also can have a poisonous effect. Regulation, for instance, imposes an enormous burden on our economy.

Today, though, we’re going to look at how subsidies can result in costly distortions. More specifically, using examples from the health sector and higher-ed sectors, we’re going to see how “third-party payer” is a very expensive form of intervention.

We’ll start with the example from the healthcare sector. Writing for the Institute for Policy Innovation, Merrill Matthews has a must-read article about an unintended consequences of Obamacare.

He starts with a very sensible point about the effect of third-party payer.

Health care actuaries will tell you that when people have to spend more out of pocket for health care, they tend to spend less. And when a third party—employers, health insurers or the government—insulates consumers from the cost of care they tend to spend more. Just imagine how much more people would spend on cars if they could have any car they wanted for a $20 copay.

The car-buying example is great. I’ve previously tried to make the same point about third-party payer by using the examples of home insurance and car insurance, but I may have to steal Merrill’s argument since it’s so intuitively effective.

But that’s a digression. Merrill has a far more important point about what’s actually happening today in the health care sector.

…out-of-pocket spending on health care has declined for decades—until the Affordable Care Act kicked in. In 1961, Americans forked over 43 cents out of their own pocket for every dollar spent on health care. That out-of-pocket spending steadily declined over the years so that by 2010 consumers were only spending about 12 cents out of pocket.Enter Obamacare in 2010. By 2012 out-of-pocket spending had risen to 14.8 percent of total health care spending, and by 2013 it was up to 15.2 percent, according to the Health Care Cost Institute. With people spending more out of pocket, they will naturally curb their spending. And expect to be spending more out of pocket in the future. That’s in part because so many Americans have had to shift to very high deductible policies in order to afford Obamacare’s very expensive coverage. Thank you, President Obama! …The upshot of these higher deductibles is that people will spend less on health care, and that is helping to slow the growth in health care spending—giving Obama his boasting point. Rising deductibles aren’t the only factor, but they are an important one.

Yet Obama doesn’t really deserve to boast.

But here’s the irony: Obama never intended any of this. He thought Obamacare would reduce out-of-pocket spending. And he and most Democrats have railed against high-deductible policies for years, claiming that greedy health insurers were taking people’s money but didn’t have to pay any claims (because of the high deductibles). And yet under Obamacare deductibles have never been so high. The fact is that moving to higher deductibles, especially when accompanied by a tax-free health care spending account for smaller and routine expenditures, is good policy.

And let’s not forget that Obama’s “Cadillac tax” on employer-provided health insurance also is good policy (though it was implemented the wrong way).

So maybe, as that policy also takes effect, we’ll get even further reductions over time in third-party payer!

Which might cause me adjust my overall assessment of Obamacare. In the past, I’ve said it was awful policy because it expanded the Medicaid entitlement while also mucking up the private insurance market.

All that’s still true, but we’re getting some unintended consequences that are positive. Not only are some states refusing to expand Medicaid, but Merrill’s big point is that the private insurance market is evolving in ways that have some good effects.

So maybe instead of Obamacare shifting us from a 68-percent-government-controlled healthcare system to one where government has 79-percent control, as I speculated back in 2013, maybe we’ll wind up with a system that’s “only” 73-percent dictated by government.

Not a victory, to be sure, but at least we’re going in the wrong direction at a slower pace.

Now let’s shift to the higher-ed sector.

Paul Campos, a law professor at the University of Colorado, writes in The Atlantic about the surging level of subsidies for higher education.

…when considering government support for American higher education as a whole, subsidies for colleges and universities are—even on a per-student basis and despite the enrollment explosion—greater than ever before. In particular, per-capita government subsidies are far higher now than they were 35 years ago, when tuition was drastically lower. …The federal government is currently spending approximately $80 billion per year on subsidies for higher education—a figure that almost exactly matches the combined higher-ed spending of the 50 legislatures. …The Pell grant program has expanded rapidly, more than tripling in size since 2000.  …What’s far less known…is the remarkable extent to which the federal tax code has been amended in ways that benefit colleges and universities. According to the congressional Joint Committee on Taxation’s most recent estimates of federal tax expenditures, the IRS is currently redistributing approximately $45.7 billion annually in tax revenue in ways that directly and indirectly support American higher education. (This represents a 675 percent increase in such spending since 1990.)

Even though I agree with his analysis, I get agitated when tax preferences are referred to as “spending.”

But that’s not particularly relevant today. What matters is that there’s been an unbroken increase in handouts and subsidies for the higher-ed sector over the past few decades.

Here’s a chart from his article.

Now let’s look at the policy implications. Mr. Campos outlines a series of problems in the higher-education sector.

…total per-student government support for higher education has increased. Yet this increase has failed to stop or even slow massive tuition increases at both public and private schools. …many higher-ed institutions have become increasingly bloated and inefficient—even as they’ve relied on a growing population of poorly paid contingent faculty members and on hundreds of billions of dollars of federal student loans, only a small percentage of which are currently being repaid in a timely manner. …roughly half of recent college graduates in the U.S. find themselves either unemployed or seriously underemployed. And many graduates struggle to pay educational debts that, unlike almost all other debts in American society, typically can’t be settled via bankruptcy.

But he doesn’t really connect the dots, other than to point out that it is absurdly dishonest when some people (like Senator Bernie Sanders) want others to believe that we need even more intervention and more handouts to compensate for non-existent budget cuts.

Claiming that skyrocketing tuition has been caused by “cuts” in government subsidies only helps delay American higher education’s inevitable day of fiscal reckoning.

If he did connect the dots, he would have explained that the higher-ed sector is needlessly expensive and pointlessly inefficient because of all the subsidies from government.

He may even agree with that assessment, though he isn’t explicit about the connection. Though Professor Richard Vedder doesn’t hesitate in pointing out that bad government policy deserves the blame.

And if you want to learn more, here’s a great video from Learn Liberty explaining why subsidies have translated into higher tuition.

Last but not least, here’s my two cents on the issue, including my dour prediction that the higher-ed bubble won’t pop until and unless we stop the handouts from government.

Yet another reason why we should dismantle the Department of Education.

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