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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Today’s Policy Agenda: School Autonomy Works



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Why Republicans might need Avikcare.

For Politico, Jennifer Haberkorn looks at how changes on the ground are affecting the politics of Obamacare for Republicans. She writes:

Many House Republicans privately worry that unless they have the 218 votes needed to pass a [health care] bill this fall, it’s futile to put something on the floor only to see it fail and expose them to Democrats’ attacks before the November elections. They insist that full repeal remains a top priority and that they want to pursue a step-by-step replacement plan with such ACA provisions as ensuring coverage for pre-existing conditions and keeping dependents on a parent’s insurance policy until age 26.

Still, the longer it takes Republicans to draft and vote on a plan — if they do it at all — the more daunting their political and policy problems become.

More than 15 million Americans already have coverage under Obamacare — 8 million through the exchanges and more than 7.2 million in Medicaid, according to the Obama administration. While Republicans downplay those numbers, arguing that many of the “newly insured” previously had plans that were eliminated under the law, they admit some people are indeed benefiting . . .

Party leaders say they have to ensure that people who got Obamacare coverage stay covered under an alternative. “There’s no question — we have to,” [Tennessee Republican representative Phil] Roe said. “You have to have a bridge to cover these folks — have a place for them to go to buy insurance.”

Republicans have a challenge: The constituencies Haberkorn and Representative Roe are describing will fight losing their newfound insurance, and the cost of health care and health insurance is at the front of the minds of middle class voters more broadly. So if Republicans did manage to repeal Obamacare, it will have to come along with a replacement plan that addresses many of the concerns Obamacare did in a market-oriented way — something like Jim Capretta’s plan.

However, we’ve now witnessed how challenging it is to pass a sweeping reform of the health-care system. Democrats needed back-to-back landslide wins to take the House, Senate, and White House and still were barely able to ram Obamacare through. Repealing Obamacare without passing an adequate replacement would be a political and policy disaster for Republicans, and even if they did manage to pass something, it likely wouldn’t even touch Medicare.

Enter Avikcare, summarized by the Angeda’s Callie Gable here. The plan uses Obamacare to achieve all of the conservative health-care-policy goals while avoiding many of the political headaches described above — it could be the precursor to a new way to think about health policy on the right.

School autonomy works.

Via Marginal Revolution, Youjin Hahn and coauthors assembled a study comparing private and public schools in South Korea. Hahn et al:

We show that private high school students outperform public high school students in Seoul, South Korea, where secondary school students are randomly assigned into schools within school districts. Both private and public schools in Seoul must admit students randomly assigned to them, charge the same fees, and use the same curricula under the so-called ‘equalization policy’, but private schools enjoy greater autonomy in hiring and other staffing decisions and their principals and teachers face stronger incentives to deliver good students’ performance. Our findings suggest that providing schools greater autonomy in their personnel and resource allocation decisions while keeping school principals accountable can be effective in improving students’ outcomes.

We’ve discussed recently the evidence showing that raising teacher pay without changing the hiring procedures would fail to improve teacher quality. This study, which would seem to relate to the debates we often have over teacher tenure, charter schools, and school vouchers, makes use of a natural experiment with findings that corroborate the call for liberalizing hiring and firing of teachers and for more decentralization and competitive pressures in education.

Since the natural experiment prevents selection effects (e.g., smarter kids going to the better schools) through random assignment and holding costs and curricula equal, the authors feel confident asserting that private schooling causally improves educational outcomes through principals facing more accountability in the form of school boards along with giving them more flexibility in assembling their faculty.

Thom Tillis hits the right note on taxes.

In an interview with Byron York of the Washington Examiner, Thom Tillis discussed his thoughts on tax reform. York’s report:

Tillis supports tax reform, but he distanced himself from the GOP stereotype of prescribing tax cuts for all economic ills. “You can’t lead with the notion that everything gets fixed by just reducing taxes,” he said. “There are a lot of other structural things that we have to do if we’re going to try to create better-paying middle-class jobs, and I think you do that by leading with regulatory reform.” He cited the EPA, plus Dodd-Frank and other strictures on business, as measures he’d like to see loosened.

Tillis is right that, while it would be beneficial for our tax code to be more pro-growth, taxes aren’t stifling the economy like they were in the 1970s. A major tenet of reform conservatism is that conservatives need to respond to the challenges of today rather than just keep advocating for the same policy actions that solved the problems Ronald Reagan faced — Tillis appears, to some extent, to get that.

Is there still slack in the labor market?

Daniel Aaronson and Andrew Jordan of the Chicago Fed have released a new report looking at why the economy has been seeing slow wage growth. They write in their abstract:

The authors find that the share of the labor force that is medium-term unemployed (five to 26 weeks unemployed) and the share working part time (less than 35 hours per week) involuntarily are strongly correlated with real wage growth. Moreover, they estimate that average real wage growth would have been between one-half of a percentage point and a full percentage point higher in June 2014 if 2005–07 labor market conditions had been restored, indicating that the slack in the jobs market still weighs heavily on the real wage prospects of U.S. workers.

In other words, “slack” in the labor market — lots of workers underemployed and lots of people on the margins of the labor force — explains why lower unemployment isn’t pushing up wages. This is a key problem for advocates of further monetary easing: If indeed there’s still significant unused productivity in the economy, keeping interest rates low is probably a good thing that could help heal our labor market and enable those at the bottom of the income ladder to experience gains. But the concern, as expressed by an informal Wall Street Journal poll of economists, is that continued stimulus could lead to the economy overheating, because monetary policy can’t necessarily get marginal workers into the labor force.

For now, though, overheating doesn’t seem like a big risk: The producer price index only rose 0.1 percent in July, and even if we reached an annual rate of 2 percent, inflation wouldn’t be the worst thing for the economy right now.



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