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The Agenda

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

America: No. 1 and Gaining in . . . Corporate-Tax Oppressiveness



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You probably knew that the U.S. has the highest top statutory corporate-tax rate in the world (an honor it’s held for three years running – it used to be just barely topped by Japan). But you may not have known that its position has gotten substantially worse relative to its competitors over the past few years, as countries around the world are cutting their corporate-tax rates to increase competitiveness, even in an age of austerity.

Here’s a chart showing the top corporate rate in some of the world’s largest wealthy economies, with the U.S. in the stratosphere in light blue:

The chart comes from Brian Williams of the Motley Fool, a personal-finance website. The top statutory federal rate in the U.S. is 35 percent, but KPMG, from which the above data is drawn, deems 40 percent the right top rate because it takes into account an average of state corporate taxes.

The above chart is about to get worse, too: Japan, America’s closest competitor in the race for the highest corporate rate, is planning to cut its corporate rate again as part of Prime Minsiter Shinzo Abe’s “Abenomics” reform package, bringing the rate below 30 percent.

Japan is pursuing a growth-oriented package of reforms but also has huge deficits to worry about — as do a number of other countries on the above chart.

Few American corporations, of course, pay anything like a 40 percent corporate-tax rate — though as one example, large financial-services companies often do — because of the huge tax preferences embedded in the corporate tax code. (Here’s a breakdown from the New York Times of effective rates paid by various companies and industries.) With an exceptionally high rate, the U.S. corporate tax garners a whopping 9 or 10 percent of the federal government’s revenue every year. 

Here’s Why We Should Fight the Dragon: A Reply to Ramesh Ponnuru and Michael Strain



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Editor’s note: The following post is by Oren Cass, who served as Governor Mitt Romney’s Domestic Policy Director in the 2012 presidential campaign. In it, he elaborates on several of the themes he first introduced in “Fight the Dragon,” his recent National Review cover story, and he replies to a critique from Ramesh Ponnuru and Michael Strain.

The last issue of National Review includes a response from Ramesh Ponnuru and Michael Strain to my essay in the prior issue arguing that the U.S. should aggressively confront China’s trade abuses. I appreciate their taking the time to respond, but wish they had engaged with the argument I made rather than simply trotting back out the standard “imports good, tariffs bad, trade deficits don’t matter” mantra that I was hoping to move beyond.

Indeed, their piece is an excellent case study of the phenomenon I described in my very first paragraph: “Conservatives, and most neoliberals, have embraced that view [of free trade as obviously positive] and consistently press for further liberalization while condemning as backward and reactionary ‘protectionism’ any proposed obstacles to the free flow of goods and services.” My goal was to explain the flaws in that view, so it is disappointing that the response is simply to have it shouted back louder. At times I thought I was reading a defense of NAFTA.

To understand just how narrow and incomplete their response is, it might be helpful to break the debate down into three discrete questions: First, what policies is China pursuing? Second, what is the impact of these policies on the United States? Third, to the extent that the impact is negative, what should the United States do?

On the first question, there seems not to be much disagreement. China is running roughshod over virtually every tenet of the free trade system. It blocks access to its own market and coerces firms that attempt to enter it (Ramesh and Michael make no mention of market access). It systematically steals intellectual property (they don’t use the words “intellectual” or “property” either). It manipulates its currency. And it uses both that currency manipulation and a range of subsidies to artificially depress the price of goods it sells into the U.S. market, with a focus on industries it has identified as most strategically important.

Ramesh and Michael do engage on this final element, taking issue with my comparison of subsidized selling to predatory pricing and correctly noting that — like Sasquatch — predatory pricing is frequently discussed but rarely found in nature. But that misses the (perhaps inartfully stated?) point. Regardless of whether China is actually selling below its cost, the subsidization has the same effect that predatory pricing would: driving other firms out of the market. And thus we should be worried about it for the same reasons: the resulting long-term cost in destroyed firms and eroded economic strength greatly exceeds any short-term benefit in cheap goods. As far as I can tell, they are not questioning that China subsidizes its producers. And they are not questioning that this harms domestic firms. Their Chicago School shout-out is just a distraction.

With China doing all these things, question two moves to the forefront: what is the impact on the United States? Here Ramesh and Michael stake out the claim that “free trade almost always benefits the country adopting it, regardless of the trade policies of other nations.” But that is a question-begging statement. Is what we have with China “free trade”? Surely it is not the case that the U.S. benefits from having its firms excluded from the Chinese market and coerced when they enter it. Nor can it be the case that the U.S. benefits from having the intellectual property of its firms expropriated. They address neither.

Instead, they focus solely on the question of whether cheap imports from China are beneficial to the United States. I read twice through their response to find a clear statement of their reasoning on this point to quote here, and came up empty. As far as I can tell, their argument is that because the classical model says free trade is beneficial, any criticisms of that model are incorrect. Kind of circular.

There are at least two reasons why we should be concerned by the flood of cheap imports generated by China’s economic strategy — not a flood of cheap imports per se, but rather a flood of artificially cheap imports that are strategically subsidized and buttressed by intellectual property theft and currency manipulation, coming from a centrally-controlled market closed to reciprocal imports. Not all influxes of cheap goods are equal, and while the classical model treats them as such our actual experience with China suggests otherwise.

The first problem is that we do not want to see our economy hollowed out. With actual free trade, some U.S. industries would see a decline in demand but others that had a comparative advantage would see an increase in demand. There would be economic disruption but at the end of the day a net economic gain. In practice we are seeing something very different: China’s imports flood the U.S. market, but China does not turn around and import U.S. goods in return. Instead, it hoards its surplus of dollars and loans it back. Which is a multi-step way of saying that it sends these imports across on credit. Applauding this is the equivalent of congratulating a friend for getting fired, lying on the couch while his skills erode, and buying everything he needs on a credit card. Because… hey, free stuff!

(Ramesh and Michael argue that savings and investment balances dictate trade balances but do not explain why causation should run in that direction and not vice versa. They also make the surprising claim that the policy decisions of the U.S. and its trading partners are irrelevant to where these balances land, as if government policy does not have the ability to influence savings and investment rates or the competitiveness of importers and exporters – an especially faulty premise when one of the parties is Communist.)

The second problem is one of distribution. Even if we took seriously the idea that running hundreds of billions of dollars in trade deficits while borrowing hundreds of billions of dollars is a healthy financial balance for the nation, we would still have to account for the uneven impact of that balance within the nation. Specifically, we would need to be prepared for substantially larger government redistributing a substantially larger share of national income. That has enormous economic and social consequences of its own.

(For more on the damage caused by the unprecedented surge of Chinese imports, see, e.g., the Wall Street Journal  that bastion of protectionism – summarizing the recent work of David Autor et al. And note that “Michael Spence, a Nobel Laureate economist at New York University [and a Senior Fellow at the Hoover Institution], said the new finding reflected how prevailing theories of trade aren’t up to the task of dealing with the breakneck pace of China and other developing economies.”)

To make matters concrete: let’s imagine that Ramesh and Michael write a book. And then let’s imagine that the Chinese government hacks into their computers, steals the manuscript, prints up 100,000 copies, and sends them over for free to bookstores and the Amazon warehouse. And let’s imagine that it is explicit Chinese policy to do this with every conservative policy book written for the next decade, and that there would be no legal recourse against retailers selling these copies. As a matter of economic policy, should the U.S. welcome this state of affairs because “free trade” is always good, or might there be cause for concern? Before you answer, remember: the book will be cheaper for consumers.

Having ignored (though not denied) many of China’s abuses, and having ignored (though not denied) many of the negative impacts on the U.S. economy, it is perhaps unsurprising that they take such umbrage upon arriving at the third question of what action the U.S. should take. Yes, if China’s only offense were offering low-cost goods to U.S. consumers then imposing a tariff in response would be foolish. But offering low-cost goods is one small and incomplete component of China’s trade strategy, and a tariff is only one small and incomplete component of my proposed response.

My goal in writing the initial essay was twofold. First, to lay out the full indictment of China’s trade abuses, emphasizing the ways its sophisticated economic strategy frustrates the classical economic model and the reasons it must be confronted. Second, to make the case that because withholding trade benefits is the primary tool by which international trading norms can be enforced, a credible willingness to disrupt the economic peace is critical to maintaining that peace and promoting prosperity.

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Today’s Policy Agenda: There’s a Growing Consensus to Repeal the Employer Mandate



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Rhode Island increased their minimum wage last week. The state’s unemployment rate is 8.2 percent — what are they thinking?

Last Thursday, Rhode Island governor Lincoln Chafee signed a bill to increase the state’s minimum wage from $8 to $9. At risk of re-litigating the minimum-wage debate, the specifics of the Rhode Island situation are unique and worthy of more analysis. While it’s true that the hike is just a 12 percent increase and will only apply to Rhode Island, which tend to have high prices and wages, unlike President Obama’s national proposal to raise the floor by 40 percent, the labor market in the Ocean State is among the weakest in the country.

At 8.2 percent, Rhode Island’s unemployment rate is the nation’s highest and clearly cannot endure the disemployment effects many economists and the CBO believe a minimum-wage increase will cause. But even if the CBO estimate (500,000 jobs lost nationwide with a $10.10 minimum wage, considered a mid-point in the academic literature) is too high and the disemployment effects are small, we know that those losses will be borne by the young and by low-skill, low-wage workers.

In Rhode Island, these groups are hurting: According to Census Bureau data, the teenage unemployment rate there is 24.8 percent, almost 14 percent of those with a high-school diploma or less are out of work, and unmarried men face an unemployment rate of 14.6 percent. These are the exactly the individuals who most need access to what work can provide: the first rung on the income ladder, inclusion in new, upwardly mobile social networks, the psychological benefits of working and experiencing human flourishing, growth in potential from learning new skills.

Maybe liberals are right and the costs of a wage hike will be small, but just moderate job losses are enough to put a better life a little farther out of reach for Rhode Island’s most vulnerable citizens.

Obamacare has increased coverage. How does this affect the starting point for conservative reforms?

The New England Journal of Medicine is out with a new study by David Blumenthal and Sarah Collins analyzing the state of Obamacare after the completion of its first enrollment period. They write:

Taking all existing coverage expansions together, we estimate that 20 million Americans have gained coverage as of May 1 under the ACA. We do not know yet exactly how many of these people were previously uninsured, but it seems certain that many were. Recent national surveys seem to confirm this presumption… With continuing enrollment through individual marketplaces, Medicaid, and SHOP, the numbers of Americans gaining insurance for the first time — or insurance that is better in quality or more affordable than their previous policy — will total in the many tens of millions.

While it’s true that rate shock and narrower networks will dampen consumer satisfaction with the new insurance products, it seems that despite the early struggles, the ACA has succeeded in at least reducing the numbers of the uninsured. This isn’t to say that Obamacare has been a success: We’re still far short of the goals set out in making the case for the law, and many of the conservative criticisms of the law still hold up and plenty of dire predictions have come true.

Yet when Republicans get their chance to move health policy in a market-oriented direction, they’ll have to do so in an environment where liberals made the case on moral and economic grounds for expanded insurance coverage, won that argument in the public square, and delivered on the expansion. This isn’t the end of the world: There are plenty of good Republican plans to reform health care that would also maintain or expand levels of coverage from the post-Obamacare status quo. But the starting point of the health-care debate seems to have changed for good.

Europe shows why we need to reform our entitlements now.

ECB Governing Council Member Christian Noyer made some interesting comments over the weekend, as reported by Mark Deen for Bloomberg.

“No country today has sufficient credibility to put in place a strategy” of financing public infrastructure with a major debt increase, Noyer said today at the Cercle des Economistes conference in Aix-en-Provence, France. “Decades of deficits have created profound skepticism.”

When deficits spiral out of control, forced, drastic austerity measures hurt the poor, and as French president François Hollande is discovering, debt-financed infrastructure investments — the kind of things governments are supposed to borrow to finance – are off the table.

If we reform our entitlements now before the worst of the demographic shift drives us to an unsustainable point, we can likely avoid the most painful of the possible paths to solvency. It’s critical, then, that the electorate and policymakers avoid “normalcy bias” and work now to enact sensible reforms.

There’s a growing consensus in favor of repealing the employer mandate.

For Politico, Paige Winfield Cunningham and Kyle Cheney report that many Democrats are changing their tune on Obamacare’s employer mandate:

The employer coverage rules were part of the ACA’s core philosophy that individuals, employers and the government should all contribute to paying health care costs. Some Democratic constituencies, including labor unions and Obamacare proponents like Families USA, still see it that way. But the shift among liberal policy experts and advocates has been rapid. A stream of studies and statements have deemed the mandate only moderately useful for getting more people covered under Obamacare. And they too have come to see it as clumsy, a regulatory and financial burden that creates as many problems as it solves. The main downside to eliminating the mandate, from the Democratic perspective? Money. Estimates of the mandate’s worth to Obamacare financing range from $46 billion to more than $100 billion over a decade. That helps pay for coverage expansion.

The employer mandate is, in a way, similar to the minimum wage: Politicians who want a certain benefit refuse to pay for it with subsidies and tax increases, so they pass off the expense on employers in an indirect way that lets them take the credit — while the costs are borne by the very people the policy was designed to help (through less employment). The employer mandate probably never should have been in the law in the first place, and now that liberals are finally realizing the unnecessary problems it causes, repealing the employer mandate should be the first of many changes to Obamacare. (Reihan wrote about the general issue of the employer mandate, in February.)

Keeping an Eye on the Relative Military Power of the United States



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In “Have We Hit Peak America,” Elbridge Colby and Paul Lettow offer a broad look at the relative decline of American power as well as thoughts on how the U.S. might leverage its considerable strengths. I found their discussion of the future global distribution of military power particularly compelling. Among U.S. policymakers, it is widely-believed that U.S. military superiority is so firmly-established as to face no serious medium-term challenge, even if the U.S. pursues deep reductions in military expenditures. Colby and Lettow remind us that this is not in fact the case. 

It is often noted that the United States spends more on defense than the next 10 countries combined. But growth in military spending correlates with GDP growth, so as other economies grow, those countries will likely spend more on defense, reducing the relative military power of the United States. Already, trends in global defense spending show a rapid and marked shift from the United States and its allies toward emerging economies, especially China. In 2011, the United States and its partners accounted for approximately 80 percent of the military spending by the 15 countries with the largest defense budgets. But, according to a McKinsey study, that share could fall significantly over the next eight years — perhaps to as low as 55 percent.

I can imagine some of my interlocutors dismissing this finding, as 55 percent remains quite high. Yet raw spending obscures the fact that affluent societies have to pay more to secure trained personnel than less-affluent societies, as the opportunity cost of military service is higher in high-productivity, high-wage countries and there is a limit to the extent to which labor-intensive military functions can be outsourced. And so the difference in spending might actually overstate the capabilities of the U.S. and its (affluent) partners while understating those of potential rival states. Moreover, Colby and Lettow note that many of the technological tools (e.g., high-end sensors, guided weaponry, battle networking, space and cyberspace systems, and stealth technology) that have increased the effectiveness of U.S. forces are rapidly diffusing to rival militaries. China in particular is much closer to becoming a true peer competitor than Americans seem to think: 

China, in particular, is acquiring higher-end capabilities and working to establish “no-go zones” in its near abroad in the hopes of denying U.S. forces the ability to operate in the Western Pacific. China’s declared defense budget grew 12 percent this year — and has grown at least ninefold since 2000 — and most experts think its real defense spending is considerably larger. The International Institute for Strategic Studies has judged that Beijing will spend as much on defense as Washington does by the late 2020s or early 2030s. Meanwhile, regional powers like Iran — and even nonstate actors like Hezbollah — are becoming more militarily formidable as it becomes easier to obtain precision-guided munitions and thus threaten U.S. power-projection capabilities.

Colby and Lettow aren’t simply arguing that the U.S. should maintain high military expenditures; they are also concerned with the effectiveness of U.S. military expenditures. By 2021, they report that the Defense Department expects that almost half of military expenditures will go to personnel-related costs, like the cost of wages and health benefits, as opposed to procurement, training, research and development, or operations. Even if the U.S. and China are spending roughly the same amount in the 2020s and 2030s, it seems plausible that, barring reform, the U.S. will be spending far more than the Chinese on personnel costs, thus freeing the Chinese to invest a larger share of their military budget in building advanced weapons systems. 

For the most part, Colby and Lettow offer a hopeful account of how the U.S. can renew its national strength. But their careful analysis demolishes the notion that the U.S. can steeply reduce military expenditures, or leave its military personnel policies untouched, without further undermining America’s strategic position. It is true that the U.S. could decide to pivot from a policy of deep or selective engagement in Europe, East Asia, and the Gulf in favor of a role as an offshore balancer, or a role more tightly-focused on continental defense. Such an approach would mark a dramatic break with the national security policies the U.S. has pursued since the Second World War, and there are no guarantees as to what the world might look like in the wake of such a disengagement. My suspicion is that it would look much like the combustible Europe of the first years of the last century, only more dangerous.   

Weaponized Secularism



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For a moment there I considered weighing in on the Hobby Lobby decision. But then I read Julian Sanchez of the Cato Institute on the subject and decided that he had basically said all that needed to be said. I’d also recommend reading Ann Friedman’s column on the same subject, as she is a talented writer who perfectly distills the left-liberal take on the decision. Joey Fishkin has argued that Hobby Lobby is ultimately about “the politics of recognition,” and specifically about recognizing various conservative religious claims. Fishkin neglects the extent to which the Obama administration’s decision to fight Hobby Lobby over its contraception mandate, and its initial decision to impose it on religious non-profits, is about recognizing claims made by liberal secularists, as Sanchez makes clear:

The outrage does make sense, of course, if what one fundamentally cares about—or at least, additionally cares about—is the symbolic speech act embedded in the compulsion itself. In other words, if the purpose of the mandate is not merely to achieve a certain practical result, but to declare the qualms of believers with religious objections so utterly underserving of respect that they may be forced to act against their convictions regardless of whether this makes any real difference to the outcome. And something like that does indeed seem to be lurking just beneath—if not at—the surface of many reactions.

It is the rising political assertion of the “nones,” or the religiously unaffiliated, that I find most interesting. America is developing a homegrown anticlerical politics, despite the fact that we’ve never had an established church. While chasing the mirage of theocracy, social liberals are increasingly embracing a weaponized secularism. This has led to sharp conflicts between right and left, and traditionalists seem to be finding themselves on the losing side of these debates as often as not. Going forward, though, I wonder if weaponized secularism will prove more divisive within the Democratic Party, which must appeal to the emphatically secular and the emphatically religious alike. 

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Why Wage Subsidies Are Superior to Unconditional Income Support



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Should the goal of anti-poverty policy be, as Columbia University political scientist Chris Blattman suggests, to purchase a better life for poor people through the use of cash transfers, or should it be to help poor people become less poor by helping them raise their earning potential, as the Campaign for Boring Development (CBD) argues? While Blattman and the CBD are both focused on the developing world, their disagreement is relevant to poverty-fighting efforts in the United States, where a growing number of policy intellectuals, on the left but also among libertarians, favor an unconditional basic income (UBI) on the grounds that it is an efficient means of redistribution and it is free of paternalism.

The trouble with a basic income in an affluent market democracy like the United States is that while it might help the most motivated poor people with the strongest social networks to raise their earning potential by giving them the resources they need to invest in their human capital, or to reduce the cognitive load caused by scarcities of various kinds (e.g., when you have very little, you have to devote considerable time and effort to making minor life decisions, which can make it hard to think long-term), it might also reduce the incentive for other poor people, who live in isolated neighborhoods or regions, or who are disconnected from the world of work, to do the same. Such is the peril of any one-size-fits-all social policy. The thornier question is whether the benefits, to poor people who are not trapped in workless families and neighborhoods and who despite their poverty already have the noncognitive skills and the cultural and social resources that are the prerequisites for upward mobility, outweigh the potential harms.

In making the case against an unconditional basic income, Brink Lindsey recently observed that the negative income tax experiments of the 1960s and 1970s appear to have reduced labor supply. Moreover, he gathered evidence concerning the link between employment and well-being: 

study using German panel data examined changes in reported life satisfaction after marriage, divorce, birth of a child, death of a spouse, layoff, and unemployment. All had predictable effects in the short term, but for five of the six the effect generally wore off with time: the joy of having a new baby subsided, while the pain of a loved one’s death gradually faded. The exception was unemployment: even after five years, the researchers found little evidence of adaptation.

Evidence even more directly on point comes from the experience of welfare reform – specifically, the imposition of work requirements on recipients of public assistance. Interestingly, studies of the economic consequences of reform showed little or no change in recipients’ material well-being. But a pair of studies found a positive impact on single mothers’ happiness as a result of moving off welfare and finding work.

Among supporters of an unconditional basic income, and in particular those who favor it on anti-paternalist grounds, it is commonplace to argue that employment is not the only way for people to lead meaningful, challenging lives. Yet Lindsey finds that for most adults, paid employment is the surest route to the sense of purpose and membership that all humans need to flourish. 

Consider the most recent results from the American Time Use Survey, compiled annually by the Bureau of Labor Statistics. In 2013, employed men averaged 6.43 hours a day on work and related activities (like commuting). So how did men without jobs fill up all that free time? Well, compared to employed men they spent 19 extra minutes a day on housework, 11 more minutes on socializing, 9 more minutes on exercise and recreation, 8 more minutes on childcare, and 6 more minutes on organizational, civic, and religious activities. The really dramatic differences in time use, though, came in two areas: jobless men spent an extra hour sleeping (for a total of 9.25 hours a day!) and two extra hours watching TV (4.05 hours a day!). The evidence is quite clear: people who don’t work can’t be counted on to fill that void with other forms of productive, engaged, goal-oriented activity.

The case for an employment-conditional earnings subsidy is far stronger than the case for a UBI. Notice that that while there is a danger that a UBI will benefit the poor people who already have the prerequisites for upward mobility while harming those who do not, the same can’t be said of a wage subsidies, which benefit poor people in both categories: by raising the incomes of the working poor, who raise their earning potential by gaining work experience, and by drawing the non-working poor into paid employment, which in turn will tend to reduce their social and economic isolation.

In other words, while a UBI is a policy that will make poverty more tolerable, wage subsidies have the potential to, over time, make poverty less pervasive. 

Today’s Policy Agenda: California Thinks More Regulation Will Fix Rate Shock



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Is it worth forgoing the logic of districts to stop gerrymandering?

In their new paper, Nicholas Stephanopoulos from the University of Chicago Law School and Eric McGhee from the Public Policy Institute of California suggest a new method for drawing nonpartisan congressional districts. The metric they use is called the “efficiency gap,” which determines the number of “wasted” votes in each district — votes the party that won the district didn’t need to win it — and then translating those votes into seats for the minority party.

They write:

 The efficiency gap has several properties that make it ideal for measuring the extent of gerrymandering. First, it directly captures the packing and cracking that are at the heart of every biased plan. Surplus votes for winning candidates are the definition of packing, and lost votes for defeated candidates the essence of cracking. All a gerrymander is, in fact, is a plan that results in one party wasting many more votes than its opponent. The efficiency gap tells us exactly how big the difference between the parties’ wasted votes is.

The efficiency gap aims to distribute seats based on a “partisan symmetry” model, which aims to give each party the number of seats that corresponds to the overall percentage votes they receive within the state. This model varies greatly from the current system, in which seats are distributed based on simple majorities within individual districts.

But should we abandon or override the district model in favor of essentially statewide elections, just because districts look ridiculous or are at the mercy of the state’s majority party? Not necessarily: Districts can be a good thing. They can group people from similar demographic areas who may have similar interests and give them direct, individualized representation from a person within their community. (That can also promote informed voting.)

Outsourcing redistricting to independent commissions, however, wouldn’t necessarily mean abandoning all of those advantages.

A college degree is worth a lot less if you’re black.

It’s no secret that the effects of past and present systematic discrimination present real problems for the African-American community. But even in the context of this reality, the extent to which race limits black mens’ employment prospects is still shocking.

A new report from the liberal nonprofit Young Invincibles lays out some stark contrasts: A black man with a bachelor’s degree, for instance, has the same chances of finding a job as a white man who dropped out of college. The gap between the likelihood of a black man and a white man’s having a job is widest for those with the least education, and only essentially closes with a professional degree:

Education is a powerful factor in shrinking job-attainment and wage disparities. But affirmative-action and tuition-subsidy policies that offer easier access to higher education can sometimes work against the people it’s intended to benefit.

Consider the case of highly selective universities who admit some students with lower standardized testing scores relative to the whole student body. These policies can have a negative effect on future achievement, because these students are academically unprepared to compete with their peers. This can later contribute to employment gaps by pushing minority students into less rigorous and potentially less professionally useful college majors. Policies that place students in environments where they are likely to succeed academically may be one way to better address this disparity.

California might vote to give its health-insurance commissioner power to reject premium hikes. This is not the way to fix rate shock.

In November, California will vote on Proposition 45, a proposal that would give the state the power to veto premium changes by health-insurance company. Shockingly, Dave Jones, the insurance commissioner, supports the measure: “This is the missing piece of the Affordable Care Act,” he says. “Without health insurance rate regulation, we will continue to see excessive rates.”

But over 200 groups, including hospitals, small businesses, and labor unions oppose Proposition 45, noting that the measure would increase barriers to care by creating delays and raising costs.

But this approach to curbing costs has understandable popular appeal: Californians suffered huge premium increases when the ACA was implemented, and Consumer Watchdog released a report saying that 1 million Californian insurance policy holders paid $250 million dollars for unreasonable premium hikes in 2012. But insurers can’t hold down rates for free: If passed, Proposition 45 could add to the pressure that insurers are already feeling to shrink networks, raise deductibles, and lower benefits to cut costs — in other words, people will see more of the other effects of the ACA that they’ve already suffered from. The existing regulations and mandates are responsible for the price increases that Californians are upset about now, so it’s doubtful that piling on more regulations will get consumers better care at lower prices in the future.

Vox-aggerating Climate Change



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Vox has an interesting take on a recent set of documents released by the Organization for Economic Cooperation and Development, a club of industrialized nations, projecting the performance of the world economy over the fifty years from 2010.

Their first takeaway: “Growth is going to slow down.” Yes, somewhat steadily after 2030:

Their second takeaway: “Climate change will pay a big part in dragging down growth.” Whoa now — that’s interesting, will it really? Here’s the OECD chart they cite:

Spoiler alert: This chart may look dramatic, but it doesn’t show climate change playing a big part in dragging down growth. It shows climate change being about 5 percent of the explanation for slower growth.

Here’s why: Vox is implicitly comparing one value — the size of the world economy — with a mathematical derivative of it — the rate at which the economy is growing at any given time. I can’t tell if the writer understands the problem here or not, but the climate-change chart explains almost none of the drop in the growth-rate chart — just about 5.2 percent of it, in fact.

What’s shown in the second chart is not the change in the growth rate of the economy over the next 50 years caused by climate change. Instead, it’s the change in the size of the world economy over that period of time caused by climate change.​

“By 2060, climate change will drag on GDP growth anywhere from 0.6 percent to nearly 2.5 percent,” Vox says. No, it will drag down GDP by that amount. “Ironically, the climate change brought about by economic growth is set to be a major drag on the global economy for decades to come,” the post says.

Just how wrong is this? Well, if you take out the effects of climate change, the OECD thinks that the global economy in 2060 will be 4.38 times the size it was in 2010. In other words, if the GDP of the world economy were 100 dollars in 2010, in 2060 it’d be 439 dollars.

But how much is that going to be dragged down when we take into account climate change? Let’s be pessimistic, and assume the OECD’s worst-case environmental scenario. If that holds true and we do nothing about climate change, in 2060 world GDP will be just . . . 428 dollars.

Yes, those 11 dollars we missed out on — or $6.58 under the most likely scenario — weren’t nothing.

But are they “a big part” of slowing growth? Nope. To be precise, what Vox says will play a “big part” in slower growth will account for 5 percent of said slower growth, according to the OECD’s central projection. (My detailed calculations are here.)

If growth rates remain until 2060 what they have been this decade, the world economy would be worth $126 dollars more than it would be under the OECD’s central projection for the world after climate change. Climate change accounts for just $6.58 of that.

(Of course, these projections are highly uncertain — climate change could be much more costly than the OECD thinks, growth could slow more, whatever. But their projections for now suggest that climate change is basically, for the world — even more so for the U.S., actually — just one economic problem in a much larger slowdown. If we think we can mitigate those relatively insignificant economic costs in a way that’s a net economic benefit, okay, something that produces a 1 or 2 percent bigger economy decades from now is a great policy. But that requires cost-benefit analyses — saying climate change is such a big part of slowing growth implies that it would be worth doing a great deal to stop it.)

UPDATE: The author has kindly amended her piece to reflect the points I’ve raised here. The wording now — “Climate change will play a part in dragging down growth” — is accurate. Like I said, climate change isn’t irrelevant; we consider policies, like fundamental tax reform, that may just result in a 1 or 2 percent bigger economy in the future well wiorth considering as a political matter. An intervention like fundamental tax reform, though, I’d note, is always assessed on its net economic benefits — policies to avert the 1 or 2 percent of GDP losses caused by climate change, if such policies are practically possible, will probably come with substantial economic costs that might well outweigh the benefits of avoiding the environmental costs the OECD projects.

The Problem with the ‘Neocon’ Case for the Export-Import Bank



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Reason’s Nick Gillespie points to an op-ed by Tom Donnelly of AEI arguing that there’s a justification for the Export-Import Bank you may not have heard of: its utility as a foreign-policy lever. He writes, noting that opponents argue that by fair-value accounting, Ex-Im costs taxpayers money:

This green eyeshade view of the bank misses a lot of [Ex-Im's] political and strategic value. Take the case of Dubai, which, as Lane notes, got an Ex-Im-underwritten loan for $117 million to buy some Boeing 737s. Dubai and the rest of the United Arab Emirates aren’t exactly hurting for cash – they have the second largest economy in the Persian Gulf and have used their oil wealth to become a regional tourist attraction – and could certainly get private financing for the plane purchases. Indeed, Emirates Airlines has been growing like a weed and is a major international carrier; it’s even got its name on the plush new stadium of the London soccer powerhouse, Arsenal.

At the same time, the UAE is a critical U.S. ally in the struggle with al Qaeda and, more generally, in security matters throughout the Muslim world; in part because Dubai has become a regional entrepot, it is a critical “node” for a host of reasons. Just this spring, an al Qaeda cell was rounded up in Abu Dhabi. At the same time – and particularly as the Obama administration’s Middle East policy continues to unravel – the UAE, like the royal family next door in Saudi Arabia, sometimes hedges its bets.

In sum, even if the Emiratis get a “sweetheart deal” from Uncle Sugar’s Ex-Im Bank, it’s a baksheesh well spent. And it’s pretty likely that the UAE will fulfill the terms of the loan. This ain’t capitalism, it’s strategy.

Let’s leave aside the problem of whether this kind of suasion appears to be working (the fact that al-Qaeda cells get rounded up in Dubai and routinely funnel baksheesh of their own through there suggests it may not). Is it, in theory, worth having Ex-Im to support deals like this, at relatively low cost to the U.S. taxpayer? Quite possibly. The problem is that this isn’t representative of the kind of deals Ex-Im supports, or what almost all of its defenders say it does, or what it’s chartered to do.

Here’s how the charter of the Export-Import Bank begins (emphasis mine):

The objects and purposes of the Bank shall be to aid in financing and to facilitate exports of goods and services, imports, and the exchange of commodities and services between the United States or any of its territories or insular possessions and any foreign country or the agencies or nationals of any such country, and in so doing to contribute to the employment of United States workers. The Bank’s objective in authorizing loans, guarantees, insurance, and credits shall be to contribute to maintaining or increasing employment of United States workers.

Not much there about national defense. Now, the charter, which sets the bank’s policies, does contain a number of foreign-policy-related restrictions and priorities: no sales to Marxist-Leninist countries, for instance (the Democratic Republic of Afghanistan is still listed as a no-no), though this can be waived when the president says it’s in the national interest, as President Obama did in 2012 to authorize a deal with a Vietnamese telecom. And no sales of any military equipment are permitted at all — as Donnelly has lamented.

He wants Ex-Im restored to its original role, where it appears to have had a de facto focus on certain foreign-policy aims. Specifically, Donnelly wants it to become a financier of arms exports again, replacing the apparently dysfunctional Pentagon program that does finance U.S. arms exports. I’ll do him one better: It might make good sense to have an export-finance institution that’s intended to help reach deals with allies, prospective allies, or whatever. The non-negligible but relatively small fiscal and economic costs of such loans might be the right price to pay for the diplomatic benefits. (Tim Carney argues it would make more sense to just use cash transfers instead — he’s right that using loans rather than direct transfers is usually just a way to mask a budgetary cost, but there are justifications for credit rather than cash in the foreign-policy and export realm.)

But what Donnelly suggests used to be Ex-Im’s job isn’t what Ex-Im does today — it’s become more or less solely an economic-policy tool, not a foreign-policy one. As such, it should produce measurable net benefits for the U.S. economy, taking into account the fiscal and economic costs of corruption, misallocation of resources and credit, etc. It’s not clear that it does so, which is why I’m not sure Ex-Im really deserves to survive.

Now, a credit agency focused on supporting U.S. foreign policy and national-security interests may not be able to accomplish those interests in the short term at a reasonable cost, either. But at least those interests are a key task of the federal government. Supporting an extremely thin slice of export transactions at highly uncertain costs to the rest of the economy is not. As Donnelly points out, for a couple reasons, the Pentagon’s attempts at such financing schemes have failed (development-focused ones like OPIC are not super successful either). But it’s certainly possible such policies could work, and I don’t want our diplomats or national-security staffs to lack for tools of American power (what do you think I am, a Reason reader?!). But this is an argument for something fundamentally different from Ex-Im, and Donnelly doesn’t explain why we should save Ex-Im rather than design an institution specifically for the purposes he envisions.

Finally Some Repeated Good News: 288,000 Jobs Added



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The U.S. economy added an impressive 288,000 jobs in April, continuing a streak of what’s now six straight months of the economy’s adding more than 200,000 jobs. The past six months have in fact been essentially the fastest half-year since the recovery (such as it is) began: Job growth over the past three months, a reasonable smoothing of month to month variations, has been an impressive 272,000 jobs a month. April’s jobs report, in fact, was revised up from 282,000 to 304,000 — a very nice number.

In fact, if you (arbitrarily) look at half-years since the recovery began, this is the best January–June we’ve seen (chart via FiveThirtyEight’s Ben Casselman):

‎Wall Street had expected a strong report, but not this strong — something more on the order of 215 or 220,000 jobs.

The unemployment rate was cut to 6.1 percent, from 6.3 percent. The unemployment rate is being cut, thankfully, by jobs growth, not by a dropping labor-force-participation rate. The composition of the jobs created wasn’t bad, either: Some decent growth in manufacturing, well-above average growth in business services, which pay much better than the median wage. One soft spot: Earnings didn’t really rise, and haven’t been rising too much this year.

Skeptics — see that incorrigible pessimist Arthur Brooks — will always question why exactly we’re celebrating the labor-force-participation rate merely staying steady, at the lowest rate since the 1970s, and jobs growth at a rate at which it will take years to return to employment levels, as a share of the population, that we saw before the recession.

Two points: It’s all relative, and it is notable that we are seeing stronger growth now than we have seen in years. Second, the labor-force-participation rate isn’t just being pushed down by a bad economy — it’s in a secular demographic decline. I’d like it to rise, and to be higher than it is, but in a certain sense, it’s not ridiculous to celebrate its holding steady as a victory.

One worrying data point: Obamacare’s employer mandate goes into effect for businesses with more than 100 employees in January, and this time last year, we began seeing some weak job growth in full-time jobs and bizarrely strong growth in part-time jobs. These data are very noisy, but it could be happening again: In June, much of the employment growth was in part-time jobs. If that sticks, the next few months could be a lot less encouraging than the last few have been, but we’ll have to see. It’s too early to draw conclusions.

Another downside: While the overall labor-force-participation rate isn’t dropping, the long-term unemployed still don’t appear to be finding jobs — they are more likely to be dropping out of the labor force than finding a job. (Which, by the way, is incredibly difficult for them, which is why some conservative economists have proposed interventions specifically to correct this huge economic and human problem.)

Is There a Compelling Public-Health Case for the HHS Mandate? Not Really



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In this week’s Hobby Lobby decision, the Court decided that it didn’t need to question whether the HHS mandate serves a compelling government interest in order to rule against it. But if it had considered the question, it’s far from an open-and-shut case that HHS was justified in including contraception under its “preventive services” mandate — under the assumption that reducing the rate of unintended pregnancies is a compelling state interest, and that free contraception is the right way to get there.

The first assumption is easily defendable. From an economic standpoint, reducing unintended pregnancies is linked to more women in the workforce and significant savings for taxpayers. Further, allowing women to better control when or if they conceive leads to higher levels of educational attainment, happier mothers, and healthier children.

The second assumption is much more problematic. Contrary to what you might think, there is little evidence to suggest free contraceptives necessarily reduce the rate of unintended pregnancy.

In 2012, the widely publicized Contraceptive CHOICE Project study published in Obstetrics and Gynecology showed strong links between a free-contraception program and reductions in abortions and teen pregnancy. However, as NRO’s Michael New points out, the study is riddled problems: It has no control group, for instance: Participants opted into a program offering them free contraception. And the study included contraceptive counseling to participants when they signed up and then throughout the study — which might be worthwhile, but isn’t a realistic experiment.

In fact, a good amount of research indicates that the effect of contraceptives on the rate unintended pregnancy is more dependent on proper use than on cost and access.

Proper use is especially relevant in regard to oral contraceptives, the most commonly used type of contraceptive in the United States. A Guttmacher Institute study found that inconsistent or improper use caused 76 percent of unintended pregnancies among oral contraceptive (i.e., the pill) users. The majority of women who do not use contraceptives consistently cite ambivalence about becoming pregnant as the reason, while ethnicity, educational attainment, level of sexual activity, and relationship status were also significant factors. While one study suggests that copay-free contraception can increase use of methods more reliable than oral contraception, the fact that ambivalence about pregnancy is such a concern for many women suggests there are limits to how much that might help.

Socioeconomic status may have little impact on consistency of use. Women with private insurance and those using publicly funded clinics experienced the same rate of gaps and inconsistencies in contraceptive use, further indicating that inconsistent use may not be directly tied to costs. A 2011 University of Michigan study found that while price increases did reduce oral contraceptive use, particularly among financially constrained women, the rate of unintended pregnancy was not significantly changed. The study reported that women had fewer sexual partners and effectively used other forms of contraceptives to avoid pregnancy.

Moreover, the mandate will only address these financial barriers, while doing little about access. There’s an important distinction between the two: While the cost of contraception can sometimes be a barrier, it is not the cost of oral contraceptives themselves that is prohibitive; rather, it is often the cost of the doctor visit associated with accessing oral contraceptives that poses a problem. Additionally, the inconvenience or impossibility of setting aside the time for and getting to a doctor’s visit limits access for some women. That’s in part why the American College of Obstetricians and Gynecologists recommends making oral contraceptives available over-the-counter to improve access, an idea that’s gained fans on both the right and left.

Some of the problems with the effectiveness of oral contraceptives can be eliminated by long-acting reversible contraceptive (LARC) methods such as IUDs and dermal implants. LARC methods are more effective because they require no consistent user action to work and remain effective for several years. In the past, the relatively high upfront cost of implanting IUDs and dermal devices and doctor’s liability concerns have limited the use of these methods. The Affordable Care Act requires that health insurance plans cover IUDs and dermal implants, so cost is no longer a barrier to LARC methods. But doctors may remain reluctant to perform implants due liability concerns, making free contraception less effective at reducing unintended-pregnancy rates, and the methods simply remain unappealing to many women.

With oral contraceptives and other user-dependent methods, user consistency appears to be the primary barrier to reducing unintended pregnancy. And regardless of their affordability under the new health-care law, access to LARCs remains limited because of doctors’ liability concerns. Offering copay-free contraceptives will not address either of these issues.

Instead, perhaps public-health efforts to raise awareness about the importance of consistent contraceptive use, making contraceptives available over the counter, or restructuring malpractice laws to reduce liability concerns about LARCs would better meet the compelling public interest of reducing the rate of unintended pregnancy. Regardless of what approach, or combination of approaches, may be effective, it’s clear that simply providing free access to contraceptives is a merely a popular policy that fails to address key factors causing high rates of unintended pregnancy.

A Better Life for a While or Higher Earned Incomes?



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Christopher Blattman, a political scientist at Columbia University and a student of poverty in the development world, argues that the success of cash transfer programs in the developing world might offer lessons for fighting poverty in more affluent societies, including the United States. Specifically, he observes that in a recent experiment, he and his colleagues identified homeless men and criminals in Libya’s urban slums and provided them with cash transfers. They found that almost none of the beneficiaries wasted the money. Rather, they dressed, ate and lived better, yet they were “back where they started” after the transfers came to a close. Blattman writes that the program brought its beneficiaries “a better life for a while, which is the fundamental goal of any welfare program.” He then asks ”if homeless people and drug users in Liberia don’t misuse cash, why would we expect the homeless in New York to waste it?”

Leaving aside exactly how the homeless in New York city, where all individuals are entitled to a suite of labor-intensive services, yet where the coercion of those who refuse assistance and counseling is frowned upon, are different from the homeless in Libya’s urban slums, who are living in desperate conditions in a failed state with limited social service provision, Blattman is too quick to assume that the fundamental goal of any welfare program is to temporarily improve the quality of life of beneficiaries. Or perhaps we ought to differentiate between the fundamental goal of welfare programs and the fundamental goal of development, a distinction captured by the Campaign for Boring Development in its Boring Development Manifesto.

The CBD takes the stance that while many development interventions, like those devised and tested by Blattman, aim to make poverty easier to bear, the goal of development is, or ought to be, to actually make the poor less poor.  CBD maintains that the only way to fight poverty is to boost poor people’s incomes, or rather to boost their earned incomes. This is a goal that involves meaningful increases in labor productivity and in savings over time, and in short run it may well involve working harder and actually consuming less. This is what happens when poor people living in rural villages migrate to cities, a traumatic transition that generally involves making life harder and more unpleasant in many important respects (social isolation, cramped quarters), yet which also leads to a sharp immediate increase in productivity, thanks to economies of agglomeration (denser places are more productive than less-dense places), and a faster rate of productivity growth, due to knowledge spillovers (if you’re around large numbers of other people in the same line of work, you can acquire skills faster than you would if you were isolated). 

The contrast between Blattman’s approach and that of the CBD is clear: Blattman will offer cash transfers to the rural poor, some of whom might then use them to settle in productive cities; the CBD, in contrast, might emphasize devoting resources to improving connectivity, so that it is easier for people to increase their long-run productivity. The former strategy might do a better job of making poverty easier to bear, particularly for those reluctant to leave family connections behind, while the latter might ultimately do a better job of actually fighting poverty. I should stress that this isn’t necessarily true. But CBD’s emphasis is clearly quite different than Blattman’s.

Is CBD’s approach to development relevant to fighting poverty in affluent market democracies? I’d suggest that it is far more development than the strategy Blattman employed in Libya’s urban slums. I’ll elaborate on this theme tomorrow.

Today’s Policy Agenda: Economic Segregation Is a Growing and Devastating Phenomenon



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The Highway Trust Fund is almost out of money. How should we keep funding it?

President Obama spoke yesterday about the need to resolve the looming transportation funding crisis, and Rebecca Kaplan of CBS had the details:

The Department of Transportation (DOT) predicts that the fund, which has traditionally drawn its revenue from the federal gas tax of 18.4 cents per gallon, will be depleted by late August. As a result, the funding that states get from the federal government for highway projects – about 45 percent – will start to shrink. Transportation Secretary Anthony Foxx warned reporters in May that letting the account expire could lead to 700,000 Americans losing jobs in road work, bridge-building and transit maintenance as 112,000 highway and 5,600 transit projects underway come to a halt…The administration recently put forward a four-year, $302 billion transportation plan that would be funded in part by the existing gas tax, and in part by vaguely-defined “pro-growth business tax reform.” The proposal actually increases both highway and transit funding, and allows states to charge tolls on interstate highways as a way to raise funds.

While the devil will likely be in the details on the president’s so-called “pro-growth tax reform,” allowing states to charge tolls is a step in the right direction toward a usage-based funding mechanism for roads. As pointed out by Rick Geddes and Brad Wassink, the problem with the gas tax is that improved fuel efficiency has reduced the revenue collected by a gas tax and has likely done so in a regressive manner (the wealthy are more likely to have new cars, Teslas, hybrids, etc.). Moving explicitly to taxing based on miles driven rather than gallons of fuel consumed would have a number of benefits including making the costs of infrastructure more noticeable to those who use it, and most important, allowing states and cities to set prices based on the traffic level. That would help fight what should be a major target of the pro-work, pro-family party: congestion.

The federal backstop for huge multi-employer pension plans could go very deep into the red, really soon.

John McKinnon reports in the Wall Street Journal on the apparent vulnerability of the Pension Benefit Guaranty Corporation program that covers multi-employer pensions:

The federal safety net for a type of private-sector pension plan common in the transportation, construction and other industries is at risk of collapse in coming years, according to a report released Monday. Such an outcome has the potential to affect more than a million people. . . . But the likely failure of several big plans means that the PBGC’s limited resources for helping retirees in failed multi-employer plans likely will be tapped out in coming years. This year’s report estimates that the $8.3 billion long-term deficit the federal backup plan for multi-employer plans faced in fiscal year 2013 will widen to $49.6 billion by fiscal year 2023. . . . The options for lawmakers are politically difficult. Bailouts of troubled plans or of the safety-net program itself could spark a backlash among voters, while forcing benefit cuts on beneficiaries—particularly current retirees—would be painful and unpopular.

The drumbeat of failing pension plans is getting louder, as it becomes obvious that from these private pensions to state and local pensions to federal entitlements, we’ve way overpromised and because of demographic shifts, can no longer hide it. There’s likely no pain-free fix for such poorly designed plans at this point, but a greater sense of urgency – even from Republican heroes – is needed for reforming these future liabilities before the debts become so large that either hugely hurtful cuts to seniors or big cuts to other public priorities are the only options.

After Hobby Lobby, what’s next for contraception? Making the pill over-the-counter?

For the Volokh Conspiracy at the Washington Post, Jonathan Adler looks at the possible ways  the federal government will try to address contraception coverage in the wake of the Hobby Lobby case.

The easiest and most rapid response would be for the Department of Health and Human Services (HHS) to provide objecting for-profit employers with the same accommodation offered to religious institutions.  Indeed, the very existence of this accommodation undermined the administration’s position before the Supreme Court, as it was hard to simultaneously argue that there was no less restrictive way to provide access to contraception while providing just such an alternative to religious institutions . . . 

A more direct way to enhance contraception coverage would be for the federal government to provide such coverage directly.  Yet while Congress could authorize such a program, it is not clear that HHS has the authority to take this step on its own . . . A final step the administration could take would be to enhance access to contraception by making all forms of oral contraception available over-the-counter without a prescription (and not just “Plan B”).  While this would not make contraception “free” it would reduce the cost, and help alleviate some of the non-monetary obstacles women face.

Making contraception available over the counter seems like an intuitive approach to move us past this issue that has become, as Megan McArdle explains, an emotional flashpoint far exceeding what any practical effects could merit. Phil Klein lays out the conservative case for allowing over-the-counter sale here.

Economic segregation is a growing and devastating phenomenon.

The Census Bureau came out Monday with a new report by Alemayehu Bishaw detailing how poverty has become more and more geographically concentrated over the past decade:

In 2010, approximately 14.9 percent of the total U.S. population lived in poverty. However, poverty is not distributed evenly across neighborhoods. The U.S. Census Bureau designates any census tract with a poverty rate of 20.0 percent or more as a “poverty area.” . . . Between 2000 and 2010, the percentage of people living in poverty areas grew from 18.1 percent to 25.7 percent. While the overall population grew by 10 percent over the decade, the number of people living in poverty areas grew by about 56 percent.

It’s worth going through the report to see the maps of where “poverty areas” claim more of the population, specifically the South. One of the major findings from the celebrated recent study by Raj Chetty and colleagues on economic mobility was that economic segregation is one of the four best predictors of upward mobility, and a host of academic studies confirm that concentrated poverty can be devastating for economic, educational, and health outcomes. How conservatives should address this through policy is obviously complicated, though Reihan has put forward thoughts on several occasions.

The first priority for conservative reformers should be getting rid of barriers upwardly mobile, poor Americans face in escaping “poverty areas.” Repealing land-use regulations designed to keep out the poor come to mind here, as do school choice and Michael Strain’s idea of buses going straight from poor neighborhoods to major job centers.

It’s also worth noting that a major force perpetuating segregation is that many poor individuals don’t feel comfortable leaving a social network of friends and loved ones behind. Furthermore, it’s harder to accumulate the capital needed to afford new housing when every month a member of that social network has, say, a car break down, needs your help, and drains your savings. This suggests forced savings programs — which is how the EITC effectively works — that deliver large lump sum payments could be helpful to low-income people in accumulating the wealth needed to leave in a way that doesn’t get dispersed throughout the social network.

Hobby Lobby Round-Up



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What should we make of the Hobby Lobby ruling? The following is a decidedly uncomprehensive guide to the conversation so far, with an emphasis on the arguments I find most interesting and convincing. I reserve the right to add to this list. 

Ramesh Ponnuru has been dispelling various misconception about the decision, pointing out that the contraception mandate at stake was not part of the legislative debate over Obamacare (and indeed that a number of pro-life Democrats would have opposed the legislation had it been a part of the statute) and that Congress can simply pass a law that explicitly exempts itself from the Religious Freedom Restoration Act (RFRA). He has also addressed the illogic of some aspects of Justice Ginsburg’s dissent, including her (bizarre) claim that “religious organizations exist to foster the interests of persons subscribing to the same religious faith,” which makes religious organizations sound rather a lot like labor unions. 

Joey Fishkin, a liberal law professor and author of the (very interesting) new book Bottlenecks, argues that while the substantive health policy implications of the decision are “miniscule,” and though it sets up an “an ambiguous, future-litigation-inviting test” (closely-held firms ought to be treated like sole proprietorships under the Religious Freedom Restoration Act, but can other private firms be treated as such as well?), the case is best understood not as a case about health policy, but rather as a case about “the politics of recognition,” a term drawn from the work of the Canadian philosopher Charles Taylor. 

Taylor’s thesis is that in modern societies, political conflicts increasingly revolve around a discourse of recognition, which is the result of two developments: the collapse of social hierarchies, which held that honor ought to be unequally distributed, has led to a world in which we at least pay lip-service to the notion that all citizens, or all human beings, are entitled to dignity; and a “subjective turn,” in which we’ve gone from the notion that the objective nature of things compels us to behave in certain ways to one in which authenticity, or living in accordance with our own ideals of what it means to be a human being, is an end in itself. Our debate over the definition and the status of marriage is a clear example of the subjective turn at work: those who believe that marriage is in its very essence about gender complementarity and reproduction, and that to suggest otherwise is to do violence to its place in society, are pitted against those who see it as an essentially expressive act.

Fishkin maintains that the Hobby Lobby decision aims to recognize the validity of several claims made by religious conservatives, e.g.:

(a) that contraception is meaningfully different from other forms of health care (but immunizations, say, are not, or not necessarily) and should be treated as such;

(b) the right of conscience, particularly when grounded in religious belief, deserves great deference and priority in the public sphere, and “a higher symbolic priority than women’s health”;

(c) and religion is not merely something you do in the privacy of your own home or house of worship, but rather it is a way of life that can inform how a for-profit firm conducts its affairs, among other things. And for-profit firms informed by a religious worldview deserve to be accommodated.

According to Fishkin, these claims are not so much legal claims as political claims, and they have deep long-term implications.

Interestingly, Yuval Levin agrees with Fishkin that while the health policy implications of Hobby Lobby are limited, it has larger and broader implications for the role of civil society. He observes that “the suggestion that corporations could effectively be bearers of rights,” the source of most of the liberal opprobrium directed at the decision, was opposed outright by only two of the justices, Ginsburg and Sotomayor, who argued that corporations can’t be understood as legal persons under the RFRA. The deeper dispute is over whether the rights of conscience extend to communities of people working together towards a common purpose — that groups, as well as individuals, “should whenever possible be protected from forms of coercion or restraint that violate their religious beliefs.” For Levin, the extension of this liberty of groups to corporations makes perfect sense.

The Obama administration, in contrast, is motivated by the progressive conviction that we ought to “clear out the space between the individual and the state and to confer rights only on individuals, rather than encouraging people to form complex layers of interacting institutions with diverse views of the good that each pursues with vigor and conviction.” The RFRA holds that government can only impose a burden on the free exercise of religion if there is a compelling government interest at stake and if the burden in question is the least burdensome way to achieve the ultimate goal. The Court concluded that the mandate was in fact more burdensome than necessary to achieve the government’s purpose. As Levin goes on to explain, the decision does not offer much clarity on whether the particular accommodation the Obama administration has made for religious organizations is adequate. But it does reaffirm that groups and institutions are as entitled to religious liberty as individuals.

Perhaps the most interesting critique of Hobby Lobby is Jacob Levy’s. Levy, a political philosopher at McGill University, argues that the decision mangles the idea of corporate personhood: 

Corporate personhood is ultimately justified in terms of the interests of natural persons– their interest in being able to pursue joint enterprises, their interest in being able to reduce transaction costs, their interest in being able to interact with stable long-term entities, their interest in the economic benefits of a system in which capital can be pooled and put to long-term use, and so on. But a particular claim of corporate rights shouldn’t require immediate recourse to natural persons to describe it and make sense of it. It makes more sense to say “The New York Times has freedom of the press and the right not to have its offices searched without a warrant” than it does to try to redescribe it in terms of the moral interests of the Sulzburger family, the various employees, the various investors, and so on. The same is true for the corporate religious liberty of the Catholic Church or the Little Sisters of the Poor or the Salvation Army.

But the entity that is Hobby Lobby, a for-profit corporation like IBM, can’t be described as itself having a religious belief. Making sense of that idea requires making the corporate person disappear from the description and talking about the Green family, treating the “closely held” corporation as if it were a partnership or sole proprietorship that doesn’t have a corporate-style separateness from the natural persons. Try as I might, I can’t persuade myself that that’s right. Corporations are persons, or corporations are made out of people– the two thoughts lead to very different conclusions, and I think protecting the former requires rejecting this kind of easy recourse to the latter.

While Levin sees the extension of the religious liberty of groups to corporations as seamless and natural, Levy believes that it collapses the (important) distinction between corporations as persons or corporations as collections of people. And if we embrace the latter view over the former view, the unintended consequences for the rights of corporate persons could be quite serious. 

Tags: Hobby Lobby

In Honor of Canada Day . . .



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In honor of Canada Day, Sarah Kliff of Vox has written a light-hearted post on various ways Canada is superior to the United States. Around the world, Canadians have a positive reputation, and a more positive reputation than Americans. They report somewhat higher levels of life satisfaction than Americans, though both countries fare well on this metric. Canada has a somewhat lower rate of assault than the U.S., and a substantially lower murder rate. Canada’s cities also have somewhat cleaner air than their U.S. counterparts.

Yet at least two of Kliff’s examples merit further discussion, e.g., that Canadian life expectancy is slightly higher than U.S. life expectancy (81 years vs. 78.7 years) and the average performance of Canadian 15-year-olds is significantly higher than that of U.S. 15-year-olds in the Programme of International Student Assessment. It is worth noting that the composition of the Canadian population is notably different from that of the United States, for historical (a large share of the U.S. population consists of the descendants of enslaved Africans) and policy reasons (Canadian immigration policy places a greater emphasis on English- and French-language proficiency and educational attainment than the U.S., where family reunification plays a larger role and immigration enforcement has been comparatively lax). 

One result of these differences is that while 2.9 percent of Canada’s population is of African origin, including immigrants of African and Afro-Caribbean descent and their children and a small number of descendants of black Americans who migrated to Canada to escape enslavement, while 13.1 percent of the U.S. population is of African origin, and nearly 1 in 10 of those in this slice of the U.S. population are foreign-born, a far smaller share than in Canada. Unfortunately, it is difficult to find comparable life expectancy data for U.S. and Canadian, in part because the two countries use different statistical designations to measure various outcomes. What we do know, however, is that while average U.S. life expectancy is 78.7 years, it is significantly lower for African Americans, and in particular for black men. Though the composition of the black populations of the U.S. and Canada are quite different, there are segments of Canada’s black population (particularly men of Somali and Jamaican origin) that face challenges not unlike those facing black Americans, including high incarceration rates and high levels of family disruption, which make it difficult for children raised in these environments to acquire human and social capital. Recently, Canada has placed tighter restrictions on less-skilled immigration and asylum-seekers, measures that will tend to limit the growth of foreign-born populations that are particularly dependent on labor-intensive services and transfers, which in turn will tend to reduce the size of second-generation populations that are similarly in need. We can expect that future growth in Canada’s population will be driven by skilled immigration and natural increase.  

Meanwhile, as of 2011, Canada’s population is 4.8 percent South Asian, 4.8 percent East Asian, 2.8 percent Southeast Asian, and 1.8 percent West Asian and Arab. Other estimates find that the total Asian Canadian population is now close in the neighborhood of 15 percent. In the U.S., people of Asian origin alone represent 5.1 percent of the population. This population has an average life expectancy of 85.8 years, and it tends to fare well on the PISA. When you have a group with higher-than-average life expectancy and educational outcomes and you triple its size, you will raise average outcomes. (The U.S. has seen a dramatic increase in its Latino population, which now stands at 15 percent – Canada’s Latin American population remains quite small – and this population has higher-than-average life expectancy, which matches Canada’s, and below-average educational outcomes.) Crafting an immigration policy that limits the influx of individuals and families belonging to communities with lower-than-average life expectancy and educational outcomes will tend to have a similar effect. This is not to say that one policy is better than another. One could coherently argue that the U.S. approach is superior to Canada’s because it is more inclusive, and that our lower levels of life expectancy and educational attainment should this be a point of pride, though that’s not a view I’d embrace. But if Kliff believes that Canada’s (modest) life expectancy advantage and its (immodest) educational advantage are signs of superiority, she is implicitly suggesting that Canada has a superior immigration policy to the U.S., and that is an implication that is worth exploring further. 

Today’s Policy Agenda: Was Kansas’s Big Small-Biz Tax Cut a Failure?



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The economy had an ugly first quarter. What should we do about it?

In complementary pieces, Mark Mills and economist John Makin weigh in on the shockingly weak economic growth numbers from last week, for Forbes and AEI respectively.

First, Mills:

There is no mystery as to what will restore growth.  The nation needs more, a lot more, new businesses. New, small businesses are where jobs come from, and then tax receipts follow to fund government programs. But the rate of creation of small businesses today is 30% lower than the booming 1980s. . . . How did we end up getting fewer small businesses?  We taxed and regulated them away.

This is touching on a distinction Republicans often miss when discussing this administration’s regulatory approach. “Anti-business” is probably a less accurate description than “corporatist,” as the new rules from energy regulations to the Walmart-endorsed minimum-wage hike offer something of a shield from competition for large incumbents. As venture capitalist Marc Andreessen explains of Sarbanes-Oxley, but also could be said of heavy regulation more generally, “The compliance and reporting requirements are extremely burdensome for a small company. It requires fleets of lawyers and accountants who come in and do years of work. . . . It’s biased enormously toward companies that are big enough to hire fleets of lawyers and accountants, biased against companies that are very young and for whom there’s still a lot of variability.” This is a problem because there’s pretty solid economic evidence that start-ups drive job growth and the kind of disruptive innovations that increase productivity and in turn GDP.

Mills also mentions the two keys to restoring previous levels of entrepreneurship. First, our corporate tax system is a mess and hurts workers as much as our firms. Luckily, there’s growing bipartisan consensus behind reforming the corporate code. We also need to create a regulatory environment more conducive to entrepreneurship; changing the tax treatment of corporate debt, moving from a too-big-to-fail financial framework to one that better serves the needs of start-ups, and removing barriers to our growing energy sector would be good starts.

And the Fed should stop just printing money before we get inflation, right? Not so much.

So says John Makin of AEI:  

The third estimate of the first-quarter 2014 US GDP rate was reported on June 25 to be -2.9 percent. Current dollar GDP also fell at a 1.7 percent pace. That is a Japan lost decade-style number. And prices rose at only a tepid 1.3 percent pace. These are awful growth numbers…This inflation fussing is nonsense for three reasons. First, it is not going to happen, especially in an economy that is barely growing. Second, there is nothing the Fed can or should do about the recent food-and-energy-driven rise in headline inflation. And third, an inflation rate that stabilizes in the 1.5 to 2.5 percent range would be optimal for a US economy struggling to sustain a subpar growth rate of barely 2 percent as real wages stagnate…Food prices have been driven up by drought conditions, and energy costs have been boosted by rising tensions in the Middle East. There is nothing the Fed can do about either factor…Core PCE inflation, the best guide to Fed policy, has stabilized at an average level well below the Fed’s 2 percent target. It currently stands at 1.5 percent.

Makin’s argument is pretty strong considering the weak growth numbers, an inflation rate well below target, and the example of the disastrous Whip Inflation Now program of the 1970s that responded just as today’s inflation hawks would to a negative supply shock and seriously damaged the economy before being abandoned. Furthermore, even if inflation crept above target, it could actually be helpful to the labor market by reducing real wages in the short term, allowing firms to hire or avoid firing employees and inducing what Scott Sumner dubbed “catch-up inflation” just to get our economy back on the trend line it was on before the recession.

Keep reading this post . . .

Today’s Policy Agenda: Do Consumers Pay Attention to Health-Care Choices?



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Do consumers even want more health-care choices?

At Wonkblog, Jason Millman considers the economic research on whether consumers actually seek out the best deals on health insurance.

Just 13 percent of seniors enrolled in Medicare’s prescription drug program changed plans during the annual enrollment period, according to an October 2013 Kaiser Family Foundation survey that reviewed the first five years of program enrollment… More than two-thirds of enrollees who faced the highest premium increases stuck with their plans… And less than 2.5 percent of people enrolled in employer-sponsored insurance in 2010 had changed health plans that year in search of a cheaper or better-quality option, according to a survey released last year by the Center for Studying Health System Change.

These studies get at the heart of the debate between a more static and prescriptive health system and one with some disruption but also more choices. At first glance, the data might suggest that consumers’ unwillingness to switch to cheaper plans would sink market-oriented health systems by not putting as much downward pressure on premiums as such a plan would need to be viable. Additionally, if deep down Americans aren’t interested in being active consumers and would rather the government just design a one-size fits all insurance product and pay whatever price, conservative health reform won’t get very far.

But . . . it’s impossible to gleam anything about the behavior of American consumers in a health care market because they’ve never experienced a true health-care market, or anything like one. The employer-sponsored insurance data come from an insanely distorted system that since World War II has operated under a third-party-payer system and with a tax deduction that gives you more of a subsidy the more expensive the plan you buy. But a market-based system isn’t a fantasy: Switzerland’s consumers have succeeded in utilizing market forces to lower premiums and reach universal coverage, Americans could too if in the right health-care structure.

Is the economy tanking?

At FiveThirtyEight, Ben Casselman sums up Wednesday’s appallingly bad revisions to first-quarter GDP:

U.S. gross domestic product, the broadest measure of goods and services produced in the economy, shrank at a 2.9 percent rate in the first three months of the year, the Bureau of Economic Analysis said Wednesday…The first quarter now stands as the worst since the middle of the recession… Economists have been mostly unfazed by the news. The weak start to the year was almost certainly due in part — possibly in large part — to the brutal winter in much of the country. Other indicators, such as hiring, didn’t drop off nearly as much, and the ones that did generally have looked much better since the snow melted. Most economists expect growth of 3 percent or more in the second quarter…But don’t be too quick to dismiss Wednesday’s rotten GDP number. Last month, I noted that negative quarters are rare outside of recessions. Quarters this bad are even rarer. There have been only two other non-recessionary quarters since World War II when the economy shrank at a rate over 2 percent. Both times, the economy entered a recession the following quarter.

While I’ll leave thorough analysis of the data to the economists, it goes without saying that a mini-recession now would becoming at the worst possible time: We still are trying to heal the labor market and allow the economy to rebuild wealth. There’s also not a better time than the present to promote pro-growth policies in the realms of regulation, energy, and the labor market that could help get us back on track.

The gaps between our richest and poorest counties are massive.

Today for the Upshot, Allan Flippen has an interesting post and interactive map that breaks the United States down at the county level by standard of living based on education (percentage of residents with at least a bachelor’s degree), median household income, unemployment rate, disability rate, life expectancy and obesity:

The 10 lowest counties in the country, by this ranking, include a cluster of six in the Appalachian Mountains of eastern Kentucky (Breathitt, Clay, Jackson, Lee, Leslie and Magoffin), along with four others in various parts of the rural South: Humphreys County, Miss.; East Carroll Parish, La.; Jefferson County, Ga.; and Lee County, Ark. . . . At the other end of the scale, the different variations on our formula consistently yielded the same result. Six of the top 10 counties in the United States are in the suburbs of Washington (especially on the Virginia side of the Potomac River), but the top ranking of all goes to Los Alamos County, N.M., home of Los Alamos National Laboratory.

For as much as we talk about concentrated poverty in urban areas, this exercise serves as a reminder of how poor some of our most rural, isolated counties are. Kevin Williamson has reported for National Review before on the suffering ubiquitous across rural Appalachia. Both the stories and data are brutal coming from these parts of the country.

The county data also nicely illustrates a recent point made by AEI president Arthur Brooks (in a recent talk soon to be posted online, check thepursuitofhappiness.com in coming days) that there are two Americas with two different growth rates. In Williamson County, Tenn., unemployment is at 5.4 percent and only 0.3 percent of the population is in the federal disability program, a notorious poverty trap. On the other hand, Humprheys County, Miss., faces an unemployment rate of 15.9, and 6.5 percent of the population are in the disability program. 

Marco Rubio and the Real Beginning of 2016



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I don’t know if Marco Rubio will be the next Republican president. But I strongly suspect that the next Republican president will sound a lot like Rubio did in the excellent speech he gave on Wednesday, in which, as Ramesh Ponnuru recounts, he described how a series of conservative reforms might better the lives of working and middle class Americans who are seeking to gain skills, accumulate savings, raise children, and keep themselves and their families healthy. What I found most appealing about Rubio’s address is that he didn’t argue that we need government to be more generous without explaing where the money will come from; rather, he touched on the structural forces that are putting low- and mid-skill workers under pressure, and how competition and innovation can drive down the cost and improve the quality of public services. Rubio gave the complexity of the challenges facing American workers their due, and he did it in an intelligent and accessible fashion. He called for modernizing America’s approach to retirement security by allowing all workers without access to employer-sponsored retirement plans to participate in the low-cost Thrift Savings Plan, and he explained how transparency and accreditation reform could give rise to new higher education institutions that can better meet the needs of working students, drawing on the experiences of several of his constituents.

Ponnuru notes the resemblance between the broad vision outlined by Rubio and that advanced by conservative reformers. What I’m looking forward to, however, is a robust contest of ideas, in which all GOP presidential aspirants are expected to offer policy proposals that (at a bare minimum) address the post-Obamacare future of America’s health system; the human capital deficits that have their roots in family breakdown, and which have in many cases been exacerbated by dysfunctional schools and colleges; and the sources of long-term unemployment and underemployment, from regulatory accumulation to a fragile, boom-and-bust financial system addicted to excessive debt. You’ll notice that I haven’t mentioned tax reform. Though I consider taxation very important, and it relates to all of the areas I’ve identified, Republican presidential contenders have in recent years tended to treat tax policy, and in particular tax rates, as the sum total of domestic policy. This represents a huge lost opportunity. The right now faces a liberal coalition that is intellectually exhausted. Having achieved the goal of near-universal coverage, the chief domestic priorities of the center-left are raising the federal minimum wage and expanding access to preschool, ideally in a way that will expand unionized public employment. There are center-left thinkers who are open to the idea that public services should be designed to benefit those who use them more than those who provide them, but they’ve been marginalized within the liberal coalition as left-liberalism has reasserted itself intellectually and politically. And so the right is where the action is — the only question is whether conservatives are up to the task. 

I’m sure that many conservatives will find much to disagree with in Rubio’s address. But we’ve entered a put-up-or-shut-up moment. Some conservatives, for example, reject the idea of an expanded child credit. Rather depressingly, virtually all of the critical reaction to Room to Grow has fixated on this particular question, an indication that many conservatives really do have a hard time talking about any domestic policy issues other than the top marginal tax rate. What I’d like to know is what tax reform you’d prefer in its place and how you expect to secure a durable majority in its favor. One theory is that conservative tax reformers can improve the tax treatment of savings and investment while using an expanded child credit to broaden the coalition for a more pro-growth tax code. The other theory is … what exactly? That we run on deep cuts in the top tax rate yet again and hope for the best? Don’t get me wrong — there are plenty of other ideas, some of which I quite like. Michael Graetz has called for exempting a large majority of U.S. households from the income tax and replacing the lost revenue with a very visible consumption tax. Alan Viard and Robert Carroll have made the case for progressive consumption taxation, a variation on a flat tax. The list goes on. But to attack Stein’s proposal without facing head on the failure of conservative tax reform proposals to resonate with the electorate since the 1990s, when Republican lawmakers championed the child tax credit, is to engage in (as much as I hate to say it) lazy carping.  There are exceptions. Ben Domenech of The Federalist, for example, has suggested that in lieu of an expanded child credit, conservatives ought to fight for replacing the payroll tax, an idea that really is responsive to the underlying political and economic questions Stein is trying to address. Other conservatives need to step up, including conservative lawmakers, governors, and other elected officials who want to shape the future of the right. 

Rand Paul, to his great credit, is talking about the surveillance state and mass incarceration — serious issues that deserve attention. He is the perfect person to start a debate about how coercive federalism has forced all states to raise their minimum drinking age, or how the Controlled Substances Act needs to change to allow states to truly go their own way on drug policy. We know that Paul opposes Obamacare. What does he intend to replace it with? Given John Kasich’s defense of Medicaid expansion, I’d love to hear what he has to say about this as well. Scott Walker made his name as a fiscal conservative, yet the fiscal challenges facing the federal government are profoundly different from those facing the states. What does Walker have to say about the old-age entitlement programs that threaten to crowd out all other federal spending, and what is his take on the future of federalism? This is the conversation we need to have. Marco Rubio has done an excellent job of getting it started. Let’s see who has the guts to follow him. 

Today’s Policy Agenda: Grit Fosters Upward Mobility



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Our savings rate needs to rise. Could a progressive consumption tax be the way to do it?

Over at Wonkblog, Jonnelle Marte discusses the latest research on savings — we may need more of it, soon. She writes:

It’s saving, not spending, that will solidify the recovery and make the country less vulnerable to another downturn, says a report released Tuesday morning by the consulting firm Oxford Economics . . . The thinking is that by boosting savings, specifically retirement savings, people will be less likely to fall into poverty in old age, making them less reliant on government-funded programs like Medicaid. They might also have more money to pass on to their children or to invest in the market, reducing the need for American companies to rely on foreign capital. Indeed, the writers argue that raising the savings rate could add $7 trillion to the U.S. economy over the next 25 years.

More savings provides the big long-term growth boost Marte describes by lowering interest rates and increasing investment, enabling a more productive economy down the line. While the proposals Marte notes — the president’s MyRA plan or requiring employers to offer tax-advantaged savings plans — may or may not significantly increase the savings rate, a more significant change to the tax code might be in order.

Instead of taxing income and employment (payroll tax), two things we want more of, taxing only spending on goods and services would discourage consumption in favor of savings. The so-called X-tax, in which total income minus savings and investment is taxed at progressive rates, could be made revenue-neutral and as progressive as our current code while raising revenue in a much more pro-growth manner by increasing our savings rate. Which, by the way, is at historically low levels:

The X-tax structure’s elegance stems from devising a way to tax consumption, usually done through regressive sales taxes, progressively, which is critical because standard consumption taxes hurt the poor because of their higher marginal propensity to consume and more pressing material needs.

There actually are some solutions to gridlock conservatives should like.

Olympia Snowe and Dan Glickman, both relatively centrist former members of Congress, argue in Politico for ten ideas to improve the functioning of our democracy. A few of them:

1. Increase Voter Participation in primaries
2. Balance Access and Integrity in Our Elections
4. Tackle Money in Politics
5. Reform the Filibuster and Senate Debate
6. Empower Congressional Committees

While hand-wringing over the filibuster and money in politics is tiresome for conservatives who have their doubts that either is the cancer some think they are, the other three items above have some promise. First, ending nominating conventions and closed primaries would make sure general-election candidates are selected by more than just the ends of the ideological spectrum, a helpful adjustment in this political environment. Using big data to both expand voter registration to underrepresented populations and to verify the voter rolls is a compromise that’s a bargain at twice the price for conservatives. Meanwhile, Rand Paul and others have recognized that the off-putting focus on voter ID is alienating voters when voter fraud doesn’t appear to be a major problem.

Finally, one trend in Congress in recent years has been the decline in importance of committee leadership. Unfortunately, committee chairmen are the very members who have the experience and relationships to foster cooperation and get things done. Think about some of the best true policymakers in the Republican party: Paul Ryan, Dave Camp, Bob Corker, John Thune — all committee chairmen or ranking members. Giving these leaders more authority would be a positive development on the Hill.

Character and Mindset Matter in Rising Out of Poverty

At Real Clear Policy, Michael Cipriano interviews Lanae Erickson Hatalsky, author of a new Third Way paper on mobility and the character traits that enable it. Hatalsky:

There has been a lot of research on the education front lately about what folks have called non-cognitive characteristics . . .Those that drive your behavior, things like perseverance and delayed gratification. Grit is defined as the ability to see a long-term goal and then take the steps and persevere to get to it…But we haven’t focused in the past on these important aspects of a mobility mentality. So I think what we need to do is look at all the ways government interacts with people in the lowest quintile, and in each of those programs reform them to be instilling and encouraging a growth mindset and grit…I think in order to increase mobility there are definitely economic things that we need to do to enable people to succeed. But we also need to focus on these social aspects, because simply providing the economic support we need isn’t enough to overcome the gravitational pull that poverty has.

The safety net is vitally important and alleviates suffering for many, but mobility requires traits that no transfer program can provide. However, there are ways that government can empower society to instill these values of grit, hard work, and a “growth mentality.” First, any reader of this blog understands that the workplace and responsible employers can teach grit and hard work, and that there are a slew of policies government could pursue that would help poor individuals gain these transformative experiences. Second, we expect parents to develop these traits in their children, but common sense and academic studies show that children from single families are less likely to have these character traits and to be upwardly mobile. Brad Wilcox’s chapter in Room to Grow – while his proposals may be more contentious – offers a number of ways government could strengthen American families and help their children thrive.

Today’s Policy Agenda: No-Fault Divorce Hurt the Poor



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Yes, the American health-care system isn’t that great. Conservatives shouldn’t have a problem admitting this.

Greg Scandlen argues in the Federalist that there are clear methodological problems with the recent Commonwealth Fund study that ranked the U.S. health-care system the worst among its peers. But that isn’t to say we should be happy with American health care: For one, it’s definitely incredibly expensive, regardless of outcomes.

One tendency on the right when talking about health care is to assume that before Obamacare wrecked everything, our system was fine. In reality, the system, as the Commonwealth Fund study or virtually any other metric shows, was excessively costly and locked out far too many individuals from insurance because our pre-Obamacare system lacked almost any market mechanisms.

One approach, in fact, to thinking about Obamacare is not that it’s so bad because it introduced “socialism” to American health care, but because it tried too hard to keep much of the old structure. Obamacare reinforced the inefficient and regressive employer-sponsored-insurance tax exclusion, expanded rather than reformed a Medicaid program that’s a clear failure, and continued the practice of offering consumers little in the way of choice. The job-killing employer mandate is a product of wanting to minimize disruption to those who already had employer-provided care.

This is a critical distinction going forward: Repealing Obamacare should not be the end goal of conservative health policy; the end goal should be a system much more market-oriented and equitable than either Obamacare or what preceded it, whether that comes by repealing and replacing Obamacare or by reforming it.

Unemployment in one’s teenage years can be a problem later in life.

Alina Tugend writes in the New York Times about teenage unemployment, how it leads to future employment and better wages, and some policy ideas to encourage it. Tugend:

Failing to find work doesn’t just mean a shortage of cash in the near term. A study released in March by the Brookings Institution’s Metropolitan Policy Program said finding a job when you’re older is harder if you haven’t worked during your teenage years. . . . Low-income and minority teenagers are particularly hard hit; only about 17 percent of African-American 16- to 19-year-olds were employed in 2013. . .

While job seekers can try innovative ways to attack the job shortage problem, the Brookings Institution study said high teenage unemployment also needed to be addressed through public policy. More programs in high schools and community colleges, for example, like work-based learning, where students learn technical, academic and employability skills in a real work environment, could help. More subsidized job programs are also needed, as well as classes that teach teenagers skills like interviewing and résumé writing, the report said.

The value of being exposed to the world of work early in life is obvious to many conservatives, and it informs many of their policy preferences. While it’s always encouraging to see left-of-center folks in the Times and at Brookings acknowledge this issue, the policy proposals mentioned are, even if interesting ideas, probably insufficient. A reduced or eliminated minimum wage for teenage workers, a broader payroll-tax cut, and wage subsidies seems like a framework that would do more to address the two obstacles to more teenage employment: teens’ costing too much to employ and the pay’s not being good enough to entice possible workers. It’s also worth noting that a hike in the federal minimum wage is perhaps the worst thing that could happen to teenage employment, as low-skilled teenagers are unlikely to be productive enough to warrant $10.10 an hour.

More evidence marriage should be part of our poverty discussions: No-fault divorce hurt lower-income men and women.

In a study that would seem to validate many of the arguments Ross Douthat has been advancing for a while, Raquel Fernandez and Joyce Cheng Wang have a new working paper out analyzing the way changed divorced laws impacted individuals across the income distribution. From the abstract:

During the 1970s the US underwent an important change in its divorce laws, switching from mutual consent to a unilateral divorce regime. Who benefitted and who lost from this change? . . . @e find that men in the top three quintiles of the initial productivity distribution are made better off by a unilateral system as are the top two quintiles of women; the rest prefer mutual consent.

Like the body of evidence that two-parent families are instrumental to children rising out of poverty, this study suggests that post-sexual-revolution lifestyles can be successfully adopted by upper-class individuals who have the resources and social networks to handle them, but that in poorer communities, the changing mores have wreaked havoc. It’s not clear to me that something like no-fault divorce can be put back into the toothpaste tube — or even that we would want to if we could — but the first step, one that the Left seems to have little interest in taking, is acknowledging the ways the changes to the institution of marriage have hurt much of America.

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