The Corner

Shopping for Bailouts

Finished with your Christmas shopping yet? You might find the stores less crowded with last-minute shoppers than usual. Karyln Bowman, pollmeister at the American Enterprise Institute, reports that far more Americans than usual say they are cutting back on gift purchases this year. The reason is obvious:

Deep pessimism about the nation’s economy explains the cutbacks. In a recent Quinnipiac poll, no one described the health of the nation’s economy as excellent, and only 4% described it as good. Thirty-seven percent said it was “not so good,” and a whopping 58% said it was poor. Nine in 10 said the economy was in recession, and four in 10 of that group called the recession severe. In the ABC/Post poll, 18% of respondents said they or someone in their family had recently been laid off or lost a job, and 27% said their work hours had been cut back.

Still, Bowman says, there are some items American shoppers just can’t seem to swear off. Most contain microchips.

In other think tank findings of note:

• State governments are lobbying furiously in Washington for a massive federal bailout. Most states are required by constitutional provisions to balance their operating budgets without debt, so they are essentially seeking to borrow the federal government’s borrowing capacity to prop up their own bloated budgets. The most frequently cited cause of their fiscal distress is Medicaid, which has been growing faster than most programs even in the good times and tends to burgeon during recessions. The Cato Institute’s Michael Cannon is one of the strongest critics of the idea of bailing out state Medicaid agencies, arguing that it will only delay the inevitable reckoning.

Which, come to think of it, is the problem with bailing out auto companies, commercial real estate, and everyone else currenly in line for fast cash.

• The real problem is that states can’t control their spending appetites. Many lawmakers actually believe their own spin that raising taxes to spend more money on public schools, Medicaid, and other programs is an “investment” in higher living standards. But all too often, it’s not. My John Locke Foundation colleague, Joe Coletti, recently completing a research project on the cost-effectiveness of state governments. Examining tax burdens, economic growth rates, and outcome measures such as test scores and mortality rates, Coletti found that states differ widely in how effectively they spend tax dollars. He graded them. You may not find it surprising that states such as Florida, Alaska, Texas, Wyoming, Montana, and Tennessee got As for their return on taxpayer investment, and that New York, California, Ohio, Hawaii, and Connecticut got Fs. But you may find other grades surprising. Click here to find out how your state fared in the rankings.

• Obama said during the campaign that his health-care proposal wouldn’t change your medical plan unless you want it to. But that’s not what’s going to happen when the rubber hits the road, says Bob Moffitt of the Heritage Foundation. He’s been studying carefully the ideas that Tom Daschle, Max Baucus, and others are tossing around, and they promise to erode the private health-insurance market. Also, all that talk about big cost savings that can be redirected to covering the uninsured is bunk. But you knew that, right?

By the way, as conservatives set priorities and craft messages for the new political environment, they should keep in mind that people tend to be more risk-averse than risk-taking. There’s plenty of data on this from experimental economics. People tend to place a higher value on avoiding loss than on the prospect of gain. That’s why highlighting the potentially deleterious consequences of an opponent’s policy — or the failure to enact your own proposed policy — is usually a more-powerful political argument than promising a potential benefit.

• An effective way to expose the agenda of left-wing environmentalism is to spell out its real-world implications for middle-class families. Emphasizing the prospect of high energy prices (which are required to justify alternative energy and other current fads) is one effective tool. Another is exposing environmentalists’ contempt for such familiar amenities of modern life as private yards, automobility, and enjoying meat.

John Hood is a syndicated columnist and the president of the John William Pope Foundation, a North Carolina–based grantmaker.

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