22 July 2009
Today’s Tabbloid
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Wait! How’d I Get in This
Invisible Box Again? [Cato at
Liberty]
JUL 21, 2009 05:10P.M.
Kevin Carey has posted his response to my reply to him, and apparently
he just won’t take it from a libertarian that we libertarians see no
dilemma in the college-cost problem. At least, he can’t see how
libertarians could “think seriously about restraining college costs” and
still come to the conclusion that the best way to cut government
spending on higher education is to, well, cut government spending. He
still insists that the only way to “bend down the long-term higher
education cost curve and thus reduce government spending is to increase
government regulation.”
The mime who is boxing libertarians in must be one powerful illusionist,
because Carey just can’t seem to not see a real box. But reading Carey’s
post makes clear why this is: He wants desperately to believe that we
must spend more on higher education, and that regulation is all that will
work to keep colleges’ excesses under control.
What makes me say this? For one thing, Carey for all intents and
purposes admits the spending part:
Just to be clear: I’d like to spend more public money on
higher education, not less, albeit in a way that’s substantially
more performance-sensitive and directed toward institutions
that serve academically and economically at-risk students.
What about his obsession with regulation? Well, the whole point of his
argument is that we must regulate higher ed more. Perhaps just as
telling, though, is that he offers nothing to refute – or even acknowledge
– what I wrote about government failure and the huge inefficiencies of
regulation in my previous reply. You know, the hugely important cost
side of the regulation ledger that most people whose first response to a
problem is “regulate” typically ignore.
But let’s get to what Carey does offer in substantive response to my
critiques, namely my argument that market forces, not regulation, best
provide the information consumers need and most efficiently deliver
goods and services.
I want to start by making one thing very clear: We absolutely do not have
a free market in higher education! Far from it! State and local
1
governments control the institutions attended by about 74 percent of
students, and almost half of students receive federal aid in the form of
grants, cheap loans, or work-study, (not to mention tax credits). In
addition, governments fund billions of dollars of university-based
research. Indeed, when you tally total revenues for public and private,
not-for-profit institutions in the 2005-06 school year (the latest with
available federal data), and then tally the amount that comes through
government (directly to institutions and through student aid), it turns
out that more than 52 percent of total postsecondary revenues come
from taxpayers, making them the majority share holders in Ivory Tower,
Inc.!
That shows clearly that higher education is absolutely not a free market!
It also provides powerful insights into the principal/agent problem in
higher education, the problem discussed at length by Robert Martin in
the paper that touched off this whole debate, and the focus of Carey’s
reply to me.
In general, the principal/agent problem boils down to the reality that
everyone is self-interested, and the interests of, say, a company’s owners
are not always aligned with those of the people they employ. At the most
basic level, employers want employees to work as hard as they can for as
little pay as possible, and employees want to work as little as possible for
as much pay as they can get.
Carey believes – and is bolstered by Martin’s agreement – that the best
way to mitigate this problem in higher education is regulation, because
schools and their employees will not voluntarily reveal bad things about
themselves:
In higher education, Martin argues, the principal / agent
disconnect is less about risky profit-taking and more about
status. Colleges are inherently status-maximizing
institutions, even if the principals—taxpayers, donors, and
students—would rather colleges focused on a different set of
priorities, like giving every student a high-quality affordable
education. As Martin writes,“senior administrators can
persuade themselves that lavish offices, extensive building
projects, expensive public relations events, luxury travel, and
high compensation are in the institution’s interest. Board
members may consider expensive social events to be in the
institution’s interest.” The same could be said for giving too
much weight to the research mission at the expense of
teaching and lots of other things.
How do you get more status, particularly in an industry
where reputations are seemingly as ancient and permanent as
the stone buildings themselves? You buy it, by purchasing
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
nicer buildings (old-looking stone is a popular choice of
materials) and more prominent researchers and students
with better SAT scores. Or you just let it accumulate in the
endowment, also a major benchmark of prestige. All of this
dovetails with Bowen’s revenue-to-cost-hypothesis: college
spending is capped only by revenues and colleges have every
incentive to spend, so they constantly build up fixed costs,
raise more money, spend more money, raise more, spend
more, and so on.
Martin’s solution? More information. To mitigate the
principal / agent problem, give the principals more data so
they know what’s really going on. And the government has to
play a role
So how does the principal/agent problem get controlled – though it can
never be totally eliminated – in the private sector? Yes, there is
regulation, but as I made clear in my previous post, regulation has
serious costs and often fails completely. I urge you to re-read my
previous post for details, or, if you really want to get a feel for regulatory
and government failure, consider the current economic mess, driven by
government pushing risky mortgages; implied – and then very real –
government bailout assurances for large financial institutions; and, if
you’re inclined to think good regulation could have prevented our
current woes, regulators failing in their duties. And no, unlike what
Carey says, government requiring McDonald’s or Ruth’s Chris to publish
nutrition information isn’t what makes them set consistent standards or
deliver food people want – it’s the need to acquire and keep customers,
who are highly motivated to spend their money on things that they think
are worth it.
Wait. Customers? Of course! What forces high standards and constrains
costs in true private markets is not regulation, but the need for firms to
maximize revenue, which means competing with one another and,
ultimately, serving customers as best they can. That is also what aligns
the interests of principals and agents – if they don’t both focus primarily
on satisfying customers, both will be out of jobs and money. Of course,
principals help keep agents in line with performance bonuses and other
tools, and there is the threat of legal prosecution if an agent outright
steals from a principal, but mutual self-interest is the most powerful
force keeping principals and agents aligned in the private sector.
The problem in higher education is that this alignment is all but
nonexistent! With over half of the “business owners” involuntary
shareholders with no power, the agents can run wild. Worse yet, the
principals’ customers consume their product to a large extent on the
principals’ dime, greatly inflating what the customers demand and are
willing and able to pay.
Now, consider the very real-world, negative ramifications of this
misalignment of interests. Because students are largely paying for their
education with someone else’s money, they have greatly reduced interest
in shopping for the most efficient education, and instead look for the
swankiest rec facilities; celebrity professors who may teach few, if any,
classes; and buildings made of “old-looking stone.” They also have
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22 July 2009
reduced incentives to determine if higher education is really best for
them to begin with, explaining such colossal waste as 34 percent of first-
year students taking remedial courses; only 56 percent of students
graduating within six years of entry; and 29 percent of Americans ages
25 and older having bachelor’s degrees, though only 25 percent of jobs
require them. And, of course, there’s the rampant tuition inflation that
ends up scaring away many of the truly poor people that government is
supposed to be focused on helping.
But it doesn’t end with those things. Because college employees don’t
have to provide a return to their “shareholders” – or anyone else, for that
matter – to make their money, they can pursue their interests without
much if any regard for how their interests align with those of principals
or customers. And their interest is, often, to pursue the “prestige” that
Carey (and certainly many others) laments is the coin of the realm in
higher ed. Oh, and it doesn’t help that principals are often forced to
directly fund things like research that adversely affect a college’s
teaching mission but really build professors’ reputations.
What if we were to remove much of the forced, distorting, third-party
money? Carey, in unfortunate, scaremonger fashion, warns that “massive
public disinvestment in higher education…would cripple thousands of
institutions and shut the doors to college for hundreds of thousands of
students nationwide.”
If you think reducing the amount of money colleges spend on wasteful
extravagances, or professors who teach very little, is “crippling”
institutions, then you’ll think Carey is right. If you believe eliminating
much of the aid that encourages people to pursue education they aren’t
ready for, often don’t finish, and that seriously inflates college prices is
shutting “the doors to college,” then you’ll think Carey is right again. But
if you realize that by reducing aid many of the major distortions that
drive up prices would also have to be reduced – the cheap, third-party
money wouldn’t be there to fund them anymore – then you also realize
that the new higher education market would still provide necessary
education to most if not all of those people who could truly benefit from
it. Indeed, even the poorest person would be able to get aid if he or she
had strong, demonstrated earning potential, because both a private
lender and the student would gain in the long run from agreeing to a
loan. And there is such as thing as “charitable giving,” by the way.
Amazingly, Carey actually finds a way – though a very weak one – to
blame the free market for the distortions in higher education. And by
“free market” Carey means, simply, the much reviled U.S. News and
World Report college rankings:
The free market has given us the U.S. News & World Report
college rankings, which are all about status and spending.
Fully 10 percent of each college’s score is based on a simple
measure of spending per student — the more you spend, the
higher you rank. Another 20 percent is based on things that
cost money to buy — low class sizes, faculty salaries, etc. —
and much of the rest flows from larger reputational and
selectivity factors that are directly and indirectly enhanced by
spending.
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
In other words, the free market has created an information
environment that exacerbates the runaway college-cost
problem that McCluskey is supposedly interested in trying to
solve.
Where to start…
Yes, the U.S. News ranking probably relies too much on reputation and
spending, but it also includes valuable output information, such as
graduation and retention rates. And here’s the thing: Despite what Carey
would lead you to believe, there are a lot more college guides out there
than U.S. News! The Princeton Review gives you all kinds of insights
into the atmosphere at numerous colleges. The Intercollegiate Studies
Institute’s Choosing the Right College furnishes lots of insights into
schools for conservatives. Forbes, in conjunction with Richard Vedder’s
Center for College Affordability and Productivity, recently published
rankings based on several college output measures. In other words, there
seems to be almost a competitive rankings market burgeoning, a sign of
market forces pushing their way into a non-market system, like shoots
that somehow find a way through cracks in even the most concrete of
jungles.
And rankings aren’t the only sign of market forces adapting as best they
can to a government-distorted system. Indeed, in a system where
everyone is artificially encouraged to pursue higher education, and
employers are essentially banned from using the most straightforward
way to assess applicants’ qualifications – direct testing – it makes sense
to use the prestige of the schools that applicants attended as a proxy
for their potential as employees. From an employer’s point of view, it is a
relatively useful and inexpensive signal for what an applicant would
bring to the job. Of course, it would be much better, especially for
taxpayers, if employers were free to use more efficient and effective
measures, and we didn’t push so many unqualified people to
get increasingly watered-down degrees, but considering the restrictions
and incentives government has imposed, market forces are doing the
best they can.
With all that now said, I’m pretty sure I’m once again out of the mime’s
box, hopefully this time to stay. Analyzing the principal/agent problem
as it applies to higher education, as well as the numerous costs and
failures of government regulation, point clearly not to regulation as the
solution to what ails the ivory tower, but reducing or eliminating
government spending. And please, don’t blame the free market for our
higher ed problems. It’s doing all it can to fix them, but government
failure is a heck of a tough thing to overcome.
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22 July 2009
FISCALLY CONSERVATIVE BLOG FEEDS
Is Buying an iPod Un-
American? [Cato at Liberty]
JUL 21, 2009 03:54P.M.
We own three iPods at my house, including a recently purchased iPod
Touch. Since many of the iPod parts are made abroad, is my family guilty
of allowing our consumer spending to “leak” abroad, depriving the
American economy of the consumer stimulus we are told it so
desperately needs? If you believe the “Buy American” lectures and
legislation coming out of Washington, the answer must be yes.
Our friends at ReasonTV have just posted a brilliant video short, “Is Your
iPod Unpatriotic?” With government requiring its contractors to buy
American-made steel, iron, and manufactured products, is it only a
matter of time before the iPod—“Assembled in China,” of all
places—comes under scrutiny? You can view the video here:
In my upcoming Cato book, Mad about Trade: Why Main Street
America Should Embrace Globalization, I talk about how American
companies are moving to the upper regions of the “smiley curve.” The
smiley curve is a way of thinking about global supply chains where
Americans reap the most value at the beginning and the end of the
production process while China and other low-wage countries perform
the low-value assembly in the middle. In the book, I hold up our family’s
iPods as an example of the unappreciated benefits of a more globalized
American economy:
The lesson of the smiley curve was brought home to me after
a recent Christmas when I was admiring my two teen-age
sons’ new iPod Nanos. Inscribed on the back was the telling
label, “Designed by Apple in California. Assembled in China.”
To the skeptics of trade, an imported Nano only adds to our
disturbingly large bilateral trade deficit with China in
“advanced technology products,” but here in the palm of a
teenager’s hand was a perfect symbol of the win-win nature of
our trade with China.
Assembling iPods obviously creates jobs for Chinese workers,
jobs that probably pay higher-than-average wages in that
country even though they labor in the lowest regions of the
smiley curve. But Americans benefit even more from the deal.
A team of economists from the Paul Merage School of
Business at the University of California-Irvine applied the
smiley curve to a typical $299 iPod and found just what you
might suspect: Americans reap most of the value from its
production. Although assembled in China, an American
company supplies the processing chips, a Korean company
the memory chip, and Japanese companies the hard drive
and display screen. According to the authors, “The value
added to the product through assembly in China is probably a
few dollars at most.”
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
The biggest winner? Apple and its distributors. Standing atop
the value chain, Apple reaps $80 in profit for each unit
sold—an amount higher than the cost of any single
component. Its distributors, on the opposite high end of the
smiley curve, make another $75. And of course, American
owners of the more than 100 million iPods sold since
2001—my teen-age sons included—pocket far more
enjoyment from the devices than the Chinese workers who
assembled them.
To learn a whole lot more about how American middle-class families
benefit from trade and globalization, you can now pre-order the book at
Amazon.com.
FISCALLY CONSERVATIVE BLOG FEEDS
Lowry on the “Mad Dash” to
Pass ObamaCare [Cato at
Liberty“Mad Dash” to Pass
ObamaCare]
JUL 21, 2009 03:53P.M.
From National Review editor Rich Lowry’s column for King Features
Syndicate:
As with the stimulus package, Obama’s health-care plan
depends on speed. More important than any given provision,
more important than any principle, more important than
sound legislating is the urgent imperative to Do It Now.
Do it now, before anyone can grasp what exactly it is that
Congress is passing. Do it now, before the overpromising and
the dishonest justifications can be exposed. Do it now, before
Obama’s poll numbers return to Earth and make it
impossible to slam through ramshackle government
programs concocted on the run. Do it now, because simply
growing government is more important than the practicalities
of any new program…
Obama cultivated an image of cool during the campaign.
Unrattled. Deliberate. Cerebral to a fault. Who knew he’d be
in a panic to remake one-sixth of the economy by the first
week of August of his first year in office?
Normally, the larger and more complicated a bill is, the
longer Congress takes to consider it. With the stimulus and
cap-and-trade, Obama and the Democrats upended this rule
of thumb by passing byzantine, 1,000-page bills that no one
had the time to read. When the work product is indefensible,
deliberation is dangerous.
4
22 July 2009
There’s a touch of the guilty conscience about Obama’s
terrible rush. As if he knows he was elected as a moderate-
sounding deficit hawk last year, and if he’s going to pass an
ambitious left-wing program, he must do it before the
opposition builds.
FISCALLY CONSERVATIVE BLOG FEEDS
The Play Is Not the Thing [Cato
at Liberty]
JUL 21, 2009 03:03P.M.
I’ve already started receiving e-mails in response to my earlier blog
challenge: name a field that has suffered a productivity collapse like
education (stagnating or declining performance with massive increase in
cost). The leader so far: live theater.
Except it just doesn’t measure up. The NYT reported in 1968 the advent
of $15 Broadway tickets. That’s equivalent to $93 today. But you can go
see revivals of Chicago for as little as $63 and Hair for as little $35.
Mama Mia starts at $60. Those are the three most popular plays on
Broadway. You can pay more for the best seats, but you can get a good
seat for the same or less money than was the case 40 years ago.
So while there has not been a dramatic improvement in the productivity
of live theater, there is also no obvious decline.
What’s more, the analogy is not entirely apt. The market for live theater,
such as it exists, is a market for a very specific service: people on stage in
front of you acting out some bit of dramatic entertainment. The market
for education is not, at least in principle, so closely bound to a particular
delivery mechanism. Parents want their children prepared for
good, happy and successful lives, but if they had a diverse range of
options available to them that would secure those ends (as they would
if education weren’t a government monopoly), they would not
necessarily insist that it be delivered in exactly the same way that it was
100 years ago — a full day of kids sitting in rooms with their age-mates
listening to teachers lecture.
Any other candidates for fields suffering calamitous productivity declines
like education?
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
FISCALLY CONSERVATIVE BLOG FEEDS
Weekly Standard Wants to Use
F-22s in Afghanistan [Cato at
Liberty]
JUL 21, 2009 02:58P.M.
The Weekly Standard’s Michael Goldfarb is particularly set off by the
fact that the Senate has declined to continue funding the F-22 program
for which SecDef Gates and President Obama requested no more funds.
He laments that Obama and Gates are representing their decision to
expand the Army by 22,000 soldiers as being paid for by cuts in the F-22
budget. Goldfarb remarks that this leaves us in a situation where
We may have more troops to patrol Afghanistan, but they’ll
be patrolling on bicycles — because it’s a zero-sum game.
Is it impolitic to observe that “The F-22 has never been flown over Iraq
or Afghanistan“?
Moreover, it’s my understanding that the Weekly Standard folks,
Goldfarb included, believe in the importance of fighting a series of labor-
intensive counterinsurgency wars across the Islamic world. Based on
Goldfarb’s remarks, he does not wish to support this objective by making
cuts in capital to fund more labor. What would be good to know, then,
just to set up the debate, is how much he thinks we ought to be spending
on defense. We spend roughly (depending on how you count and
whether you include the two wars we’re fighting) the same as the entire
rest of the world combined. Based on my consumption of the Weekly
Standard’s foreign-policy output over the past several years, you
could easily convince me that the between $600,000,000,000 and
$800,000,000,000 American taxpayers spend each year on defense is
insufficient to support the Weekly Standard’s foreign-policy aims. But if
there should not be a tradeoff like the one Gates pointed to in this
discussion, how much is enough? Inquiring minds want to know.
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22 July 2009
FISCALLY CONSERVATIVE BLOG FEEDS
Why War in Afghanistan Is
Futile [Cato at Liberty]
JUL 21, 2009 02:25P.M.
A couple weeks ago, my Cato colleague, Justin Logan, wrote a post on
Rory Stewart’s brilliant article that appeared in the London Review of
Books. Justin offered compelling reasons why arguments for nation
building, and the concomitant “state failure is a threat to humanity,” are
deeply flawed. But I think Stewart’s piece offers arguments that bears
emphasis.
Stewart is Chief Executive of The Turquoise Mountain Foundation, a
not-for-profit, non-governmental organization based in Kabul.
According to Stewart, many policymakers and prominent opinion
leaders are prone to:
minimizing differences between cultures, exaggerating our
fears, aggrandizing our ambitions, inflating a sense of moral
obligations and power, and confusing our goals… [these
irresistible illusions] papers over the weakness of the
international community: our lack of knowledge, power and
legitimacy… It assumes that Afghanistan is predictable. It is a
language that exploits tautologies and negations to suggest
inexorable solutions. It makes our policy seem a moral
obligation, makes failure unacceptable, and alternatives
inconceivable.
Perhaps Stewart’s most important point:
But Osama bin Laden is still in Pakistan, not Afghanistan. He
chooses to be there precisely because Pakistan can be more
assertive in its state sovereignty than Afghanistan and
restricts US operations. From a narrow (and harsh) US
national security perspective, a poor failed state could be
easier to handle than a more developed one: Yemen is less
threatening than Iran, Somalia than Saudi Arabia,
Afghanistan than Pakistan.
The argument that America’s security depends on rebuilding failed
states, like Afghanistan, fails partly since terrorists can move to governed
spaces. Rather than setting up in weak, ungoverned states, enemies can
flourish in strong states because these countries have formally
recognized governments with the sovereignty to reject interference in
their internal affairs.
Insurgents know they can’t fight a conventional army directly. With a
protracted war of attrition, however, they can gradually expand their
political and economic influence.
Thus, as we’ve seen in Vietnam, Iraq, and today in Afghanistan,
insurgents leave areas where American troops concentrate and then
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com 22 July 2009

return when those troops deploy elsewhere. And Afghan militants find
sanctuary in neighboring, nuclear-armed Pakistan, which is not targeting
the original Afghan Taliban.
In fact, Islamabad still supports the original Afghan Taliban that at one
time controlled most of Afghanistan. The Swat valley offensives we keep
hearing about feature the Pakistanis fighting indigenous Pakistani
Taliban groups that have proliferated in response to Islamabad’s
alignment with the United States in the so-called “war on terror.”
Bernanke’s pandering to the Left on misguided “consumer protections,”
and the absence of any debate over the Fed’s role in the housing bubble,
raise serious questions as to whether Bernanke understands the causes
of the current financial crisis. We cannot hope to avoid the next financial
crisis without a Fed chairman who understands the current one.
FISCALLY CONSERVATIVE BLOG FEEDS

Honestly, America has no business stopping Pakistan from influencing
Afghanistan. Let them have it! As I argue here, “the war’s strategic
rationale still remains tenuous. Central Asia holds little intrinsic
strategic value to the United States, and America’s security will not
necessarily be endangered even if an oppressive regime takes over a
contiguous fraction of Afghan territory.”
Sadly, however, bureaucratic inertia and misconceptions of
Washington’s moral obligations could trap the United States in
Afghanistan for decades. Hopefully, some people in the Obama White
House will inform the president that Afghanistan is not a winnable war.
FISCALLY CONSERVATIVE BLOG FEEDS
Don’t Bail Out Bernanke [Cato
at Liberty]
JUL 21, 2009 02:24P.M.
Lock It Down, Centralize It,
Federalize It [Cato at Liberty]
JUL 21, 2009 02:22P.M.
Speaking of the Center for Democracy and Technology, Leslie Harris
gave a terrific quote to Forbes.com for an article on cybersecurity:
The Rockefeller-Snowe Bill represents just the sort of heavy-
handed regulation that could stifle innovation and hurt the
economy, argues Leslie Harris, president and chief executive
of the Center for Democracy and Technology. “If you lock
things down too tight and try to centralize and federalize all
kinds of standards, you’re on a collision course with the
innovators who may be making the next great tech product in
their backyard,” she says.
The question is why CDT doesn’t apply this thinking to the field of
identification and credentialing.

Here is the message members of Congress should send to Ben Bernanke

during the Fed chief’s annual Capitol Hill testimony this week: He is FISCALLY CONSERVATIVE BLOG FEEDS
fighting for his job. With his term up in January of next year, Bernanke
needs to be called to account for the Fed’s many questionable actions Help Fight Earmarks and Win a
during the financial turmoil of the past year.
Kindle [The Club for Growth]
Even while correctly identifying the “global savings glut,” Bernanke sat JUL 21, 2009 01:56P.M.
by and did nothing about the unsustainable build-up of leverage in the
housing market—the “bubble” which famously burst in late 2008. Wow, this seems like a really easy way to win a Kindle if you have a lot of
Bernanke also used Fed financing to bail out Bear Stearns and spare time and hate pork projects.
AIG—hotly political moves which should rightfully have been left to
Congress—and oversaw the massive expansion of the Fed’s balance sheet
from about $900 billion to over $2 trillion. Under Bernanke, the Fed has
transcended monetary policy and bank supervision into the world of
fiscal policy.

While thus politicizing the Fed on one hand, Bernanke has sought to
insulate the bank from congressional pressures by appeasing majority
Democrats with various new credit regulations. Both the recently
proposed credit card and mortgage rules unnecessarily restrict credit and
increase the litigation risk facing banks, while doing nothing to roll back
some of the irresponsible lending policies that exacerbated the housing
bubble.

6
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com 22 July 2009

FISCALLY CONSERVATIVE BLOG FEEDS what procedures to cover.”

Coburn to File ‘Dozens of

Amendments’ [The Club for FISCALLY CONSERVATIVE BLOG FEEDS

Growth] EPIC on PASS ID: a National ID

JUL 21, 2009 01:35P.M.
Card [Cato at Liberty]
This is from our good friend, John Fund of the Wall Street Journal ($): JUL 21, 2009 12:26P.M.

ObamaCare Is Failing Its Stress Test
Senator Tom Coburn vows to make the health care plan now
moving through Congress famous. “I will be there with
dozens of amendments showing just how bad for the nation’s
health this legislation will be,” the Oklahoma Republican told
me. “I will push to put the entire text of the bill on the
Internet, something Majority Leader [Harry] Reid will
oppose.”
Mr. Coburn says that as a physician he views the bill as a
vehicle by which millions of Americans will lose the coverage
they now have, some 20 million uninsured Americans will
remain without health insurance and doctors will be forced to
accept reimbursement for treatment at declining Medicare
and Medicare rates that will guarantee rationing.
The bill is so draconian that Mr. Coburn believes it has no
realistic chance of being enacted into law through
reconciliation, a process by which its provisions would be
attached to a budget bill that requires only a majority vote in
the Senate. “That maneuver would only give them a life of five
years on [the bill’s] provisions, and they would be worried
about how angry the public would be with it after that time,”
he says. “This bill will require a 60-vote majority in the
Senate and right now it doesn’t have it.”
He says the bill may pick up new opposition from pro-life
Democrats now that it’s becoming clear it may have the effect
of gutting the Hyde Amendment, which has prevented
Medicaid funding for abortions since 1976. An amendment to
add restrictions on abortion funding to the bill was defeated
in the Senate Health Committee last week.
The Electronic Privacy Information Center has produced a very thorough
analysis of the PASS ID Act, which would revive the REAL ID national ID
program.
The EPIC analysis states flatly, “The bill would establish a national ID
card,” and, “The intent of this legislation is to facilitate a National ID
system.”
That’s quite a contrast to Ari Schwartz at the Center for Democracy and
Technology, who alone believes that PASS ID “prevents the creation of a
National ID system.”
FISCALLY CONSERVATIVE BLOG FEEDS
As Immigrants Move In,
Americans Move Up [Cato at
Liberty]
JUL 21, 2009 12:25P.M.
Critics warn that immigration reform would bring in its wake rising rates
of poverty, higher government welfare expenditures, and a rise in crime.
In a new paper, Cato scholar Daniel Griswold says that Congress should
not reject market-oriented immigration reform because of misguided
fears about “importing poverty.”
Griswold argues that “Comprehensive immigration reform that included
a robust temporary worker program would boost economic output and
create new middle class job opportunities for native-born Americans.”

President Obama hasn’t taken a position on whether the new For more, read the whole thing.
“public option” plan would support the use of taxpayer
dollars for abortions, but he clearly hasn’t ruled it out. White
House Budget Director Peter Orszag would only tell Fox
News on Sunday that federal funding of abortion is “one of
the questions that is playing out in this debate.” The White
House currently hopes to dodge the issue by punting it over
to the bureaucracy. White House press secretary Robert
Gibbs says Mr. Obama thinks “a benefit package is better left
to experts in the medical field to determine how best and

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Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
FISCALLY CONSERVATIVE BLOG FEEDS
Has Any Other Field Suffered a
Productivity Collapse like
Education? [Cato at Liberty]
JUL 21, 2009 12:16P.M.
I’ve repeatedly claimed that public schools are alone in having suffered a
productivity collapse over the past 40 years: their outcomes stagnating
or even declining while per pupil costs have skyrocketed. Is that really
true?
Dr. Stephen Bohrer, who appears to work in Colorado’s public school
system, begs to differ. Responding to a recent op-ed of mine, he writes
that: “The price of a Baby Ruth is up 2,000% since 1970. It doesn’t taste
any better and is smaller.”
Though historical prices on Baby Ruths are hard to find, there’s a nice
suite of data on the Hershey bar, which seems a fair enough test of the
good Dr.’s claim. According to FoodTimeline, the price of a 1.375 oz
Hershey bar in 1970 was 10 c, and the price of a 1.55 oz bar in 2008 was
59 c. Adjusting the first price to 2008 dollars puts it at 55.5 c.
So the real price-per-oz of a Hershey bar FELL from 40.4 c to 38.1 c over
the past 40 years. And it didn’t get any smaller. No gold star for Dr.
Bohrer.
So, who else wants to play Stump the Chump? If you think you know a
field that has suffered a productivity collapse like education over the past
40 years, send me an e-mail with your claim and the data on which it’s
based (ACoulson |at| cato.org). If anybody comes up with a winner, I’ll
report it here.
FISCALLY CONSERVATIVE BLOG FEEDS
Economics Bloggers Weigh in
on Income Inequality [Cato at
Liberty]
JUL 21, 2009 12:10P.M.
The economics blogosphere has been buzzing about Will Wilkinson’s
new paper on income inequality.
George Mason University economist Tyler Cowen discusses why social
inequality has been falling for some time in the United States:
I agree with Will Wilkinson’s point that real social inequality
has (mostly) been falling for some time in the United States.
Today many an upper middle class person is plausibly
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22 July 2009
happier than many a billionaire. Yet most self-made
billionaires work very hard to get to that position, which
creates a possible tension between cardinal and “observed
choice” or “ordinal” metrics of welfare. Why work so hard for
so little? Presumably many of these billionaires really want to
“be there,” even if they are only marginally better off or in
some cases worse off.
The Atlantic’s Megan McArdle offers her initial thoughts, and promises
more analysis soon:
I broadly agree with Will that consumption inequality, not
income inequality, is what matters. If the rich have access to
broad classes of goods that the poor can’t have, I find this
worrying. On the other hand, if the problem is that Bill Gates
has a really awesome 80 inch flat panel television, while the
poor have to be content with a 32 inch CRT, well, I can’t say
my heartstrings are plucked very tight by this injustice. So it’s
important to know what the real differences are.
Ezra Klein parses some of Wilkinson’s arguments at
WashingtonPost.com:
One of Will’s first arguments is that income inequality is not a
good way to think about the issue. The real key is
consumption inequality. It’s not, in other words, how much
money people make, but how much stuff they buy. And “the
weight of the evidence shows that the run-up in consumption
inequality has been considerably less dramatic than the rise
in income inequality.”
The Economist Free Exchange blog has mixed reactions to the study:
Inequality, in and of itself, is no bad thing, and inequality in
America has co-existed right alongside significant
improvements in welfare across the income spectrum—and
contributed directly to them, in many cases. Redistribution
for its own sake is bad policy, and as Mr Wilkinson notes, it’s
often bad policy pursued to cover up for still more bad policy
elsewhere. But America’s society is a very unequal one, by
developed nation standards, and it’s not always clear that that
inequality is justified or advantageous. And any good student
of human behaviour can tell you that wealth will seek to
protect wealth, and will often succeed.
Matt Yglesias from Think Progress has posted twice on Wilkinson’s
study:
I’m not in agreement with the overall thrust of Will
Wilkinson’s paper on inequality for the Cato Institute, but
one point that I think is in the spirit of what he’s saying was
brought to mind by a question at last night’s event. The way I
would put the point is that it’s a mistake to think of the world
as composed of, on the one hand, “economic issues” in which
we worry about wealth or income inequality and then on the
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com 22 July 2009

other hand, “social issues” in which we worry about racism or FISCALLY CONSERVATIVE BLOG FEEDS
sexism. Progressives ought to be concerned with a general
issue of justice and social inequality, of which gaps in money Cap-and-Trade: An Economic
income or wealth may be part.
Empty Tank [Americans for Tax
Reform]
FISCALLY CONSERVATIVE BLOG FEEDS JUL 21, 2009 11:46A.M.

Tuesday’s Daily News [The Club The threat of cap-and-trade to the economy is still present. ATR is
continuing our energy tax policy series with this recent installment
for Growth] analyzing the economic impact of cap-and-trade. The Senate...
JUL 21, 2009 11:55A.M.

THE DAILY NEWS On Health Care, Blue Dogs May Wag Tails - Miller
& Haberkorn, Wash Times Stocks Are Far From Fair Value - Brian FISCALLY CONSERVATIVE BLOG FEEDS
Wesbury & Robert Stein, Forbes The Fed’s Exit Strategy - Ben Bernanke,
Wall Street Journal Poll: Public Losing Trust in President Obama - Andy Not So Sure [The Club for
Barr, Politico Medical Care Confusion - Thomas Sowell, Real Clear
Politics Perils of Obamacare: The Three Big Lies - Michael Tanner, New Growth]
York Post Card-Check Is a Trojan Horse - National Review Editorial JUL 21, 2009 11:40A.M.
Deficit Deceit - IBD Editorial Will Obama Devalue the Dollar to Save
Democrats? - Jimmy P, Reuters Detroit’s Beautiful, Horrible Decline - From our friends at Let Freedom Ring:
TIME Magazine Cubs 1, Phillies 10 - Associated Press

FISCALLY CONSERVATIVE BLOG FEEDS

FISCALLY CONSERVATIVE BLOG FEEDS
Congressional Democrats and
Pictures of the Day [The Club
Republicans Agree: Treasury
for Growth]
Transparency = FAIL JUL 21, 2009 11:39A.M.

[Americans for Tax Reform] Here’s a collection of photos that show what high taxes and big
JUL 21, 2009 11:53A.M. government will do to a major U.S. city.

Congressional Democrats and Republicans certainly don’t agree on many

things these days. Today, however, they jointly lashed out at the
Treasury Department for failing the transparency test aft... FISCALLY CONSERVATIVE BLOG FEEDS

Soaring Sales for ‘Road to

Serfdom’ [The Club for Growth]
JUL 21, 2009 11:35A.M.

From Cato’s David Boaz:

Cato’s new staff writer, Aaron Powell, told me he had recently

seen two people on the Washington Metro reading The Road
to Serfdom by F. A. Hayek. That prompted me to check the
sales figures for Road to Serfdom at Nielsen’s Bookscan. And
whattaya know? Sales have increased this year at an even
faster pace than sales of Atlas Shrugged. (Atlas sells 10 times

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Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
as many copies, but the percentage increase over last year is
less.)
So far this year the most popular edition of Road to Serfdom
has sold 11,366 copies. That compares with 3,131 copies at the
same point last year. That’s a 263 percent increase for those
of you keeping score at home.
Here’s the book on Amazon.com. It’s available on Kindle as well.
FISCALLY CONSERVATIVE BLOG FEEDS
Bernanke Rules? [Cato at
Liberty]
JUL 21, 2009 11:15A.M.
In today’s Wall Street Journal, Fed Chairman Ben Bernanke has
outlined “The Fed’s Exit Strategy.” He tells the reader how the central
bank will avoid an inflation of historic proportions resulting from all the
money and credit it has injected into the economy. All of the strategies
he outlines are technically feasible ways for the Fed to implement
monetary restraint.
The op-ed has an air of a classroom exercise, however, rather than a
practical central-bank strategy. Much of the article is devoted to
explaining how the Fed can now pay interest on reserves, and how it
could raise that interest rate so as to dissuade commercial banks from
lending the reserves out. It could do that, but what would that rate need
to be in order to meet a private bank’s threshold rate of return in normal
economic times?
More importantly, the Fed has never lacked the technical tools to combat
inflation. What it has so often lacked is the will to make tough decisions.
And, quite frankly, it does not possess the information needed to fine-
tune the economy in the way Chairman Bernanke imagines (a point
made by Milton Friedman many years ago). Lack of will and lack of
information combine to keep the Fed behind the curve. Its policy was too
easy after 2001, and so it fueled the housing boom. It was late to
recognize the turn in housing and the economy, and its policy was then
too tight. If past is prologue, it will be late to implement its exit strategy.
The Fed Chairman has presented a laundry list of policy tools. What
investors need is some assurance that the right tools will be used at the
right moment. The mere promise of a policymaker to do the right thing
has little credibility. There is no monetary rule in place, only the rule of a
man.
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22 July 2009
FISCALLY CONSERVATIVE BLOG FEEDS
Obama’s Health Care
Showdown [The Club for
Growth]
JUL 21, 2009 10:52A.M.
FISCALLY CONSERVATIVE BLOG FEEDS
More Undeserved Praise for
Obama’s NAACP Speech [Cato
at Liberty]
JUL 21, 2009 10:47A.M.
Mike Petrilli of the Fordham Foundation is an affable and intelligent
man. But he has gone round the rocker in regard to President Obama’s
NAACP speech last week.
His review reads like promotional excerpts for a blockbuster movie;
Don’t miss what critics are calling a can’t-miss experience . . .
“transcendent” . . . “inspirational” . . . “honest, direct, bold.”
Why such superlatives? Because Obama is an “African-American
president, speaking to the NAACP, and arguing for reform in our schools
and responsibility in our homes and community.” Wow. Reform and
responsibility?
Of course, as I point out here, the President OPPOSES the most direct
and effective means of reforming education and empowering parents;
school choice. And he supports expanding federal control of education
from pre-k to college. Our President is working against reform and
responsibility in education.
Our President has the nerve to lecture parents on the importance of
getting involved as he supports ripping vouchers out of the hands of
children in DC and elsewhere. He and his Congressional colleagues have
effectively told thousands of District parents, who desperately want to
direct their children to a better future, to shut up and sit down.
There is absolutely nothing to celebrating about a President who mouths
nice platitudes while doing all he can to undermine the principles that
underlie those sentiments.
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com 22 July 2009

FISCALLY CONSERVATIVE BLOG FEEDS

President Obama’s Dishonest

Demagoguery [Cato at Liberty]
JUL 21, 2009 10:20A.M.

Politicians exaggerate as a routine matter and have well-deserved

reputations for stretching the truth. But when they repeatedly make
assertions that they (or their aides) know to be false, they surely deserve
to be criticized. That is the purpose of my new video. Entitled “President
Obama’s Dishonest Demagoguery on So-Called Tax Havens,” the four-
minute presentation looks at the two sound bites that the President uses
to demonize low-tax jurisdictions.

FISCALLY CONSERVATIVE BLOG FEEDS

Commerce Secretary and IP

Leaders Release Copyright
Report [Americans for Tax
Reform]
JUL 21, 2009 10:09A.M.

Yesterday, Commerce Secretary Locke and intellectual property rights

leaders released a detailed report citing the impact of copyright on the
U.S. economy. Stringent copyright protection is vital cons...

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