Public Policy and Governance – Page 317

What He Said

A relatively simple statement from the President’s State of the Union speech last night deserves emphasis. After reminding Americans of the economic situation when he assumed office, when the country was bleeding jobs and reeling from the collapse of the housing bubble, Obama reported

“In the last 22 months, businesses have created more than three million jobs. Last year, they created the most jobs since 2005. American manufacturers are hiring again, creating jobs for the first time since the late 1990s. Together, we’ve agreed to cut the deficit by more than $2 trillion. And we’ve put in place new rules to hold Wall Street accountable, so a crisis like that never happens again.

The state of our Union is getting stronger. And we’ve come too far to turn back now. As long as I’m President, I will work with anyone in this chamber to build on this momentum. But I intend to fight obstruction with action, and I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place.”

Americans have a notoriously short attention span, and a wildly inflated conception of Presidential power. Republican prospects depend upon those characteristics. If the GOP is to recapture the Presidency, Americans must forget how we got into this mess, and how long it took for George W. Bush to dig the hole we find ourselves in. We also have to forget how he did it–what those “policies that brought on the economic crisis” were.

There may have been some unrecognized underlying weaknesses, but economists of all political persuasions agree that Bush inherited a healthy economy, and a shrinking national debt. It took him eight years, but Bush destabilized and weakened that economy, and dramatically increased the debt.

Let’s just look at the three most damaging policies Bush pursued. First, he refused to pay for the wars he so recklessly waged (wars that cost several times the estimates given by then-budget director Mitch Daniels). Second, he actually reduced taxes on the wealthy–thus exacerbating the widest income gap between rich and poor since the gilded age. (Those tax breaks were justified as “job creation” measures, despite the fact that such cuts have historically failed to create jobs.) And third, he eviscerated government regulation, allowing banks and other big businesses to operate with lawless impunity in the serene belief that the market would provide all necessary discipline.

There were plenty of other policies the Bush Administration pursued that were wrong-headed and harmful– failure to address environmental issues, cowboy unilateralism in foreign policy, an assault on civil liberties–but the “big three” did the most widespread damage and make it more difficult to address the others.

A lot of Americans who acknowledge all of this nevertheless believe that it should all be turned around by now. Why, Obama has had three years! These are the folks who must think we elect a king, rather than a President. In the real world, however, Presidential power is more constrained. The President can only do so much–and when those who control Congress refuse to cooperate, refuse even to negotiate, refuse to put the interests of the nation above the interests of their contributors, it shouldn’t come as a surprise that improvement has come slowly.

What’s surprising is that we’ve had improvement at all.

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You’ll Never Get Your Hair Cut in this Town Again

Recently, a colleague of mine was asked to research the impact of professional licensing laws and to report her findings to a legislative study committee. Licensing laws have steadily proliferated—in1970, about 10% of the American workforce required a license of some sort in order to earn a living; by 2000, that percentage had doubled to 20%. It is now estimated to be around 29%.

Lest we think of these requirements as evidence of “big brother” or the much-deplored (and largely fanciful) triumph of an insatiable governmental regulatory fervor, most of these rules are the result of lobbying efforts by the occupational groups being regulated. The result is that Indiana—like many states—requires that workers be licensed before they can shampoo or braid your hair, hypnotize you, or decorate your family room.

Licensing laws are justified by concerns for public safety. We license doctors because most patients lack the knowledge to spot charlatans, and the consequences of what academics call “information asymmetry” can be fatal. We license architects and engineers because building collapses are similarly consequential. This justification seems weaker when we get to shampoo girls and interior decorators.

There is statistical evidence that licensing acts as a barrier to entry into a profession, and also as a barrier to labor mobility (since states have different requirements, licenses are considerably less portable than one might imagine). There is also clear evidence that licensing raises consumer prices—depending upon the profession, those increases range from 4-35%.

The study committee was weighing these benefits and burdens, and considering whether other means of protecting consumers in lower-risk situations might be more cost-effective. Certification, for example, might offer a middle ground. Physicians with specialties use this approach—they have numerous board certifications that are administered by professional organizations. Government isn’t involved, and taxpayers don’t pay the administrative costs, but consumers have the benefit of information about that particular doctor’s training and expertise.

Enter political reality.

Facebook postings warned of disease spread by unclean cosmetic instruments. Tweets went out to rally those in the affected occupations. On the day of the hearing, swarms of scissors-wielding hairdressers (and for all I know, livid interior designers and angry hypnotists) descended on the Indiana Statehouse. My colleague, somewhat shell-shocked, reported that those whose scissors were confiscated by security were furious—evidently it hadn’t occurred to them that weapons couldn’t be taken into the Statehouse. She may have to leave town to get her hair cut after this, and she wasn’t even there to advocate de-regulation; she was just reporting what the relevant research showed.

I am not a betting woman, but I’d give odds against any change in the status quo. As any political scientist can confirm, it is easier to stop change than to effect it.

There are a couple of lessons here, for those interested in reality, rather than the ideologies of Right or Left.

The Right needs to admit that government regulations are just as likely to be a product of the economic self-interest of the regulated industry as the expression of authoritarian impulses. At the state level, much of the drumbeat for licensure reflects the (understandable) belief that one’s occupation should be elevated to the status of a profession; much more comes from a less noble desire to restrict entry and increase profits.

The lesson for the Left is that regulations do, in fact, increase costs, and that they are not always the best way to achieve public goods. The perceived benefits in public safety must be weighed against those costs.

The lesson for my colleague is to avoid angry hairdressers brandishing scissors.

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Crushing Their Dreams

In last night’s GOP debate in South Carolina, Mitt Romney once again promised that, as President, he would veto the Dream Act.

I’ll admit that I find opposition to the Dream Act incomprehensible. I was really disappointed when Dick Lugar responded to the rightwing challenge from Richard Mourdock by withdrawing his long-time sponsorship of that measure. And I am constantly surprised and disheartened by those who are so rabidly anti-illegal-immigration that they see nothing wrong with punishing children for the acts of their parents.

The Dream Act would provide (conditional) permanent residency to undocumented residents of “good moral character” who graduate from US high schools, arrived in the US as minors, and lived in the country continuously for at least five years prior to the bill’s enactment. If they complete two years in the military, or two years at a four-year institution of higher learning, they can obtain temporary residency for a six year period. Within that six year period, they may qualify for permanent residency if they have “acquired a degree from an institution of higher education in the United States or has completed at least 2 years, in good standing, in a program for a bachelor’s degree or higher degree in the United States” or have “served in the armed services for at least 2 years and, if discharged, received an honorable discharge.”

People for whom illegal immigration is a high-priority issue almost always defend that position by insisting that it isn’t the race or ethnicity of the people involved–that it is a question of rewarding law-breaking. Okay, I get that. But if the point is to punish those who break the law, why punish children who made no such decision, who had no choice in the matter? Most of these children know no other home but America, speak no language but English, and want nothing more than to be contributing citizens. It is heartless to insist that they must be deported to countries with which they are totally unfamiliar.

Not to get all biblical about it, but why visit the sins of the fathers on the children?

Why crush their dreams?

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Not-So-Private Enterprise

This morning’s New York Times has a story about Mitt Romney’s campaign-trail praise for a “private” enterprise that–just coincidentally–happens to be owned by one of his largest contributors. It’s a story that could undoubtedly be written about several of the other candidates in an era when money makes the political world go around, and it wouldn’t merit much more than a sigh and a shrug if it weren’t for two things: the enterprise in question and the increasingly dishonest characterization of what constitutes “private enterprise.”

The business that Romney praises as a “cost-effective” alternative to soaring tuition rates is a for-profit college in Florida named Full Sail University. As the Times points out,

“Mr. Romney did not mention the cost of tuition at Full Sail, which runs more than 80,000, for example, for a 21-month program in ‘video game art.'”

Nor did he mention the institution’s 14% graduation rate.

In fact, there has been a growing recognition that many, if not most, for-profit colleges are royal rip-offs, promising students credentials that prove worthless in the marketplace and vastly overcharging for poor-quality instruction. In response, President Obama has proposed new regulations that would make it much more difficult for students attending such institutions to receive federal aid.

And that leads to the problem of mis-characterization. The reason so many of these for-profit colleges are lobbying so frantically against the Obama proposals is that they are “private” enterprises in name only. They depend almost entirely upon the financial aid available to students courtesy of the American taxpayer.

I’m told that for-profit colleges got their biggest boost in the aftermath of the Second World War, when the availability of the GI Bill promised quick profits to educational entrepreneurs who could best market their programs. Today, most of them would disappear without the ability to tap public funds.

We have a long history in this country of politicians extolling the virtues of those who fund their campaigns, and we have an equally long history of people railing against “socialism” and “bailouts” and “welfare” while happily sucking at the public you-know-what. (Remember Ross Perot, that apostle of private-sector “can do” attitudes who made his fortune contracting with the government?)

As the Times article points out, the for-profit college industry has “been the target of withering criticism in the last few years in the wake of federal investigations into fraudulent marketing practices, poor academic records and huge loans assumed by students ill-prepared for the expensive programs.”

Bottom line: these enterprises are not examples of private entrepreneurship. And what they are offering bears little resemblance to an education.

Our Money, Our Information

There is a very interesting op ed in this morning’s New York Times from an academic who does medical research, opposing a bill that has been introduced in Congress that would “protect” academic medical journals.

Protect them from what, you ask?

Under current practice, when the NIH or other tax-supported government agency funds research, the peer-reviewed articles that are subsequently written about that research are made available on-line for free. The journals want to change that practice, so that anyone interested in the results will have to buy their journals (which are, by the way, very expensive). The op-ed’s author believes–and I agree–that research funded by taxpayers ought to be freely available to taxpayers; it doesn’t seem fair to make the public pay for something that is then given to private parties who can profit from it.

It is interesting that our debate over healthcare reform has ignored the fact that this is a widespread phenomenon in medical science. Representative of “big Pharma” talk endlessly about the money they spend on research, and what constitutes a fair return on that R & R investment. They talk a lot less about how much of the essential research is funded by taxpayers, and how much more it would cost to develop drugs if that were not the case.

When I was doing some research for a paper a few years ago–before the Affordable Care Act–colleagues from the medical school shocked me when they explained that taxpayers were shouldering between 60% and 70% of all costs for medical care. From public hospitals like Wishard, to programs like Medicare and Medicaid, to underwriting scientific research, We the Taxpayers have paid most of the tab for many years.

Whatever the merits of “private enterprise,” it doesn’t exist in medicine, and hasn’t for a very long time. Perhaps if policymakers understood that, we taxpayers would get some respect–and a return on our investment.

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