When it comes to tax plans, it’s all just so confusing. Or at least that’s what the NYT seems to be telling us.
The NYT ran an article that reports on a study by the Tax Policy Center that showed Governor Romney’s tax plan would lead to a large reduction in taxes for the wealthy, while raising taxes for everyone else. It then cites Romney’s claim that his tax plan is similar to the one developed by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson, the co-chairs of President Obama’s deficit commission. The piece goes on to tell readers:
“The Simpson-Bowles plan called for reduced income tax rates, but it would have raised about $2 trillion more in tax revenues over 10 years, mostly from high-income taxpayers.”
Wow, this should really leave us scratching our heads. After all, if Romney’s plan is similar to the Bowles-Simpson plan, and the Bowles-Simpson plan would raise $2 trillion, mostly from high income taxpayers, then the Romney plan must also increase revenue from high income taxpayers. But, then the Tax Policy Center study would be wrong. What is a careful NYT reader to think?
The NYT could have resolved this seeming paradox by pointing out an important difference between the Romney plan and the Bowles-Simpson plan. Romney has explicitly said that he would not change any of the tax incentives for saving. This means that he has ruled out raising the tax rate on capital gains and dividends or curtailing some of the tax benefits for IRAs and 401(k)s. This makes his plan much more friendly to upper income taxpayers, who are the primary beneficiaries of these tax breaks.
Perhaps the NYT assumed that all its readers already knew about this difference between the Romney plan and the Bowles-Simpson plan, but it still would have been worth reminding them.
When it comes to tax plans, it’s all just so confusing. Or at least that’s what the NYT seems to be telling us.
The NYT ran an article that reports on a study by the Tax Policy Center that showed Governor Romney’s tax plan would lead to a large reduction in taxes for the wealthy, while raising taxes for everyone else. It then cites Romney’s claim that his tax plan is similar to the one developed by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson, the co-chairs of President Obama’s deficit commission. The piece goes on to tell readers:
“The Simpson-Bowles plan called for reduced income tax rates, but it would have raised about $2 trillion more in tax revenues over 10 years, mostly from high-income taxpayers.”
Wow, this should really leave us scratching our heads. After all, if Romney’s plan is similar to the Bowles-Simpson plan, and the Bowles-Simpson plan would raise $2 trillion, mostly from high income taxpayers, then the Romney plan must also increase revenue from high income taxpayers. But, then the Tax Policy Center study would be wrong. What is a careful NYT reader to think?
The NYT could have resolved this seeming paradox by pointing out an important difference between the Romney plan and the Bowles-Simpson plan. Romney has explicitly said that he would not change any of the tax incentives for saving. This means that he has ruled out raising the tax rate on capital gains and dividends or curtailing some of the tax benefits for IRAs and 401(k)s. This makes his plan much more friendly to upper income taxpayers, who are the primary beneficiaries of these tax breaks.
Perhaps the NYT assumed that all its readers already knew about this difference between the Romney plan and the Bowles-Simpson plan, but it still would have been worth reminding them.
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NPR told listeners that Standard & Poors downgrading of U.S. government debt caused the stock market plunge last summer:
“A year has passed since the debt ceiling debacle in Washington, D.C. The showdown cost the U.S. its AAA credit rating and sent the stock market and President Obama’s approval ratings plunging.”
Is that so? Let’s try a little logic 101 here. S&P downgraded U.S. government debt, meaning in principle that there was a greater risk that there would be a default on this debt. Let’s assume that the markets took S&P’s judgment seriously. What would we probably expect?
That’s right! We would expect the price of U.S. bonds to fall, this would cause the interest rate on U.S. debt to rise.
But, what actually happened was that U.S. bond prices soared and interest rates plummeted. This is 180 degrees at odds with the idea that the markets agreed with S&P’s assessment about the risk of holding U.S. bonds.
There is another factor that could explain both the jump in bond prices and the plunge in the stock market. This is the euro zone crisis, which became far more serious in early August as interest rates on Italian debt soared. That would cause investors to flee to U.S. bonds and make shareholders weary about the future of the economy.
That explanation logically fits the set of events that we saw in financial markets. Unfortunately it doesn’t fit the morality tale that NPR seems to want to give its listeners, so we apparently won’t get to hear it on the air.
NPR told listeners that Standard & Poors downgrading of U.S. government debt caused the stock market plunge last summer:
“A year has passed since the debt ceiling debacle in Washington, D.C. The showdown cost the U.S. its AAA credit rating and sent the stock market and President Obama’s approval ratings plunging.”
Is that so? Let’s try a little logic 101 here. S&P downgraded U.S. government debt, meaning in principle that there was a greater risk that there would be a default on this debt. Let’s assume that the markets took S&P’s judgment seriously. What would we probably expect?
That’s right! We would expect the price of U.S. bonds to fall, this would cause the interest rate on U.S. debt to rise.
But, what actually happened was that U.S. bond prices soared and interest rates plummeted. This is 180 degrees at odds with the idea that the markets agreed with S&P’s assessment about the risk of holding U.S. bonds.
There is another factor that could explain both the jump in bond prices and the plunge in the stock market. This is the euro zone crisis, which became far more serious in early August as interest rates on Italian debt soared. That would cause investors to flee to U.S. bonds and make shareholders weary about the future of the economy.
That explanation logically fits the set of events that we saw in financial markets. Unfortunately it doesn’t fit the morality tale that NPR seems to want to give its listeners, so we apparently won’t get to hear it on the air.
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It used to be common for stories in the business press to make a big deal out of the weekly unemployment insurance claims numbers. And, it used to be common for me to beat up on them for exaggerating the importance of a weekly number that is highly erratic and subject to large revisions.
On the other hand, these numbers do provide information, especially when we see a trend over a number of weeks. That has been the case in the last five weeks as the average weekly claims number reached a recovery low.
For some reason the media no longer seems to be paying attention to these numbers. If they were, then they would not have been surprised by the 163,000 job growth reported for July.
It used to be common for stories in the business press to make a big deal out of the weekly unemployment insurance claims numbers. And, it used to be common for me to beat up on them for exaggerating the importance of a weekly number that is highly erratic and subject to large revisions.
On the other hand, these numbers do provide information, especially when we see a trend over a number of weeks. That has been the case in the last five weeks as the average weekly claims number reached a recovery low.
For some reason the media no longer seems to be paying attention to these numbers. If they were, then they would not have been surprised by the 163,000 job growth reported for July.
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Patent monopolies raise the price of drugs from free market prices of $5-$10 per prescription to hundreds or even thousands of dollars per prescription. They have the same effect with medical devices.
The actual cost of using even the most advanced medical equipment is usually very low. After all, the machinery is already there, the only cost is a bit of electricity, the technicians’ time and possibly the time of a highly paid medical specialist. Even if we averaged the cost of manufacturing the machine over the number of uses, the cost is still likely to be relatively low. The big cost involved with medical equipment, as with prescription drugs, is the cost of the research that went into its development.
Using patent protection as a mechanism to recover these costs is incredibly inefficient, as Robert Samuelson inadvertently shows us in his column today. The piece is devoted to the results of a study that found that effective monitoring of the use of MRIs and greater cost-sharing with patients has led to a substantial reduction in the growth of their usage. As Samuelson reports, the study suggests that the main cost of this reduction in usage to patients may have been somewhat slower treatment of various aches and pains. It doesn’t have data on whether it might have had more serious effects in delaying the treatment of life-threatening conditions.
While it is certainly desirable to limit the unnecessary use of medical technology, it is worth noting that this problem comes about largely because of the patent monopoly provided for medical equipment. The article cited by Samuelson focuses on the fees paid to radiologists, one of the most highly paid medical specialties. However, even with their bloated pay of more than $500,000 a year, radiologists account for a small portion of the costs of an MRI. (Freeing up trade in radiological services could probably knock down this cost by 60-80 percent.)
With a typical radiologist able to perform more than 5000 MRIs a year, their fee would only account for around $100 of the cost of a scan. This means that most of the cost is going to pay for the overhead associated with buying the equipment, not the use of highly paid labor in the scan itself. Since this is a sunk cost (the machinery is already sitting there), we should want people to get scans anytime the expected benefit exceeds the $100 we have to pay the radiologist (until we get free trade), plus the pay to the other technicians and medical staff involved in providing the procedure.
Under this standard, we would probably want many of the people with aches and pains to be able to have access to the equipment. By contrast, devising and enforcing an effective system of controls like the one described in this column involves a considerable amount of time, much of it from highly paid professionals.
The alternative is to devise a mechanism for paying for research up front and letting the equipment be sold at its marginal cost of production. This would make MRI scans and the use of most other medical equipment cheap. It would also remove the incentive for providers to use this equipment in situations where it is not appropriate, since they would not be making the super-profits that patent monopolies allow.
There are alternatives to the current patent system. As Nobel winning economist Joe Stiglitz suggested with prescription drugs, we could have a patent buy-out system, where the government buys up useful patents and puts them in the public domain. Alternatively, the government could simply pay for research up front, perhaps doubling or tripling the $30 billion a year it now spends on research through the National Institutes of Health.
Patent monopolies raise the price of drugs from free market prices of $5-$10 per prescription to hundreds or even thousands of dollars per prescription. They have the same effect with medical devices.
The actual cost of using even the most advanced medical equipment is usually very low. After all, the machinery is already there, the only cost is a bit of electricity, the technicians’ time and possibly the time of a highly paid medical specialist. Even if we averaged the cost of manufacturing the machine over the number of uses, the cost is still likely to be relatively low. The big cost involved with medical equipment, as with prescription drugs, is the cost of the research that went into its development.
Using patent protection as a mechanism to recover these costs is incredibly inefficient, as Robert Samuelson inadvertently shows us in his column today. The piece is devoted to the results of a study that found that effective monitoring of the use of MRIs and greater cost-sharing with patients has led to a substantial reduction in the growth of their usage. As Samuelson reports, the study suggests that the main cost of this reduction in usage to patients may have been somewhat slower treatment of various aches and pains. It doesn’t have data on whether it might have had more serious effects in delaying the treatment of life-threatening conditions.
While it is certainly desirable to limit the unnecessary use of medical technology, it is worth noting that this problem comes about largely because of the patent monopoly provided for medical equipment. The article cited by Samuelson focuses on the fees paid to radiologists, one of the most highly paid medical specialties. However, even with their bloated pay of more than $500,000 a year, radiologists account for a small portion of the costs of an MRI. (Freeing up trade in radiological services could probably knock down this cost by 60-80 percent.)
With a typical radiologist able to perform more than 5000 MRIs a year, their fee would only account for around $100 of the cost of a scan. This means that most of the cost is going to pay for the overhead associated with buying the equipment, not the use of highly paid labor in the scan itself. Since this is a sunk cost (the machinery is already sitting there), we should want people to get scans anytime the expected benefit exceeds the $100 we have to pay the radiologist (until we get free trade), plus the pay to the other technicians and medical staff involved in providing the procedure.
Under this standard, we would probably want many of the people with aches and pains to be able to have access to the equipment. By contrast, devising and enforcing an effective system of controls like the one described in this column involves a considerable amount of time, much of it from highly paid professionals.
The alternative is to devise a mechanism for paying for research up front and letting the equipment be sold at its marginal cost of production. This would make MRI scans and the use of most other medical equipment cheap. It would also remove the incentive for providers to use this equipment in situations where it is not appropriate, since they would not be making the super-profits that patent monopolies allow.
There are alternatives to the current patent system. As Nobel winning economist Joe Stiglitz suggested with prescription drugs, we could have a patent buy-out system, where the government buys up useful patents and puts them in the public domain. Alternatively, the government could simply pay for research up front, perhaps doubling or tripling the $30 billion a year it now spends on research through the National Institutes of Health.
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The first sentence a Washington Post article told readers:
“American manufacturing unexpectedly contracted in July for a second month, reflecting a drop in orders that threatens to undercut a mainstay of the recovery.”
As the article then explains, this statement is referring to an index from the Institute for Supply Management which showed a reading of 49.8 percent in July. A reading of less than 50 is associated with contraction in the sector.
However this is a broad index that assesses many factors, including orders and hiring. It does not directly measure factory output. We do have such a measure from the Federal Reserve Board. While the numbers for industrial production are not yet available for July, the Fed’s index showed manufacturing output increasing by 0.7 percent in June (following a comparable decline in May). This means that if manufacturing output does fall in July, it will be the first month, not the second.
The first sentence a Washington Post article told readers:
“American manufacturing unexpectedly contracted in July for a second month, reflecting a drop in orders that threatens to undercut a mainstay of the recovery.”
As the article then explains, this statement is referring to an index from the Institute for Supply Management which showed a reading of 49.8 percent in July. A reading of less than 50 is associated with contraction in the sector.
However this is a broad index that assesses many factors, including orders and hiring. It does not directly measure factory output. We do have such a measure from the Federal Reserve Board. While the numbers for industrial production are not yet available for July, the Fed’s index showed manufacturing output increasing by 0.7 percent in June (following a comparable decline in May). This means that if manufacturing output does fall in July, it will be the first month, not the second.
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Sorry boys and girls, this is not a debatable issue. It is easy to identify the countries in Europe that have the most generous welfare states. They would be the Nordic countries like Denmark, Sweden, Norway, and Finland. Also high on the list would be the Netherlands, Germany, France and Austria. No one has Greece, Spain, Italy, or even Ireland on the list of countries with the most generous welfare states.
This means that conservatives would be mistaken if they blame the euro crisis on overly generous welfare state. Unfortunately the NYT did not point this fact out to reader in an article about Governor Romney’s summer travels.
At one point the article said:
“That Europe [the one with an extensive welfare state], which some conservatives label the “old Europe,” is symbolized by the troubles of the euro zone, where heavy regulation and a vast social welfare network, they maintain, has led to an intractable economic crisis.”
Since most readers probably would not know that debt crisis has been confined to the countries with the least generous welfare states, it would have been useful if the NYT had called readers attention to this fact.
Sorry boys and girls, this is not a debatable issue. It is easy to identify the countries in Europe that have the most generous welfare states. They would be the Nordic countries like Denmark, Sweden, Norway, and Finland. Also high on the list would be the Netherlands, Germany, France and Austria. No one has Greece, Spain, Italy, or even Ireland on the list of countries with the most generous welfare states.
This means that conservatives would be mistaken if they blame the euro crisis on overly generous welfare state. Unfortunately the NYT did not point this fact out to reader in an article about Governor Romney’s summer travels.
At one point the article said:
“That Europe [the one with an extensive welfare state], which some conservatives label the “old Europe,” is symbolized by the troubles of the euro zone, where heavy regulation and a vast social welfare network, they maintain, has led to an intractable economic crisis.”
Since most readers probably would not know that debt crisis has been confined to the countries with the least generous welfare states, it would have been useful if the NYT had called readers attention to this fact.
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The NYT had a truly bizarre piece that at least implicitly portrayed Japan unfavorably compared with the United States for having an over-valued currency. The second paragraph tells readers:
“In an echo of a debate that raged in the United States in the 1980s, the government faces growing criticism for doing almost nothing to rein in the yen, despite alarm that the record-high currency is dealing crippling blows to the country’s once all-important export machine.”
The article then goes on to tell readers that Japan’s large number of retirees benefit from a high yen, which means cheap imports. However the high yen hurts young people by making manufacturing less competitive, and thereby reducing employment.
The reason that this piece is so bizarre is that these criticisms would be much more obviously directed at the United States than Japan. The United States has an 8.2 percent unemployment rate. Japan’s unemployment rate is 4.3 percent. Japan has a current account surplus of more than 2.0 percent of GDP; the United States has a deficit of close to 4.0 percent of GDP. If there is a country that could obviously benefit from a lower valued currency it would seem to be the United States.
Remarkably, while the value of the currency is apparently a hotly debated issue in Japan (at least according to the NYT), it is rarely mentioned in the United States. This could be due to the fact that more powerful interests than retired workers support an over-valued dollar in the United States.
The financial sector typically supports an over-valued currency since it reduces the risk of inflation and it makes them bigger actors overseas. Also, major retailers like Wal-Mart have established extensive supply networks overseas that rely on being able to buy goods cheaply. Most major manufacturers have also established subsidiaries in China and other countries with low wages.
These powerful interest groups would strongly resist any effort to lower the value of the dollar and thereby make U.S. goods more competitive in world markets. This could explain why the value of the currency is debated in Japan, while the NYT tells us that it is only a matter of historical concern (the 1980s) in the United States.
One fun tidbit in this piece is that it tells us that in the midst of the crisis, Japan became a “haven for investors”:
“After the crisis began, raising doubts about the soundness of American and European banks and the ability of governments to stand behind them, the tide of money reversed. Japan, with its huge security cushion of domestic savers, suddenly became a haven for investors, driving the yen up.”
That’s right, a country with a debt to GDP ratio of more than 230 percent is a haven for investors. Doesn’t that make you worry about those big deficits that Obama is running up?
The NYT had a truly bizarre piece that at least implicitly portrayed Japan unfavorably compared with the United States for having an over-valued currency. The second paragraph tells readers:
“In an echo of a debate that raged in the United States in the 1980s, the government faces growing criticism for doing almost nothing to rein in the yen, despite alarm that the record-high currency is dealing crippling blows to the country’s once all-important export machine.”
The article then goes on to tell readers that Japan’s large number of retirees benefit from a high yen, which means cheap imports. However the high yen hurts young people by making manufacturing less competitive, and thereby reducing employment.
The reason that this piece is so bizarre is that these criticisms would be much more obviously directed at the United States than Japan. The United States has an 8.2 percent unemployment rate. Japan’s unemployment rate is 4.3 percent. Japan has a current account surplus of more than 2.0 percent of GDP; the United States has a deficit of close to 4.0 percent of GDP. If there is a country that could obviously benefit from a lower valued currency it would seem to be the United States.
Remarkably, while the value of the currency is apparently a hotly debated issue in Japan (at least according to the NYT), it is rarely mentioned in the United States. This could be due to the fact that more powerful interests than retired workers support an over-valued dollar in the United States.
The financial sector typically supports an over-valued currency since it reduces the risk of inflation and it makes them bigger actors overseas. Also, major retailers like Wal-Mart have established extensive supply networks overseas that rely on being able to buy goods cheaply. Most major manufacturers have also established subsidiaries in China and other countries with low wages.
These powerful interest groups would strongly resist any effort to lower the value of the dollar and thereby make U.S. goods more competitive in world markets. This could explain why the value of the currency is debated in Japan, while the NYT tells us that it is only a matter of historical concern (the 1980s) in the United States.
One fun tidbit in this piece is that it tells us that in the midst of the crisis, Japan became a “haven for investors”:
“After the crisis began, raising doubts about the soundness of American and European banks and the ability of governments to stand behind them, the tide of money reversed. Japan, with its huge security cushion of domestic savers, suddenly became a haven for investors, driving the yen up.”
That’s right, a country with a debt to GDP ratio of more than 230 percent is a haven for investors. Doesn’t that make you worry about those big deficits that Obama is running up?
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I’m serious. The Washington Post columnist notes the Americans With Disability Act, which prohibits employers from discriminating against workers because they have a disability, then complains about the paradox that the Social Security disability program gives money to people with disabilities who can’t work. I don’t really see the paradox in trying to make it easier for people with disabilities to find jobs while still supporting those whose disabilities don’t allow them to work, but maybe that’s why I don’t write for the WAPO.
Anyhow, Lane goes on to note that the disability payments have doubled as a share of GDP over the last three decades, then asks, “what’s going on?” He tells readers:
“There’s no evidence that workers in general are substantially less healthy than they used to be.”
Umm, actually that is not true. The workforce has aged substantially in the last three decades. In the 1980, the huge baby boom cohort was in their 20s and early 30s, today they are in their 50s and 60s. Workers in their 50s and 60s are far more likely to have disabilities that keep them from working than workers in their 20s and 30s. Even Lane himself notes the aging of the workforce later in the piece.
There is also the paradox (there’s that word again) that improvements in health care can increase disability rates. Suppose a worker has a disease like AIDS or cancer. Improvements in treatment can keep this worker alive much longer, but may not allow them to go back to work.
There are also other factors that would increase disability rolls that have nothing to do with more freeloaders, most importantly the increase in the percentage of women who have worked long enough to be eligible for disability. According to the Congressional Budget Office the percentage of the working age population eligible for disability increased from 62 percent in 1970 to 75 percent in 2009.
As this report also notes, disability rolls tend to increase in economic downturns. This is the point that seems to concern Lane, that many workers turn to disability when their unemployment benefits run out.
While Lane sees something pernicious in this story, with the disabled pocketing checks that average a bit more than $1,100 a month at the expense of the rest of us (and also getting Medicare after two years), there is another way to view this picture. Many people with various types of physical and psychological problems work.
It is likely the case that these disabilities do reduce their productivity on the job. When employers are looking to cut back their work force, they may be more likely to lay off a worker whose bad back makes them slower than other workers or a person with fits of depression that prevent them from functioning for periods of time. Much of the answer in this story would seem to be that if we keep the economy operating at high levels of employment there will be job opportunities for these workers. That would bring us back to our friend stimulus, but Lane and the Washington Post don’t like to talk about such things. (It’s all so complicated, we just can’t know if it works.)
Anyhow, we certainly can do better in making it easier for workers to leave disability and get back in the workforce. There also are freeloaders on the program who should be working. But all the evidence suggests that the bulk of the rise in disability is due to changes in the health of the workforce and the economy, not a sudden proliferation of freeloaders.
[Addendum: Charles Lane didn’t address this issue, but since it has come up in comments and elsewhere, disability payments actually increased more rapidly under President Bush (the second) than under President Obama. This means that if we want to point fingers at a president pandering to freeloaders, our target should be the last occupant of the White House, not the current one.]
I’m serious. The Washington Post columnist notes the Americans With Disability Act, which prohibits employers from discriminating against workers because they have a disability, then complains about the paradox that the Social Security disability program gives money to people with disabilities who can’t work. I don’t really see the paradox in trying to make it easier for people with disabilities to find jobs while still supporting those whose disabilities don’t allow them to work, but maybe that’s why I don’t write for the WAPO.
Anyhow, Lane goes on to note that the disability payments have doubled as a share of GDP over the last three decades, then asks, “what’s going on?” He tells readers:
“There’s no evidence that workers in general are substantially less healthy than they used to be.”
Umm, actually that is not true. The workforce has aged substantially in the last three decades. In the 1980, the huge baby boom cohort was in their 20s and early 30s, today they are in their 50s and 60s. Workers in their 50s and 60s are far more likely to have disabilities that keep them from working than workers in their 20s and 30s. Even Lane himself notes the aging of the workforce later in the piece.
There is also the paradox (there’s that word again) that improvements in health care can increase disability rates. Suppose a worker has a disease like AIDS or cancer. Improvements in treatment can keep this worker alive much longer, but may not allow them to go back to work.
There are also other factors that would increase disability rolls that have nothing to do with more freeloaders, most importantly the increase in the percentage of women who have worked long enough to be eligible for disability. According to the Congressional Budget Office the percentage of the working age population eligible for disability increased from 62 percent in 1970 to 75 percent in 2009.
As this report also notes, disability rolls tend to increase in economic downturns. This is the point that seems to concern Lane, that many workers turn to disability when their unemployment benefits run out.
While Lane sees something pernicious in this story, with the disabled pocketing checks that average a bit more than $1,100 a month at the expense of the rest of us (and also getting Medicare after two years), there is another way to view this picture. Many people with various types of physical and psychological problems work.
It is likely the case that these disabilities do reduce their productivity on the job. When employers are looking to cut back their work force, they may be more likely to lay off a worker whose bad back makes them slower than other workers or a person with fits of depression that prevent them from functioning for periods of time. Much of the answer in this story would seem to be that if we keep the economy operating at high levels of employment there will be job opportunities for these workers. That would bring us back to our friend stimulus, but Lane and the Washington Post don’t like to talk about such things. (It’s all so complicated, we just can’t know if it works.)
Anyhow, we certainly can do better in making it easier for workers to leave disability and get back in the workforce. There also are freeloaders on the program who should be working. But all the evidence suggests that the bulk of the rise in disability is due to changes in the health of the workforce and the economy, not a sudden proliferation of freeloaders.
[Addendum: Charles Lane didn’t address this issue, but since it has come up in comments and elsewhere, disability payments actually increased more rapidly under President Bush (the second) than under President Obama. This means that if we want to point fingers at a president pandering to freeloaders, our target should be the last occupant of the White House, not the current one.]
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In an interview with Senator Tom Harkin (sorry, no link yet), Morning Edition host Renee Montagne managed to turn reality on its head. She repeatedly referred to restrictions on the type of schools where students could use government loans and Pell grants as interfering with the free market and imposing restrictions on the industry.
This is truly bizarre. Free market purists presumably would not want the government program at all. However, those who support the program would presumably want to ensure that money goes for its intended purpose, educating students and providing them with marketable skills.
Prohibiting students from using their government support at diploma mills that do not do either would be like prohibiting people from using food stamps to buy whiskey at their local liquor store. Few would describe such a restriction as interfering with the free market or government regulation of the liquor store industry.
In the case of liquor stores, they can sell liquor to whoever they want (above legal age), their customers just can’t use food stamps for their alcohol purchases. Similarly, for profit colleges can sign up any student they want, these rules just prohibit students from using government support at these schools unless they have a track record of actually providing an education.
[Addendum: The NYT commits the same sin. It told readers:
“Many Republicans see such colleges [for profit colleges] as a healthy free-market alternative to overcrowded community colleges, offering useful vocational training and education to working adults who will not attend more traditional institutions.”
Of course the NYT has no idea how the Republicans “see” these colleges, they only know what they say about these colleges. It is entirely possible that many Republicans see these colleges as sleaze bucket outfits that give them large campaign contributions. If this is the case, they might be inclined to speak positively about not for profit colleges regardless of what they actually think about them.
Remember, reporters are not mindreaders, and those that claim to be are not reporters.
In an interview with Senator Tom Harkin (sorry, no link yet), Morning Edition host Renee Montagne managed to turn reality on its head. She repeatedly referred to restrictions on the type of schools where students could use government loans and Pell grants as interfering with the free market and imposing restrictions on the industry.
This is truly bizarre. Free market purists presumably would not want the government program at all. However, those who support the program would presumably want to ensure that money goes for its intended purpose, educating students and providing them with marketable skills.
Prohibiting students from using their government support at diploma mills that do not do either would be like prohibiting people from using food stamps to buy whiskey at their local liquor store. Few would describe such a restriction as interfering with the free market or government regulation of the liquor store industry.
In the case of liquor stores, they can sell liquor to whoever they want (above legal age), their customers just can’t use food stamps for their alcohol purchases. Similarly, for profit colleges can sign up any student they want, these rules just prohibit students from using government support at these schools unless they have a track record of actually providing an education.
[Addendum: The NYT commits the same sin. It told readers:
“Many Republicans see such colleges [for profit colleges] as a healthy free-market alternative to overcrowded community colleges, offering useful vocational training and education to working adults who will not attend more traditional institutions.”
Of course the NYT has no idea how the Republicans “see” these colleges, they only know what they say about these colleges. It is entirely possible that many Republicans see these colleges as sleaze bucket outfits that give them large campaign contributions. If this is the case, they might be inclined to speak positively about not for profit colleges regardless of what they actually think about them.
Remember, reporters are not mindreaders, and those that claim to be are not reporters.
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