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January 7, 2009

The Power of “Stimulus”

Filed under: Politics — paulmatzko @ 1:24 pm
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I love listening to NPR interviews with politicians, a one-stop shop for evasion, pandering, and euphemism. Yesterday the House Majority Leader, Democrat Stanley Hoyer, spoke on “All Things Considered” about the proposed $775 billion economic stimulus package (”stimulus” being the current euphemism for “spending”). He noted that many economists (and he made a special point of including “Republican economists”) thought that the stimulus should be even larger, up to $1.5 trillion. The interviewer asked if balancing the budget were a possibility and if that would help the economy as well. Hoyer said that we are “damned if we do, damned if we don’t” concerning debt since revenue is going to fall as tax receipts decline during this recession.

Hoyer’s “in for a penny, in for a pound” logic dictates that since debt is inevitable we shouldn’t concern ourselves about the size of the debt. If you’re in debt a trillion what’s another trillion or two among friends? I’m a layperson when it comes to economics, but Hoyer’s reasoning subverts common sense. If a friend needed to borrow money to pay his regular monthly bills I could be quite understanding and even supportive. But if my friend then borrowed additional money to remodel his kitchen, put in an inground pool, and purchase a newer car, I would begin to question his financial wisdom. “But I already have to go into debt,” my friend says. Hmmmm…

It appears that fiscal prudence is predicated upon the Big Lie idea: the bigger the proposed package, the less people question it and the more efficacious it must be. If $100 billion could boost the economy what would $1 trillion do?! I guess there’s also a dollop of Stalin, “One death is a tragedy; a million is a statistic.” I bet that people are more likely to complain about small local spending increases (of course accompanied by small local tax increases) than they are about mind-numbingly massive stimuli. The turgid scale of a federal stimulus (and the fact that the costs are neither felt immediately nor directly) defies comprehension and when accompanied by a deafening cacophony of expert opinion any opposition is overwhelmed.

December 17, 2008

The Obamas Go to School

Filed under: Politics — paulmatzko @ 11:05 pm
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Barack and Michelle Obama ought to be commended for choosing the best school possible for their two young girls, Malia and Natasha. Only a couple of days after Barack won the presidential election the Obamas announced that their children would attend Sidwell Friends School, a prestigious, Quaker-run institution that has a long pedigree of educating first sons and daughters. The school is of course private and the tuition prohibitive. But since the Obama’s get free government provided housing, a meal allowance, and a generous stipend they can well afford the best. After all, don’t all children, the future of America, deserve the best?

Only the richer ones apparently. You see, Barack and Michelle have the luxury of choosing where their kids attended because they have money. Only parents who can afford the tuition of a private school can send their kids there. Obviously the Obamas and Sidwell Friends School is an extreme example, but the inequity is very real. A middle aged woman at my teller window the other week needed to change her address with the bank because she had moved. I asked her why and she said that she had decided to move from her old neighborhood in Philadelphia to Bensalem, PA because she wanted her kids to attend a better quality suburban public school in Bensalem rather than having to go to the failing inner city public schools in Philadelphia. She appeared, and Bensalem is, solidly middle class. Even though she was not as wealthy as the Obamas and other elites, she could still offer her kids a better quality education by voting with her feet and relocating to a different school district. Middle class families do this all the time. One of the top questions asked real estate salespeople is “What public school is this area assigned to?” If the school is bad, the parents buy a house somewhere else.

The public educational system in America is perverse. The children who need the most help are relegated to the worst schools. Lower income families cannot afford to send their kids to private schools since the tuition would come straight out of their pockets. Poor parents can’t even move to nicer neighborhoods because they can’t afford the higher property or rental prices. Consider a single mother in North Philadelphia who struggles to provide for her kids. She doesn’t want her kids influenced by the gang/drug culture at the local public high school, but what choice does she have? She can try to get them into a charter school, but the waiting list is miles long. Why shouldn’t she be able to send her children to a safer school where they may even receive a better education in a safer environment?
What I’m saying is that the wealthier you are the more educational opportunities your children have. Rich kids go to good schools. Poor kids go to bad schools. This is a generalization and so there are going to be exceptions, but on the whole the system favors those with the most money and influence at the expense of those who do not. I hope that Barack Obama realizes that the biggest change that we can believe in is the reform of the public educational system. He should be applauded for picking Arne Duncan for education secretary. Duncan is a compromise candidate who pushed for Chicago reforms yet was palatable to teacher unions. He moved on teacher accountability and student standardized testing.

But I believe that the best tool for educational reform remains unused: school choice. Parents deserve greater choice over where they send their children to school. Access to a quality education should be universal, not limited to the middle and upper classes that can pay the additional premium of private tuition or the hidden relocation tax. Funding for schools should be distributed through parents rather mandated by bureaucrats. Each family with eligible children should be given a voucher worth the amount spent per pupil by the public school system in the prior year.  The parent could turn that voucher in to the school of their choice, whether public or private.

What would be the end result? Better students, better schools, and a more equitable system. The principal problem with the public school system is that it is essentially a monopoly. Every taxpayer in the United States is forced to give the public educational system money. True, you could choose to pay extra and send your kid elsewhere, but only if you have the extra money to spend; hardly a level playing field. Furthermore, public school teachers are virtually guaranteed their positions…they can’t be fired! It costs the state of New York several hundred thousand dollars and takes years to fire even the worst of teachers.

With yesterday’s post in mind, let me use an allegory based on the car industry. Let’s say there was one giant car company, let’s call it DET, that makes over 90% of the cars in America. The government uses tax money to subsidize the company for cars made regardless of quality. In fact up until recently a factory that made shoddy cars got rewarded the same as one that made excellent cars. The subsidies mean that a DET car is free to whoever wants one. It is true that you can purchase a competitor’s car, but you have to pay full cost without subsidy. Unsurprisingly people continue to buy DET cars even though they would prefer the better cars made by competitors. Furthermore, even though the quality of DET’s cars vary from place to place, there is just one type of DET car produced in each region and if you live in that region the only car you can get for free is that specific DET car. DET is under very little pressure to improve the quality of their cars or to make them more efficiently since there is little competition. Poor people essentially have to drive DETs and many others do just because it’s cheaper, not because they actually prefer DET. Indeed DET deserves our sympathy since they can’t fire or effectively discipline their own workers.

Obviously DET is the public educational system. Forget Carnegie, Rockefeller, or Ma Bell, public schools are effectively the biggest monopoly in American history. Whatever the industry be it cars or education, entrenched monopolies stymie innovation, hurt consumers, and encourage inefficiency. Why try to make a better car is people have to buy one no matter what? Competition, the essence of the marketplace, is the answer. In a competitive marketplace companies are encouraged to streamline production, improve quality, respond to customer complaints, and reward innovation. That is why we have antitrust regulations on the book to break up monopolies and encourage healthy competition.

School vouchers would encourage competition for students. Schools would want the tax money tied to vouchers and would vie to get the most students by offering the highest quality education possible. Schools that failed to offer a good education would go under while schools that succeeded would grow and replicate. Poor teaching and inferior educational models would be punished by the marketplace while good teaching and superior school systems would be rewarded. Just as competition lowered the cost of cars while the quality improved, the educational marketplace would raise the quality of education at a lower cost per pupil.

So, where does Obama stand on all of this? To his credit at times Obama has sounded open to school choice. Unfortunately whenever teacher unions barked Obama toed the Democratic Party line and ignored school choice. I get the feel that Obama could be personally persuaded that school vouchers are a viable alternative, but the interests backing the (abysmal) status quo are the same interests that back him. Bucking those powerful interest groups would require a leader willing to sacrifice his own self-interest for the good of America, a bit of a messiah figure really.

So far when it comes to educational policy, President elect Obama has acted more like a typical politician. Let’s hope he introduces some educational change we can believe in.

December 16, 2008

Buy American, not Detroit

Filed under: Politics — paulmatzko @ 11:06 pm
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The Congressional hearings concerning the Big Three bailout exemplified political gamesmanship at its finest. Senator after senator ripped into the irresponsible practices of the Detroit car companies. How dare you make cars that get low mileage per gallon (and which Americans desperately wanted until very recently)!?! Yet after sufficient self-righteous huffing and puffing, the majority of the Senate (though not a supermajority) supported giving billions of dollars to Ford, Chrysler, and GM.

This is a horrible idea. The market works when inferior business models or companies which make bad fiscal decisions fail. In the market though, failure is often good. When inefficiently run companies fail, better run companies win. The failure of the Big Three is the gain of Toyota, Honda, and other car companies which made smart decisions and promoted an efficient business model. When bad or inefficient behavior is rewarded similar behavior is encouraged and good behavior discouraged. (Here’s a fun way to help your kids understand financial panic-style economics: Every time your kid throws a temper tantrum give them a cookie!).

The best way to encourage a healthy car industry would be to allow the Big Three to go bankrupt. This is true whether you measure health by energy consumption or productive efficiency. GM, Chrysler, and Ford lose market share to companies like Toyota which invested early and often into “green” technologies. For the Big Three to regain that lost market share they would have to trump Toyota by developing even more fuel efficient, cost effective vehicles.

I should note that bankruptcy would not lead to the doomsday scenarios painted by Rick Wagoner and the like. Americans want cars. Admittedly they don’t want as many of them this year as last, but that has nothing to do with the Big Three and everything to do with our economic recession. But all things being equal, if the Big Three are forced to cut production on less profitable lines of cars, the slack will be picked up by Toyota, Honda, BMW, and the like. Bankruptcy would even allow car companies to streamline their contractual obligations by working with a bankruptcy judge. GM could pare down its unwieldy (and government protected) car dealership model. Ford could renegotiate its still unreasonable union labor contracts. All three could sell off unproductive divisions to other car manufacturers who have cash on hand which would help make the Big Three solvent again. No government needed.

The real problem is political. The fear is not that jobs will be lost; the fear is that Detroit jobs will be lost. If you are a Rustbelt politician than you are going to look out for the people of your state or region first whether or not it is in the best interests of the nation or the economy! Politicians love to condemn special interests (preferably the special interests supporting their opponents), but consistently cuddle up with the most powerful interests in America. When was the last time a politician with something on the line put up more than token resistance against AARP, NEA, or AFL-CIO? Rather than step on toes, politicians from both sides of the aisle are voting to bailout inefficient, flawed, and nearly bankrupt car companies.

The worst scenario possible is to throw money down a rat hole at a time when public debt is skyrocketing. Indeed, good money follows bad, so if the government gets in now, I doubt they’ll get out without spending tens or even hundreds of billions dollars more in the future. Even worse in the long term would be the end result of a bailout: propping up a bankrupt system created by union bullying and shortsighted politicians.

I am once again disappointed in Bush’s economic vision (or lack thereof). I supported him on social security privatization and immigration reform, but sadly in this financial crisis he has acted more like Herbert Hoover than like Calvin Coolidge. Not only does the backing from the White House make poor economic sense, it is even worse politically. The Detroit bailout is toxic, hence the empty posturing from the Senatorial peanut gallery. No one, not even union friends wants to be too closely associated with the bailout. No one wanted the blame, no one that is until Bush offered himself, and by extension the Republican Party, as a sacrificial lamb. True leftists dislike Big Business, so bailing out corporate America doesn’t play well among the liberal base. Many populist conservatives don’t much approve of unions, so preserving the pro-labor biased status quo is equally unpopular.

So let’s do something different: ignore the pleas to “Buy Detroit.” Instead let’s embrace that slogan “Buy American.” Take a gander at that nice Toyota Tundra rolling out of the plant in Texas. Get on up to Kentucky and get yourself a nice Honda Accord. And if you invested big last year in Campbell Soup, then head on over to Upstate South Carolina and buy a BMW.

December 10, 2008

O Death, Where is Thy Sting?

Filed under: Uncategorized — paulmatzko @ 12:58 am

Friends-Mourn-Jet-Crash-Victims.html

Dear Father,

I thank you for the grace you have given Dong Yun Yoon in his hour of need. May you comfort and encourage him as he undergoes a loss that I cannot even begin to comprehend. (more…)

November 21, 2008

I don’t think that’s what he meant…

Filed under: Uncategorized — paulmatzko @ 12:09 am

(more…)

November 4, 2008

It’s Just Begun.

Filed under: Politics — paulmatzko @ 10:59 pm

With Ohio falling into the Democratic column, Barack Obama will be the next President of the United States.

But this is the beginning of a Republican come back in 2010. Lest you think me foolish… (more…)

A Policy Decision: Withholding a Vote From Obama

Filed under: Politics, Uncategorized — paulmatzko @ 11:26 am
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A friend recently posted the following note outlining Senator Obama’s stance on the issues. (more…)

September 12, 2008

Obama Gets Off the High Road

Filed under: Books, Politics — paulmatzko @ 9:53 pm
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The Obama campaign has taken off its gloves. Tired of being lambasted by shallow Republican attack ads comparing Barack to vapid celebrities and misconstruing his words about feminine comestic products, Obama representatives have started series of ads portraying McCain as hopelessly out of touch. (more…)

August 31, 2008

Palin Signals Shift in Focus for McCain Campaign

Filed under: Politics, Uncategorized — paulmatzko @ 9:24 pm
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In my last post I noted that one of Sarah Palin’s weaknesses as a vice presidential candidate was her lack of experience. Sure enough, Democratic operatives and journalists have made Palin + inexperience = risky choice the dominant storyline. Republicans are also worried that McCain has handicapped his strongest line of attack against Obama. (more…)

August 30, 2008

John McCain Chooses a Hockey Mom

Filed under: Politics — paulmatzko @ 1:59 am
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Today John McCain surprised the pundit panoply by announcing Alaskan Governor Sarah Palin as his running mate. Odds on favorite for the Vice Presidential nod was Minnesota Governor Tim Pawlenty along with a bevy of failed contenders from the Republican primary. McCain’s choice of Palin was such a surprise that the NPR correspondents covering the topic today were audibly astounded, sputtering their surprise that the former mayor of Wasilla, Alaska (population: 8,471) would even be considered; I think they hoped that John McCain was just joshin’ around and would let the country in on his little joke after a couple hours. Sorry, but McCain only jokes around about his age and bombing Iran. (more…)

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