The Case of the Missing Investment

The first quarter GDP report shows that the supply-side of the economy is hurting from anti-growth policies

WSJ editorial.

"You could hear the relief on Wall Street as economic data released Thursday suggested the U.S. isn’t slipping into recession—yet. Inspect the quarterly gross-domestic-product numbers more closely, however, and the U.S. remains in the woods rather than out of them.

Inflation-adjusted growth of 1.1% on an annual basis was lower than many economists predicted. Investors’ optimism as measured by relief in the stock market arises in part because falling inventories contributed an outsize share to the decline in growth from 2.6% in the previous quarter. If consumption remains as robust as it was in this quarter—growing 3.7% from the previous quarter—businesses may have to boost production this year to keep up.

Yet inventories weren’t the only weak spot, and far more troubling is the slowdown in private investment. Gross private domestic investment fell 12.5% in the quarter, driven by declines in business equipment (down 7.3%) and residential housing (down 4.2%). This tells a worrying story about economic policy. A characteristic of the post-pandemic recovery has been that business investment often hasn’t kept pace with robust consumer demand, and now it looks like investment might fall behind again.

This runs counter to the theory Keynesians used to sell their pandemic-era spending blowouts—that stoking demand would stimulate more supply. It hasn’t. The Biden Administration and its economic muses first blamed “supply-chain disruptions” and then the war in Ukraine for this supply-side dysfunction. 

The next scapegoat will be March’s bank panic, which at least is more plausible than the previous excuses. As deposits have shifted out of regional banks into too-big-to-fail institutions and money-market funds, smaller businesses especially may start experiencing difficulty tapping credit from their local banks.

All the more reason, then, for the Administration and Congress to focus on supporting productive business investment—which they’ve failed to do. Democrats say the Inflation Reduction Act will stimulate a new investment bonanza. But that will only be for a narrow cohort of favored green businesses. Everyone else will pay higher taxes and much higher energy prices while facing tighter regulation on environmental and many other grounds—on top of higher interest rates. The wonder is that business investment hasn’t fallen further.

One quarter’s GDP data rarely say anything definitive, but this quarter’s report brings into focus the policy battle to come. Absent supply-side tax and regulatory relief from elected politicians, pressure will mount on Federal Reserve Chairman Jerome Powell to surrender to inflation and cut interest rates.

What a mistake that would be. Inflation poses the biggest threat to consumer demand, which has been keeping the U.S. out of recession. The country awaits a new voice making the case for a politics of economic growth, rather than income redistribution."

Can Nuclear Solve the Renewables Problem?

Even in Texas, there are no free lunches

Letter to WSJ.

"“A Texas-Sized Energy Fiasco” (April 15) is an excellent editorial on how ill-designed subsidies for renewable energy have led to unintended and costly consequences, requiring support for dispatchable fossil-fuel generation at the state level to play a supporting role. It should, however, have been expected.

In the U.K. and EU countries, subsidizing renewables has led to what we call “capacity payments” to dispatchable fossil-fuel plants to run at minimum stable generation to back up the intermittent and random output of renewable energy. In addition to the costs of random intermittence, renewables as distributed generation require a lot more wires and use a lot more land than fossil fuels.

Though their variable cost is virtually free when the sun shines and wind blows, their indirect costs and externalities are huge. Fully costed, renewable energy isn’t competitive. If such costs and indirect support were internalized, investors would never find the returns adequate given the paucity of generation hours. Even in Texas, there are no free lunches.

Lawrence Haar, Ph.D.

University of Brighton

Brighton, England"

Building Consensus to Address Housing Challenges

By Vanessa Brown Calder of Cato. Excerpts:

"The number of “missing” housing units (that is, the number of units required to keep up with household formation minus existing units) grew from approximately 2.8 million in 2018 to 3.8 million at the end of 2020, though some scholars estimate that this figure is much higher.¹

Although a variety of factors are relevant, federal and local policy is unfortunately substantially to blame. State and local regulatory constraints on housing supply have limited supply in many places for many years. Zoning and land-use regulation continues to limit housing supply by increasing development costs, creating uncertainty, and producing delays.

These regulations limit nearly every aspect of development. They subject housing development to lengthy review processes with many veto points. Together, these regulations effectively freeze pre-existing development in place, which makes it difficult to build new homes or accommodate new residents. As a result, high regulation areas issue an abysmally low number of housing permits per new job each year.²

A large volume of academic research ties land-use regulations to high housing prices. A well-known paper finds that zoning regulations pushed up the cost of apartments by around 50 percent in Manhattan, San Francisco, and San Jose.³ A recent paper reviewing 24 metropolitan areas finds a massive “zoning tax” (up to $500,000 per quarter-acre) in cities with restrictive land-use regimes but much lower zoning taxes in less-regulated places.⁴

Parking minimums provide one example of a costly local regulation that limits supply. These regulations require that developers provide a predetermined number of parking spaces per square foot or developed unit, which reduces the available space for housing. Recent research finds that the cost of garage parking is approximately $1,700 per year or an additional 17% of rent for renters.⁵ Unfortunately, these costs, like zoning regulations more generally, fall hardest on low-income renters that are unable to readily absorb the costs of increased rents and often have no need for parking spaces in the first place.

The importance of housing supply becomes quickly evident when contrasting the outcomes of homeless policy initiatives across Utah, California, and Houston, Texas. All three locations have adopted Housing First policies which emphasize the need for permanent housing before tackling other issues, such as mental health problems or substance use disorder. Despite their commitment to providing the homeless with housing, only Houston, a place lacking a traditional zoning code, with a pro-development culture and responsive housing supply, has been able to significantly reduce homelessness under this policy. In Utah and California, chronic homelessness grew 95 and 93 percent following policy implementation. On the other hand, chronic homelessness in Houston declined by 68 percent.⁶

Although housing programs are often the focus of housing affordability conversations, underlying housing affordability problems will not be fixed through subsidies for rent and homeownership. 5.2 million households use federal rental assistance, but there are over 41 million cost-burdened or severely cost-burdened households and 62 million low-income renters in the United States.⁹

Even generously expanding existing programs or creating new ones would still only reach a fraction of renters and homeowners experiencing affordability issues. The Department of Housing and Urban Development spends about $70 billion per year, much of which is devoted to improving housing affordability, and the federal government spent around $90 billion on rental assistance in 2021.¹⁰ Despite this, the number of renters that are cost-burdened has stayed approximately stable over the past decade and grew during the pandemic.¹¹

Although housing subsidies will not solve widespread housing affordability issues, there are nonetheless opportunities to improve existing housing programs. These improvements should be made with an eye towards increasing effectiveness, innovation, and human flourishing. Senator Scott’s proposal to reward effective homeless initiatives, allow greater experimentation, reduce regulation, and allow the continuing conversion of public housing to voucher assistance, are common-sense reforms that should be seriously considered by both sides.

As one specific example of productive reform, the ROAD to Housing Act reduces the regulation of manufactured homes by striking the federal requirement that manufactured housing is attached to a permanent chassis, or a metal base frame. Research suggests that this requirement increases the cost of development and is used by local regulators to limit the use of manufactured housing.¹² This is unfortunate because manufactured housing provides an alternative to traditional stick-built homes, at a fraction of the price.

Furthermore, existing housing programs that are ineffective or poorly targeted to the poor, should be repurposed or eliminated. For instance, research indicates that the benefits of the Low-Income Housing Tax Credit (LIHTC) program primarily flow to developers, rather than low-income tenants.¹³ Moreover, supply-side subsidies including LIHTC, public housing, and project-based Section 8 programs concentrate poverty and limit mobility, with dire effects for low-income residents."

Work Requirements in SNAP

By Chris Edwards of Cato.

"Federal policymakers will soon run into a hard deadline to increase the government’s legal debt limit. President Biden wants a simple debt‐​limit increase with no strings attached, but House Republicans have proposed spending reforms called Limit, Save, Grow to include in a debt‐​limit deal.

One GOP reform would strengthen work requirements for the Supplemental Nutrition Assistance Program (SNAP), also called food stamps. The proposal would affect a small fraction of people on the program and reduce costs only slightly. But restricting hand‐​outs to encourage work makes sense because the economy has millions of job openings, as shown in the chart below.

In 2023, about 42 million people will receive food stamps at a cost of $127 billion. Many recipients are exempt from SNAP work requirements, including children, the elderly, and the disabled. About four‐​fifths of SNAP households include a child, a senior, or a disabled person. The other one‐​fifth consist of adults who generally need to be working, looking for work, or in training to receive ongoing benefits.

There are two sets of work requirements for SNAP recipients. General rules require individuals able to work, age 16–59, and not caring for a child under age 6, to register for work, to accept suitable work, or be in a training program. These rules have numerous exceptions. There are additional rules for able‐​bodied adults without dependents (ABAWDs) age 18–49 to receive benefits for more than three months within any three‐​year period.

The Republican proposal would tighten work requirements by raising the top age for the ABAWD group from 49 to 56. Looking at Table 3.2.a here, 3.5 million SNAP households do not include either children, the elderly, or the disabled, and about 2.5 million are in the ABAWD group. That appears to leave about 1 million households or fewer that may be affected by the GOP proposal. The data is for the October 2019 to February 2020 period.

SNAP’s ABAWD rules had been suspended during the pandemic but come into force again this year. And even then, the American Enterprise Institute’s Kevin Corinth notes that numerous states have federal waivers that void some of the program’s work requirements.

Tightening the SNAP work requirements would generate just a small part of the savings from the Republican plan. But it is important to begin reining in bloated entitlements, and adjusting eligibility to encourage work is a good place to start.

More on SNAP here, here, and here."

Electric Cars: Policy Beyond Capability?

By Peter Van Doren of Cato.

"The Environmental Protection Agency (EPA) recently announced proposed emission standards that would mandate a large increase in the sale of new zero‐​emission vehicles from model years 2027 through 2032. Compliance with the proposed rule is estimated to require 67 percent of new vehicles to be electric in 2032 compared to 5.8 percent in 2022. Informed analysts claim that the rule is extremely ambitious: “The new rule will effectively try to shove electric vehicles down the throats of the public at a faster rate than it has shown a willingness to swallow them.” The Energy Information Administration in its 2023 Annual Energy Outlook (Figure 10) would seem to confirm the ambitious nature of the proposed rule, projecting electric vehicles sales of around 15 percent in the early 2030s and still under 20 percent by 2050.

But the unrealistic nature of the proposal is actually a persistent characteristic of environmental policy. So persistent, in fact, that Charles Jones used the phrase “policy beyond capability” in a 1975 book (chapters 7–8). Alan Altshuler in a 1979 book (p. 73) elaborated: “There was a widespread view in 1970 that the manufacturers could do virtually anything if simply told they had to.”

The history of environmental regulation consists of ambitious unrealistic goals followed by missed deadlines and lack of enforcement. The most ambitious unrealistic goal was the California legislative proposal in 1970 to ban the internal combustion engine by 1975. The California State Senate approved the bill while floor consideration in the Assembly failed by one vote. The 1970 national Clean Air Act required ambient air quality standards be achieved by 1975. The deadlines were extended many times (pp. 237–238). By 2005, of the 338 deadlines set by the Clean Air Act Amendments of 1990 only 37 had been met by the deadline (Table 2) specified in the statute.

This pattern has been described (pp. 239–240) as “Institutionalized Nonattainment.” As of March 2022, 15 counties with a population of 20,941,659 are in nonattainment of the 2012 annual standard for particulate matter (PM_2.5). For pollutants other than PM_2.5,37 states, districts, and territories have nonattainment counties with a total population of 131,418,000. Finally, as of 2016 over half of U.S. river and stream miles violate water quality standards.

If agencies attempt to implement unrealistic policies Congress often retreats quietly. It enacts legislative language to the monies appropriated for the Departments that restricts their ability to implement unrealistic regulations. To implement the 1970 Clean Air Act requirements the EPA proposed parking surcharges and parking space reductions. Congress responded in 1974 with a ban on use of any EPA funds to regulate parking (Altshuler pp. 78–79).

Under rare circumstances unrealistic policies proceed far enough to alienate voters and receive direct congressional attention. 1974 model year automobiles were required to have electronics that prevented automobiles from being started unless the seatbelts were in use. Motorists revolted and in October 1974 Congress enacted (pp. 180–81) legislation (pp. 21, 42–43) prohibiting the use of that technology or any seat belt warning buzzer that sounded for more than eight seconds.

Environmental policy has these characteristics because it has a large theological component. Saving the planet is different from bargaining over the Library of Congress Budget: “the emissions of greenhouse gases from Interior Department lands (about 20 percent of the United States) were ‘playing God’ with the Earth’s climate.”

So, the Biden EPA proposal is probably unrealistic. But environmental policy proposals have always been unrealistic. The retreat from unrealism will probably be quiet. But if motorists can’t buy the cars they want, the retreat will be visible and rapid."

Earth Day 2023: Utterly Bereft of Ideas

By Benjamin Zycher of AEI.

"Earth Day falls on April 22 — Lenin’s birthday, appropriately enough — so let us first recall the blessed memory of the official theme for Earth Day 2022: “Invest In Our Planet^TM.” “This is the moment to change it all — the business climate, the political climate, and how we take action on climate. It’s going to take all of us. All in. Businesses, governments, and citizens — everyone accounted for, and everyone accountable. A partnership for the planet.”

Put aside the profound totalitarian implications of the “change it all” exhortation; suffice it to say that centralized attempts in the past to change everything uniformly have engendered mass murder by governments and attendant economic, environmental, and moral destruction. Focus instead on the official theme for Earth Day 2023: “Invest In Our Planet^TM.” 

No, that is not a copy-and-paste error. Last year’s Earth Day slogan is this year’s Earth Day slogan. Given the shameless groveling by a long queue of corporate officials and public relations gasbags desperate to advertise their environmental bona fides so that the green alligators might eat them last, one would think that the massive financial support from the corporate boardrooms for the Earth Day charlatans might have financed a contract with a PR firm to come up with something new.

And one would be wrong. The basic imperatives of the Earth Day environmental left are eternal, immutable, unchanging, impervious to evidence, and utterly mindless. “Ensure that students across the worldbenefit from high-quality education to develop into informed and engaged environmental stewards.” Translation: Propagandize the young, Komsomol-style. “Sign the petition for a global plastics treaty.” Over three-quarters of ocean plastic pollution is discharged from rivers in Asia and other less-developed regions. (Your plastic straw is irrelevant.) Needless to say, the Earth Day proponents have not bothered to tell us how those governments can be induced to make the attendant massive changes; bribing them will not work because the western governments will prove curiously parsimonious, as the travails of the Green Climate Fund (part of the thunderously-applauded Paris Agreement) make clear. 

And on and on. “Plant trees.” Yes, trees absorb carbon dioxide, but because forest canopies for the most part are dark, forest expansion would reduce albedo (reflective) effects, and the net impact is likely to be a small warming. Oops. As an aside, there are important benefits from mild warming, among them reduced mortality, planetary greening, and an increase in agricultural productivity. “Vote Earth,” by which the Earth Day campaign means “send us your contact information so that we can ask you for money.” “Global Cleanup,” the local neighborhood version of the crusade against plastics, except that the neighborhood mobilizations might actually yield some small measure of waste removal, presumably to be taken to local landfills, ironically not a favored outcome for the environmental left. 

My favorite among the Earth Day 2023 nostrums is “Sustainable Fashion”: “Behind every piece of clothing in a store, there is an industry stripping the Earth of its limited resources and exploiting the labor force that works in its garment factories. Tremendous waste characterizes this industry as it depletes healthy soil, contaminates fresh water sources, pollutes the air we breathe, defiles our oceans, destroys forests and damages eco-systems and the health of their biodiversity.”

Wow. Who knew that blouses, blue jeans, and bras are mass murderers? And in the circular argument department, one floor up from the clothing aisles, Earth Day 2023 informs us that “In order for true recycling to take place, clothing must be collected, sorted and distributed to recyclers.” Do Earth Day staffers actually receive salaries to come up with such drivel? One wonders why the Earth Day proponents do not simply argue for a return to the pre-serpent nakedness of the Garden of Eden. After all, would that not eliminate a vast source of “unsustainability,” whatever that means?

Let me be blunt: The Earth Day initiatives are destructive silliness, a form of mass hysteria, and utterly unsubtle. It can surprise no one that the Earth Day propagandists now scream that “CLIMATE ACTION IS NOW THE BEST PATHWAY TO A STRONG ECONOMY.” 

Oh, dear. One wonders why “climate action” requires massive subsidies and economic upheaval. The Earth Day proponents assert that “The cost of renewable energy has plummeted in the last decade,” but even if true (a deeply problematic premise) it is irrelevant in that the appropriate comparison is with the costs of conventional energy and electricity generation, and with the costs of renewables when combined with the costs of backup generation required to avoid constant service interruptions. Example: The cost of onshore wind power including backup capacity is four times greater than that of gas-fired electricity. Earth to Earth Day: There are enormous engineering and reliability problems inherent in wind and solar power, which cannot be wished away. 

The cost realities for electric and hybrid plug-in vehicles yield the same conclusion: Unconventional (that is, expensive) energy is uncompetitive. Accordingly, the “climate action/strong economy” assertion is propaganda: Radically higher energy costs cannot engender economic wellbeing. Even the International Energy Agency — far from immune to the political pressures exerted by fashionable opinion and the environmental left — in its latest World Energy Outlook projects that by 2050 global oil consumption will be about equal to that in 2015, coal consumption about equal to that in 2010, and natural gas consumption higher than that in 2020. If we assume annual real GDP growth of only 1 percent, global GDP in 2050 will be a third higher than now. Trust me: The IEA projections will prove vastly too low.

But the Earth Day beat goes on. Many billions of people are little more than environmentally destructive mouths to feed, without moral standing and devoid of the ingenuity, intelligence, and inventiveness to solve problems. They are, therefore, environmental sinners, and only massive economic destruction and impoverishment can redeem mankind. And just as the pagans for millennia attempted to prevent destructive weather by worshipping golden idols, so now does the Earth Day congregation attempt to prevent environmental Armageddon by bowing down before recycling bins. 

The Earth Day revision of the Old Testament might read: “In the Beginning, Earth was the Garden of Eden. But Mankind, having consumed the Forbidden Fruit of the Tree of Technological Knowledge, has despoiled it. And only through repentance and widespread suffering can we return to the loving embrace of Mother Gaia.” Dogbert’s version is pithier: “You can’t save the earth unless you’re willing to make other people sacrifice.” Truer words were never spoken."

Great News for Female Academics!

By Alex Tabarrok.

"For decades female academics have been told that the deck is stacked against them by discrimination in hiring, funding, journal acceptances, recommendation letters and more. It’s dispiriting to be told that your career is not under your control and that, no matter what you do, you face an unfair, uphill battle. Why would any woman want to be a scientist when they are told things like this:

A vast literature….shows time after time, women in science are deemed to be inferior to men and are evaluated as less capable when performing similar or even identical work. This systemic devaluation of women women results in an array of real consequences: shorter, less praise-worth letters of recommendation, fewer research grants, awards and invitations to speak at conferences; and lower citation rates for their research…

The good news is that this depressing and dispiriting story isn’t true! In an extensive survey, meta-analysis, and new research, Ceci, Kahn and Williams show that the situation for women in academia is in many domains good to great. For example, in hiring for tenure the evidence is strong that women are advantaged. Moreover, women are advantaged especially in fields where they have relatively low representation (GEMP: geosciences, engineering, economics, mathematics/computer science, and physical science).

Among political scientists, Schröder et al. (2021) found that female political scientists had a 20% greater likelihood of obtaining a tenured position than comparably accomplished males in the same cohort after controlling for personal characteristics and accomplishments (publications, grants, children, etc.). Lutter and Schröder (2016) found that women needed 23% to 44% fewer publications than men to obtain a tenured job in German sociology departments.

…In summary, all of the seven administrative reports reveal substantial evidence that women applicants were at least as successful as and usually more successful than male applicants were—particularly in GEMP fields.

…In a natural experiment, French economists used national exam data for 11 fields, focusing on PhD holders who form the core of French academic hiring (Breda & Hillion, 2016). They compared blinded and nonblinded exam scores for the same men and women and discovered that women received higher scores when their gender was known than when it was not when a field was male dominant (math, physics, philosophy), indicating a positive bias, and that this difference strongly increased with a field’s male dominance. Specifically, women’s rank in male-dominated fields increased by up to 40% of a standard deviation. In contrast, male candidates in fields dominated by women (literature, foreign languages) were given a small boost over expectations based on blind ratings, but this difference was small and rarely significant.⁶

The situation is also very good in grant funding and journal acceptance rates which are either not biased or biased towards women. Similarly, “no persuasive evidence exists for the claim of antifemale bias in academic letters of recommendation.”

There is evidence of bias in student evaluations. Both female and male students rate male professors higher, even in blinded situations. Male students are more likely to write nasty comments. Most research universities, in my experience, don’t put much weight on student teaching evaluations, beyond do you pass a fairly low bar, but it can be disconcerting to get nasty comments.

There is also mild evidence of differences in salary, although less so when productivity is taken into account.

Some critics will say, but the real discrimination happens before a women applies for a tenure track job! Maybe so but that is a shifting of goal posts and we should take pride in the fact that in the United States today (and most developed countries) there is very little bias against women in high stakes, important decisions in tenure track hiring, journal acceptances, grant funding and so forth. This is a major accomplishment.

It should be noted that the Ceci, Kahn and Williams paper is an adversarial collaboration; Ceci and Williams have published previous work showing that women are, generally speaking, not discriminated against in academia while:

Kahn has a long history of revealing gender inequities in her field of economics, and her work runs counter to Ceci and Williams’s claims of gender fairness. Kahn was an early member of the American Economics Association’s Committee on the Status of Women in the Economics Profession (CSWEP). Articles of hers in the American Economics Review (Kahn, 1993) and in the Journal of Economic Perspectives (Kahn, 1995) were the first publications on the status of women in the economics profession. She was the first to identify gender inequities as a concern in economics, something she has revisited every decade since then in her publications. In 2019, she co-organized a conference on women in economics, and her most recent analysis in 2021 found gender inequities persisting in tenure and promotion in economics (Ginther & Kahn, 2021). In short, gender bias in academia has been a long-standing passion of Kahn’s. Her findings diverge from Ceci and Williams’s, who have published a number of studies that have not found gender bias in the academy, such as their analyses of grants and tenure-track hiring in Proceedings of the National Academy of Sciences (PNAS; Ceci & Williams, 2011; Williams & Ceci, 2015).

The Ceci, Kahn, and Williams paper covers much more material than I can cover here and is nuanced so read the whole thing but do also shout the good news from the rooftops!"

TABOR’s Track Record: $8.2 Billion in Taxpayer Savings

By Dan Mitchell.

"The Center for Freedom and Prosperity has a video on spending caps that focuses on international evidence, such as Switzerland’s debt brake.

Here’s a video from the American Legislative Exchange Council that that looks at a successful domestic spending cap – Colorado’s Taxpayer Bill of Rights.

Here’s the short and simple explanation of how the Taxpayer Bill of Rights (TABOR) constrains spending.

Under the constitutional provision, state tax revenue cannot grow faster than population plus inflation. Any revenues above that amount have to be returned to taxpayers.

And since the state has a requirement for a balanced budget, that means that spending also can only grow as fast as population plus inflation.

Has TABOR been successful?

Colorado has out-performed other states, as measured by the growth of personal income, which presumably is a key variable.

Another key variable is the amount of money that TABOR has returned to taxpayers. Here are some excerpts from a new study, authored by Professor Barry Paulson and published by the American Legislative Exchange Council.

"This year, the Colorado General Assembly announced a taxpayer rebate of $3.6 billion in surplus revenue. …These rebates are mandated by TABOR, a fiscal rule that limits the growth of revenue and spending at all levels of government and requires that surplus revenue be rebated to taxpayers. …It is important to understand why TABOR has been successful and resilient. TABOR is designed to limit the rate of growth in state revenue and spending to the sum of inflation plus the rate of growth in population while allowing a majority of voters to increase the revenue and spending limit when needed. This prevents many new taxes increases. If the state government collects more tax dollars than TABOR allows, the money is returned to taxpayers as a TABOR refund. …As a result, the state has not incurred deficits or accumulated debt as much as other states, like California. …tax rebates…totaling $8.2 billion since TABOR passed in 1992, has strengthened Colorado citizens confidence in the TABOR Amendment over the years."

The last sentence is key. TABOR has resulted in $8.2 billion in tax rebates. More important, it has prevented Colorado politicians from spending $8.2 billion.

Taxpayers seem to understand that TABOR is a very important protection against over-taxing and over-spending.

Here are some excerpts from a column by Ben Murrey of Colorado’s Independence Institute.

"Every time voters speak on key issues related to TABOR, they send the same unambiguous message: “Leave TABOR alone and let us keep our money!” …In 2019 after voters gave Democrats unified control over state government, legislators thanked them by sending Proposition CC–which would have permanently ended TABOR refunds–to the November ballot, where Coloradans soundly rejected it. …In 2020, voters had the choice between two competing citizen-led ballot initiatives. One would have raised taxes and repealed TABOR’s requirement that Colorado maintains the same income tax rate for all taxpayers. The other, put on the ballot by my organization, Independence Institute, reduced the state’s income tax rate from 4.63 to 4.55 percent. The latter passed with a wide margin. The former failed even to gather enough signatures to appear on the ballot. …Fast forward to 2022. …Initiative 63 would have taken TABOR refunds from taxpayers and given the money back to the state to spend on public education. Like the tax increase measure from 2020, the initiative failed even to make the ballot. Conversely, Independence Institute worked to put Proposition 121 on the ballot. The measure won with more than a 30-point margin and lowered the state income tax rate from 4.55 to 4.4 percent, saving taxpayers over $400 million per year."

Colorado voters don’t always reject tax increases. At the local level, such measures often are approved.

But Murrey’s article shows that voters want to preserve TABOR and don’t want to give state politicians a blank check for more taxes and more spending.

Needless to say, a TABOR-style spending cap would be very helpful in other states. And at the national level as well.

P.S. The ALEC study looked at 30 years of evidence. There’s also a study that looked at the first 20 years of evidence."

Nutrition: Major Government Fail?

By Chris Edwards of Cato.

"Americans are getting used to failures by government experts. Government economists have a dismal forecasting record. Government actions and advice during the pandemic were often misguided. And dozens of former government intelligence experts got the Hunter Biden laptop story wrong.

A less recognized but also important failure may be in nutrition. Federal experts appear to have issued faulty advice for decades, even as American obesity exploded from 15 percent in the 1970s to 42 percent today. Federal guidance on nutrition has a large influence on health practice across society. Some researchers argue that Americans have generally responded to the guidance, yet obesity has nonetheless soared.

A clue to shortcomings in federal nutrition guidance comes from calorie data. A new U.S. Department of Agriculture (USDA) study shows that average daily calorie intake increased 21 percent from 1977–78 to 2003-04, and then started trending down. By 2017–18, calories were up 15 percent from the 1970s, but as the study notes, “the rise in obesity rate outpaced the increase in calorie intake.”

In a 2022 article, Professor of Nutrition Dariush Mozaffarian noted that “over the last 20 [years] we are not eating more calories, nor exercising less, but are still becoming more obese.” As average calories have dipped, the obesity rate rose from 31 percent in 2001–2002 to 42 percent today.

How can that be? Obesity is caused not just by the amount we eat but also what we eat. Generally, the government advised us to emphasize carbohydrates and deemphasize protein and fat, as shown in the food pyramid. But some nutritionists are now saying that was backwards. As a libertarian, I don’t want the government telling us what to eat, and our diets may have been better if that had been the case.

Like government experts, private‐​sector experts get things wrong. But the government uses mandates and subsidies to impose its will, and its strong positions often displace other views. In a presentation at Cato, author and science journalist Nina Teicholz discussed the government’s flawed nutrition standards and the harm she believes they caused. She observed, “the level of certainty you need to have for public policy of an entire population ought to be very high,” and federal directives on nutrition fell far short of that level.

The chart shows average daily calorie intakes of Americans, based on the new USDA data. Carbohydrates are up 22 percent since the late 1970s, fat is up 12 percent, and protein is unchanged. It appears that we mainly want to look at carbs to explain the rise in obesity.

Below I excerpt from two studies that sync with Nina Teicholz’s views about the record of faulty government advice on protein, fats, and carbohydrates. I understand that other experts have conflicting views. Nutrition is a complex field and scientists have not figured it all out yet.

However, the costs of bad diets to individuals, the medical system, and society are huge, so we should pay close attention to government interventions. This is particularly true this year because Congress is set to consider another large farm and food subsidy bill, which may adversely influence American diets.

First, an excerpt from a 2015 study by Evan Cohen and colleagues in Nutrition. Note that the latest USDA data show fat calories up somewhat since this study was published.

Americans in general have been following the nutrition advice that the American Heart Association and the US Departments of Agriculture and Health and Human Services have been issuing for more than 40 [years]: Consumption of fats has dropped from 45% to 34% with a corresponding increase in carbohydrate consumption from 39% to 51% of total caloric intake. In addition, from 1971 to 2011, average weight and body mass index have increased dramatically, with the percentage of overweight or obese Americans increasing from 42% in 1971 to 66% in 2011.

… Since 1971, the shift in macronutrient share from fat to carbohydrate is primarily due to an increase in absolute consumption of carbohydrate as opposed to a change in total fat consumption. General adherence to recommendations to reduce fat consumption has coincided with a substantial increase in obesity.

… Since the late 1970s, the US government, following the American Heart Association (AHA) and much of academia, has consistently recommended lowering the dietary percentage of fat and saturated fat, as well as the absolute levels of dietary cholesterol, based on a theoretical link between those food components and higher risk for coronary heart disease. This government guidance suggested that the reduction of dietary fat would be accompanied by a concurrent increase in the dietary share of carbohydrate. Taken together, these recommendations were also considered to be beneficial for the prevention of overweight and obesity, along with diabetes, cancer, and other chronic diseases.

… In 1961, spurred by emerging medical and epidemiologic research, the AHA issued dietary recommendations to ‘reduce the intake of total fat, saturated fat, and cholesterol. In 1977, the US Senate Select Committee on Nutrition and Human Needs issued Dietary Goals for the United States, which recommended that fat consumption be reduced to 30% of energy intake, and that carbohydrate consumption be increased to account for 55% to 60% of energy intake.

Following this report, Dietary Guidelines for Americans, issued by the USDA and the US Department of Health, Education and Welfare (now the Department of Health and Human Services; DHHS) in 1980, recommended a reduction in the consumption of the share of total macronutrients attributable to fat and saturated fat, and a reduction in the absolute consumption of cholesterol. To compensate, the guidelines recommended increasing consumption of carbohydrate as a share of total calories because “carbohydrates contain less than half the number of calories per ounce than fats.”

During the 1980s, the federal government continued to issue reports and recommendations encouraging Americans to limit fat consumption. In 1982, the Committee on Diet, Nutrition, and Cancer of the National Research Council issued Interim Dietary guidelines that recommended fat intake be lowered from 40% to 30% of total calories in the diet, officially endorsing the AHA’s recommendations from 1961 and the Senate committee’s recommendations from 1977. The USDA and DHHS recommendations have remained largely unchanged since 1980. In 1992, the Food Guide Pyramid was released, urging Americans to use fats, oils and sweets “sparingly,” and to consume between 6 and 11 servings of bread, cereal, rice, and pasta.

… There is a strong relationship between the increase in carbohydrate share of total intake and obesity.

… this study demonstrated that general adherence to government dietary recommendations to decrease fat share of total dietary intake has been accompanied by a rapid increase in obesity rates.

Second, an excerpt from a 2022 study by Joyce Lee and colleagues in Frontiers of Nutrition:

[From 1800 to 2019] processed and ultra‐​processed foods increased from <5 to >60% of foods. Large increases occurred for sugar, white and whole wheat flour, rice, poultry, eggs, vegetable oils, dairy products, and fresh vegetables. Saturated fats from animal sources declined while polyunsaturated fats from vegetable oils rose. Non‐​communicable diseases (NCDs) rose over the twentieth century in parallel with increased consumption of processed foods, including sugar, refined flour and rice, and vegetable oils. Saturated fats from animal sources were inversely correlated with the prevalence of NCDs.

… Ancel Keys’ Diet‐​Heart Hypothesis posited that the mid‐​nineteenth century heart disease epidemic resulted from “a changing American diet”: increased consumption of fats, especially saturated fatty acids (SFAs), and decreased grain consumption.

… The unprocessed elements of our nineteenth century diet–animal fats, whole fat dairy, fresh vegetables, and fresh fruits—were progressively replaced with more processed elements, including industrial seed oils, HFCS, and ready‐​to‐​eat snacks and meals. The data do not support the widely publicized [Ancel Keys’] “changing American diet” of increasing animal‐​derived SFAs over the first 60 years of the twentieth century.

Rather, polyunsaturated fats and partially hydrogenated fats from vegetable oils progressively replaced lard, butter, and other animal‐​derived fats. Across the twentieth century, rising rates of obesity, diabetes, heart disease, and cancer were associated with stable SFA consumption. Yet, large increases in sugar and refined carbohydrate consumption and more modest increases in total calories make refined carbohydrates and total calories more likely factors than SFA in NCD pathogenesis.

… The increased consumption of red meat and SFAs as the cause of the heart disease epidemic was one foundation for Keys’ Diet‐​Heart Hypothesis, strengthened by authoritative repetition, including McGovern’s Senate Select Committee’s Dietary Goals for America (1977), Science in the Public Interest’s (1978) monograph The Changing American Diet, the New York Times columnist Jane Brody’s (1985) Good Food Book, Surgeon General Koop’s Report on Nutrition and Health (1988), and the World Health Organization’s Diet, Nutrition, and the Prevention of Chronic Diseases (1990). However, neither the USDA nor other data supported this narrative.

… The alleged increase in American SFA consumption in the twentieth century was considered the cause of the dramatic rise of non‐​communicable diseases (NCDs) … [But] our findings suggest that SFAs are unlikely to drive obesity, diabetes, or other NCDs.

… US and international agencies and medical associations strongly supported a low‐​fat/​low‐​SFA, high‐​carbohydrate diet for everyone over age 2 years, and through 2008, advocated sugar as healthy for diabetics and the general population.

… Evidence supports both the roles of energy balance and refined carbohydrates‐​insulin mechanisms in obesity, with their relative roles likely varying based on genetics and other factors.

… our findings suggest that increased sugar and refined carbohydrate consumptions during the twentieth century in America may have played a larger role than total calories or physical activity, although this remains a speculation without accurate data on all variables.

Data Notes: The chart shows average daily calories for all Americans over age two. USDA data on grams were converted to calories using 4 grams per calorie for protein and carbohydrates and 9 grams per calorie for fat. Using this approach, the sum of calories in the chart matches the USDA total for 1977–78 but understates the total for 2017–18 of 2,093 calories. More on nutrition and the farm bill here and here. The Nutrition Coalition explores these issues here."

Friedrich Hayek on Industrial Organization, Competition, and Monopoly

From David Henderson.

"One of the treats of the recent Liberty Fund colloquium on the Austrian and Chicago schools of thought was getting to read or reread various excerpts from Friedrich Hayek’s work. In a chapter titled “Government Policy and the Market” from his 1982 book Law, Legislation, and Liberty, Volume 3, Hayek nicely puts perfect competition in perspective  and lays out the incredible benefits of real-world, as opposed to “perfect,” competition.

On the problem with perfect competition as a normative standard:

From basing the argument for the market on this special case of ‘perfect’ competition it is, however, not far to the realization that it is an exceptional case approached in only a few instances, and that, in consequence, if the case for competition rested on what it achieves under these special conditions, the case for it as a general principle would be very weak indeed. The setting of a wholly unrealistic, over-high standard of what competition should achieve thus often leads to an erroneously low estimate of what in fact it does achieve. (p. 66)

Hayek goes on to lay this out more.

Two comments:

First, I occasionally run into people who took economics as undergraduates, and even some how minored or majored in economics, who believe that because the market is not perfectly competitive, it has failed and that the door is wide open for government to intervene and improve things.

Second, one reason I like Shark Tank is that the sharks generally appreciate markets as they are. They will often ask those who pitch their firms and products what their margins are. The margin they have in mind often seems to be the difference between average variable cost and price and sometimes seems to be the difference between average total cost and price. If someone answered, for the latter case, that the margin is zero (which would be the case for perfect competition) all 5 sharks would say, almost in unison, “I’m out.”

On temporary monopoly as an incentive to innovate:

The inducement to improve the manner of production will often consist in the fact that whoever does so first will thereby gain a temporary profit. Many of the improvements of production are due to each striving for profits even though he knows that they will only be temporary and last only so long as he leads. (p. 70)

When I was teaching this point to my students and we were studying efficiency of perfect competition versus efficiency of real-world competition, I would ask them to imagine 2 buttons, one of which they could push. The first button would yield a world in which no one would make above-normal profits, even for a short time. The second button would yield a world in which such profits would be allowed. Which one would they push if they cared about long-run well-being? Most of them got that they should push the second button because pushing the first would reduce the incentive to innovate, thus reducing innovation, so that most innovations would come about randomly rather than due to focused effort.

The injustice of requiring a monopolist to produce to where the price equals marginal cost:

Quite apart from the practical difficulty of ascertaining whether such a de facto monopolist does extend his production to the point at which prices will only just cover marginal costs, it is by no means clear that to require him to do so could be reconciled with the general principles of just conduct on which the market order rests. So far as his monopoly is a result of his superior skill or of the possession of some factor of production uniquely suitable for the product in question, this would hardly be equitable. At least so long as we allow persons possessing special skills or unique objects not to use them at all, it would be paradoxical that as soon as they use them for commercial purposes, they should be required to use them to the greatest possible extent. We have no more justification for prescribing how intensively anyone must use his skill or his possessions than we have for prohibiting him from using his skill for solving crossword puzzles or his capital for acquiring a collection of postage stamps. (pp. 71-72)

Later, Hayek gives what he thinks is the clinching reductio ad absurdum:

There exists no more an argument in justice, or a moral case, against such a monopolist making a monopoly profit than there is against anyone who decides that he will work no more than he finds worth his while. (p. 72)

I would agree with Hayek that this is a slam-dunk reductio ad absurdum. But two authors have recently taken that absurd conclusion and run with it. In their 2018 book, Radical Markets: Uprooting Capitalism and Democracy for a Just Society, Eric A. Posner and E. Glen Weyl warm to a related proposal. Here’s what I wrote in my 2018 review of their book in Regulation:

Toward the end of the book, they even toy with having people pay taxes on their human capital. They give an example of a surgeon who announces that she would perform gallbladder surgery for $2,000 and pay a tax accordingly. She would be obligated to provide that surgery to anyone willing to pay $2,000. So if the surgeon was thinking of retiring, forget it. The only satisfactory solution for her would be to estimate the value of her services at a number that really would make her indifferent between working and retiring.

The authors are aware that they’re treading on sensitive ground here, writing, “A COST [common ownership self-assessed tax] on human capital might be perceived as a kind of slavery.” Might be? They claim that such a perception is incorrect, but the reasoning behind their claim is weak.

They implicitly admit that their proposal is coercive when they write that it would be a mistake “to think that the current system is not coercive.” How is the current system coercive? Here’s how: “Those with fewer marketable skills are given a stark choice: undergo harsh labor conditions for low pay, starve, or submit to the many indignities of life on welfare.” In short, to Posner and Weyl, being relatively poor is akin to being coerced. I would bet that a newly freed slave in 1865, though almost certainly poor, would understand the difference between poverty and coercion better than Posner and Weyl seem to.

I’ll have more to say on Hayek on these issues soon."

The Impact of Regulation on Innovation

Many scholars have been concerned that slower growth in countries with heavy labor regulations could be due to firms’ reluctance to innovate given the burden of red tape. 

By Philippe Aghion, Antonin Bergeaud, and John Van Reenen of Cato.

"There is considerable research on the economic impacts of regulations but relatively few studies about their impact on technological innovation. Moreover, most analyses focus on the costs and benefits of regulation at a point in time, rather than on its effects over time. Yet potential effects on economic growth are likely to be much more pronounced in the long run. Many scholars have been concerned that slower growth in countries with heavy labor regulations could be due to firms’ reluctance to innovate given the burden of red tape. For example, the slower growth of Southern European countries and parts of Latin America have often been blamed on onerous labor laws.

Identifying the innovation effects of labor regulation is challenging. The Organisation for Economic Co‐​operation and Development, the World Bank, the International Monetary Fund, and other agencies have developed various indices of the importance of these regulations based on examination of laws and surveys of managers. Although these indices are sometimes used to study the effects of labor regulations, they are associated with many other unobservable factors; this prevents identifying the true effects of labor regulations. We address this issue by exploiting the fact that many regulations only apply when a firm gets sufficiently large. In particular, the burden of French labor legislation substantially increases when firms employ 50 or more workers. For example, such firms must create a works council with a minimum budget of 0.3 percent of total payroll, establish a health and safety committee, and appoint a union representative. Several authors have found that these regulations have an important effect on the size of firms. Indeed, unlike the distribution of U.S. firm sizes, for example, in France, there is a clear bulge in the number of firms that are just below this regulatory threshold.

Existing models that seek to explain these patterns have not usually considered how this regulation could affect innovation. But when firms are choosing whether to invest in innovation, regulations are likely to matter. Intuitively, French firms may invest less in research and development as there is a very high cost of growing if the firm crosses the 50‐​employee threshold. We developed a model that generates the intuitive prediction that the regulatory threshold discourages innovation most strongly for firms just below the threshold. However, the threshold also discourages innovation for all firms larger than the threshold because the growth benefits of innovation are lower due to the implicit regulatory tax.

We use the sudden increase in cost at the regulatory threshold to test the theory in two ways when taking it to our data on French firms. First, we investigate how innovation (measured by patents held) changes with firm size. As expected, there is a sharp fall in the fraction of innovative firms just below the 50‐​employee threshold, an “innovation valley” that suggests a chilling effect of the regulation on the desire to grow. Moreover, the share of firms with a given number of employees grows more slowly above the threshold, consistent with a greater tax on growth.

Although the previous evidence is suggestive of labor regulation stifling innovation, there could be other reasons why we see an innovation valley near the threshold. So, we turn to a second and stronger test by exploiting data on firms over time. Previous research predicts that an increase in demand should have a positive effect on innovation. Thus, we analyze how firms of various sizes respond differently to sudden demand increases, measured by changes in the growth of markets for exported products. We first show that these positive demand increases significantly raise innovative activity. We then examine differences in firm responsiveness to these demand increases depending on firm size prior to the demand increase. We find a sharp reduction in firms’ innovation response to the demand increase for firms with size just below the 50‐​employee threshold. Consistent with intuition and our model, firms appear reluctant to take advantage of market growth through innovating if they will then be subject to a wave of labor regulation.

Our estimates suggest that the French labor regulation is equivalent to a tax on profit of about 2.6 percent that reduces total innovation by about 5.8 percent—equivalent to cutting the annual growth rate from 1.7 to 1.6 percent—and reduces welfare by at least 2.3 percent in terms of consumption. This results partly from discouraging the creation of new firms and incentivizing existing firms to employ fewer people. However, most of this impact is from lower innovation per firm once they reach a certain size. This implies that previous research that focuses on output loss at a point in time—rather than over time—has significantly underestimated the cost of the regulation.

Also, we find that the effect of French labor regulations differs between radical innovation (creating new technology) and incremental innovation (improving existing technology). We classify patents as radical or incremental by citations in future patent applications and the novelty of the patent text and find that the negative effects of regulations are confined to incremental patents. Radical innovation is likely unaffected because if a firm decides to innovate despite the chance of incurring heavy regulatory costs, it will try to “swing for the fence” to avoid landing only slightly above the 50‐​employee threshold. We also find that regulation biases innovation toward technology that replaces labor with automation.

NOTE
This research brief is based on Philippe Aghion, Antonin Bergeaud, and John Van Reenen, “The Impact of Regulation on Innovation,” Programme on Innovation and Diffusion Working Paper no. 1, January 2021."

Celebrate Earth Day by burning latest UN climate report

By Kenneth P. Green of The Fraser Institute.

"Next Saturday is Earth Day and, not coincidentally, the United Nations Intergovernmental Panel on Climate Change has released a summary of its summaries of summaries of a massive unreadable multi-volume report that specifies how the climate is changing and what must be done. Again, not surprisingly, the new plans are more stringent than the already unachievable previous plans.

In presenting the report, which is still not available in its final form, Antonio Guterres, UN secretary-general, called on developed countries to move up their already impossible “net-zero” greenhouse gas emission timelines from 2050 to 2040. He also wants coal use to end entirely by 2030 in developed countries, and wants the developed world on carbon-free electricity generation by 2035, meaning no gas-fired power plants. Yes, only 12 years from now.

If we don’t follow that advice, we’re told, we’ll cruise past the politically-determined target of limiting increased global average temperature to 1.5 Celsius above pre-industrial temperatures. And, we’re told, UN scientists believe we’ll see all kinds of negative trends—droughts, floods, storms, hot weather, cold weather, ocean acidification, glacier retreat (basically all the worst parts of the Bible). Some of this may be true, much is likely untrue, as almost all of it is based on speculative computer models infused with assumptions about how things might work in nature, rather than rigorously measured values that establish how they actually work in nature. Canadians who believe computerization can correct soothsaying will be concerned; those who believe the future is unpredictable will be less so.

But either way, the secretary-general’s net-zero acceleration is a terrible idea that Canada’s governments should ignore, mainly because the side effects of this prescription will be far worse than the ailment. In 2021, RBC estimated it would cost a cool $2 trillion to reach net-zero by 2050. Broken down by year, the estimated cost rivalled spending on our health-care system. And RBC’s estimate assumed continued use of natural gas, which the UN is taking off the table. And even though, through RBC’s rose-coloured glasses, a “nation of electric vehicles, solar-powered houses and hydrogen-fueled airplanes” will help enormously, RBC found even the best-case scenarios for these technologies might only get Canada three-quarters of the way to net-zero—the old net-zero of 2050, not the potential new net-zero of 2040.

Finally, as always, the climate benefits from all of this will be negligible. Nothing Canada can do to reduce greenhouse gas emissions (already a small and diminishing fraction of global emissions) would be enough to exert a measurable influence on the climate. Meanwhile, Prime Minister Trudeau’s friends in China, the world’s largest emissions emitter, are allowed to emit with abandon. Hopefully, Canadian policymakers will file the new UN report in the voluminous burn bin with other silly UN reports, and with the Trudeau government’s current woes, there’s room for hope.

In any event, spring is springing. So this Earth Day, check the gas grill, get the planks for the salmon, layer on some fossil fuel-based sunscreen (before those too are banned), and enjoy some of the Earth’s most beautiful environments, which Canada has in abundance."

The humanizing effect of market interaction

By Colin Harris (Department of Economics, St. Olaf College), Andrew Myers (Department of Political Science, Stanford University) and Adam Kaiser (Department of Economics, George Mason University). From The Journal of Economic Behavior & Organization.

"Abstract

The quality and quantity of intergroup contact affects how outgroups are perceived. Positive interaction tends to have a humanizing effect of moral inclusion. Negative interaction instead tends towards dehumanization and moral exclusion. One avenue of intergroup contact that has been empirically underexplored is interaction in a market. Do markets generate moral sympathy, or do they allow us to ignore or deny the moral status of others? We create a measure of moral sentiment that captures the frequency, valence, and type of moral language used about an outgroup. We match our novel sentiment data to dyadic measures of market interaction to test if markets act as a (de)humanizing force. We find a positive relationship between market interaction and the use of (1) moral, (2) virtuous (but not vice), (3) bridging, and (4) bonding language to talk about a contacted outgroup. Our results suggest market interaction has a humanizing effect."

Research shows that most children need systematic, sound-it-out instruction — known as phonics

Fed up parents, civil rights activists, newly awakened educators and lawmakers are crusading for “the science of reading.” Can they get results?

See ‘Kids Can’t Read’: The Revolt That Is Taking On the Education Establishment by Sarah Mervosh of The NY Times. Excerpts:

"Research shows that most children need systematic, sound-it-out instruction — known as phonics — as well as other direct support, like building vocabulary and expanding students’ knowledge of the world.

The movement has drawn support across economic, racial and political lines. Its champions include parents of children with dyslexia; civil rights activists with the N.A.A.C.P.; lawmakers from both sides of the aisle; and everyday teachers and principals." 

"About one in three children in the United States cannot read at a basic level of comprehension, according to a key national exam. The outcomes are particularly troubling for Black and Native American children, nearly half of whom score “below basic” by eighth grade. 

"“The kids can’t read — nobody wants to just say that,” said Kareem Weaver, an activist with the N.A.A.C.P. in Oakland, Calif., who has framed literacy as a civil rights issue and stars in a new documentary, “The Right to Read.”

Science of reading advocates say the reason is simple: Many children are not being correctly taught.

A popular method of teaching, known as “balanced literacy,” has focused less on phonics and more on developing a love of books and ensuring students understand the meaning of stories. At times, it has included dubious strategies, like guiding children to guess words from pictures.

The push for reform picked up in 2019, when national reading scores showed significant improvement in just two places: Mississippi and Washington, D.C. Both had required more phonics."

"The push for reform picked up in 2019, when national reading scores showed significant improvement in just two places: Mississippi and Washington, D.C. Both had required more phonics."

"In 2000, at the behest of Congress, a National Reading Panel recommended many strategies being argued for today. And the Bush administration prioritized phonics. Yet that effort faltered because of politics and bureaucratic snafus."

"a central problem was the curriculum: a popular program by Lucy Calkins of Columbia University’s Teachers College. Until recently, the curriculum had put less emphasis on phonics and more emphasis on children reading and writing independently."

"Professor Calkins rewrote her early literacy curriculum last year to include, for the first time, daily, structured phonics to be used with the whole class."

"amid calls for racial justice after the murder of George Floyd, Dr. Hampton (Sujatha Hampton, the education chair for the N.A.A.C.P. in Fairfax County, Va) saw an opportunity to address gaps in reading outcomes for Black and Hispanic students, compared with white and Asian students in her district.

She pressed for structured literacy in 2021 — and saw swift change."

"Panther Valley, though, used grants, donations and Covid relief money to buy a new phonics curriculum. The school also recently added 40 minutes of targeted, small-group phonics at the end of every day.

Nearly 60 percent of third graders are now proficient in decoding words, up from about 30 percent at the beginning of the school year, progress Mr. Palazzo (principal Robert Palazzo) hopes will translate to state tests this spring."

Related posts on phonics:

Phonics, Failure, and the Public Schools

Phonics in High School!

Two-Thirds of Kids Struggle to Read, and We Know How to Fix It

Sweden is a relatively wealthy country despite being a welfare state, not because of it (Swedes never bought into Progressive education with look-say ‘reading’, whole language, new math, etc. as Americans did. The three R’s are taught better over there. Learning to read using the phonics method explains the higher literacy rates)

Education Schools Have Long Been Mediocre. Now They’re Woke Too ("The National Council on Teacher Quality reviewed how many schools of education taught prospective elementary-school teachers the “science of reading”—decades-old research that confirms the necessity of phonics, spelling and vocabulary instruction. Only 15% of schools emphasized these elements in 2006, which increased to 22% according to a survey from 2019.")

‘Poverty, by America’ Review: Poverty Is Your Fault

Despite trillions spent on social programs, a professor argues that American society is to blame for the persistence of poverty.

By Leslie Lenkowsky. By Leslie Lenkowsky. He reviews the book Poverty, by America by Matthew Desmond. Excerpts:

"What is needed most of all, in Mr. Desmond’s view, is a shift in perspective or a change of consciousness. We all need to become “poverty abolitionists,” he writes, “unwinding ourselves from our neighbors’ deprivation and refusing to live as unwitting enemies of the poor.” He isn’t calling for us to follow Tolstoy and take vows of poverty; he even says that he’s not calling for more income redistribution, since America already manages to do a fair amount of it, though in the wrong direction—toward the better-off, not the needy. He argues instead that, by changing how we shop, reside, invest, donate and spend public funds—by redefining the norms that guide our lives—we can help the poor enjoy the kinds of choices that other Americans have today.

For Mr. Desmond, in fact, poverty is less a matter of insufficient income than insufficient options. The poor, in his portrait, are basically compelled to work in low-paying jobs, live in rundown communities and make use of high-cost banks. It’s almost as if they aren’t allowed to do otherwise. Yet in his discussion of the ways in which the poor might be empowered, he overlooks school vouchers, which enable low-income families to bypass neighborhood public schools if they wish. He also gives short shrift to similar programs—aimed at helping the poor—in housing and health care, such as the Affordable Care Act, which was meant to aid the uninsured but which, he tells us without explaining why, has left 30 million Americans uncovered a decade after its enactment.

Nor does Mr. Desmond consider whether the poor might sometimes prefer to stay in their “segregated” neighborhoods (as he calls them) rather than move next door to people with whom they have little in common, as he thinks they should be encouraged to do. As for turning companies like Amazon or Walmart into union shops, he doesn’t say how doing so would create more job opportunities rather than limit them to those who hold a union card."

"Mr. Desmond believes that we still live in the world that John Kenneth Galbraith characterized, in 1958, as “private affluence amid public squalor.” The resources for eliminating poverty are bountiful, Mr. Desmond maintains, and need only to be put to better use. Gone are the messy complications of politics and economics or the actions of the poor themselves: The high rates of school failure or drug use in poor communities, for instance, barely warrant attention. In Mr. Desmond’s view, we have “so much poverty” because we lack the will to have less of it. If only that were so."

A large chunk of the income tax in the U.S. is paid by a small slice of the population

See Your Income Taxes Are Due. Here’s Who Pays The Most by Laura Saunders. Excerpts:

"Which of these statements is true about 2022 individual income taxes? 

(A) They’ll provide 35% of federal revenue for the year. 

(B) Most of the 180 million taxpayers will be lower earners, as about 70% are expected to earn less than $100,000. In aggregate, they will earn nearly 30% of the income of individual U.S. taxpayers and owe about 1.5% of the income taxes. 

C) About one quarter of filers will earn between $100,000 and $500,000, and they’re expected to have nearly half the aggregate income and owe nearly half of income taxes.   

(D) The top earners will owe the most compared with their share of income. A small group—about 900,000 filers earning $1 million or more—will have 16% of income and owe nearly 40% of income taxes. 

The answer: All the statements are true except (A). Individual income taxes are expected to provide 54% of federal revenue for 2022"

"the data show that the lowest U.S. earners—about 43% of taxpayers with $50,000 or less—will earn about 10% of total income and owe -4.8% of income taxes."

"This picture changes if levies such as payroll and excise taxes are counted for this group, in part because they include flat taxes that can apply from the first dollar. In this case, filers earning $50,000 or less in aggregate will pay 3.5% of total taxes."

"nearly 80% of projected income taxes for 2022 will be paid by about 10% of filers earning $200,000 or more, and those earning $1 million or more will pay half of that. All told, filers in this group will earn 44% of income earned by individuals."

"many filers earning $1 million or more will get a large chunk of their income from long-term capital gains on investments rather than wages or other income. Overall, about 70% of long-term gains for 2022 are expected to come from people earning $1 million or more"

"Under current law, long-term gains have significant tax advantages. They include a top tax rate of 20% rather than the 37% top rate on wages; no tax due until an investment is sold; the ability to borrow against an investment without selling it and owing tax; and the “step-up” that exempts long-term gains from income taxes at death."

"the top 0.001% of earners—about 1,600 filers—had an average tax rate of 24%, lower than the average rate of 26% for the top 1% of filers."

"the number of filers with $1 million or more of income is expected to be 917,000 for 2022, compared with 597,000 in 2018, a 54% increase."

"words attributed to Jean-Baptiste Colbert, finance minister to King Louis XIV of France:   

“The art of taxation consists of plucking the goose so as to get the most feathers with the least hissing.”"

How the FDIC Rigged the SVB Auction

The agency snubbed nonbank bidders, which cost taxpayers more

WSJ editorial. Excerpts:

"the Federal Deposit Insurance Corp. snubbed nonbanks interested in buying SVB, resulting in increased costs to the insurance fund.

FDIC Chairman Martin Gruenberg told Congress last month that the agency received a valid bid to acquire SVB the weekend after it failed on Friday, March 10. But he said the bid didn’t meet the FDIC’s statutory requirement to minimize costs to the deposit insurance fund because losses on SVB’s insured deposits were likely to be very small. The bid, he added, “was more expensive than a liquidation” would have been.

Yet, lo, on March 12 the FDIC invoked a “systemic risk” exception to its least-cost resolution requirement and guaranteed SVB’s uninsured deposits."

"the FDIC placed nonbanks on an unequal playing field. 

The FDIC offered banks—but not nonbanks—a loss-share arrangement" 

"A loss-share arrangement reduced the due diligence potential acquirers had to perform to evaluate SVB’s hard-to-value loan book"

"The FDIC also offered banks—but again not nonbanks—cheap financing."

"several nonbanks made competitive bids, but they needed more time to raise money and perform due diligence. Blackstone, for one, backed a bid by regional bank Valley National Bancorp.

The FDIC insisted on closing a deal by the end of March 26, and its refusal to offer nonbanks the same terms as banks put alternative investment firms at a significant disadvantage."