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Unoins, Charters, Detroit, Oh My!

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The Detroit Federation of Teachers monthly publishes a news bulletin entitled the Detroit Teacher.  May’s issue contained an interesting article by the DFT’s president Keith Johnson.  It opens:

Let’s dispel the rumors regarding DFT’s decision to organize charter schools in Detroit. The DFT does not support charter schools and/or the expansion of charter schools!

The DFT has agreed to organize and unionize charter schools in Detroit, offering its collective bargaining benefits to them in return for union dues.  Charter schools are given liberty by the state to pursue more inventive practices in instruction, and also are allowed to use private providers for pensions and health care plans, but those that wish to can unionize.

Mr. Johnson is the one who sold the DFT on the idea of organizing charters, but why the lack of support?  Why is he adding to his ranks those institutions he does not approve of?

Since charter schools in Michigan, unlike in most states, are not regulated by statute or collective bargaining agreements, charters are allowed to engage in an educational free for all with each deciding how it will operate and without any parameters to govern them other than the agencies that authorize the charter.

In short, Mr. Johnson sees it as his calling to help reform charter schools and bring them up to the standards of public schools.

In truth, the current oversight of charters by state universities has been quite successful and effective at shutting down ineffective and mismanaged organizations.  Also, charters are outperforming their local districts year after year on MEAP assessments, all while running on less funding.

By no means does the DFT have to offer its services to charter schools.  If the DFT thinks it can use its oversight to reform charters, it may have to think again.  As a march Detroit News editorial says:

To organize charter schools, the teacher unions will have to adapt to charters’ innovative school models — and be open to flexible, modern bargaining contracts.

Finally the editorial quotes Mr. Johnson as saying in regards to overseeing Detroit’s charters:

If we don’t do it, it would open the way for the MEA (the rival Michigan Education Association) to organize charters when our membership is shrinking.

If the DFT thinks it will be reforming charters, it will be breaking down the very freedoms that make charter schools sucessful.  If it is union dues they are after, the times must be tough that they need to go to their adversaries for funding.

Adam Rule – MCPP Intern

A Government of the People…Lots of People

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Just how big is the government?

Big.

According the the most recent annual figures from the BLS (2007) there are over 21 million government employees in the United States.  More than one out of seven employed Americans sets their coffee on a government desk every day.  You would think that would be enough to have more than just preliminary data for the number of government employees in 2008.  If all the government employees in the US made their own country, they would be the 54th largest in the world, coming in just ahead of Sri Lanka and Australia.

Adam Rule – MCPP Intern

State Decision Making

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Its time to pull the college psychology textbook of the shelf and give it a good dusting.  I would advise you brush up on the chapters on behaviorism and re-familiarize yourself with the likes of Pavlov and Skinner. Why pray tell?  In the next few years we are going to see work in their field streaming out of Washington, a flow that should be resisted.

During his campaign President Obama consulted with a behavioral dream team to figure out why people make the choices they do. The group included Dan Ariely of MIT as well as the Univeristy of Chicago coauthors of Nudge, Richard Thaler and Cass Sunstein, among others.

The recent buzz about behavior modification has centered on the concept of a choice architecture.  Essentially, there is a landscape of costs and benefits people survey when they make decision.  The goal is to modify this landscape, to design the choice architecture by introducing unnatural consequences so people make the right decision.

In their book Thaler and Sunsein note examples of etching flies into urinals to reduce spillage, painting smaller parking spots to encourage the use of more fuel efficient vehicles, even government programs that discourage teenage pregnancy by giving teenage mothers a dollar for everyday they avoid becoming pregnant again.

Recent legislation is starting to wander down this path of helping citizens make “right” decisions.  The FDA has been authorized to have extreme control over tobacco marketing, and there is discussion in the air of adding a tax to sugary drinks.

Similar action by parents should be applauded.  Moving cookies and other unhealthy snacks to out of reach place and laying out fruit instead should be encouraged as good parenting.  Even the idea given in Nudge of motivating yourself to reach your goals by agreeing to donate to a charity you detest if you don’t achieve them should be explored privately.  Such tactics could have a great effect in improving our choices.  But these techniques are not for the government.

In all other cases, changing the choice architecture is done with the consent of those affected.  The Sox lover agrees to divert their funds to the Cubs Fan Club if they don’t go for a run three times this week.  The government on the other hand may act outside of the will of citizens in trying to help them make the “right” decision.

Also, such a role falls outside the proper scope of government which is to rule or govern between entities, not within them.  The government has too much power to be allowed to so aid individuals in decision making. Those who hold the power to use force to achieve their means must be confined to those areas where the use of force is appropriate.

Behavioral policy in the extreme will lead to a uniformity in people’s choices and actions, all conformed to a proper behavior as defined by the state.  This way dystopia lies.

Adam Rule – MCPP Intern

Accurate Measures

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Predicting how the economy will react to current market conditions is a difficult task.  There is any number of factors that economists may assign variables to and throw coefficient in front of before producing their masterpiece equation that is sure to tell us how the economy will turn.  With the dynamic nature of economics, it isn’t hard to imagine why these models are just that, models and not the laws of physics.

You would think that after the event growth would be easier, though not trivial, to measure and link to potential causes.  Easier that is as long as fatal errors are not committed in the evaluation process.

The director of the Mackinac Center’s Morey Fiscal Policy Initiative Michael LaFaive has just released a paper showing how a government commissioned report has put on the rose colored glasses.  Says LaFaive:

A recent Michigan State University report on the Michigan Film Incentive program is of limited use in determining the program’s success because it fails to enter the film subsidy’s costs into the economic model used to calculate the benefits to Michigan’s economy. This is analogous to an accountant leaving the liabilities off a company’s balance sheet and concluding it has a high net worth.

We’re all looking for signs of success in the current economy.  Like the farmer checking his field everyday for the first sprouts of a crop we all want to see some green come up.  One cannot declare that there is growth however when he has dug up the plants from another man’s field and placed them in his own.  Now more than ever, when we are desperately searching for what will instigate and deter growth, policy analysts need to be relentless in accounting for all intervening factors and all costs a certain policy might have.

Adam Rule – MCPP Intern

Cars.gov

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www.cars.gov

No, its not the new website of GM.

Cars.gov, launched today by the National Traffic and Highway Safety Administration, gives information about the cash-for-clunkers program signed into law June 19th.  Under what is officially being called the Car Allowance Rebate System (CARS), those who trade in an old gas-guzzling car can receive up to $4,500 off the purchase of a new vehicle, compliments of the government.

I’ve already shared my thoughts on the program in a previous post.

In any case, those who want to make use of the program will have to act quickly.  All deals are off November 1st.  Call now!

Adam Rule – MCPP Intern

Losing Faith (Part 2)

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This is the continuation of a previous post in which I showed that living out one’s faith in providing social services has been the root of a 10% better success rate for Faith-Based Organizations (FBOs) than similar non-faith organizations.

Government funding requires FBOs to do the impossible, stay successful and lose their faith.  Current law states that organizations receiving government funds cannot perform religious acts at the same time or place as their social services.  However, it is the inclusion of faith that makes FBOs successful.

As a result, FBOs have had to do extra accounting to make sure government funds do not go toward their religious activities.  Some organizations that are faith-based only by affiliation have chosen drop religious programs altogether.  Even those that separate accounts and hold onto their faith elements are prone to mission shift.

In 1974 Catholic Charities USA received 24% of its funds from the government.  That figure rose to 52% by 1979, and today has leveled off around two thirds of their total funding.  With this increase has come a change in programming and a redefinition of the organization’s mission in secular terms.

As government grants were offered for alcohol and drug treatment programs, Catholic Charities programming followed. In 1995 its Massachusetts office in focused 80% of its funds on substance abuse services that benefited only a quarter of their clients.  A 2001 Cato institute report found the St. Francis House in Boston, once staffed largely by Franciscan Brothers, now avoids hiring “overtly religious people” at the same time filling 52% of its budget with state contracts.

Other issues arise from government funding.  FBOs are called on to professionalize their staff, who in many cases are former clients.  FBOs have found that the best person to rehab a drug addict is a former drug addict who, though not having a masters in counciling, knows the challenges their client will face.

By using this model, and being extremely clear that Jesus is the answer to leaving a life of drugs, Teen Challenge has been extremely successful in its mission to rehabilitate those with drug addictions.  Time Magazine and Northwestern University found Teen challenge to have a 70%-80% success rate, a figure dwarfing that of secular organizations.  The Northwestern Report concluded that,

The “Jesus Factor” is still the only true answer to the drug problem.

It is faith and local volunteers, not training, not professionalism, and not high salaries that has had the greatest sucess in solving social problems.  Government funding pulls down these two pillars of FBO success.  Charity should be left up to private citizens who invest in the communities they live in and use everything they believe in when serving others.

Adam Rule – MCPP Intern

Losing Faith (Part 1)

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When running for the presidency in 2000, George Bush pushed for the inclusion of faith-based organizations (FBO’s) in the government grant making process.  He targeting social programs, arguing that faith allowed these organizations to reach people in a way government simply could not.  FBOs had traditionally been excluded from receiving grants because they practiced discriminatory hiring based on faith.

Though legislation in 1994 opened the government’s coffers to FBOs, it took Bush’s 2001 executive order creating the Office of Faith Based and Community Initiatives to get significant money flowing.

In the early months of his presidency, Obama followed Bush’s lead with an executive order of his own, essentially extending Bush’s faith office under the new name of Faith Based and Neighborhood Partnerships.

Community based social organizations are more effective in achieving their ends than larger government programs because they have a vested interest in the area in which they work.  If they can decrease local poverty, drug abuse, and criminal activity they will be directly benefitted by a safer, more stable community.

FBOs go a step further.  Not only are workers benefitted indirectly through the community, they are also benefited on a more personal level as they serve in response to a call from God.  When they help others leave a life of drugs, crime or poverty, FBO workers get the added bonus of obeying God’s command to reach out the downcast and impoverished.

A similar benefit is given to FBO clients, who through these programs respond to God’s call to leave drugs, crime and injustice toward others.  There is an extra motivation to succeed when one believes that by doing so, they will be pleasing God.

This extra benefit of faith comes to the tune of a 10% higher success rate for FBOs than community based organizations not based on faith.

But what has government funding done to this structure?  Look for part two in the next few days.

Adam Rule – MCPP Intern

Pursing Wealth, Not Money

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Maybe all of us became enamored of making money from money, money from money from money, and we forgot that making things, real, innovative things, matters.

So said Dow Chemical’s CEO Andrew Liveris today at The National Summit in Detroit.  The Summit, hosted by the Detroit Economic Club, is bringing together top business leaders and politicians to determine the next steps that need to be taken to bring a remedy to America’s shaky economy.  The program looks to focus on the areas of technology, energy, environment, and manufacturing.  The hope is that this meeting of ideas will produce a list of top issues in each area as well as top actions that need to be taken in the near future to thoroughly address these problems.

What is so interesting about Mr. Liveris’ quote is that it hits the foundation of wealth.  A country’s wealth is found not in the amount of money it has, but in the amount and quality of goods and services it provides.  If the summit can bring about a revolution in the American economy that increases manufacturing, and advances technology to truly achieve greater wealth, it will go far to reverse the current crisis.

Adam Rule – MCPP Intern

Competiton in the Church

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As of late my view of economics has been narrowed by report after report of “$_____ billion appropriated for ______” and “$____million could be saved if we just_____” to strictly contain dollar amounts.  Liberty however is a basic human right not limited to the scope of the financial sector, and the need to economize can be found in nearly every area of life.  Consider then, the church.

World Magazine’s Marvin Olasky recently conducted an interviewwith John Micklethwait and Adrian Wooldridge, editor-in-chief and Washington bureau chief of The Economist regarding their latest book God is Back.  Despite secularization theory, these two men have found that religion looks to be on the rise and that Christianity seems to be doing quite well compared with many other faiths.

The reason for the success of the church?  Micklethwait and Wooldridge claim it is competition.  Having such a root in free societies, churches are forced to be accountable to parishioners for both the quality of their services and an efficient use of resources.  If a church-goer does not think a specific church is making good use of their tithes they are free to find one that will. 

These findings should come as no surprise.  All over the world, and especially in countries like China that have strict church control by the state, it is underground churches that are flourishing.  These unsanctioned institutions provide believers with organizations they can have a say in and hold to account, in strict contrast to state regulated institutions that largely dictate what the church may do.  The desire to worship freely apart from state control was in large part what sparked American colonization. 

The need for freedom in not restricted to markets or politics.  Competition is not something that should be shied away from, even in religion.

Adam Rule – MCPP Intern

Still Not Running GM

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As we and others have noted before, Washington’s assurances that it has no interest in running GM are not lining up with the reality of the situation. Could it be because actions speak louder than words?

A Daniel Howes article in the Detroit News today reads,

GM’s CEO and the task force spent a portion of their latest confab mulling the “culture” of GM and ways to change it, a fair point if you know anything about GM’s culture. But it’s also a clear indication of just how deeply the people who don’t “want to run GM” are pushing themselves to do just that with their latest investment.

Adam Rule – MCPP Intern

Demolition Derby

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The United States looks to be following Germany, France, Italy and Spain in subsidizing destruction.  On Tuesday, the House approved a “cash for clunkers” bill that would give car-owners vouchers worth up to $4,500 if they would trade in their old vehicles for newer, more fuel efficient ones.  The bill directs dealers to crush or shred traded in vehicles to ensure they cannot be resold.  Bill proponents hope the measure will boost the automobile sales and clean up the environment.

While new and fuel efficient cars are to be desired, destroying old vehicles is not the way to go about obtaining them.  The fact is this bill will actually lower the American standard of living, not raise it.  What is seen is the greater incidence of new vehicles on the road.  What is not seen is the number of goods that have foregone production because the money that would have been used to buy them was put into a new car instead.

Take for example a person owning a $3,000 dollar old car and having $20,000 dollars to spend, having a net worth of $23,000.  They take the government incentive, scrap their old car and buy a new fuel efficient one costing $20,000.  Since the Government subsidy is $4,500, the citizen went to purchase the car expecting to pay only $15,500, and having $4,500 of their own $20,000 left in pocket.  Thus with a $20,000 car and $4,500 in pocket, their net worth has gone from $23,000 to $24,500.  Imagine their surprise when they go to pay and have only $15,500 in their pocket!  What happened to the rest of the money?

Government subsides are supported by taxpayers, so last week this certain citizen had to pay $4,500 for the new “cash for clunker” tax, which they had forgotten about.  So in the end, they have only just enough money to buy the $20,000 car.  Being completely broke, their net worth has fallen from $23,000 to $20,000 dollars.

Look at Frederic Bastiat’s broken window fallacy for a better explanation of this phenomenon.

Adam Rule – MCPP Intern

Don’t Be Hasty

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President Obama is starting to echo John Keating’s quote from The Dead Poet’s Society,

Now I want you to rip out that page. Go on, rip out the entire page. You heard me, rip it out. Rip it out!

 But this isn’t the introduction to a poetry book he’s asking us deface, no this would be the tomes of American law that we are to disregard. The fate of American investment now sits before the highest court in the land to determine if the destruction will go unchecked.

Just over a month ago, Chrysler was forced into bankruptcy by our president, and the whole structure of stakeholders was shaken. What was once a 20% Daimler and 80% Cerberus enterprise is now slated to be 2% Canadian Government, 8% US Government, 35% Fiat, and 55% UAW. A number of secured creditors, who should have been the first in line to receive funds or a stake in the reorganized Chrysler have been left out of the deal entirely.

As a result, several Indiana funds have brought their case before the Supreme Court. While the bankruptcy of Chrysler has moved at an alarming rate, Chrysler, Fiat, and the US Justice Department have each filed a brief with the Supreme Court encouraging it to keep the ball rolling. The briefs collectively urge the court to hurry to a decision as the fate of Chrysler is uncertain past June 15th when Fiat is to close with Chrysler. If Chrysler is not sold on this date, Fiat can withdraw from the deal.

The argument of Chrysler’s continued loss each day the court delays should be countered with the fact that the court is being asked to shake the economy to its core. If the court should establish that the Indiana funds do not have a right to a stake in or funds from Chrysler before the government, investment as we know it will cease to exist. Such a ruling would set the precedent that the rules of investment are subordinate to political wants. President Obama has said of the creditors,

They were hoping that everybody else would make sacrifices, and they would have to make none,

Mr. President, what you ask for is the sacrifice of freedom, and in its place, government rule.  How can you ask us to do that?

Adam Rule – MCPP Intern

Central Planning

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Despite evidence of entrepreneurship, Michigan’s government is still looking to plan the economy, and for Granholm, the future looks green.  The Governor, citing a 7.7% growth in “green companies”, has announced her Green Jobs Initiative to expand the green sector.  This $6 million program seeks to promote green sector education.  $3 million of the funds are to be set aside specifically for underemployed and unemployed workers.  Granholm also noted that:

Back-to-back visits from national leaders focusing on the changing auto industry and green jobs seem fitting

Fitting?  In short, what the governor is doing is economic planning. She is noting that there will be a number of workers displaced by auto industry downsizing who will need employment, and is trying to coax them into the sector she thinks Michigan needs to become competitive in.

What Granholm does not realize is that, one, she is fighting the private sector, and two, she has already been doing economic planning in a different direction.  Note today’s Detroit News column on plans for GM’s Centerpoint Complex.  Real estate investor A Alfred Taubman and Linden Nelson of Nelson Ventures are teaming up with Hollywood’s Raleigh Studios to buy and convert a portion of the Centerpoint Complex into a film studio training ground for the laid-off and unemployed. 

Why the investment?  Michigan’s tax credits to those making movies in the state, and the surplus of workers.  Said Taubman,

You look out at these spaces and wonder what happened to the people who worked here

Granholm’s initiative is working in direct competition with entrepreneurs and even her own tax break incentives.  This will lead to disaster as those industries that Michigan does have an advantage in will be abandoned for those given a false government advantage.  This is only creating more economic woes for the future.

Adam Rule – MCPP Intern

Influencing Spheres

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Why does it seem that countries with political and social problems are the same ones who are economically wrecked as well? Notably Zimbabwe under dictatorial Mugabe has been topping international news in recent months with everything from an 11 figure inflation rate, to 94% unemployment, to a cholera epidemic. North Korea, under its own dictator, has been around the circuit lately as well with missile launches, the sentencing of two US reporters to years in its gulags, and government luxury in the face of mass starvation.

 While toping the international news list, Zimbabwe and North Korea are bottoming out another. Each year the Heritage foundation, in conjunction with the Wall Street Journal, publishes its Index of Economic Freedom, ranking countries world wide on their economic liberty. Of the 179 countries included in the 2009 index, Zimbabwe and North Korea come in at 178th and 179th respectively with economic freedom scores of just 22.7 and 2.0 out of 100.

At the other end of the spectrum Hong Kong, Singapore, and Australia were dubbed by Heritage as the most economically free countries. The United States came in 6th with a score of 80.7.

To get back to my original question, political, social, and economic problems are all linked to freedom and often when freedom is restricted in one area, it is restricted in all. Politically, individual freedom kills corruption and fosters good governance. Socially, freedom especially freedom of speech leads to the address of discrimination and oppression. Economically, freedom leads to prosperity. I

 do not pretend to say that more freedom is the panacea to all ills, but it alleviates a good number of them. What is interesting is that what can be seen so clearly and consistently, that freedom leads to society’s betterment, is neglected economically.  If anyone would threaten our social or political freedom outcry is heard, but when economic freedom is attacked the dissent is much quiter.  May Americans realize the power of freedom in all spheres and regain their voices.

Adam Rule – MCPP Intern

Rough Roads Ahead

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njslom.com

njslom.com

Just a few short weeks after Michigan’s announcement that the upkeep of public systems is on its short list, this “state government core function” is already under attack 

“Roadwork Axed” read the front page of the Detroit News today.  The following article detailed the Thursday cancelation of 137 road projects by the Michigan Department of Transportation.  The total cut comes to $740 million dollars.

Whats worse is the roadwork would have been funded largely with matching funds from the federal government.  Michigan only needs to come up with 20% of the funding for road projects, the remaing 80% being paid from Washington.  A loss of gas tax revenues and vehical registration fees has been blamed for the shortcoming.

MDOT Director Kirk Steudle called for a gas tax increase in his June 2nd appearance before the joint House and Senate Transportation Committee, but was immediatly reprimanded by State Representative Tim Moore who stated that, 

Michigan drivers cannot afford a gas tax increase right now, and it’s ridiculous to say that. People in my area aren’t buying $4 coffee drinks, they need that money and whatever else they can scrape together to put whole meals on the table.

 Rather than increase taxes the government needs to stop blaming taxpayers and look for better ways to obtain and utilize funds.  It should look at how under 15 years of Proposal A  public schools have seen their base funding grow faster than inflation, and taxpayers have seen their propery taxes cut significantly. 

The government also needs to realize what it has commited itself to.  Identifying the upkeep of public systems as a core function means the state will have to give it priority over other nonessential tasks, many of which to government should not be involved in anyway.  Mackinac Center analyst Jack McHugh has already detailed how the state can save $2.2 billion if it would get creative and stop appeasing special interest groups.  The government needs to show taxpayers that it means what it says and that priorities are priorities.

Adam Rule – MCPP Intern