“Innovative Schools”

Posted on by Sarah Brodsky

Mississippi’s state legislature is revising a bill that, if passed into law, would allow some traditional public schools to convert to charter schools with certain limitations. Legislators have dubbed this brand of charters “innovative schools.” Here’s how they would work:

An innovative school is a type of charter school but does not divert dollars or students. The concept is simply parents taking an existing school and running it, Brown said. More than 50 percent of the parents would have to agree and the parents would elect a board to run the school.

I don’t think these charters would be as innovative as their name suggests. There are several disadvantages to the “innovative schools” model:

  • “Innovative schools” would start out with their student bodies already in place. In comparison, the typical charter school has to market itself from the very beginning. An “innovative school” would face less pressure to try anything new, because students would be enrolled from the start whether it innovates or not.

  • Regular charter schools are free to specialize. They can offer programs that don’t interest everyone — like language immersion or career preparation — and enroll students who formerly attended many different schools. “Innovative schools” could only form at the agreement of parents of students who attend one traditional public school. They would have to settle on a safe plan that the majority is happy with.

  • Poorly performing schools would be eligible to convert to “innovative schools,” whereas other public schools would not. So, every “innovative school” would have to focus on turning around a bad situation and correcting mistakes. The need to work with multiple grade levels might compound the difficulty. “Innovative schools” could not start with one grade and build up, as many successful charters have done. It would be difficult for any school to innovate while struggling with these challenges.

Mississippi would see more innovation if it were to drop the “innovative schools” idea and instead authorize schools that are more like the charters currently found in Missouri and other states.

Birth Center Regulations

Posted on by Sarah Brodsky

This article in the Post-Dispatch identifies a regulatory barrier to opening birth centers in Missouri:

Another challenge in Missouri is the state’s licensing requirements for birth centers, which Henman and others are trying to change[.] Birth centers are licensed as ambulatory surgical centers even though no surgeries take place. Many of the requirements are expensive and unnecessary, says nurse midwife Rachel Williston, 34, who wants to open a birth center in Independence, Mo.

Complying with all the regulations for ambulatory surgical centers is no simple task. The regulations can make the difference between a facility being profitable enough to operate and being forced to close. This was evident in 2007, when Missouri law was changed to impose the ambulatory surgical center regulations on abortion clinics, which challenged the law in court. They argued that imposing such onerous regulations was a ploy to shut them down.

It’s unfair to regulate birth centers the same way as surgery centers, when no one performs surgery in them. Women can legally give birth at home, and their houses need not meet all the code specifications of a surgery center. Births in birth centers should be regulated more like births in homes.

Public Health Spending

Posted on by Charis Fischer

On Monday, the St. Louis Post-Dispatch ran this opinion piece discussing the amount of public health spending by state. The article points out that Missouri spent just $9.26 for each resident, which is the second-lowest amount of all the states, higher only than Nevada. The author is concerned because “public health is one of the most cost-effective investments any state can make.” To support this assertion, the piece cites a 2008 study which, “found that investing in public health and disease prevention can reduce rates of chronic illnesses such as cancer, [heart] disease and diabetes.” This study also estimated “that every $1 invested in those programs would return $5.60 in benefits over five years.”

What the article doesn’t mention is that the study it cites also concluded that an investment of $10 per person per year in “proven community-based programs” would give us the aforementioned rate of return. Furthermore, according to this study, “evidence shows that implementing these programs in communities reduces rates of type 2 diabetes and high blood pressure by 5 percent within 2 years; reduces heart disease, kidney disease, and stroke by 5 percent within 5 years; and reduces some forms of cancer, arthritis, and chronic obstructive pulmonary disease by 2.5 percent within 10 to 20 years.” Missouri spends almost $10 per person per year, the figure observed in the study, but still has poor health outcomes. This tells me that we are probably not spending our money in the most effective way.

There is further evidence of that in a comparison of four measures of public health in Missouri and Nevada, the one state that spends even less than we do in this area:

Missouri Nevada
Overweight/Obese (2008) 65.4% 62.6%
Diabetes (2008) 9.1% 8.5%
High blood pressure (2003) 27.5% 23.6%
Smokers (2004) 24.9% 22.1%

* Information on high blood pressure from CDC; all other information from statehealthfacts.org

So, even though we spend more than Nevada on public health, we still have higher numbers in all four of these categories. This is admittedly an overly simplistic analysis, but the point is that amount of state public health spending is obviously not the only factor that matters for health outcomes in Missouri. The programs themselves should be evaluated for effectiveness, to determine whether investment of additional resources in them is worthwhile.

The larger point here is that using state taxpayer funds to address public health problems might not be the best strategy, given the frequent ineffectiveness of state-run programs. Instead, we should end the tax benefit for employer-provided health insurance, which would allow individuals to have control over their health insurance. People would then have a direct financial incentive to become more sensitive to the effect that their lifestyle choices have on their premiums. As a result, a greater number of people would make healthier choices, in addition to the obvious incentive of health in and of itself.

Kansas City School District Makes the Hard Decisions

Posted on by David Stokes

I am not writing to commend the Kansas City School District for closing down almost half of its schools or laying off hundreds of staff. I will, however, commend it for being willing to make hard decisions, and these must have been incredibly hard.

I don’t think there is anything more difficult in current public policy debates than the issue of education in big cities. Even the school choice measures I believe in strongly, like charter schools and vouchers, are by no means magic bullets. That being said, the Kansas City School District has changed dramatically during recent decades, and it needed to shrink in order to reflect those changes and efficiently operate itself. The last thing the school district, or any government agency, should do is linger on indefinitely as a jobs program for government workers, whether they are needed or not.

Payday Loan Reading List

Posted on by Abhi Sivasailam

One problem with the debate over payday loan regulation in Missouri and elsewhere is a lack of sustained focus on data. Regrettably, both opponents and proponents of regulatory legislation within the state seem to cling reflexively to familiar, abstract narratives and consequently fail to engage the public with meaningful evidence to support their assumptions. To alleviate this problem, I am compiling this list of literature — both sympathetic and unsympathetic to the payday loan industry — to enrich the public dialogue. If any of you know of more quality literature on the topic, please add to this post in the comments.

  1. Payday Holiday: How Households Fare after Payday Credit Bans (ungated), Donald P. Morgan and Michael R. Strain.

    “Compared with households in states where payday lending is permitted, households in Georgia have bounced more checks, complained more to the Federal Trade Commission about lenders and debt collectors, and filed for Chapter 7 bankruptcy protection at a higher rate. North Carolina households have fared about the same. This negative correlation—reduced payday credit supply, increased credit problems—contradicts the debt trap critique of payday lending.”

  2. The Economics of Payday Lending (ungated), John P. Caskey, Swarthmore College.

    General overview of payday lending industry and basic issues. Written for a lay audience.

  3. Do Payday Loans Cause Bankruptcy? (ungated), Paige Marta Skiba and Jeremy Tobacman.

    “Though the size of the typical payday loan is only $300, we find that loan approval for first-time applicants increases the two-year Chapter 13 bankruptcy filing rate by 2.48 percentage points.”

  4. Factors Affecting the Location of Payday Lending and Traditional Banking Services in North Carolina (ungated), Mark L. Burkey and Scott P. Simkins.

    Explores the geography of payday loan institutions. “A key finding is that after controlling for many covariates, race is still a powerful predictor of the locations of both banks and payday lenders.”

  5. The Profitability of Payday Loans (ungated), Paige Marta Skiba and Jeremy Tobacman.

    “Despite charging effective annualized rates of many thousand percent, we find lenders’ firm-level returns differ little from typical financial returns. The data are consistent with an interpretation that payday lenders face high per-loan and per-store fixed costs in a competitive market.”

  6. Quantifying the Economic Cost of Predatory Payday Lending (ungated), Keith Ernst, John Farris, Uriah King:

    “Our analysis of quantitative data reveals that payday lenders collect the vast majority of their fees from borrowers trapped in a cycle of repeated transactions, where borrowers are forced to pay high fees every two weeks just to keep an existing loan outstanding that they cannot afford to pay off.”

  7. A Comparative Analysis of Payday Loan Customers (gated), Edward C. Lawrence and Gregory Elliehausen.

    “By analyzing the data collected in a national survey of payday customers, this research allows policymakers to better understand what type of consumer borrows from payday lenders, for what purpose, and what the true benefits and costs are. The results confirm a strong demand for payday loans that satisfy a real financial need within a certain segment of the population.”

  8. Mayday Payday: Can Corporate Social Responsibility Save Payday Lenders (ungated), Carmen M. Butler and Niloufar A. Park.

    “In this article we ask what the best ways are to maximize the wealth of the payday lending industry while limiting the industry’s harmful impact on consumer communities? We assert that payday lenders will likely demonstrate greater corporate social responsibility only after there is a change in the laws that govern the industry coupled with industry-wide reform in corporate governance.”

  9. Restricting consumer credit access: Household survey evidence on effects around the Oregon rate cap (ungated), Jon Zinman.

    “Borrowing fell in Oregon [after interest rate caps] relative to Washington, with former payday borrowers shifting partially into plausibly inferior substitutes: bank overdrafts and late bill payment. Additional evidence suggests that restricting access caused deterioration in the overall financial condition of Oregon households. Overall the results are consistent with restricted access harming, not helping, consumers on average.”

  10. Consumers’ Use of High-Price Credit Products: Do They Know What They Are Doing? (gated), Gregory Elliehausen:

    This paper asserts that consumers of payday loans are sufficiently rational. A caveat, however, is that rationality is a just a process and does not imply that “good” decisions are made.

Some op-eds include:

The last of those op-eds was written by a former employee of the Show-Me Institute. Perhaps unsurprisingly, my views on payday loans are fairly similar to his. Taking an economic view, I’m concerned that regulatory reform will be unable to limit payday loan harms effectively without driving the market underground. Taking a political view, I view payday loan consumers as sufficiently rational and believe that a government (at least in this arena) has more of an imperative to maintain free, private contracts than to protect the politically weak.

Dora the Explorer Promotes the Census

Posted on by Sarah Brodsky

The Census Bureau has enlisted Dora the Explorer to spread its message that the Census counts babies and children. In a new video, Dora proclaims that counting small children on Census forms “helps us get important things in our town, like day care centers, schools, and more.”

Dora didn’t discover the connection between Census data and federal spending on her own. The Census Bureau is itself emphasizing the link between counting kids and spending:

“The adults among themselves sometimes forget the census is about everyone, and kids should be counted,” said Census Bureau director Robert Groves. “If we fail to count a newborn that is born this month, that newborn misses all the benefits of the census for 10 years.”

If you forget to count your newborn on this year’s form, does that mean your baby won’t get to attend a publicly funded daycare or school for the next decade? Obviously not. So, what “benefits of the Census” are the uncounted babies missing out on?

Radio Appearance Imminent!

Posted on by Eric D. Dixon

This notice may be too late for those of you who read our blog to tune in, but for those of you Columbia readers who encounter this blog entry right after I post it and find yourselves near a radio, be sure to tune in to The Eagle 93.9 FM at 4:33 p.m. to hear research assistant John Payne talk about unemployment and possibly our new study of the relationship between taxes and economic growth.

The Attack of the Rent-Seeking HVAC Contractors Has Begun!

Posted on by David Stokes

Here is St. Louis Board of Aldermen Bill No. 337, which would apply current licensing requirements for commercial HVAC work to residential work, as well. Look for almost the exact same thing to be introduced in St. Louis County shortly, too. I understand that these proposed licensing rules and regulations will be introduced in Jefferson County, as well.

Should we expect another fight over this unnecessary, anti-competitive, and simply appalling use of government to restrict competition? Well, given that one of the people who led the fight against this same effort in 2000 — and who was partly successful in that effort — is now a cosigner on the letter requesting the expansion of licensing authority in the county, I don’t have much hope.

My initial post on this HVAC licensing issue last month has all the links you need to find media stories on this subject. I once again recommend the Riverfront Times story from 2000. I basically feel like a boxer who is still standing, but has been hit so many times that he can’t respond. (And, yes, I have boxed and know what it’s like to be hit really hard in the face.) These proposals are coming, they are a perversion of capitalism, and they will raise costs for St. Louis consumers, yet there is absolutely nothing anyone can do to stop it from happening. The capacity to fight back that existed in 2000 just does not appear to be extant right now (as I am sure the licensing proponents are well aware).

Taxes and Government Spending Undermine Economic Growth

Posted on by John Payne

 

With stimulus spending one of the most contentious issues in a very contentious political year, politicians of all stripes have argued about whether government spending boosts or hinders economic growth. It is beyond debate, however, that the spending will have to be paid for by taxpayers either now or in the future. Those taxes cause the economy to grow slower, according to a new study released by the Show-Me Institute, “Taxes and Economic Growth: A Review of the Evidence.” Written by Mark Skidmore and Nicole Bradshaw — both professors at Michigan State University’s Department of Agricultural, Food, and Resource Economics — the study shows that stimulus spending may not prove to be very stimulating, because only spending on highly demanded government services appears to boost economic growth.

In a review of the academic literature, Skidmore and Bradshaw find a general agreement among researchers that higher taxes lead to lower economic growth, and therefore lower standards of living for American workers. The exact size of taxation’s effect on growth is not firmly established, but the consensus range is that for a 10-percent tax cut, there will be an additional rise in economic activity of 1.5 percent to 8.5 percent. When the bills for our current spending binge eventually come due, taxes will be raised and economic growth will fall. However, when confronted with these facts, supporters of the stimulus will likely argue that the economic growth generated by current spending will more than offset the drop in growth that will follow the tax hikes. This is theoretically possible, but Skidmore and Bradshaw provide good reasons to doubt the idea.

The professors divide government spending into two categories, which they call general fund expenditures and fund transfer payments. The former involves spending on core government services like security and necessary infrastructure, and the latter are government payments made to a group of people who provide no good or service in return, a classification that includes food stamps or government provided health insurance. From their review of the literature, Skidmore and Bradshaw conclude that transfer payments have either a negligible or negative impact on government growth, which is unfortunate because transfer payments have made up the bulk of stimulus spending so far. According to a CNN analysis of the first year of the $787 billion stimulus package, only $31 billion has been spent on projects like infrastructure and high-speed rail, while the remaining $148 billion spent during the past year has gone to states and individuals for purposes such as funding Medicaid and extending unemployment insurance. That spending will directly benefit those hit hardest by the recession, by helping them weather the storm, but it will not cause the economy to recover any faster.

Even that portion of stimulus spending used for infrastructure and other government purchases, an amount projected to more than double to $84 billion for the next year, may not have the positive impact that stimulus supporters expect. Government spending on infrastructure and expanded government services usually, but not always, has a small positive effect on growth. Skidmore and Bradshaw argue that this puzzle can be solved by using a cost-benefit analysis of specific government projects. If the project is demanded by a large number of people, it will probably lead to higher economic growth, but if it is simply a pork barrel project designed to benefit relatively few people, the spending will likely have no (or even a negative) impact on economic growth. For example, spending $3.4 million on an underground animal crossing in Florida and $1.15 million to replace the guard rail around an empty lake in Oklahoma is unlikely to generate any economic growth.

Probably the most efficient part of the stimulus in terms of generating economic growth is the $119 billion in tax cuts, because the literature shows that a new job is generated by the private sector for every $1,906 to $10,800 of taxes that the government cuts from its yearly budget. Still, if tax cuts are not balanced with a corresponding decrease in spending, those gains will be at least partially wiped out by future tax increases that go toward paying off current deficits.

Skidmore and Bradshaw’s study shows that government efforts to revive the economy through greater spending and higher taxes are doomed to fail. The best prescription for reviving the economy of Missouri and the entire United States involves lowering taxes and balancing the budget.

John Payne is a research assistant at the Show-Me Institute, a Missouri-based think tank.

 

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