Susan Pendergrass speaks with Andrew G. Biggs, senior fellow at the American Enterprise Institute, about the Social Security trustees’ latest report and what it means for the program’s future. They discuss the projected 2032 insolvency of the retirement trust fund, why the trustees’ birth rate assumptions may be too optimistic, the proposed Moreno-Warren plan to eliminate the payroll tax ceiling, the Cassidy-Kaine plan, and why pension experts oppose it, what would actually happen if the trust fund ran out, and more.

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Episode Transcript

Susan Pendergrass (00:00):
I feel fortunate to have grabbed some of your time. Andrew Biggs from the American Enterprise Institute, I appreciate you coming on to talk to us. Social security has been nothing but in the news recently, and you know more than anyone else. So thank you for taking the time.

Andrew Biggs (00:14):
That’s why I’m so cheerful. The more you know about Social Security, the happier you are. But thanks for having me, Susan. It has been busy. I’m really happy to be with you today.

Susan Pendergrass (00:16):
I’m in my sixties. I see something about Social Security running out of money and I pay attention. So just to bring us all up to speed: in the last week, there was a news flash that Social Security is going to run out of money sooner. What does it really mean?

Andrew Biggs (00:39):
Every year the Social Security trustees, which is mostly members of the cabinet, the Secretary of the Treasury, the Social Security Commissioner, and so on, come out with a report projecting the program’s financial health, both in the short term and the long term. That happens every year, and it’s been getting worse every year. In this year’s report, they projected that the retirement trust fund will go insolvent, or run out of money, in 2032. They also projected a significantly larger long-term funding gap in the years thereafter, and this is worth explaining.

When the trust fund runs out, it doesn’t mean there’s zero money to pay benefits. As long as we’re paying a trillion dollars a year in payroll taxes, there will be money to pay benefits. But when the trust fund runs out, it means benefits will be cut, and their projection is somewhere around 22%. The size of that long-term funding gap dictates how big the cuts are going to be in the years thereafter. The trustees lowered their projections for birth rates, and they found that the One Big Beautiful Bill has worsened Social Security’s finances. A variety of things made this long-term funding gap worse. It’s really hard to paint a happy picture. The trust fund can be running out in about six years, and the funding gap and the benefit cuts in years thereafter are going to be larger. It’s a sobering picture.

Susan Pendergrass (02:16):
I’m not trying to pile on, but I think I saw that they extended the time when they expect birth rates to bounce back. Is that true? Because I have not seen anything anywhere, and I’ve spoken to some demographers, to suggest birth rates are ever going to bounce back.

Andrew Biggs (02:35):
Here’s the interesting thing. If you look at the Congressional Budget Office or the US Census Bureau, right now the fertility rate is about 1.6 children per woman on average, and both the CBO and the Census project that’s going to remain pretty much steady, declining a little bit over coming decades. Social Security had a very different picture. As of last year, they thought the birth rate, which is 1.6 now, was going to immediately start rising and go back up to 1.9 children per woman in the next several decades. That makes Social Security’s finances better. More kids being born means more people paying into the system. What they did in this year’s report is moderate a bit on fertility. They said, okay, it’s not going to rise back to 1.9, it’ll rise back to 1.75. So they are still over-optimistic. I’ve talked to some demographers and economists who’ve really focused on the birth rate, and they described the trustees’ assumptions as, quote, fanciful, meaning they just weren’t plausible. Now they’re somewhat more plausible, but they still tend

Susan Pendergrass (03:32):
Okay.

Andrew Biggs (03:48):
to be more optimistic than other agencies. And to me, frankly, this is a concern. You really want the people who are the scorekeepers, the umpires, to be playing it as straight as they possibly can. We know that these guesses are going to be wrong because this stuff is impossible to predict with certainty, but most demographers think the best guess is we’ll stay around 1.6 going forward. You’ve seen a decline, and a good predictor of birth rates is religiosity, the level of religious belief in a country. The US has typically been much more religious than Western Europe, and that’s played into fertility. There has been a big decline in religious belief, particularly among younger Americans, along with all the other pessimism you see among younger people. When people are pessimistic, they tend not to have a lot of kids. So the best guess is we’re going to stay about where we are.

I wrote something the other day saying the bad news in this trustees report is even worse than last year’s, but it could have been even worse. They project a long-term funding gap above 4.4 percent of payroll. What that means is if you took the 12.4% payroll tax today and raised it immediately and permanently by 4.4 percentage points, from 12.4 to 16.8, that would in theory keep the trust fund solvent for 75 years. But a better guess would be a funding gap of around 4.8 to 5 percent. This is real money. For years, people on the left have said, well, okay, we know Social Security has a solvency problem, but it’s a manageable issue. They were saying that when the funding gap was 2% of payroll. Now you’re looking at four to five percent. That’s a lot of money, at a time when a lot of other things are making claims on the budget. We have some difficult choices to make and we really have to start thinking hard about this.

Susan Pendergrass (06:09):
Okay, so what about this idea that’s been floated in the last week of getting rid of the payroll cap? First of all, explain the payroll cap, and then this idea of getting rid of it.

Andrew Biggs (06:17):
Sure. Social Security has a 12.4% payroll tax, half paid by you and half paid by your employer. That applies only to wages up to $184,500. That’s called the payroll tax ceiling, or the tax max. That dollar figure goes up every year, but this year it’s $184,000. You only pay taxes on those wages, and you also earn benefits only on those wages. People say, well, Bill Gates doesn’t pay more taxes than that. But he doesn’t earn any benefits either. So you’re capping both the taxes and the benefits.

To fast forward a little bit: there’s an op-ed in the Washington Post this week from Senator Bernie Moreno, a Republican from Ohio, and Elizabeth Warren, a Democrat from Massachusetts. They say it’s just common sense to eliminate that cap and tax all earnings for Social Security. The interesting thing is how uncommon that would actually be. Our payroll tax ceiling is $184,000. Almost every other country has a ceiling on their payroll taxes for their pension system, and in almost every other country that ceiling is lower. In Canada, you only pay taxes and earn benefits up to around $60,000 in earnings. In the UK it’s about $70,000. In Germany it’s about $70,000. We are already an outlier for how high up the income ladder we tax people. To eliminate the cap entirely is a big deal. It’s effectively a 12 percentage point increase in the top marginal tax rate. I pulled an example of somebody living in New York City. A high-income person already pays 37% in federal income taxes, plus regular Medicare taxes, the additional Medicare tax, state taxes, and city taxes. If you add another 12 percentage points on top of that, their marginal tax rate would be in the mid-60s. And that’s before we’ve fixed Medicare or done anything else. The federal budget is still broke, and you’ve taxed these people as high as you possibly can. So these things that look like common sense, why don’t we just tax everybody,

Susan Pendergrass (08:37):
Right, right.

Andrew Biggs (08:46):
look, there are reasons for that.

Susan Pendergrass (08:49):
And were they suggesting that if I make $300,000 and I pay my 6.2 percent, totaling 12.4 with my employer, on my entire salary, that my Social Security benefit one day would be higher? Are they talking about capping the benefit or just getting rid of the cap on contributions?

Andrew Biggs (09:06):
They haven’t been very specific. They say Social Security would continue to be an earned benefit, which kind of implies you would continue to earn benefits on the additional taxes you would pay. Let’s say if we uncap the payroll tax and base your taxes on your total earnings, you’d also base your benefits on your total earnings. What you get then is, okay, you’re getting all this money from people in the short term, but you have to pay them higher benefits in the long term. That offsets some of the savings. And this morning I was running some numbers looking back to the 1970s. We had a huge run-up in benefit levels from Social Security in the 1970s. The benefit formula we have today is not the one FDR invented. It really happened in the 1970s, where they jacked up benefits in a really foolish way, and then to help pay for it, they increased the payroll tax ceiling. Right now you pay taxes on earnings up to $180,000. If we had just kept the tax max from 1970 and indexed it to wages, it would have been only $95,000. So they essentially doubled the wages on which you pay Social Security taxes. But what happens is they also doubled the wages on which people earn benefits. I’ve highlighted the point that if you have a high-income

Susan Pendergrass (10:38):
Mm-hmm.

Andrew Biggs (10:43):
couple retiring today, they could get almost $100,000 in total benefits, which is absurd. There’s no reason a government program should be paying anybody that amount. If you want that kind of income in retirement, you save more in your 401k. It’s better for you, better for the economy. But it was a result of this short-term step they took in the 70s. They said, hey, we raised benefits too high, let’s jack up the tax max. And they didn’t worry about the fact that in the future you’d have to pay benefits on that. Well, the future is today.

Susan Pendergrass (11:05):
Okay.

Andrew Biggs (11:13):
Now we’re broke again, we need extra money again, and these guys say, well let’s just jack up the tax max. But then you’ll pay extra benefits in the future. It becomes this chasing-your-tail kind of thing.

Susan Pendergrass (11:16):
Yeah. Yeah.

Andrew Biggs (11:25):
And the problem when you do it is there’s no country on earth paying $100,000 a year from a social insurance program, except for us. And the reason we do is these stupid historical decisions. If you’ve got this high-income couple in the US retiring today, they can get almost $100,000 from Social Security. If they lived in Canada, they’d get like $35,000. And that’s perfectly fine. Nobody’s starving to death in Canada in retirement. They just save more on their own.

Susan Pendergrass (11:35):
I’ll say.

Andrew Biggs (11:55):
The irony is that we think of ourselves as a free-market, small-government country, and our Social Security program is enormous, primarily because we’re paying benefits to people that other countries say, yeah, we don’t need to pay benefits to these guys.

Susan Pendergrass (12:11):
And yet people say, I put my money in, I get my money out.

Andrew Biggs (12:14):
Yeah, and I understand it. When I say we shouldn’t be paying $100,000 a year to a high-income couple, you get the email saying, well, I paid in. And if you paid in, you feel you have this moral claim on benefits. The problem is Social Security is still broke. We still need higher taxes or lower benefits. The idea that you’re just going to get your full benefits with the taxes you paid doesn’t work because the system can’t afford to do it. So you have to make the choice: do I want to pay higher taxes or get lower benefits? I’ve got to pick my poison. Most high-income people would prefer to get lower benefits. They care more about their taxes than their benefits. But people are still living in this dream world where this system, which is $30 trillion in the hole, is somehow going to pay them everything they’ve been promised and just screw somebody else. Everybody thinks they’re the guy who’s going to get everything and somebody else is going to get screwed.

Susan Pendergrass (13:14):
Yeah. I definitely hear people saying today, maybe I should go ahead and take it early and then I’ll get grandfathered in and my benefits won’t get lowered.

Andrew Biggs (13:26):
It probably won’t make a difference. In general, the Social Security benefit formula works based on your birth cohort, the year in which you’re born, not really the year in which you claim benefits. And people who are going to do Social Security reform understand the incentives. They don’t want to make it easy for people to game the system. So Social Security reform will probably work itself out in such a way that

Susan Pendergrass (13:42):
Right.

Andrew Biggs (14:03):
you can’t get some big advantage by claiming early. I could think of some conceivable possibilities, but I still would not encourage people to claim early.

Susan Pendergrass (14:14):
Okay, I want to talk about two more things I read in the last week. One was a letter from Tim Kaine about his idea with Senator Cassidy. What’s that idea for fixing it?

Andrew Biggs (14:24):
The interesting thing is people say Social Security reform has to be bipartisan. So we have two bipartisan ideas. We have Moreno and Elizabeth Warren, a Republican and a Democrat. They’ve got one idea, eliminating the payroll tax ceiling.

Susan Pendergrass (14:39):
Third rail.

Andrew Biggs (14:49):
Cassidy, a Republican from Louisiana, and Tim Kaine, a Democrat from Virginia, they’ve got a bipartisan plan. And guess what? Their plan is also terrible. If there’s any lesson from this, it’s that bipartisan doesn’t mean good.

Susan Pendergrass (15:00):
Bipartisanly terrible.

Andrew Biggs (15:04):
Yeah. Look, ultimately Social Security reform is going to have to be bipartisan, given the way the political system works. On the other hand, there is some lesson that if both Republicans and Democrats can agree on something, it might be a terrible idea. With Cassidy and Kaine, they are explicitly, and Cassidy said this, solving a political problem. The political problem is that neither Republicans nor Democrats want to vote for either tax increases or benefit cuts. You’d think Democrats want to raise your taxes and Republicans want to cut your benefits. The reality is they don’t want to do either of those things because they realize both are politically unpopular, which is why we’ve gone 40 years literally doing nothing. So their solution is that we don’t have to make these difficult votes. Instead, the federal government will borrow about $2 trillion, invest that money

Susan Pendergrass (16:02):
Tough.

Andrew Biggs (16:04):
in stocks and private equity, high-risk, high-return stuff. Then they claim they’re going to hold this fund for 75 years so it can build up value. In the meantime, when Social Security’s trust fund runs out in 2032, the federal government will borrow against the assumed gains on this investment fund.

Susan Pendergrass (16:06):
Right. Mm-hmm.

Andrew Biggs (16:29):
They say the borrowing will be at a lower rate because it’s the federal government. And they say after 75 years, all the gains in this investment fund will pay back all the borrowing and we’re all good. And let me count the ways there are problems with that. If you work at the state level,

Susan Pendergrass (16:45):
It’s just kicking the can.

Andrew Biggs (16:52):
state-based think tanks almost know more about this than federal people. A lot of underfunded state pension systems do things called pension obligation bonds. Their pension system is underfunded, they don’t want to raise contributions or cut benefits, so they borrow and invest in the stock market and hope it works. The pension obligation bond is the hallmark of a poorly funded, poorly run pension system. Think New Jersey, Illinois, things like that.

Susan Pendergrass (17:21):
Yeah.

Andrew Biggs (17:23):
There’s a national group of state budget officers that has come out and basically said as an institution, don’t do this. Borrowing for your pension is a bad idea. So it really is fitting for the times that the Cassidy-Kaine plan says, let’s take this worst idea from state and local government

Susan Pendergrass (17:45):
Yeah.

Andrew Biggs (17:47):
employee pensions, which has been condemned as bad practice, and put it on steroids and do that for Social Security. And what it really gets to is they just don’t understand the finances of it. And to be frank, they won’t listen. They have talked to every pension expert I know, and this Social Security world is pretty small. We all know each other on both sides. We may not agree on everything. Literally every pension expert I know says this is a terrible idea.

Susan Pendergrass (17:54):
Yeah.

Andrew Biggs (18:17):
But their political considerations are more important than policy, and that’s the problem with all of them.

Susan Pendergrass (18:24):
I mean, it feels free. They’re basically saying it’s like a timeshare. It just feels free right now. We just borrow the money. Okay, so

Andrew Biggs (18:31):
It’s been pointed out to them that if you can fund Social Security this way, you could fund the entire federal government this way and never collect any taxes. At one point Senator Cassidy was quoted in a newspaper article saying, well, yeah, sure, in theory you could. And I’m like, if something implies there’s a free money machine, maybe you need to question your assumptions.

Susan Pendergrass (18:38):
Sure. Okay.

Andrew Biggs (18:54):
I could give you a whole variety of reasons why this doesn’t work, but one macro point that’s come to me: I’ve been doing Social Security for a long time. I worked in the Bush administration in 2005 when they tried and failed to do Social Security reform. One of the problems we face today is that your elected officials understand Social Security policy much less well than they did 20 years ago. They just don’t understand how the system works. Going back to the Moreno-Warren idea of applying the payroll tax to all earnings,

Susan Pendergrass (19:22):
Yeah.

Andrew Biggs (19:37):
okay, you’re adding 12 percentage points to your top tax rate. There’s a reason Sweden and France and others don’t do this anymore. They used to have incredibly high tax rates. They don’t now. We would end up in many cases with a higher tax rate than most European countries. We have some philosophical dedication to small government and things like that. They don’t. And so if they’re not doing it,

Susan Pendergrass (19:43):
Yes. Yeah, yeah.

Andrew Biggs (20:02):
it’s because there’s a practical reason this isn’t a good idea. The same applies to wealth taxes. That’s been tried in Europe. They’re like, yeah, we’re not doing that anymore because it doesn’t work. But your average senator now

Susan Pendergrass (20:14):
It is happening around the country, the billionaire tax. What happens in 2032 if no one is either brave enough or smart enough to take this on in the next six years?

Andrew Biggs (20:17):
They’re just not aware of these policy issues, and that’s a real problem. It’s like having a guy fix your car who doesn’t know how to fix cars. 2032 is the date. If you have a recession, it might be 2031. It’s not certain, but it is certain it’s happening soon.

Susan Pendergrass (20:47):
Yeah. Okay.

Andrew Biggs (20:53):
There’s a literal reading of the law, which is that Social Security can’t pay out benefits it doesn’t have dedicated resources for. Once the trust fund runs out, the only dedicated resources are mostly the payroll tax, plus a little bit of money from income taxes levied on retirement benefits. And those were cut as part of the One Big Beautiful Bill. So if the trust fund runs out, they’d have to rely on the money they have on hand, which implies around a 22% benefit cut.

A lot of times people assume that benefit cut has to be across the board. If you did it that way, you’d throw a lot of people into poverty. I did some work a year or so ago with a lawyer in DC named Kristen Shapiro, and what we found is that the legal precedent shows the executive branch, meaning the president working through the Social Security Commissioner, would have some discretion. What we found is you could maintain full benefits for about 50% of people, the poorest 50% of seniors, and then cap benefits above that. If you cap the maximum benefit at about $24,000 per year for a single person or $48,000 for a couple, that is enough to make Social Security solid without raising taxes. So the point is simply you have some discretion.

The reality is Congress isn’t going to allow big benefit cuts, for political reasons. On the other hand, are they willing to have the size of tax increases needed, all in one go, to keep Social Security paying full benefits? I don’t think they want that either. So the reality is probably they’re going to borrow a lot of the money. And that’s where you get to the issue of how much more borrowing the financial markets will swallow. We effectively borrow from the public to repay the Social Security Trust Fund, but there’s an end to that. You say, okay, 2032, we have to do something. We have to raise taxes or cut benefits. If in 2032 the stated policy of the federal government is, well, we’re just going to keep borrowing to pay Social Security even though we have no prospect of paying it back, you wouldn’t blame some big market players for saying, yeah, I’m out, because you don’t want to lend money at low interest rates to someone who says they can’t pay it back. Then you start getting a couple of things. One is more federal borrowing squeezes out capital in the rest of the economy, and so interest rates naturally rise.

Susan Pendergrass (23:18):
Right.

Andrew Biggs (23:31):
But then there’s a second element: if you’re afraid the federal government can’t pay you back, over and above that natural increase in the interest rate, you’d apply a risk premium to treasury debt. You’d say, look, Treasury is not this rock-solid investment anymore. It’s more like a junk bond, or like borrowing from Illinois, and you make them pay a premium. That’s going to drive up

Susan Pendergrass (23:43):
US government borrowing. Yeah, yeah, yeah.

Andrew Biggs (24:01):
interest rates, and that makes it tougher not just for the federal government but for everybody. If you want to buy a car or a house, all your interest rates rise. There’s also going to be real temptation to inflate away the debt. The federal government doesn’t want to default on its debt, but

Susan Pendergrass (24:24):
Yeah, yeah.

Andrew Biggs (24:25):
historically the way you deal with this is inflation. Think about all the debt we took on during COVID, shoveling money out the door to everybody, and then we had massive inflation after it. A lot of those people who bought treasury debt didn’t get a good deal, because if you get 20% inflation on

Susan Pendergrass (24:34):
Absolutely. Yeah.

Andrew Biggs (24:47):
a treasury bond with a nominal fixed interest rate, that’s a real problem. So inflation becomes increasingly tempting. You look at this scenario and you’re like, can’t anybody here play this game? Every other country is not going bankrupt. We just have to do what they do.

Susan Pendergrass (24:51):
Yeah, yeah. So could we, if we really got our heads around it and started today or next year, incrementally raise the 12.4%, or incrementally get people used to lower benefits after a certain income or wealth level?

Andrew Biggs (25:18):
Sure. Yes. The way I think about it, there are two ways people think about it: the wrong way and my way. The wrong way is, let’s just pick from this menu of options to make Social Security solvent. We can raise the payroll tax a bit, raise the retirement age a bit, cut cost-of-living adjustments a bit, raise the tax cap a bit, and do these things until the system is solvent.

Susan Pendergrass (25:34):
Yes. Yeah.

Andrew Biggs (25:54):
That’ll get you a solvent program, but it won’t be a program that particularly works very well or is good for the economy. A more effective way is to ask, what do we want this system to do? If you talk about Social Security reform, what you hear is that it’s a social insurance program, a safety net, an anti-poverty program. Okay, it has to do that. And that part is really very cheap, because we don’t literally have that many poor seniors, their benefits aren’t very high, and it’s not a problem to maintain benefits for low-income seniors. When you ask what Social Security should do, nobody is saying we need to be paying high-income seniors $100,000 a year. There’s no public purpose for it. Nobody thought it out in advance. It was simply an unintended consequence. So if you’ve got things that are really costing a lot of money and have no public purpose, and those people can save for retirement on their own, you start scaling that back. The distinction I’m making is between policy changes simply for the purposes of keeping Social Security solvent, and policy changes for the purpose of making Social Security do what it needs to do, the real public purpose, and not doing things that serve no public purpose. My point is the things I’m talking about are things you should do whether Social Security is insolvent or not.

I’ll give you an example: Australia’s retirement system. Australia is a lot like us, not particularly more conservative or liberal, just sort of normal. Their Social Security program essentially is targeted at eliminating poverty in old age. It’s actually a better safety net than Social Security provides, but the benefits decline down to zero once you get above the poverty level. And to help people above that level save for retirement, everybody is enrolled in a 401k-type account. What that says is, if everybody’s participating in retirement plans as they should, the government’s job becomes easier. Their Social Security system costs about two percent of GDP. Ours costs about six percent. It’s a third as costly, provides a better safety net, and it comes because they’re actually thinking about what they’re doing.

Susan Pendergrass (28:18):
Mm-hmm.

Andrew Biggs (28:26):
We’re literally not thinking about what we’re doing. There’s a saying in business: the worst reason to do something is because we’re already doing it. That is literally how Social Security policymaking works. Nobody knows why our benefit formula is what it is or why the tax max is what it is. It’s all just stuff we inherited from the 1970s from people who were not in any way thinking clearly about what they were doing. It was people in the 70s trying to win elections, and we end up with the bag.

Susan Pendergrass (28:52):
Speaking of 2005, there was an attempt to offload a small portion of people’s contributions into the market, right? That failed.

Andrew Biggs (29:09):
That was the Bush proposal. I was in the White House then, kind of in a number-cruncher role, so I knew that stuff pretty well. I did a lot of events with President Bush around the country. When we came up on the 20th anniversary of Bush’s proposal in 2025, I started thinking to myself, what if his plan had passed? What would have happened? So I built a model. Back then they were saying, okay, you’re going to have some reductions in traditional Social Security benefits for middle and high-income people, and then you’re going to have a personal account where you can invest part of your existing payroll tax in stocks and bonds. The total benefit you get at retirement is a combination of those two. People were speculating. Well, we don’t know what the stock market’s going to do. But 20 years later, we’ve got some data, so let’s just see what happened. The results were that for people

Susan Pendergrass (30:01):
Now we do.

Andrew Biggs (30:07):
retiring today, low and middle-income people would have had higher total benefits by a little bit. The very highest-income people, their benefits would be down by a couple percent because the cuts to their traditional benefits would be larger than the gains from their personal account. But even they would be fine; it’s not a big deal. Going forward, it looked like people would do a little bit better with the Bush plan than with the traditional system. But here’s the important thing: the traditional system is broke. We just talked about how it goes broke in 2032, with huge deficits. The Bush proposal wouldn’t have made Social Security totally solvent, but it would have addressed half or two-thirds of the long-term funding gap. So you’d get a system that would have paid you benefits around the same as, or maybe a little bit better than, Social Security, but would be in much more solid financial shape. Today the times are different, and I don’t think personal accounts are really viable. But the point is, if they had done something back then, everything could be easier today. But members of

Congress were just too afraid. Republicans were afraid of taking the political hit. For Democrats, it was too tempting to give the political hit. They knew they had to do something, but they couldn’t swallow hard and say, look, let’s just go in on this thing together. They didn’t want to give Bush the win because by that point Iraq was going badly and they really didn’t like him. So they beat him up. But the problem is Bush served his term and is happily retired in Texas. The people who really got screwed were the ones who depend on Social Security, because we didn’t fix it. And you just hope that’s not what we do again.

Susan Pendergrass (31:42):
Yeah. Somebody not us in 2045 could be having the same conversation, right? Like, if only in 2025 or 2026 we’d gotten serious. And I do think people mix up the trust fund with the whole program. A lot of people think all of Social Security is going to be bankrupt in six years, versus the reality that we’re still taking in a trillion dollars, we just need about 22% more than what we’re taking in.

Andrew Biggs (32:14):
Yeah. If you go back 20 or 25 years, there were all these arguments about whether the trust fund is real or fair or whatever. The trust fund is essentially IOUs written from one side of the government to the other. I thought at the time the trust fund is not real in an economic sense. It doesn’t make it easier for the government to pay Social Security benefits. It is a pledge that we will pay them, but it doesn’t make it easier to pay them. But here’s the interesting thing:

Susan Pendergrass (32:25):
Right. Al Gore. The lock box.

Andrew Biggs (32:50):
if having a trust fund doesn’t make it easier to pay benefits, then not having a trust fund doesn’t make it harder. The trust fund runs out, we still have taxes coming in, we can still pay 80% of what is owed. If we retarget that, you can maintain the safety net. It’s not like you’re totally insolvent or broke. All those long debates over whether the trust fund is real get resolved because the trust fund itself is gone in six years. So that doesn’t matter very much anymore. But I do hope that, as you said, we’re not in 2045 looking back on a solution of just borrowing $500 billion a year or whatever it’s going to be. People in 2045, when the federal government is bankrupt, the dollar is dropping, and all these financial crisis things we think only happen to other countries are happening to us, they would look back and say, I wish those people were more responsible. The Social Security problem, in a sense, if we went back 25 or 30 years ago, was a manageable problem. The real issue is not the demographics or the benefit growth or whatever. The real issue is just poor stewardship of this program by Congress and respective presidents. It is absolutely a governance problem. It is not a problem of economic or demographic fundamentals. All of that can be handled.

Susan Pendergrass (34:19):
Everyone wants to be Santa Claus, right? No one wants to be the Grinch.

Andrew Biggs (34:22):
It’s very true, but leadership is about giving people bad news. Good news kind of tells itself. Bad news has to be told and people have to be convinced that this is going to hurt, but we’ve got to do it. And we just didn’t have the willingness. President Clinton in the late nineties tried to do some stuff, but he didn’t deliver much bad news because we had surpluses. President Bush was willing to tell people, okay, look, you’re not going to get every penny you’ve been promised. Beyond that, the level of leadership has been very poor.

Susan Pendergrass (35:01):
Hasn’t been good. All right, well, next year when the trustees report comes out, come back and give us more bad news.

Andrew Biggs (35:09):
Yeah, until then, things are looking up. But no, it’s something people want to be aware of, and I think that’s the key thing.

Susan Pendergrass (35:13):
Well, I think one of the more important things you said is that no one understands it. People are upset and arguing over something they don’t understand the mechanics of. I do know people who think they have an account with their name on it that their Social Security taxes went into, and they’re just going to start taking the money out.

Andrew Biggs (35:23):
I have some bad news for that. Your taxes go into Social Security and go straight out the door to pay for your grandmother’s benefits. If you want to know where your taxes are, they’re in your grandmother’s bank account. So go ask her.

Susan Pendergrass (35:45):
That’s right. That’s right. All right, thank you so much. I really appreciate the time.

Andrew Biggs (35:51):
Thank you, Susan. It’s a pleasure to be with you.

Produced by Show-Me Opportunity

The post The Social Security Crisis Is Worse Than You Think with Andrew G. Biggs appeared first on Show-Me Institute.

Susan Pendergrass speaks with Show-Me Institute policy analyst Avery Frank about his new report, Connecting Nuclear Energy’s Past and Present: Guiding Missouri’s Future. They discuss why electricity demand is rising again, why major companies are turning back to nuclear, and how Missouri can position itself to benefit. From data centers and AI to regulatory hurdles and smart policy steps like a state nuclear advisory council, Avery explains how Missouri could play a leading role in America’s nuclear resurgence.

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Timestamps

00:00 The Resurgence of Nuclear Energy
03:37 Challenges and Historical Context
07:30 Missouri’s Nuclear Potential
12:06 Future of Nuclear Energy and Policy
16:09 Conclusion and Future Outlook

Transcript

Susan Pendergrass (00:00)
This morning we’re joined on the podcast by Avery Frank, policy analyst at the Show-Me Institute. You’ve got a paper out, and I’m really looking forward to talking to you about it because I have a lot of questions. You’ve done a lot of research and analysis around nuclear energy, and I see a lot in the media these days about the resurgence of nuclear energy.

Number one, why does nuclear energy seem to be back, bigger and better than ever? And secondly—well, I’ll start with that. Why is nuclear energy back in the news so much?

Avery Frank (00:34)

Nuclear power surged in the United States during the Cold War. Electricity demand was soaring—it kept going up and up. Nuclear energy is clean, reliable, and powerful. Just in Missouri, we have one nuclear power plant and it supplies 14% of the entire state’s electricity. So when you need a lot of electricity, nuclear power is something you can turn to.

Since 2007, electricity demand has pretty much flatlined as we’ve become more efficient. But with data centers, artificial intelligence, and electric manufacturing, electricity demand is back on the rise, looking similar to Cold War–era growth. Just data centers by themselves are supposed to go from 3% of U.S. electricity demand today to 8–12% by 2030. That’s a huge jump.

Susan Pendergrass (01:56)
Well, if it’s so great, why did it go away? I remember Three Mile Island, and I saw the movie about Chernobyl. When it gets bad, it gets really bad. Why did nuclear go away so hard if it’s such a great, clean, reliable source of energy?

Avery Frank (02:26)
I’d say it went away for three key reasons: public fear, regulation, and regulatory attitude. Most of the time, public fear from events like Three Mile Island drove increased regulation.

Two key events stand out. First, the National Environmental Policy Act (NEPA) *correction* in 1970. That was a huge blow for the nuclear industry. Construction costs went up 25% and projects took two years longer. Then came Three Mile Island in 1979. It was mitigated by safeguards, but public fear skyrocketed. Costs afterwards were three times higher and construction took twice as long. That was the big turning point.

Susan Pendergrass (03:54)
Then if it’s that expensive, why is it coming back?

Avery Frank (04:14)
Companies are turning to nuclear out of desperation. They need a lot of power, as I mentioned with data centers, but they also have clean climate pledges. They can’t really do it with solar or wind. They’re kind of backed into a corner.

Susan Pendergrass (04:20)
Why not solar or wind?

Avery Frank (04:39)
Solar and wind are intermittent resources. Nuclear plants run consistently. Data centers can’t have outages—you need steady, reliable power. That’s what nuclear does best.

Susan Pendergrass (05:08)
Does it generate a lot of nuclear waste?

Avery Frank (05:15)
In the U.S. we use a once-through cycle. We refine uranium, put it in a plant, then seal it up forever. Other countries like France and Japan recycle their fuel. About 96% of spent fuel is still reusable, but the U.S. stopped recycling in the 1970s. If we restarted, we could reduce waste significantly, which already isn’t that large to begin with.

Susan Pendergrass (06:09)
So what could Missouri be doing right now to take advantage of this moment?

Avery Frank (06:32)
Timing is key. Missouri already has advantages: intellectual capital, infrastructure, the Missouri University Research Reactor, and Missouri S&T producing top nuclear engineers. We also have retiring coal plants that could be retrofitted into advanced nuclear plants, cutting costs by up to 35%.

Federal reforms like the ADVANCE Act are making things easier, but Missouri could act too. For example, we could form a Nuclear Advisory Council, like Tennessee did, to identify strengths and weaknesses and make recommendations. That’s attracted significant investment there.

Susan Pendergrass (08:14)
What about public-private partnerships?

Avery Frank (08:37)
That’s a great point. We believe the free market can play a big role, just like it did in space travel. One idea is Consumer Regulated Electricity (CRE), where private developers build small modular reactors for large customers like data centers on their own dime, outside the regulated grid. That takes the burden off ratepayers while meeting rising demand.

Susan Pendergrass (10:26)
Because I assume energy demand forecasts keep being revised up, right?

Avery Frank (11:03)
Exactly, and they’re hard to predict. What if AI suddenly uses less power? Then Missouri could be stuck with excess nuclear capacity. Letting the free market take some of that risk makes sense.

Susan Pendergrass (11:39)
What about the last Missouri legislative session?

Avery Frank (12:06)
Senate Bill 4 passed. It was a big utility bill that allowed “construction work in progress,” meaning utilities can charge ratepayers during construction, not just when a plant comes online. It’s unclear if it applies to nuclear, but it could. I’ve suggested treating it more like a bond, so consumers who shoulder the risk also see some reward, like lower rates or refunds.

Susan Pendergrass (13:44)
Any other signs that Missouri welcomes nuclear investment?

Avery Frank (13:47)
Yes. I attended the Missouri Nuclear Energy Summit in Columbia. Governor Kehoe was there and said we need to develop nuclear at business speed, not bureaucratic speed. That shows real resolve. Legislators are supportive too. Missouri has the advantages and infrastructure—we just need the right regulatory environment.

If Missouri created a Nuclear Advisory Council, like Tennessee, it could attract significant investment and expertise. Energy availability is now one of the top factors for companies deciding where to locate. If Missouri can offer abundant, reliable, clean energy, we’ll be far more competitive.

Susan Pendergrass (16:20)
That’s awesome. You have a paper out on this, available at showmeinstitute.org. Thanks for coming on and explaining it to us.

Avery Frank (16:32)
Awesome, thank you for the interview, Susan.

Produced by Show-Me Opportunity

The post Missouri’s Nuclear Opportunity with Avery Frank appeared first on Show-Me Institute.

The reality is starkly different, and we shouldn’t be surprised. Historically, the economic benefits of hosting the Olympics have been dubious, and Paris is proving no exception. Despite the €7.5 billion investment, tourism has slumped, with travelers avoiding the city due to expected overcrowding. The author of the Telegraph piece writes:

Judging by the experience of other cities, many of those supposed benefits never materialise and the host is stuck with a series of expensive developments that no one can find a use for. To take just one example, the London Stadium, constructed for the 2012 games, makes a decent ground for West Ham, but it is hard to understand why taxpayer’s cash was needed to build it.

I share this in the hopes that seeing the failed promises of big sporting events overseas will make the argument at home more palatable. These investments just don’t pan out for taxpayers, be they for the Olympic Games, the Royals, Chiefs, or Cardinals. And yes, as my colleague David Stokes wrote 14 years ago, “there is a big difference between hosting an event for which you have to build facilities, like the Olympics, and hosting an event for which you already have the requisite facilities for other purposes.” But the impact, or rather the lack thereof, remains.

Given these challenges, the author suggests a permanent home for the games. Perhaps Greece. Establishing a permanent venue could drastically reduce costs, simplify organization, and minimize corruption.

That may be a viable solution for the Olympics, but for those of us stateside, the lesson needs to be learned. These events, be they Olympics or political conventions, don’t drive meaningful economic activity. They aren’t worth expending public funds on.

The post Sacre Bleu! Sporting Events and Stadia Don’t Drive Economic Development appeared first on Show-Me Institute.

De Tocqueville focused much of his analysis on America’s civil society, the tapestry of voluntary organizations that citizens put together to unite themselves and solve problems. He wrote:

“In the United States, as soon as several inhabitants have taken an opinion or an idea they wish to promote in society, they seek each other out and unite together once they have made contact. From that moment, they are no longer isolated but have become a power seen from afar whose activities serve as an example and whose words are heeded.”

I have a paper out with Washington, D.C.’s R Street Institute exploring the role the civil society has played in Kansas City’s charter schooling sector. While the traditional public school district has struggled with legitimacy and engagement over the past three decades (enrollment has  been on the decline, and KCPS struggles to recruit enough candidates to make school board elections competitive), charter schools have been an outgrowth of the community, reflecting their needs, values, and desires.

In the paper, I briefly explain the roles of local philanthropists in founding and supporting high-performing charter schools, of civic organizations like the Guadalupe Centers in creating schools geared towards the needs of specific communities, and of parent groups in recruiting potential school operators to create the types of schools that they want.

The charter sector in Kansas City is not perfect, but it is built on a sturdy foundation. Somewhere, Alexis de Tocqueville is smiling.

The post Charter Schools and Civil Society in Kansas City appeared first on Show-Me Institute.

Well, my friend, if you are, I have to admit: You had a couple of modest “wins” in 2018. Here in Missouri, free-market thinking took it on the chin in two ballot initiatives. On Aug. 7, by an overwhelming majority, Missourians voted to kill a right-to-work law passed by the Missouri Legislature in 2017. Then on Nov. 6, Missouri voters passed another ballot initiative boosting the state’s minimum wage from today’s $7.85 to $12 by 2023.

Compared with other news, however, those victories by deep-pocketed trade union groups and their co-dependent, big-government allies were small beer. The year’s big story was the striking success at the national level of free-market policies in driving faster growth and widely shared prosperity for all groups of people. For two years, the federal government has been lifting the burden of regulations and taxes on businesses and consumers alike. The dynamism of American capitalism has done the rest.

Recent GDP growth has been close to 4 percent – or about double the rate sustained over the eight years of the prior administration. Suddenly, there are more job openings than people seeking work. That, in turn, has led to higher pay for people at all income levels.

On Oct 2, Amazon CEO Jeff Bezos announced that he was raising his company’s internal minimum wage for warehouse and other unskilled workers to $15 an hour. This led to mutual back-slapping between Bernie Sanders and Bezos. The self-declared socialist complimented the world’s richest man on “doing the right thing,” and Bezos responded with self-congratulations, saying he hoped that other companies would follow his lead.

But guess what? He wasn’t leading. The U.S. Labor Department recently reported that wages for nonsupervisory warehouse employees had risen 4.6 percent from a year earlier, to $17.87 an hour. That’s almost $3 an hour more than the wage set by Amazon’s act of supposed enlightenment. Faced with the demands of an expanding economy and a tight labor market, companies did what they had to do – they raised wages to poach workers or keep the ones they have. So it wasn’t Mr. Bezos who deserved the compliment, but the unimpeded operation of the free market.

If you look around the country and the world, you see people everywhere who are fed up with the cluelessness of wealthy and long-established political elites who continue to pursue highly questionable policy objectives regardless of the cost in higher taxes, reduced paychecks, and lost economic growth. We are witnessing what the Wall Street Journal calls a “Global Carbon Tax Revolt,” with ordinary people rising up in protest against fuel-tax hikes and costly climate-change initiatives aimed at boosting unreliable renewable power. That has happened with the violent “Yellow Vest” protests in Paris and many rural areas that have rocked the presidency of France’s Emmanuel Macron. Other hot spots in the same revolt by taxpayers opposed to sacrificing growth on the altar of environmental piety include Germany and Canada, along with the states of Arizona, California, and Washington.

In sum, 2018 was a bad year for government-failure deniers. It was a much better year for those who believe in the unrivaled power of free markets to create and spread wealth and to promote greater individual freedom, responsibility, and creativity. But 2018 wasn’t all roses either, with rising fears of a global trade war sparked by retaliatory tariffs.

Tariffs are another tax – a tax on commerce. Of course, the more you tax something, the less you get of it. Missouri is a soybean basket to the world. Our state can ill afford a major disruption in world commerce. Neither can the nation. Looking ahead to 2019, let us hope that the substantial economic gains made in 2018 are not jeopardized or lost through the folly of managed (or mismanaged) trade policy.

The post 2018: A Bad Year for Government-failure Deniers appeared first on Show-Me Institute.

Well, my friend, if you are, I have to admit: You had a couple of modest “wins” in 2018. Here in Missouri, free-market thinking took it on the chin in two ballot initiatives. On Aug. 7, by an overwhelming majority, Missourians voted to kill a right-to-work law passed by the Missouri Legislature in 2017. Then on Nov. 6, Missouri voters passed another ballot initiative boosting the state’s minimum wage from today’s $7.85 to $12 by 2023.

Compared with other news, however, those victories by deep-pocketed trade union groups and their co-dependent, big-government allies were small beer. The year’s big story was the striking success at the national level of free-market policies in driving faster growth and widely shared prosperity for all groups of people. For two years, the federal government has been lifting the burden of regulations and taxes on businesses and consumers alike. The dynamism of American capitalism has done the rest.

Recent GDP growth has been close to 4 percent – or about double the rate sustained over the eight years of the prior administration. Suddenly, there are more job openings than people seeking work. That, in turn, has led to higher pay for people at all income levels.

On Oct 2, Amazon CEO Jeff Bezos announced that he was raising his company’s internal minimum wage for warehouse and other unskilled workers to $15 an hour. This led to mutual back-slapping between Bernie Sanders and Bezos. The self-declared socialist complimented the world’s richest man on “doing the right thing,” and Bezos responded with self-congratulations, saying he hoped that other companies would follow his lead.

But guess what? He wasn’t leading. The U.S. Labor Department recently reported that wages for nonsupervisory warehouse employees had risen 4.6 percent from a year earlier, to $17.87 an hour. That’s almost $3 an hour more than the wage set by Amazon’s act of supposed enlightenment. Faced with the demands of an expanding economy and a tight labor market, companies did what they had to do – they raised wages to poach workers or keep the ones they have. So it wasn’t Mr. Bezos who deserved the compliment, but the unimpeded operation of the free market.

If you look around the country and the world, you see people everywhere who are fed up with the cluelessness of wealthy and long-established political elites who continue to pursue highly questionable policy objectives regardless of the cost in higher taxes, reduced paychecks, and lost economic growth. We are witnessing what the Wall Street Journal calls a “Global Carbon Tax Revolt,” with ordinary people rising up in protest against fuel-tax hikes and costly climate-change initiatives aimed at boosting unreliable renewable power. That has happened with the violent “Yellow Vest” protests in Paris and many rural areas that have rocked the presidency of France’s Emmanuel Macron. Other hot spots in the same revolt by taxpayers opposed to sacrificing growth on the altar of environmental piety include Germany and Canada, along with the states of Arizona, California, and Washington.

In sum, 2018 was a bad year for government-failure deniers. It was a much better year for those who believe in the unrivaled power of free markets to create and spread wealth and to promote greater individual freedom, responsibility, and creativity. But 2018 wasn’t all roses either, with rising fears of a global trade war sparked by retaliatory tariffs.

Tariffs are another tax – a tax on commerce. Of course, the more you tax something, the less you get of it. Missouri is a soybean basket to the world. Our state can ill afford a major disruption in world commerce. Neither can the nation. Looking ahead to 2019, let us hope that the substantial economic gains made in 2018 are not jeopardized or lost through the folly of managed (or mismanaged) trade policy.

The post 2018: A Bad Year for Government-failure Deniers appeared first on Show-Me Institute.

Nixa Public Schools outsourced maintenance to Sodexo, based out of Paris, France. St. Louis Public Schools contract with First Student, “the largest bus company in North America,” for transportation services. More than 100 public school districts contract with Chesterfield, Mo.-based Opaa! to provide food service for public school students.

I was reminded of this piece last week when I read an interesting story by Dale Singer of St. Louis Public Radio, “Outsourcing substitute teachers deemed a success.” Singer shares how several Saint Louis area school districts, including Parkway, Normandy, and Maplewood Richmond Heights, now use Kelly Educational Staffing to find substitutes. 

This arrangement of privatized substitute services has been beneficial for everyone. In Normandy, for example, a district that has had its fair share of trouble over the past few years, the district has struggled to fill classrooms when the teacher is absent. According to Singer, “the rate of filling classrooms with substitutes had been in the 55-60 percent range; that figure rose to around 90 percent” with Kelly Educational Staffing.  The arrangement also means school districts can cut down on administrative costs in the central office.

The system is even great for retired public school teachers who wish to teach. In Missouri, a retired teacher can only work 550 hours for a school district while collecting their pension benefits. When substitute teachers are outsourced to Kelly, they no longer work for the school district. They work for Kelly Educational Staffing. This means they can work more and still draw their pension.

This is just another example of how privatization can be a good thing. As I wrote in my piece two years ago,

Opponents of school choice like to throw out the word privatization as if it was a bad thing. Yet, public schools contract with private providers in nearly every aspect of our K-12 education system.

If the goal is to provide a world-class education to students, policymakers need to avoid the knee-jerk reaction against school choice and recognize that the private sector can help deliver on the promise that every child should have access to great schools.

The post Privatization: Still a Good Thing in Education appeared first on Show-Me Institute.

As first appearing in the Kansas City Star and the American Spectator:

A surprised and outraged Franklin D. Roosevelt called it “a date which will live in infamy.” But Dec. 7, 1941, may also be remembered as one of the great turning points (for the better) in world history. It had the startling effect of rousing a sleeping giant (the United States) into purposeful action, and that was the primary factor in stopping the forces of evil from cruising to an easy triumph in World War II. In Churchill’s words, the world was in danger of entering “a new dark age made more sinister, and perhaps more protracted, by the lights of perverted science.”

The Japanese Imperial Navy struck Pearl Harbor in two waves beginning at 7:48 a.m. Hawaiian Time. Japanese aircraft destroyed much of the U.S. Pacific fleet and killed a total of 2,403 Americans – which compares to the 2,605 Americans and 372 U.S. residents from other countries who lost their lives in the surprise attack on the United States launched by al Qaeda on 9-11-2001.

As the Japanese readied for their attack, Hitler was sitting pretty – perilously close to winning a two-front war. Having already conquered France and other smaller European nations in 1940, German troops scored one victory after another against the poorly equipped and outmanned British Army in Southern Europe and North Africa in 1941. “Evacuation going fairly well – that’s all we’re really good at!” Alexander Cadogan, at the British Foreign Office, observed in his diary during the British withdrawal from Greece. “Our soldiers are the most pathetic amateurs, pitted against professionals.”

Things looked no better on the eastern front – with the German army on the outskirts of Moscow. In three parallel offenses, German forces invaded Russia in late June – sweeping across the vast countryside with the same lightning speed that marked the earlier invasions of Poland and Western Europe. Desperately short of every kind of war materiel from boots and rifles to tanks and planes, the Russian army was saved by the onset of winter.

Pearl Harbor changed everything – ending the long, enfeebling debate inside the U.S. between isolationists and interventionists. Suddenly, America was at war, and almost everyone – from FDR on down to Charles Lindbergh, hitherto an arch isolationist – agreed that this was a war that had to be fought with everything we had. Overnight Lindbergh turned from dove to hawk. Though unable to regain the Army Air Corps commission which he had resigned in April 1941, Lindbergh flew 50 combat missions in the Pacific Theater as a civilian consultant.

Within days of Pearl Harbor, hundreds of thousands of Americans made up their minds to join the armed forces. That included the two oldest sons of Joseph Kennedy, another isolationist and outspoken advocate of the appeasement of Nazi Germany, whose departure from London where he had served as U.S. ambassador to the Court of St. James’s was a major addition by subtraction for both Roosevelt and Churchill. The older Kennedy left England in October 1940, at the height of the Battle of Britain, which reduced much of London and other cities to rubble.

My late father – then 24, a reporter with the Kansas City Star, with a wife and baby daughter – was one of the many who rushed to serve. He failed his first Navy physical – being exceedingly thin – but passed the second time after gorging on food and water. He was one of the “ninety-day wonders” – sent to officer training school for just 90 days of rigorous physical and classroom training – and went on to skipper a submarine chaser that saw action along the eastern seaboard, off the coast of North Africa, and in the North Atlantic.

If any disaster may be called a good disaster, it was Pearl Harbor, which awakened America with a violent start and averted what might easily have been the greatest setback to human freedom, joy, and advancement in world history.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute.

The post Remembering Pearl Harbor appeared first on Show-Me Institute.

In a classic episode of The Three Stooges, the phrase “Niagara Falls” triggered a visceral reaction from Moe and Larry, which ended with Curly getting punched, slapped, and thrown to the ground. I am often reminded of that episode when I talk to policymakers and public school officials about school choice. Like Moe and Larry, they seem to have their own trigger word—privatization.

Many reject outright the idea of allowing public dollars to follow a student to the school of his or her choice—including a private school. Never mind that there is a long history of individuals using public dollars at privately operated pre-schools and universities. When faced with this proposition for K-12 education, Missouri Gov. Jay Nixon (D) said that is where he draws the line. Missouri Rep. Jeff Grisamore (R–Lee’s Summit) echoed his sentiment: “Public schools should be publicly funded and private schools should be privately funded, period.” Like the reaction to Niagara Falls, these responses are almost comical.

They are laughable because public dollars already flow to private institutions. Examples abound. Nixa Public Schools outsourced maintenance to Sodexo based out of Paris, France. St. Louis Public Schools contract with First Student, “the largest bus company in North America,” for transportation services. More than 100 public school districts contract with Chesterfield, Mo.-based Opaa! to provide food service for public school students.

Every day, school districts rely on private, for-profit providers to deliver services and supplies. Some even contract with private schools to serve their most at-risk students. Yet, for some reason there is strenuous objection to private school choice programs that allow individuals to direct their education dollars to the school of their choice.

Opponents of school choice claim that private schools are unaccountable. That is, they do not have to teach the state’s academic standards, administer state standardized exams, or comply with a host of burdensome regulations.

This argument assumes that the only way to have accountability is through government regulations. That is not the case. Accountability simply looks different in a school choice system.

When parents choose a school for their child, they essentially are entering into a contract with the school for the education of their child. In the traditional system, parents have little recourse if the school fails to meet that obligation. They can meet with teachers, principals, and central office staff. They can even take their plight to the school board. At the end of the day, however, they have very little ability to hold the school accountable for meeting their needs. They are dependent upon the school for change.

In a school choice system, however, the dynamic is very different. In fact, the arrangement between parents and schools in a school choice system closely resembles the contracts between public schools and private service providers. If Opaa! fails to provide nutritious meals, they can be fired. Similarly, if a school fails to keep a child safe or does not live up to the expectations of the parents, the school can be fired.

Choice is a powerful accountability tool.

Opponents of school choice like to throw out the word privatization as if it was a bad thing. Yet, public schools contract with private providers in nearly every aspect of our K-12 education system.

If the goal is to provide a world-class education to students, policymakers need to avoid the knee-jerk reaction against school choice and recognize that the private sector can help deliver on the promise that every child should have access to great schools.

James V. Shuls, Ph.D., is the director of education policy at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Privatization in Education-Not as Scary as Some Think appeared first on Show-Me Institute.

Ludwig von Mises, a mentor to Friedrich Hayek and a major figure in economics in his own right, set out his views on capitalism and inequality in a slender book (just 113 pages) called The Anti-Capitalistic Mentality. First published in 1954, and readily available online for less than $10, it is well worth reading today.

Mises’ treatise on why capitalism sits in the dock, falsely accused of various crimes against humanity, is a classic: bravely saying what still needs to be said. It offers a robust rebuttal to the jaundiced view of capitalism found (most recently and conspicuously) in Thomas Piketty’s Capital in the Twenty-First Century.

In The Anti-Capitalistic Mentality, Mises asks: Why do so many people “loathe” capitalism? He gives a threefold answer.

The first factor is simple ignorance. Few people credit capitalism for the fact that they “enjoy amenities that were denied to even the most prosperous people of earlier generations.” Telephones, cars, steel-making, and thousands of other advancements are all “an achievement of classical liberalism, free trade, laissez faire, and capital” — with the driving force being the profit motive and the deployment of capital used in the development of better tools and machines and the creation of new products. Take away capitalism and you wipe out most or all of the extraordinary progress that has been made in raising living standards and reducing poverty since the dawn of the Industrial Revolution.

The second factor is envy, the green-eyed monster, which causes many people to think they have gotten the short end of the stick. As Mises observes: “Capitalism grants to each the opportunity to attain the most desirable positions which, of course, can only be attained by the few … Whatever a man may have gained for himself, there are always before his eyes people who have outstripped him … Such is the attitude of the tramp against the man with the regular job, the factory hand against the foreman, the executive against the vice-president, the vice-president against the president, the man who is worth three hundred thousand dollars against the millionaire, and so on.”

And finally, the third factor is the unceasing vilification of capitalism by those who seek to constrain or destroy it. As Mises notes, the critics and anti-capitalists go on telling and re-telling the same story: saying that “capitalism is a system to make the masses suffer terribly and that the more capitalism progresses and approaches its full maturity, the more the immense majority becomes impoverished.”

Indeed, that is the story Piketty tells in his book, which has soared to the top of the New York Times and Amazon best-seller lists. Does inequality rank as the great defining issue of the twenty-first century? If you agree with Piketty, it does. He contends that disparities in income and wealth are spiraling out of control, setting the haves- against the have-nots. Without “confiscatory” taxes to create a new social and economic equilibrium, he warns, today’s democracies may ultimately collapse, taking capitalism and the capitalists down with them.

Piketty makes much of the seeming fact (some dispute his statistics) that those at the highest levels of income in the United States have claimed a sharply rising share of total U.S. national income over the past three or four decades. From there he leaps to the conclusion that the vast disparity in income between the top 1 percent and the bottom 90 percent will lead over time to the emergence of a new “patrimonial capitalism.” With nothing (save perhaps violent revolution) to worry about, the heirs to big fortunes will turn into a new class of rentiers, living off the rent they receive from owning land and other forms of capital.

In his analysis, it is set in stone that return on capital (r) outstrips economic growth (g), which means that the heirs to great fortunes stay on the fast track to even greater wealth – without even having to work – while the lower and middle class are condemned to economic stagnation or utter hopelessness. His little formula, r>g, is supposed to be one of the great takeaways from the book, but it points up one of the problems of presenting a far-too-static picture of how people behave in a competitive marketplace.

That would not have escaped Mises’ attention. Mises would have challenged Piketty’s assumption that the heirs to great fortunes would manage their money wisely, or that they would have the same success as others (more driven than they) in searching out the best investments. Mises maintained that “the dull and stolid progeny” of people who built business empires were likely to “fritter away” their heritage and “sink back into insignificance.”

Under a capitalist system worthy of the name (meaning, to Mises, a competitive market economy free of the crippling effects of state planning and controls); it is neither the powerful industrialist nor the rich investor who calls the shots; it is ordinary people in their capacity as consumers. Through their “buying or not buying,” consumers provide “a daily referendum on what is to be produced and who is to produce it.” They have the whip hand – the power to “make poor suppliers rich and rich suppliers poor.”

One may almost pity the poor capitalist portrayed by Mises. However hard he might work or fast he might run, someone is probably gaining on him. At all times, other suppliers are striving to unseat the incumbents by discovering new and better ways of serving their customers. In comes a Wal-Mart or Target and out goes a Sears or K-Mart. It is a battle fought with an unending supply of fresh recruits, and it is never the case (as Piketty claims) that “The past (i.e. wealth accumulated from previous success) devours the future.” Rather, it is the future (whatever the next big thing may be) that replaces the present with something better.

In The Anti-Capitalistic Mentality, Mises states unequivocally: “Nobody is needy in the market economy because of the fact that some people are rich. The riches of the rich are not the cause of the poverty of anybody.”

Look at the fastest-growing countries in today’s world. Is there not a natural compatibility – as opposed to an inherent contradiction – between major advances in the standard of living in some countries and the ability of their most enterprising citizens to make spectacular gains? That is what has happened in China as a result of economic liberalization: the number of Chinese billionaires has skyrocketed (and is now close to the number of U.S. billionaires), while hundreds of millions of people inside China have worked their way out of poverty.

Is it true – as Piketty contends – that we are witnessing a hyperconcentration of wealth inside the United States?

It might be true if the people with the highest incomes remained the same from one year to the next – over an extended period of time. But they are not the same people. Just as Mises would have expected, it is an ever-changing cast of characters. A recent report from the Tax Foundation data shows IRS data on people reporting a million dollars or more in income over a nine-year period. Fully half of these people made a one-time-only appearance. Only 15 percent of them reported at least a million in income two of the nine years and only 5.6 percent made it all nine years.

There is no danger of an oligarchy of the rich taking shape here to rival the power and permanence of the landed aristocracies in the pre-capitalistic France and Britain. (Note: This assumes that governments do not intervene, as they have been doing, to favor certain groups and enterprises. For more on how government increases income inequality, see Frank Hollenbeck’s article on income inequality, and Andreas Marquart’s work on this topic.)

But there is something else to worry about – something that caused Mises to lose sleep. That is the thought that the natural tendency under capitalism “towards a continuous improvement in the average standard of living” will be stymied by a growing “absence of capitalism” due to “the effects of policies sabotaging the operation of capitalism.” Among those perverse policies, Mises pointed to credit expansion, gunning the money supply, and raising minimum wage rates. Still more, he railed against progressive policies that diminish individual choice and leave more and more economic decision-making in the hands the state. Mises’ greatest fear was that people would “renounce freedom and voluntarily surrender to the suzerainty of omnipotent government.”

Ironically, the most ardent proponents of big government are those who carry on the most about inequality. Do they want nothing more (to paraphrase Churchill) than an equal sharing of misery?

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, a free market think tank based in St. Louis, MO.

The post Thomas Piketty and Mises’s ‘The Anti-Capitalistic Mentality’ appeared first on Show-Me Institute.

This is exactly why I listen to the Freakonomics podcast, which highlights the ways that economics can provide insight to seemingly inexplicable situations. Recently, Freakonomics discussed efforts in Romania to fine witches if their predictions fail to come true. The jail-time punishment being proposed for multiple false predictions could result in six months to up to three years in jail.

I suppose that if you acted on a false prediction, you would want to punish the person who led you astray. But think of all of the people and organizations who make predictions that affect the way our economy runs. We don’t penalize, say, politicians, economic development officials, or coalition groups when the promises they make fail to materialize.

As Steven Dubner, host of the Freakonomics podcast put it, “I don’t care if you’re anti-witch or pro-witch or witch-agnostic. Why should witches be the only people held accountable for bad predictions?”

In Missouri, it isn’t very hard to find evidence of bad economic development predictions. The recent Mamtek scandal is one. The 2006 prediction that the Ballpark Village development in downtown Saint Louis would result in more than $700 million in economic impact looks unlikely, to put it kindly. And, for a recent example, we have the ever-changing job estimates associated with a proposal to dedicate $300 million in state tax credits to construct warehouses and facilities.

Consider also a state audit report that found, among many other problems, that Missouri’s Low Income Housing Tax Credit is much more costly than initially predicted. How about the overly rosy economic growth assumptions used to sell Tax Increment Financing (TIF) projects? An East-West Gateway Council of Government study found that “broad measures of regional economic outcomes strongly suggest that massive tax expenditures to promote development have not resulted in real growth” (emphasis mine).

Of course, I’m not advocating that we throw politicians and economic development officials in jail for making the wrong promises. But I would suggest, for the health of Missouri’s economy, that we start holding these people responsible for their predictions.

As Freakonomics co-host Steve Levitt points out in the podcast, people have every incentive to make absurd predictions:

So, most predictions we remember are ones which were fabulously, wildly, unexpected and then came true. Now, the person who makes that prediction has a strong incentive to remind everyone that they made that crazy prediction which came true. …But if you’re wrong, there’s no person on the other side of the transaction who draws any real benefit from embarrassing you by bringing up the bad prediction over and over.

Levitt’s point reminds me of the St. Louis Regional Chamber and Growth Association’s outlandish predictions. The RCGA frequently issues press releases touting incredible job and investment numbers. Sometimes, the message of one RCGA study (say, that the region needs to build millions more in warehouse space) conflicts with another RCGA press release (that the region has an abundance of cheap warehouse space). The agency clearly isn’t worried about making an unlikely prediction, either.

I also wonder about the Missouri Department of Economic Development, and the state legislature’s propensity to create tax credit programs in the hopes of attracting jobs to the state. Audit reports have shown that these tax credits are more expensive than anticipated, and that the state gets little in return. And yet, in the face of  bad earlier predictions (and even blatant overstatements), state legislators continue to fail to pass substantive tax credit reform.

A solution that Freakonomics proposes is a little unexpected, but elegant. We all are familiar with baseball players’ batting averages. Let’s apply those to people who make economic development predictions.

Consulting organizations should report their track record of success (and failure). What if every estimate of job and investment creation the RCGA publishes had to be accompanied with a percentage showing the accuracy of previous estimates the agency predicted? What if, when contemplating creating new tax credit programs, we considered whether existing programs delivered on the promises used to create them?

If we are considering whether hundreds of millions of taxpayer dollars should be allocated to a particular project, it is not enough to take proponents’ claims for fact, especially if those organizations have a track record of poor prediction. We need to know how frequently those predictions actually become reality.

We wouldn’t throw anyone in jail. We might find that some organizations are really good at making predictions. And, like Romanians burned by a bad prediction from a witch, we could stop relying on organizations and individuals that provide wildly unreliable predictions.

The post Witches, Economic Development Promises, and Baseball appeared first on Show-Me Institute.

The state of Missouri, like many governments around the world, has decided that utilities are to be treated differently than other industries. For the most part, Missouri long ago granted monopoly powers to utilities, along with price regulations. Private, investor-owned utilities are granted monopoly jurisdiction within certain areas of the state, and their prices and fiscal structure are subject to strict regulation by state law and the Public Service Commission (PSC). This system works fine in some capacities, but current regulations are preventing the development of increased nuclear capacity — something that could greatly benefit the citizens and economy of Missouri. It is time for the General Assembly to relax the restrictions on utility financing that prevent a second nuclear reactor from being constructed in Callaway.

Ideally, we would have less regulation, more competition, and more choice in all aspects of utility provision in Missouri, but it is necessary to deal with current realities. The state’s laws and regulations make it prohibitively difficult for Ameren to construct an expanded nuclear power facility. The primary obstacle is the construction-work-in-progress (CWIP) law that prohibits utilities from charging current energy customers for expenses incurred during a construction phase. Even if such construction would bring more electrical power, environmentally cleaner power, and potentially lower rates over the long run, the law prevents the project from moving forward unless Ameren can fund the entire project itself without passing on any charges to customers until after the operation is completed and running. This requirement is so restrictive that it has succeeded in preventing any nuclear power expansion in Missouri since it was passed in 1976 — which is exactly what its backers intended.

Thankfully, utilities do experience some degree of competition. Regulated gas, cable, and water companies still compete with propane, satellite television, and well or septic systems. But consider the regulatory obstacles that face one of these monopolies when it plans to begin a major capital project. Companies that compete in a free market, on the other hand, have the option of raising their prices to help pay for such projects. That type of funding strategy may or may not be a smart move, depending on numerous factors, but at least they have the option. Ameren does not, because the interests of anti-nuclear activists in the 1970s still dominate our discussions in 2011.

The citizens of Missouri now know a great deal more about the risks of nuclear power in Missouri then they did when CWIP was passed. Nationwide, support for the increased use of nuclear power is strong. A March 2010 Gallop poll found that 62 percent of Americans favored the use of nuclear power, with only 33 percent opposed.

If completed, an expanded nuclear power plant in Callaway County would benefit all of Missouri, not only Ameren customers or shareholders. Because of the way the electrical grid is maintained, the increased baseload power generated at Callaway would be put to safe, efficient, and clean usage throughout the state and country. For that reason, it is fair that other regulated power utilities participate in financing the plant and that their customers pay a portion of the costs.

A pending bill, S.B. 50, would exempt the second Callaway plant from some of the CWIP regulations, and has received early bipartisan support. Unlike the failed proposal to amend CWIP two years ago, this bill addresses the use of CWIP only for nuclear power plant expansion. The bill’s sponsors deserve credit for that. Support for or opposition to this bill should now be based on the merits of nuclear power, rather than on tangential issues.

Nuclear power still has significant shortcomings that need to be settled, such as long-term waste storage. France has demonstrated that reprocessing of nuclear waste can work, and that might be one answer for the United States. A few powerful federal politicians have been able to prevent the installation of one workable storage idea: Yucca Mountain. But even though technological solutions are being temporarily held hostage to narrow political interests, that is hardly a reason for Missouri to halt the power expansion it requires for economic growth. History has shown that technological progress will win out in the end, to the benefit of its pioneers.

Missouri needs increased generation of environmentally friendly energy, and nuclear power is currently the most effective way to provide it. Removing CWIP restrictions from this project is a necessary maneuver. It’s important to remember that end-consumers of energy will pay the final costs either way, whether by financing construction or by purchasing less-efficient energy. A second Callaway plant is one instance in which the benefits of an increased supply of clean, efficient energy in the future are worth the costs of higher consumer prices in the present.

David Stokes is a policy analyst for the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post Changes to Utility Financing Regulations Necessary for Cleaner, More Efficient Energy appeared first on Show-Me Institute.

These schools are not perfect — far from it, in some cases — but, for most of these students and parents, the system works relatively well. There is a well-known correlation between academic achievement and socioeconomic status, and students from higher-income families outperform lower-income students on practically every measure. This disparity is also reflected in the achievement gap between white and minority students. Tino Sanandaji, a Ph.D. student in public policy at the University of Chicago, recently compared the scores of non-Hispanic white American students with those of non-immigrant Europeans on the Programme for International Student Assessment (PISA) test, and found that the American students performed admirably. White Americans scored seventh out of 28 countries, beating students from Denmark, Sweden, and France, as well as an average of 15 European Union countries.

On the other hand, our educational system routinely fails poor and minority students — those least able to choose a different school by moving to another district. Although the racial achievement gap has narrowed somewhat in recent years, at age 17, black and Hispanic students still score about 10 percent worse on average than white students on the reading portion of the National Assessment of Educational Progress (NAEP). There a number of proven ways we can expand choice and improve academic achievement for those students.

Missouri has already experienced some success with charter schools. According to a 2009 study by the Center for Research on Education Outcomes at Stanford University, students attending charter schools in Missouri show more improvement in both mathematics and reading than similar students in traditional public schools, and this remains true when looking only at black and Hispanic students. Unfortunately, state statute limits the existence of charter schools to the cities of Saint Louis and Kansas City. If that restriction were removed, the gains of charter schools could be expanded to students in other struggling districts.

Furthermore, we could provide parents and students with more options in existing public school districts simply by restructuring how the schools are funded. Under a weighted-student-formula program (also known as “backpack funding”), students can attend any school within the district, and the schools are funded based upon the number of students they attract — with more dollars devoted to students who typically require more resources to educate (e.g., those with disabilities). Schools are then allowed more autonomy to experiment and compete for students — and for the money attached to them. In California, the cities of San Francisco and Oakland both implemented backpack funding and saw large gains in student achievement across ethnic and socioeconomic lines. San Francisco is now the top performing large urban school district in California. There is no reason, outside of political intransigence, that the Saint Louis and Kansas City school districts could not enact the same reforms.

It would be difficult to design an educational system worse for the disadvantaged than one that assigns students to schools based on the housing that their parents can afford. Although our best schools, public and private, are the product of parental choice, poor and minority students are frequently stuck in monopolistic urban school districts. School choice is not a panacea for this problem, but giving parents the power to choose is a necessary step toward ensuring a quality education for all of Missouri’s students.

John Payne is a research assistant for the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post Real School Choice Options Would Help to Narrow Educational Achievement Gap appeared first on Show-Me Institute.

Whatever it is called, Missouri wants to raise the taxes and fees on it. Not surprisingly, for those who follow this blog and know the real motivations behind occupational licensing and taxing, some current tattoo shop owners support the tax and fee increase. KOMU reports (emphasis added):

“Surprising to some, some artists think fees should go up because it will help get the people who do tattoos illegally out of the market. Dean Jones, managing owner at Living Canvas in Columbia, says the possible increase does not bother him at all.”

I love how they make a big deal in the story about shops that don’t give out after-care instructions for their “illegal” tattoos. It took me less than 10 seconds to find online all the after-care instructions you would want.

I am not opposed to all regulation of the tattoo industry. I think statewide licensing of individual artists is unnecessary, and many other tattoo regulations are absurd, but basic sanitary inspections by county health departments seems reasonable.

I have news for people who believe that a higher license fee will keep people from performing tattoo work illegally: Higher costs and increased regulation may mean that more people — not fewer — will start doing the work “illegally.”

The state should get out of the business of regulating tattoo artists, and leave public health issues to local health departments.

The post Tattoo You appeared first on Show-Me Institute.

On a closely related point, I recently found one reason why AmerenUE was so intent on expanding within Callaway County — a project that hopefully will succeed eventually. Callaway County has a commercial property tax surcharge of just 11 cents per hundred dollars of assessed valuation, one of the lowest surcharge rates in Missouri. (Only two counties are lower: Reynolds and Camden.)

The post What to Do With Nuclear Waste in Callaway County? appeared first on Show-Me Institute.

However, reading Mound City Money reveals one aspect of French policy that ought to stay in France: free newspaper subscriptions for teenagers. If you’re going to waste money on newspapers, at least give them to someone who will read them.

The post One Way in Which We Should Not Imitate France appeared first on Show-Me Institute.

France has more than 60 nuclear power plants that generate more than 80 percent of its electrical power. France also is the world’s largest exporter of electrical power, sending 18 percent of its production to other nations.

We’ve followed in France’s footsteps by establishing an official language; it would be a good idea to emulate their openness to energy innovation, too.

The post Can Missouri Catch Up to France? appeared first on Show-Me Institute.

The author of the Times piece dislikes the VP office for several reasons, but primarily because presidential candidates select running mates based largely on political benefits instead of leadership qualities, so the nation is damaged when one of those people moves up to be the president after a death or impeachment. The author cites several examples in which, because of a death, the voters ended up with someone very different than the person they had elected. (The author does, however, make one blatant factual error that the Times corrected.) Because governors and lieutenant governors in Missouri do not run on the same ticket, part of that objection is made moot. The author also cites Mexico and France as countries with system similar to ours, that do not have VPs.

I do not agree with the author about the VP position — nor the lieutenant governor position, for that matter. Just because voters usually don’t put much weight into the quality of a VP candidate when they make their choices for president does not mean they can’t at least consider it. For each position, there are essentially two main jobs: cast tie-breaking votes in the Senate, and be available in the case of a death or impeachment (which we have come close to twice during the past 35 years). In years past, presiding over the Senate was also a large part of the job. That changed a long time ago in DC, and a few decades ago in Jeff City, as well, after a lawsuit between the majority Democrat senate and the new Republican lieutenant governor (Bill Phelps) was won by the senators.

As for France and Mexico, I love comparative politics, so I’ll dive in. As you may or may not know, most nations have a head of state and a head of government. For example, Britain has a queen and a prime minister. Nations without kings, no matter how little power they hold, generally choose to elect another official to hold a post — that might be called president — to serve as head of state. Germany and Israel are two examples of this. That post tends to have very little power, is mostly ceremonial, and usually goes to popular elected officials later in their careers. The United States is one of the only countries that combines both positions into one office.

Most nations also have bicameral legislatures, like ours. However, generally one house dominates the other. Historically, the House of Lords had a great deal more power than the House of Commons, but now the reverse is usually true. So, the leader of the House of Commons, or whatever it may be called, is the Prime Minister, and by far the most powerful politician. In the United States, both of our houses of Congress are comparable in power, so we don’t have a singular dominant politician. (Don’t even get me started on the Federal Reserve.) In short, because we don’t have a clearly marked other person to take over in case of a death (head of state for head of government, or vice versa), it behooves us to elect someone to be designated to fill that role, if required. The same goes for governors in the states.

France is interesting in comparison, because it is one of the few western democracies to maintain more power in its president than in the prime minister, although it does a have a prime minister who is very influential. If the president of France were to expire, the prime minister would be there to manage things in a way that the Speaker of the House and the Majority Leader of the Senate might not agree with each other on. As for Mexico, its system comes out of a long period of one-party rule, and it has a strict one-term limit, anyway. Historically, if its president died, you could count on another member of the one party to be quickly chosen to replace him. With a two-party system, this is different — but I’m no expert on Mexican politics, so I don’t know what to recommend.

This post is getting too long, but I want to correct one inconsistency in the Times author’s logic. He says we should abolish the VP post and designate the secretary of state to serve until we can elect a new president. But, without a VP, what does he think would happen to the office of secretary of state? That office would quickly become politicized, with pressure on candidates to name who they would select for it during the campaign, so that voters could judge them just as they do the VP. The idea that qualified diplomats and generals would continue to be chosen for secretary of state if it was designated to succeed the president is crazy. Same goes for any other position that could be made second in line. We are much better off keeping the VP, and the lieutenant governor, and allowing voters to consider it is much or as little as they want in their votes.

The post Vice Presidents and Lieutenant Governors: Should They Be Abolished? appeared first on Show-Me Institute.

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Although official state business is not always understandable to ordinary Missourians, the reason probably has more to do with bureaucratic rules and jargon than with any language barrier. Nevertheless, the possibility that official state business will someday be conducted in a foreign language concerns legislators so much that they’re trying to prevent it. In November 2008, Missouri voters will decide whether to tack an English-language amendment onto the state Constitution.

The proposed amendment is a bad idea. We needn’t work to prevent this hypothetical problem, which will almost certainly never materialize on its own. Missourians will continue to speak English long into the future, both in official business and in their daily lives.

It’s hard to predict how culture and language will evolve. Based on the history of immigration into Missouri, one might guess that Missouri’s common language today would be French or German. But as we all learned in elementary school, immigrants in the past assimilated and learned English. The great-grandchildren of Germans communicate easily with the great-grandchildren of immigrants from France or Ireland. Even though immigrants’ descendants often hold on to cultural traditions and ethnic foods, this doesn’t cause a problem for society. In fact, most of us celebrate diversity.

Some argue that today’s immigrants are different. They claim that immigrants no longer want to assimilate and become Americans. In the past, immigrants left everything behind, traveled for weeks or even months, and then had to start new lives. Now, the argument goes, family and friends back home are just a phone call away, so immigrants keep in touch and retain their identities.

The evidence paints a very different picture: Immigrants continue to join American culture despite the ease with which they can speak with or visit people they left behind. Even if Missouri receives a large influx of immigrants who don’t speak English, we can be confident that the immigrants’ children will learn our language. Second- and third-generation immigrants generally assimilate and adopt the language of the majority. For example, a study of immigrants in California found that 96 percent of third-generation Mexican-Americans prefer to speak English at home. Missouri’s level of immigration is nowhere near California’s, so we would expect third-generation immigrants here to speak English at even higher rates. And a Pew Hispanic Center survey found that 92 percent of Hispanics consider “the goal of teaching English to the children of immigrant families” to be very important, higher than the percentages of whites or blacks who valued teaching English to immigrants so highly.

Immigrants still learn English because this country offers so many opportunities for English-speakers. It just wouldn’t be worth it to forego learning English in the hope that someday city council meetings will be held in another language. Immigrants want well-paying jobs and they want their kids to get an education; English is a prerequisite for participating in American society. True, it’s easier than it once was to retain one’s identity, but that means that it’s also less necessary for immigrants to stay in tight-knit communities all the time. And there are many resources for people trying to learn English, such as courses at public schools and libraries—a luxury that 19th-century immigrants didn’t have.

Future immigrants will learn to speak English, whether or not we pass an amendment about it. But the more we add amendments that don’t matter, the less seriously our state’s Constitution will be regarded. And legislating about remote possibilities draws attention away from immediate quandaries, stirring up fear over imaginary threats. This proposed amendment won’t solve any of Missouri’s problems; we should focus instead on policies that will make a difference.  

Sarah Brodsky is a policy analyst at the Show-Me Institute.

The post Missouri Doesn’t Need an English-Language Amendment appeared first on Show-Me Institute.