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.

We have all seen the television ad where the man walks into the sandwich shop and orders bread but nothing inside of it because that’s all he can afford. “Everything is so expensive these days,” he says.

That may well be how many Americans are feeling, but I only wish that were true for our government. The price tags for government’s infrastructure “improvements” are becoming astronomical, and at some point we have to recognize that this isn’t an unfortunate fact of life. The high cost is a choice, not a requirement.

Let’s start with the high-speed rail disaster in California, which was originally approved in 2008 for an estimated cost of $33 billion; the current estimate is $135—for a system that won’t have anything completed until the 2030s at the earliest. Actually connecting Los Angeles and San Francisco, as promised, is many more years away. All this for a system that hasn’t laid any track 15 years after it was approved.

It doesn’t have to be this way. In Spain, they built an entire 2,500-mile system of high-speed rail for $62 billion. That’s obviously a lot of money, but it got them an entire, advanced rail system for less than half of what California will spend for two routes at best.

Unlike high-speed rail, elevators have been around for a long time. There is nothing fancy about an elevator. Yet in New York City, a project to replace 70 elevators at transit stations cost taxpayers $5.5 billion, or about $80 million per elevator. Elevators for subways may indeed be more expensive than in office buildings, but in Germany they have managed to hold the cost to less than $10 million per elevator per transit station. Something is deeply wrong with how we fund government infrastructure in America.

Closer to home, St. Louis County is considering several options for its governmental complex in Clayton. The most expensive and most comprehensive plan—which includes replacing the main county administration building with an entirely new building among other projects—is estimated by the county to cost around $600 million. If that sounds preposterous, it should. The key part of that proposal—the new administration and public safety building in downtown Clayton, is estimated to cost $250 million for a 190,000-square-foot building. (This doesn’t even include the cost of demolishing the existing buildings.)

Currently, a 21-story residential tower has been approved by the city for downtown Clayton. It would have 299 units, some retail space, and over 300,000 total square feet. What is the total estimated cost of that project? $106 million. This residential tower would be significantly larger than the new county building, yet it would cost approximately $150 million less. Based on cost per square foot, the proposed county building is almost four times as expensive.

In Robert Caro’s book The Powerbroker, about Robert Moses, the autocratic boss of New York city and state infrastructure projects for four decades in the mid-20th century, Caro spent an entire chapter detailing the way Moses employed various interest groups to get his projects going, no matter the cost. Moses had support from a wide cross-section of interest groups because he made sure that they all made money from his projects. Construction companies, contractors, labor unions, consultants, banks, law firms, the list goes on. If any politicians started opposing his projects, there was an orchestrated campaign of pressure from all these groups to get it approved. The people who benefitted from these enormous expenditures benefited greatly and quickly. The taxpayers or commuters who paid more than they should have did so in small increments over time via higher taxes, tolls, or other fees, but they didn’t feel the higher costs all at once. So the taxpayer shakedown has continued on to the present day.

In simpler terms, the developer of the high-rise in Clayton is spending its own money to build it, where St. Louis County officials are not. The county is spending taxpayer money, obviously, and when you do that in Missouri’s largest and richest county you can get away with spending a lot of it. Taxpayers aren’t going to revolt over an extra $50 a year in taxes spread out over 365 days of sales tax on purchases or mixed in at the end of the year with a dozen other property taxes on their bill. This is why you end up with a proposal for a new county building that costs four times more (per square foot) than a new, private building nearby.

Addressing this overall problem is going to be extremely difficult. Every option for change involves cutting off someone else’s golden goose. For now, let’s just hope St. Louis County government doesn’t put the New York Transit Authority in charge of the new elevators. Then it’s going to really get expensive.

The post Government Infrastructure Costs Are Out of Control appeared first on Show-Me Institute.

As Harford explains, Sony, Xerox, Kodak, and the British Army couldn’t readily adapt to new ideas because of their organizational structure. Teams of lawyers who were used to negotiating large contracts with banks and government agencies did not translate well into marketing and selling a computer to a single consumer, and a regimented military with centuries of tradition could not readily adapt to the advent of mechanized warfare.

So what does this have to do with in-person learning during the COVID-19 pandemic? The issue is one and the same—traditional school systems are simply not organized in a manner that allows them to adapt to the new challenges presented by this virus.

Think about the two big issues that school leaders must address in light of the coronavirus—social distancing and the mixing of students. For social distancing, students should be able to sit in classrooms with several feet of space between them and their nearest peers. And, to the extent possible, the number of other students that a student encounters each day is supposed to be limited. If a student is in one class with a total of 20 other people, they only have 20 possible chances of exposure to COVID-19. If, however, they switch to a new class every hour, the possible chances of exposure increase exponentially.

The solution to this seems simple enough: reduce class sizes and reduce the number of times students switch classes. As we have seen throughout the country, however, this has been difficult for school districts to accomplish in practice.

The reason schools are not able to meet in person is because they are trying to deliver education in the same way that they have always delivered education. Some states have laws that dictate when the school year must begin and when it must end. In many school districts, contracts spell out when teachers may be asked to begin work, how many classes they may be asked to teach, and a host of other issues that shape a school system’s operational plans.

The current structure, from the school board down to the kindergarten teacher, is designed to deliver an in-person education that packs 20 to 30 students in a single class. Additionally, at least at the middle- and high-school levels, a bell rings every 50 minutes to tell the students to shuffle through the halls to a new classroom filled with different students.

Most school districts have responded to the pandemic in one of three ways: They’ve gone fully virtual, they’ve gone hybrid with half of the students coming to school each day, or they have rolled the dice with students returning to “normal” as much as possible. None of these scenarios fully meets the challenges of social distancing and mixing. Virtual learning gives up on in-person learning altogether. Blended learning only addresses the social distancing by having half as many kids on campus at a time, but typically still has kids mixing in different classes throughout the day. And doing school “as usual” almost ignores the problem altogether; which may be possible (even desirable) in small schools, elementary schools where the effects of COVID have been mild, or in communities where the number of cases is extremely low. Nevertheless, school as usual does not address the issues of distancing or mixing.

Addressing both the social distancing problem and the mixing problem caused by COVID-19 would require school districts to be nimble and to rethink many of the norms governing how schools operate. Do we have to have two semesters and four quarters, or could we spread the school year over the entire calendar year? Could we use trimesters? Do students have to take seven or eight classes at once, or could they take two or three classes at a time? Do we have to meet all day from 7:30 a.m. to 2:30 p.m., or could we have two shifts of in-person learning?

If we reconsidered the norms around school and how schools must operate, we would have a much better chance at coming up with solutions that allow us to social distance in classrooms and to keep student mixing to a minimum. But we don’t do these things. We simply say it is all too hard and do virtual learning, we force a blended model on our old structures, or we just put our heads in the sand.

Tim Harford’s cautionary tale helps us to understand why organizations often do not adapt to new ideas and inventions—their organizational structures aren’t designed to do so. It also helps us understand why school districts are struggling to provide robust in-person learning opportunities for students during the pandemic. Our public schools simply aren’t equipped to be nimble, out-of-the-box organizations.

The post In-Person Learning during the Pandemic 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.

Charter schools are public schools, but instead of being governed by a local school board, they are governed by a document—their charter—that lays out how the school will operate and the metrics by which its performance will be judged. The charter is granted to the group of individuals who seek to open and run the school, and it has an expiration date of three to five years, at which point it needs to be renewed or the school is closed. The charter is awarded by an authorizer, or sponsor, who is responsible for making sure that the school stays on track, both academically and financially, and who makes the renewal or closure recommendation.

A little history might be helpful in understanding how the charter school movement began. It started in the late 1980s as an idea to let teachers, parents, or community leaders open and run a public school outside of district oversight. Credit for the idea usually goes to Al Shanker—head of one of the two major teacher’s unions in the United States. In 1988, Shanker offered an idea for reinvigorating public education that was inspired by a visit to a school in Cologne, Germany the prior year. He argued that we should allow teachers to create innovative, autonomous public schools, and that these chartered schools would serve as laboratories from which effective ideas could be replicated.

Around the same time, political economists John Chubb and Terry Moe argued that the institutional structure of public education wasn’t working. they found that autonomy was the one indispensable requirement for an effective school. And, they concluded, the existing structure of public education limits and undermines school autonomy. In their book Politics, Markets, and America’s Schools, Chubb and Moe proposed building an entirely new structure for public education that would withdraw authority from existing institutions and place it directly in the hands of schools, parents, and students. School districts could continue to operate their existing schools, but they would have no authority over the “chartered” public schools.

In 1991, bipartisan support for Al Shanker’s idea led to the passage of the first charter school law in Minnesota. The law was groundbreaking, and in 1992 eight chartered public schools opened in Minnesota that were autonomous, student-centered, results-oriented, and designed and run by teachers. The following year California followed suit. At the start of the 2017–18 school year, there were over 7,000 charter schools in 42 states plus the District of Columbia, serving nearly 3.2 million students. Charter schools now represent seven percent of all public schools and enroll six percent of public school students. Today, one in five public school students attends school in a district with at least 10 percent of its students in charter schools.

The post Charter Schools 101: What Is a Charter School? 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.

First, some of the data relies on physician and patient surveys. Individuals in different countries have different expectations for their health care systems, an important factor that the study’s authors admit might have affected the ratings:

Patients’ and physicians’ assessments might be affected by their experiences and expectations, which could differ by country and culture.

One of the categories I find most objectionable is “long, healthy, and productive lives,” which has a rather ambiguous meaning. The authors used three indicators to determine what constituted a “long, healthy and productive life.” (Table data excerpted from the study):

Exhibit 8. Long, Healthy, and Productive Lives Measures

These three indicators do not fully capture “productive” or “healthy” lives. There are more relevant measures of productivity and quality of life, such as statistics about morbidity, the amount of time spent ill, or disability-adjusted life years (DALYs), which account for degree of sickness as well as length of life. These are sometimes difficult to calculate, but they are standard measures used by the World Health Organization (WHO) and far more relevant for a category about “healthy” and “productive” lives.

The indicators used do not capture the fact that someone waiting 18.3 weeks for surgery in Canada may also be losing four months of work productivity, as well as spending a long time with an impaired quality of life. The United States ranked first in wait times for specialists and nonemergency surgeries. When one includes those factors, a different story emerges from the data.

For the indicator “Health life expectancy at age 60” the United States ranks sixth, but a closer look at the raw percentages shows a very small range from first to last; whether these differences are even statistically significant was not addressed in the study. Nor does the category capture that Americans work longer — both in their work week and in their lifespan — than the other countries listed, which could explain the slight difference in the raw percentages. American work ethic is a cultural issue, not an implication of the health care system.

Also, infant mortality is a contentious indicator for the success of a health care system. Different countries use different measurements to calculate the statistic. The United States strictly follows WHO guidelines by counting all babies that have shown any sign of life, whereas Germany, for instance, only counts babies that weigh at least one pound at birth. Other countries do not count births earlier than 26 weeks. This disparity in measures of reporting artificially skews the rates, without factoring in cultural differences, like teen births, that also contribute to higher infant mortality.

In developed countries, a large portion of the increase in life expectancy is not attributable to the health care system. During the past century, the average life expectancy in the United States has increased by 30 years; modern medicine can only account for five of those years, while public health measures account for the other 25. Attributing small changes in mortality to medical care is very tricky. Lifestyles can affect health outcomes as much — if not more — than health care. The obesity rates in the United States are much higher than the other countries listed. Holding health care systems equal, that one factor would lead the United States to have lower health outcomes. Again, this is a cultural issue, and not an indication that a universal system would improve U.S. results.

A conclusion some may reach after reading the study is that universal health care is the solution to perceived disparity; this seems to be the conclusion the authors hoped to make. In fact, the study actually suggests that the new federal health care legislation will improve U.S. outcomes:

Newly enacted health reform legislation in the U.S. will start to address these problems by extending coverage to those without and helping to close gaps in coverage—leading to improved disease management, care coordination, and better outcomes over time.

Incentives need to be realigned, but that has more to do with the disconnect between patient and physician — the health care wedge, explained in the Show-Me Institute study “Prognosis for National Health Insurance: A Missouri Perspective.”

The Commonwealth Fund study admits that none of the other nations considered have “ideal” health care systems, and makes some questionable comparisons in order to “prove” that universal health care is the best way to solve problems in health care. Show-Me Institute staff and scholars have discussed better solutions for health care reform in blog entries, op-eds, and policy studies.

The Commonwealth Fund study notes that the largest problem in the U.S. system is affordability of health care; the study thus concludes that universal health care is the solution, rather than making health care more affordable. The Congressional Budget Office has calculated that the recent legislation, lauded in this study, will actually increase the cost of health care. The Commonwealth Fund study suggests a solution that will bring the exact opposite of the problem it anticipated: Health care will become too expensive for some people.

Just because a few countries are getting (questionably) better results by some carefully selected measures under universal health care systems does not negate the fact that market-based solutions are a better solution for Missouri and the whole United States.

The post Questionable Comparisons, Questionable Conclusions appeared first on Show-Me Institute.

Working with a curriculum from a private Christian correspondence school — one not recognized by the German government — they expected to be punished with moderate fines and otherwise left alone.

But they soon discovered differently, he said, facing fines eventually totaling over $11,000, threats that they would lose custody of their children and, one morning, a visit by the police, who took the children to school in a police van. Those were among the fines and potential penalties that Judge Burman said rose to the level of persecution.

Reading these details of their story reminds me how fortunate homeschooling families in the United States are today. Some states impose more regulations than others; depending on where they live, parents may need to hold college degrees, to submit their curriculum for approval, or to agree for their children to take standardized tests. But it’s unheard of for the government to remove children from their homes forcibly and send them to school.

A sign of U.S. homeschoolers’ freedom is that when legislation is introduced that would affect them, the right to homeschool is usually not at question. And, secure in their ability to homeschool, parents can ask states for more than the right to be left alone. For example, homeschooling parents in Utah are currently lobbying for public schools to include homeschoolers in extracurricular activities. In Germany, parents fight to take their children out of the public schools; permission to bring them back for activities is the least of their concerns.

Supporters of homeschooling might point out that homeschooling can become an issue in divorce cases like this one in Missouri that Caitlin Hartsell discussed. It’s true; divorce courts do sometimes order a parent to send his or her children to school instead of teaching them at home. However, these decisions are not comparable to the harassment homeschoolers face in Germany and other countries. If divorced parents disagree about their children’s education, whatever the court ruling is, one parent will end up better satisfied and the other unhappy. Parents who want to send their children to public or private schools can be disappointed by these orders, and parents who want to homeschool are not immune from unfavorable divorce court rulings. What matters for homeschoolers in general is that divorce decisions apply only to individual families, and do not create new policies for everyone else.

The post Homeschooling Family in the New York Times appeared first on Show-Me Institute.

On the other hand, not having a cap can encourage too many lawsuits and add to medical cost inflation. However, it is important to keep the costs of excessive lawsuits in perspective. The Congressional Budget Office estimates that the savings for instituting a typical set of tort reforms (including but not limited to a cap on damages) saves 0.5 percent on total medical spending. This is not completely insignificant, but those savings would be totally swamped by a single year’s medical inflation.

There is a way to reform the tort system without giving anyone special privileges. Outside of the United States, most of the developed world uses what is usually referred to as the “loser pays” system, whereby whoever loses the lawsuit must pay both sides’ legal expenses. This system would have the salutary effect of eliminating frivolous lawsuits and lowering total lawsuit expenses. A 2008 Manhattan Institute study found that when compared to countries with the loser pays system (e.g. Britain, Australia, Germany), the United States spends at least twice as much on tort litigation as a percentage of GDP. If Missouri instituted loser pays, we could reap the benefits of lower litigation costs without creating a privileged legal class.

The post Real Tort Reform appeared first on Show-Me Institute.

The organization’s message was that Americans shouldn’t forget the lessons learned from a divided Germany, and that we should be wary as our government expands in size and scope.

Show-Me Institute intern Caitlin Hartsell was interviewed on KMOX (link via Combest):

“I mean it’s out there and it’s really out of the box,” said graduate student [Caitlin] Hartsell, “But I think it’s good that it really gets people thinking about what the actual implications of what socialism and communism mean.”

Ultimately, the university shut down the gulag because it was “too offensive.” Jim Hoft at Gateway Pundit reports more on this subject.

The post Gulag Demonstration at Washington University appeared first on Show-Me Institute.

Have you ever sat back and thought about the amazing freedom we have in this country to name someone who’s just been born? I hadn’t until I read this post on Freakonomics. Germany forbids extra-long surnames because German bureaucrats don’t like them. Those same bureaucrats approve the first names of new babies, too, and ensure that names are gender-appropriate.

The Freakonomics post lists a few other countries that regulate children’s names. I’m glad that the United States isn’t one of them. This is one of those quiet freedoms that don’t get a lot of press coverage, but that make up a part of human initiative and self-determination. Kind of like the freedom to enter your tractor in a parade.

The post Freedom by Any Other Name appeared first on Show-Me Institute.

Tennessee has fairly flexible homeschooling laws. Homeschooling families have to report on curriculum and attendance every year to their local superintendent. Missouri’s law is even better — it requires some record keeping, but those records aren’t looked at unless there’s a problem. This leaves parents free to focus on teaching rather than notifying the public schools about their “attendance,” a term that’s meaningless for homeschoolers anyway. (How could homeschoolers be absent? If they walk outside?)

I hope the Romeike family is enjoying the freedom to homeschool in Tennessee. If they ever find Tennessee’s regulations too burdensome, they should consider Missouri.

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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.

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What would be the effects?

Well, first of all, gas prices would be higher, not lower. Demand for gasoline is inelastic, at least in the short run. Gas station owners are already squeezing out a mere two cents in profit per gallon of gasoline sold. Therefore, with no real retail markup, the higher wholesale gasoline costs incurred by distributors would have to fall on consumers at the pump in order for the retailers to break even. So we’re worse off here. If you like paying $4.00 per gallon, how about if we add another 20 cents or so to that?

And which investors will pay for the tax — the rich or the broad middle class? Robert Shapiro, President Clinton’s former undersecretary of commerce, argues that ownership of industry shares is "broadly middle-class," with the majority represented by institutional investments in mutual funds, pension funds, and individual retirement accounts that are held on behalf of millions of ordinary Americans. This coincides with my previous post about energy investors and who benefits from oil profits.

And, lastly, the early 1980s experiment with a windfall profits tax suggests that tax revenues would be significantly lower than expected. When Congress passed the windfall profit tax in 1980, the Congressional Budget Office projected that it would raise $393 billion in tax revenues. According to Congressional Research Services, it only raised $80 billion. That would be enough revenue to run the government for about 10 days, based on the 2008 fiscal budget.

Remember, gas prices are about three times as high in Germany and other European countries, where combined excise taxes, fuel taxes, windfall profits taxes, and VAT taxes are passed on by oil companies to the consumers. Oh, and if you factor in the exchange rate, they’re about 4.5 times higher.

So why are we debating this, again?

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