Kids do better when their parents have the freedom to choose the right kind of educational program for them, without regard to whether the program is public or private. Nine out of ten gold standard social science studies showed that vouchers improve student outcome, and 18 out of 19 showed that they positively impact regular public schools. The remaining studies showed no impact.
But vouchers still limit options. Sometimes home school or a combination of public or private school, tutoring, and home school may be the right fit. Additionally, if set too low or too high, vouchers can limit student options or artificially inflate the cost of education.
The solution? Education savings accounts, which are now available to special needs kids in Arizona. Under the new program, if a child with special needs leaves public school, a portion of the state per-pupil funding will go into a personal education savings account. The money can be used for private school tuition, online courses, tutoring, or home school curriculum. Any unspent money can be used for college within four years of high school graduation.
Such a program harnesses the benefits of vouchers, while tapping into the psychological and financial benefits of asset building. Of children who expect to one day graduate from a four-year college, those with savings accounts are six times more likely to attend college by the time they are 23.
It is time that Oregon extend such educational opportunities to our students.
By Douglas A. Perednia, M.D.
Here’s a riddle: What costs Americans over $12 billion per year, generates more work than the nation’s thirteenth largest employer, drives millions of doctors and patients crazy, and is growing so fast it makes kudzu look stunted? The answer: the over half-billion hours of health care paperwork mandated last year by the Department of Health and Human Services (HHS). Even before ObamaCare the burden of HHS paperwork had been doubling every six years. The sheer complexity of the health care reform law guarantees a massive increase between now and 2020.
Combined with the red tape generated by insurance companies, state governments, and a proliferation of other organizations, this administrative overhead is a major reason why the cost of health care continues to grow at a rate that dwarfs increases in the nation’s gross domestic product. Our marginal health care dollars are generating less health than ever.
These insights come to us courtesy of the Information Collection Budget of the United States, an annual report that documents the amount of time Americans must spend filling out forms at the behest of Washington bureaucrats. By far the biggest paperwork offender is the tax-levying U.S. Treasury, which accounts for 84% of the 8.8 billion hours consumed. But while Treasury paperwork has grown 25% since 1999, the amount mandated by HHS has risen by 331% – far outstripping the growth rate of any other federal agency. Unchecked, HHS will generate more paperwork than all other non-Treasury federal agencies combined by 2015.
Figure 1 shows the amount of private sector paperwork demanded by HHS, compared to the total amount required by all other non-Treasury departments. The recent drop in non-HHS paperwork is purely the result of agencies lowering their estimates of how long their paperwork takes to complete. Nevertheless, last year HHS bucked even this trend with an increase of nearly 50 million hours. Only 15 million of those were attributed to ObamaCare.
Another way of looking at HHS paperwork is to express it as a proportion of all non-Treasury paperwork Americans must complete in the course of each year. This is shown in the Figure 2.
The burden of paperwork required by HHS is growing so fast that it now accounts for almost 40% of all non-Treasury paperwork, dwarfing the individual contributions of agencies like the EPA, the SEC, Homeland Security, and the Department of Labor. And it seems willing to demand more information at any price. HHS is now the nation’s foremost offender with respect to the Federal Paperwork Reduction Act, with sixty-five violations in FY 2010. This is nearly 60% of the violations generated by the entire federal government.
Just how much is 542 million hours of paperwork? Imagine 271,000 people employed doing absolutely nothing other than filling out forms at the behest of HHS. If these people were all in a single private company, it would have more employees than Albertsons. At the current rate of increase, over 540,000 full-time employees would be needed by 2015. That would make HHS paperwork the second largest employer in the country, right behind Walmart. The cost to the private sector for supplying the government with all that information? Nearly $26 billion.
Most of the people doing this work are doctors, patients, and armies of administrative personnel hired by hospitals, clinics, nursing homes, and private offices to help handle the load. All of these documents are in addition to those they have to complete for literally thousands of private health insurers, disability insurers, state governments, licensing boards, and accreditation organizations. If you want to know why your insurance premiums are rising at 9% per year, this is a big part of the answer.
Why does HHS need all of this information? Quite simply, federal regulators are now struggling to control nearly every aspect of health care – from the price and distribution of hundreds of thousands of health care-related goods and services, to the benefits to be included in private health insurance policies, to exactly what procedures doctors must follow when dealing with patients who smoke. It is an impossible task. No central authority can possibly gather and process enough information fast enough to reconcile the needs of hundreds of millions of patients, providers, and medical suppliers. Free markets are efficient precisely because such information is passed along automatically, instantly, and for free in the form of prices, inventories, and demand.
HHS’s information budget should warn us that the only way to truly reduce health care costs in the long term is by dumping government controls and returning to something that looks far more like a free market in health care goods and services. The entire system needs to be drastically simplified, and fast.
To borrow a phrase from the President, we can’t wait.
Douglas A. Perednia, M.D. is a physician and senior research associate at the Cascade Policy Institute. He is author of the book Overhauling America’s Healthcare Machine: Stop the Bleeding and Save Trillions, published by Financial Times Press, and writes for the blog The Road to Hellth. Dr. Perednia is a guest writer for Cascade Policy Institute, Oregon’s free market public policy research organization.
Among the blessings for which to be thankful this holiday weekend is the charitable legacy of Theodore Forstmann, who died last Sunday at age 71 after a battle with cancer.
Known to the financial world as CEO of IMG and the Senior Founding Partner of Forstmann Little & Co., Ted Forstmann was also well known for his commitments to philanthropic causes, particularly those helping children.
Forstmann’s interest in education led to his involvement in providing scholarships to children of low-income families. In 1998, he and the late John Walton cofounded the Children’s Scholarship Fund. The Children’s Scholarship Fund is the country’s largest charity helping parents send their children to the school of their choice. Forstmann and Walton challenged local donors across the country to join them in funding the initial 40,000 K-12 scholarships worth $200 million.
Forstmann said, “Every child, regardless of their parents’ income, should have access to a quality education – an education that will not only prepare them for successful private lives, but help them to build cohesive communities and a strong democracy. We believe if you give parents a choice, you will give their children a chance.”
He was also known to say, “If you save one life, you save the world.” The Children’s Scholarship Fund has helped almost 123,000 low-income children nationwide, including more than 600 here in Oregon. The Children’s Scholarship Fund-Portland is thankful for Ted Forstmann’s vision and for the generosity that opened a world of achievement to low-income kids with few options.
Senior Policy Analyst Steve Buckstein debates an Occupy Portland participant at its downtown camp about the Morality of Capitalism on the Victoria Taft Show, KPAM radio, Friday, October 21, 2011. Steve’s portion begins about 40% into segment.
Kathryn Hickok talks with radio show host Bill Meyer to discuss impacts of changes in the tax code on charitable giving.
The Occupy movement is encouraging people to take their money out of “big Wall Street banks” and to open accounts in local credit unions. Now, a Portland mayoral candidate is urging the city to do just that with some of its official funds.
Big banks are understandably under fire for their role in the recent economic downturn and for their ability to get bailed out by their friends in Washington, D.C. But the call for moving deposits from banks to credit unions relies in part on an assumption that must be challenged.
One reason mayoral candidate Jefferson Smith gives for advocating that public funds be deposited in credit unions is that “[a]s not-for-profit financial institutions, credit unions don’t pay boards or stockholders, meaning credit unions can offer advantageous interest rates.”
What Smith and the Occupiers apparently don’t understand is that profit is not so much a cost that raises prices as it is a signal that consumer needs are being met. Satisfy more consumers, and a business can earn more profits. And, those profits don’t have to come at the expense of higher prices. In fact, some of our most profitable businesses got that way by lowering prices to attract more customers.
So, if credit unions offer a better deal, then by all means consider them. Just don’t fall for the profit-is-bad justification touted by some candidates and protesters.
The recent Occupy Wall Street/Occupy Portland movement has focused attention on a number of perceived ills in our society. Fortunately, a new book, written before the movement began but distributed in the middle of it, can shed light on why many of the “occupiers” blame the wrong people for their troubles and risk replacing one set of thieves with another.
The Morality of Capitalism* is a short book of essays written by entrepreneurs, philosophers, and economists. Each brings his own perspective to the subject. The editor, Dr. Tom Palmer, may have anticipated the Occupy movement, because he included in the book’s Introduction a timely discussion of free-market capitalism versus crony capitalism. It’s a discussion that the occupiers would do well to read.
Tom Palmer is on a book tour, which included a forum sponsored by Cascade Policy Institute in Portland on November 3. Just a few blocks from city and federal parks “occupied” by a mix of protesters, homeless, and street youth, he shared his insights on the movement and where it goes wrong.
He thinks the occupiers yearn for a world before modernity. The creative destruction involved in progress and innovation scares them. Here is a summarized example Palmer used that younger audience members may not have related to, because the innovation it involves largely happened before they were born:
Not too many years ago people went to school to become typewriter repairmen. Every town had a typewriter repair shop and you could earn a respectable living repairing them all your life. Then, personal computers were invented and typewriters virtually disappeared, putting the repairmen out of work. What happened to them? They all starved (just kidding). No, they retrained for other, more useful jobs and we all benefitted from the computer revolution. The typewriter repairmen didn’t die — the way things had been done died.
Palmer places blame for the recent economic crisis at the feet of government enterprises, including The Federal Reserve System, mortgage facilitators Fannie Mae and Freddie Mac, and The Bank for International Settlements.
He explains that free-market capitalism involves profit and loss, but cronyism is only about profit. Losses are pushed off onto the taxpayers. Cronies are friends of those with political power. They seek protection from market forces. They urge their political friends to outlaw their competitors and to bail them out with taxpayer funds when their risky schemes go wrong. Those now occupying Wall Street and Portland parks may have identified the cronies, but they mistake them for those who bear the ultimate blame.
One of Palmer’s more colorful descriptions may resonate with the occupiers. He postulated that most nations were established by pirates―stationary pirates who, rather than periodically attacking ships and looting them, now could loot smaller amounts from their subjects all the time.
Another very powerful insight might make the occupiers stop and think about their assumption that the rich got that way by stealing from the rest of us, thus making us poor. Palmer pointed out that poverty has no cause. Wealth has causes. Poverty is the absence of wealth. In the Introduction to The Morality of Capitalism, he states:
In many countries, if someone is rich, there is a very good chance that he (rarely she) holds political power or is a close relative, friend, or supporter—in a word, a “crony”—of those who do hold power, and that that person’s wealth came, not from being a producer of valued goods, but from enjoying the privileges that the state can confer on some at the expense of others.
In a country with a primarily free-market capitalist system, the rich got that way by providing value to others. They created, made, and/or sold goods or services that lots of us value and are willing to pay for. We value those goods or services more than the money we voluntarily give up to acquire them. Both sides of these transactions benefit.
Boiled down, the essential difference between free-market capitalism and every other economic system is that capitalism involves voluntary transactions between willing buyers and willing sellers. It is this voluntary feature that makes capitalism moral.
Occupiers don’t seem to have grasped this important concept. Too many of them seem hell-bent on trying “…to redirect crony capitalism in the protesters’ preferred direction, stealing for them rather than from them.”† Theft, whichever direction it goes, is still theft.
*The Morality of Capitalism: What Your Professors Won’t Tell You, edited by Tom G. Palmer. Published by Students For Liberty & Atlas Network
†Gary Galles, “Protesters’ gripe is with crony capitalism,” October 12, 2011
Kids today learn how to use a computer or a video game system before they can even read or write, yet states are not taking advantage of this kind of technology in education, according to the Nation’s Digital Learning Council.
The Council released the first Nation’s Digital Learning Report Card last month, evaluating states on their adoption of healthy policies to help kids get more out of their education through online courses and materials.
Oregon received high marks for our state’s full-time online programs, thanks to online public charter schools. Charter schools are privately run public schools, in which parents can choose to enroll their children regardless of their residential district. Oregon’s online charter schools are growing quickly, but they still serve only about one percent of public school students.
Meanwhile, Oregon received low marks in the national Report Card for failing to make online classes available to public school students on a course-by-course basis. Yet, the need for such options is undeniable.
Consider that 75% of Oregon schools fail to offer students Advanced Placement or IB classes in reading, math, science, and social studies. Contrast that with states like Florida, where thousands of kids attending regular public schools that don’t offer in-house AP courses can access effective online advanced courses, as well as courses designed to help them catch up with their peers.
Oregon’s legislature will soon consider online learning again, since it commissioned a task force to examine governance for online charter schools. But instead of focusing on how to govern our state’s successful online charter schools, legislators should focus on removing the barriers that keep so many children from the valuable online opportunities available to kids in other states and nations.
As Michael Sherraden pointed out 20 years ago in his book Assets and the Poor: A New American Welfare Policy, the key to getting ahead is not income but assets. People play better and smarter when they have a stake in the system.
According to research, assets not only provide financial security, but they cause people to lead more stable lives, think in longer time frames, be more involved in community affairs, and have more hope for the future.
While many government programs discourage asset accumulation, causing low-income individuals to miss the psychological and tangible benefits of asset building, some states are trying a new approach. South Carolina is testing personal health accounts in a pilot project for Medicaid recipients. Participants get high-deductible insurance paired with savings accounts for medical expenses that aren’t covered by insurance, all funded by Medicaid. When program recipients increase their income and no longer qualify for Medicaid, they keep the balance in their health accounts.
The program realizes the benefits that higher income individuals (and businesses) have already seen from switching to high deductible insurance paired with health savings accounts: People make smarter decisions about what health care they need or want when they have “skin in the game.” That “skin” is the balance of their health savings account.
Isn’t it time that Oregon think outside the box to incorporate asset building into its safety nets?