The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 16, Issue 8: February 25, 2014

1. How the Feds Lost the War on Poverty
2. The Federal Education Bureaucracy Has Failed Our Children
3. Health Care: Could the Free Market Deliver?
4. Climate Activists Cloud Issues on Global Warming
5. New Blog Posts
6. Selected News Alerts

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In the half century since President Lyndon Johnson declared a war on poverty, the percentage of Americans living below the federal poverty line has hardly budged, falling from 18 percent to 15 percent. In terms of expenditures, the cost of this failure has totaled about $15 trillion (including $3 trillion spent by the states) and is rising about $1 trillion per year. In contrast, in the postwar years before the failed experiment began, the federal poverty rate fell so dramatically that if the trend had continued, the current poverty rate would be only 1.4 percent. Sadly, the devastating consequences of federal anti-poverty programs have been known for decades, but the perverse policies continue and pundits fail to take the lessons to heart.

In the late 1960s, the federal government embarked on a massive study of the war on poverty, comparing government relief recipients with similar non-recipients. “The experiments were all conducted by social scientists who believed in the welfare state and had no doubt about its capacity to be successful,” Independent Institute Senior Fellow John C. Goodman writes. “To the dismay of the researchers, they largely confirmed what conventional wisdom had thought all along.” The disincentives embodied in the programs led to reduced work hours, more unemployment, and higher divorce rates among the experimental group (relief recipients) than among the control group (similar non-recipients).

“Reviewing some of the early literature, I find it very difficult to determine what Lyndon Johnson would have called ‘success’ in the war on poverty,” Goodman writes. “But there is no doubt in my mind what the average citizen thinks success is. The goal is to have people earning enough and saving enough to support themselves above a poverty level income without any help from government. So by that measure, there has been no progress at all—despite spending $1 trillion a year on the effort.” Goodman also notes that social-science research has discovered a reliable four-step path to avoiding the poor house: finish high school, get a job, get married, and don’t have child until you get married.

Why We Lost the War on Poverty, by John C. Goodman (2/18/14)

Priceless: Curing the Healthcare Crisis, by John C. Goodman

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Just as the federal war on poverty has failed, so too has the federal Department of Education. Created in 1979, the agency has had thirty-five years to boost student achievement, and yet overall student performance in the nation’s public K-12 schools is essentially unchanged.

Here’s Independent Institute Research Fellow Vicki E. Alger’s assessment of public schooling today: “Results on the Nation’s Report Card for 9-year-olds, 13-year-olds and 17-year-olds in reading, math and science have virtually flat-lined since the early 1970s—even though total public school funding more than doubled in real terms since then—increasing nearly $400 billion, while student enrollment has grown less than 10 percent.”

Yet there are pockets of success in education today. According to Alger, studies consistently show that students enrolled in the 32 voucher and tax-credit scholarship programs in 16 states and the District of Columbia enjoy higher reading and math scores, and higher rates of graduation and college attendance, than peers not enrolled in parent choice programs. In addition, Alger notes that these programs also help students who are not enrolled in them. “More than 200 scientific analyses show beneficial effects of competition on public schools, including higher student achievement, graduation rates, efficiency, teacher salaries, and smaller class sizes.”

Education Improves When Parents Can Bypass Clueless Bureaucrats, by Vicki E. Alger (The Fresno Bee, 2/20/14; other McClatchy newspapers on other dates)

School Choices: True and False, by John D. Merrifield

Can Teachers Own Their Own Schools?, by Richard K. Vedder

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Could a genuine free market deliver high-quality, affordable health care? Some economic theorists have claimed that such a system—a market totally devoid of government mandates, subsidies, and regulations—couldn’t reliably overcome key challenges, such as pricing problems that can arise due to asymmetries of information (e.g., the fact that patients and doctors can withhold from insurers the information needed to set actuarially sound premiums). For the free-market agenda to maintain momentum, it’s crucial that its leaders understand these concerns—and adequately address them.

D. Eric Schansberg, an economics professor at Indiana University Southeast, examines the naysayers’ claims in the cover article of the Winter 2014 issue of The Independent Review. He concludes that the worries are overblown. Free markets, he argues, have ways of getting around obstacles that discourage buyers and sellers from entering into transactions that would make each party better off. Free markets could even handle the thorny issue of “pre-existing conditions.”

One way to deal with this particular challenge, Schansberg explains, is to encourage insurers to develop a new product: health-status insurance. This type of policy would protect consumers whose health required them to move into a more expensive coverage category. A change in health status would trigger a payout that would cover the extra cost of the new coverage. How should the government encourage the development of health-status insurance? Citing research by economist John H. Cochrane of the University of Chicago, Schansberg suggests that the elimination of government subsidies and regulations would suffice. Insurers would then have the incentive and ability to develop this type of innovation.

The Economics of Health Care and Health Care Insurance, by D. Eric Schansberg (The Independent Review, Winter 2014)

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Priceless: Curing the Healthcare Crisis, by John C. Goodman

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In his latest piece for American Thinker, atmospheric scientist and Independent Institute Research Fellow S. Fred Singer takes on claims about a “scientific consensus” on global warming. Is there a consensus? It all depends on exactly how the proposition is worded and who is asked, he explains.

Yes, all scientists believe that average temperatures have increased since the late nineteenth century. And yes, almost all scientists believe that human activity has some effect on the climate. But this latter proposition is broad enough to include local causes and effects (such as the effect of urbanization on urban warming or the local effects of forest clear-cutting). The question of whether man-made global warming poses significant dangers is a different issue, Singer explains. Surveys of scientists by the German researcher Hans von Storch and by polling groups such as Pew and Gallup show that scientists are more divided on this issue than coverage of the media-savvy U.N. Intergovernmental Panel on Climate Change suggests. Climate activists, and a complicit media, are guilty of obfuscation on the question of “scientific consensus.”

Activists have also clouded the issues surrounding the recent global-temperature record. It’s disingenuous for them to claim that the past decade is the hottest since thermometer records have been kept (which is true) while ignoring the fact that global mean temperatures have not increased in the past 15 years. This “inconvenient truth” reveals the failure of the climate models on which the notion of dangerous anthropogenic global warming is based. “Climate activists seem to embrace faith and ideology—and are no longer interested in fact,” Singer concludes.

Climate Consensus Con Game, by S. Fred Singer (American Thinker, 2/17/14)

Hot Talk, Cold Science: Global Warming’s Unfinished Debate, by S. Fred Singer

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From The Beacon:

From MyGovCost News & Blog:

You can find the Independent Institute’s Spanish-language website here and blog here.

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