Category Archives: Milton Friedman

Milton Friedman and Dan Mitchell on the Economics of Medical Care!!!

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Milton Friedman on Medical Care (Full Lecture)

Way back in 2009, some folks on the left shared a chart showing that national expenditures on healthcare compared to life expectancy.

This comparison was not favorable to the United States, which easily spent the most money but didn’t have concomitantly impressive life expectancy.

At the very least, people looking at the chart were supposed to conclude that other nations had better healthcare systems.

And since the chart circulated while Obamacare was being debated, supporters of that initiative clearly wanted people to believe that the U.S. somehow could get better results at lower cost if the government played a bigger role in the healthcare sector.

There were all sorts of reasons to think that chart was misleading (higher average incomes in the United States, more obesity in the United States, different demographics in the United States, etc), but my main gripe was that the chart was being used to advance the cause of bigger government when it actually showed – at least in part – the consequences of government intervention.

The real problem, I argued, was third-party payer. Thanks to programs such asMedicare and Medicaid, government already was paying for nearly 50 percent of all heath spending in the United States (indeed, the U.S. has more government spending for health programs than some nations with single-payer systems!).

But that’s just party of the story. Thanks to a loophole in the tax code for fringe benefits (a.k.a., the healthcare exclusion), there’s a huge incentive for both employers and employees to provide compensation in the form of very generous health insurance policies. And this means a big chunk of health spending is paid by insurance companies.

The combination of these direct and indirect government policies is that consumers pay very little for their healthcare. Or, to be more precise, they may pay a lot in terms of taxes and foregone cash compensation, but their direct out-of-pocket expenditures are relatively modest.

And this is why I said the national health spending vs life expectancy chart was far less important than a chart I put together showing the relentless expansion of third-party payer. And the reason this chart is so important is that it helps to explain why healthcare costs are so high and why there’s so much inefficiency in the health sector.

Simply stated, doctors, hospitals, and other providers have very little market-based incentive to control costs and be efficient because they know that the overwhelming majority of consumers won’t care because they are buying care with other people’s money.

To get this point across, I sometimes ask audiences how their behavior would change if I told them I would pay 89 percent of their dinner bill on Friday night. Would they be more likely to eat at McDonald’s or a fancy steakhouse? The answer is obvious (or should be obvious) since they are in box 2 of Milton Friedman’s matrix.

So why, then, would anybody think that Obamacare – a program that was designed to expand third-party payer – was going to control costs?

Though I guess it doesn’t matter what anybody thought at the time. The sad reality is that Obamacare was enacted. The President famously promised healthcare would be more affordable under his new system, both for consumers and for taxpayers.

So what happened?

Well, the law’s clearly been bad news for taxpayers.

But let’s focus today on households, which haveborne the brunt of the President’s bad policies. The Wall Street Journal had a report a few days ago about what’s been happening to the spending patterns of middle-class households.

The numbers are rather grim, at least for those who thought Obamacare would control health costs.

A June Brookings Institution study found middle-income households now devote the largest share of their spending to health care, 8.9%… By 2014, middle-income households’ health-care spending was 25% higher than what they were spending before the recession that began in 2007, even as spending fell for other “basic needs” such as food, housing, clothing and transportation, according to an analysis for The Wall Street Journal by Brookings senior fellow Diane Schanzenbach. …Workers aren’t the only ones feeling the pain of rising health-care costs. Employers still typically pay roughly 80% of individual health-insurance premiums… In 2015, 8% of Americans’ household spending went toward health care, up from 5.8% in 2007, according to the Labor Department.

Here’s a chart from the story. It looks at data from 2007-2014, so it surely wouldn’t be fair to say Obamacare caused all the increase. But it would be fair to say that the law hasn’t delivered on the empty promise of lower costs.

Let’s close with a few important observations.

First, there’s a very strong case to repeal Obamacare, but nobody should be under the illusion that this will solve the myriad problems in the health sector. It would be a good start, but never forget that the third-party payer problem existed before Obamacare.

Second, undoing third-party payer will be like putting toothpaste back in a tube. Even though there are some powerful examples of how healthcare costs are constrained when genuine market forces are allowed to operate, consumers will be very worried about shifting to a system where they pay directly for a greater share of their healthcare costs.

Third, there’s one part of Obamacare that shouldn’t be repealed. The so-called Cadillac Tax may not be the right way to deal with the distorting impact of the healthcare exclusion, but it’s better than nothing.

Actually, we could add one final observation since the Obama era will soon be ending. When historians write about his presidency, will his main legacy be the Obamacare failure? Or will they focus more on the failed stimulus? Or maybe the economic stagnation that was caused by his policies?

 

Related posts:

Michael Cannon observed, “The centerpiece of Rubio’s proposal… If you purchase a government-approved health plan, you could save, for example, $2,000 on your taxes. If you don’t, you pay that $2,000 to the government. That is exactly how Obamacare’s individual mandate works.”

  Michael Cannon observed, “The centerpiece of Rubio’s proposal… If you purchase a government-approved health plan, you could save, for example, $2,000 on your taxes. If you don’t, you pay that $2,000 to the government. That is exactly how Obamacare’s individual mandate works.” The Obama-Rubio “Healthcare Mandate” Controversy March 2, 2016 by Dan Mitchell My colleague […]

FRIEDMAN FRIDAY Taxmageddon and Obamacare: What Would Milton Friedman Say? Rich Tucker / @RichardBTucker / July 31, 2012

Milton Friedman on Medical Care (Full Lecture) Published on Feb 2, 2014 Website:http://www.commonsensecapitalism.com Facebook:http://www.facebook.com/pages/Common-… Twitter:https://twitter.com/#!/CommonSenseCap Taxmageddon and Obamacare: What Would Milton Friedman Say? Rich Tucker / @RichardBTucker / July 31, 2012 / 3 comments “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever […]

FRIEDMAN FRIDAY Column: Don’t blame Heritage for ObamaCare mandate By Stuart Butler

Milton Friedman on Medical Care (Full Lecture) Published on Feb 2, 2014 Website:http://www.commonsensecapitalism.com Facebook:http://www.facebook.com/pages/Common-… Twitter:https://twitter.com/#!/CommonSenseCap I have written about Obamacare over and over again on this blog. Dan Mitchell has shared many funny cartoons about Obamacare too. Milton Friedman has spoken out about government healthcare many times in the past and his film […]

FRIEDMAN FRIDAY Milton Friedman on the Energy Crisis (and ObamaCare to come) By Robert Bradley Jr. — July 31, 2013

Milton Friedman – Health Care Reform (1992) pt 1/4 Milton Friedman – Health Care Reform (1992) pt 2/4 Milton Friedman on the Energy Crisis (and ObamaCare to come) By Robert Bradley Jr. — July 31, 2013 July 31st is the birth date of one of the great intellectuals of the freedom philosophy. Milton Friedman (1912–2006) would have […]

FRIEDMAN FRIDAY Milton Friedman And ObamaCare November 4, 2013

Milton Friedman – Health Care Reform (1992) pt 1/4 Milton Friedman – Health Care Reform (1992) pt 2/4 Milton Friedman – Health Care Reform (1992) pt 3/4 Milton Friedman – Health Care Reform (1992) pt 4/4 Milton Friedman And ObamaCare November 4, 2013 Where is Milton Friedman when we need him most? His ability to […]

FRIEDMAN FRIDAY Milton Friedman would oppose bailouts, Obamacare Robert Enlow | Tuesday Jul 31, 2012 6:02 PM

Milton Friedman on Medical Care (Full Lecture) Published on Feb 2, 2014 Website:http://www.commonsensecapitalism.com Facebook:http://www.facebook.com/pages/Common-… Twitter:https://twitter.com/#!/CommonSenseCap I have written about Obamacare over and over again on this blog. Dan Mitchell has shared many funny cartoons about Obamacare too. Milton Friedman has spoken out about government healthcare many times in the past and his film […]

Taxmageddon and Obamacare: What Would Milton Friedman Say? Rich Tucker / @RichardBTucker / July 31, 2012

Milton Friedman on Medical Care (Full Lecture) Published on Feb 2, 2014 Website:http://www.commonsensecapitalism.com Facebook:http://www.facebook.com/pages/Common-… Twitter:https://twitter.com/#!/CommonSenseCap Taxmageddon and Obamacare: What Would Milton Friedman Say? Rich Tucker / @RichardBTucker / July 31, 2012 / 3 comments “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever […]

Column: Don’t blame Heritage for ObamaCare mandate By Stuart Butler

Milton Friedman on Medical Care (Full Lecture) Published on Feb 2, 2014 Website:http://www.commonsensecapitalism.com Facebook:http://www.facebook.com/pages/Common-… Twitter:https://twitter.com/#!/CommonSenseCap I have written about Obamacare over and over again on this blog. Dan Mitchell has shared many funny cartoons about Obamacare too. Milton Friedman has spoken out about government healthcare many times in the past and his film […]

FRIEDMAN FRIDAY Whining Harvard Professors Discover Obamacare 3225 JAN 5, 2015 4:29 PM EST By Megan McArdle

Milton Friedman on Medical Care (Full Lecture) Published on Feb 2, 2014 Website:http://www.commonsensecapitalism.com Facebook:http://www.facebook.com/pages/Common-… Twitter:https://twitter.com/#!/CommonSenseCap I have written about Obamacare over and over again on this blog. Dan Mitchell has shared many funny cartoons about Obamacare too. Milton Friedman has spoken out about government healthcare many times in the past and his film […]

Milton Friedman on the Energy Crisis (and ObamaCare to come) By Robert Bradley Jr. — July 31, 2013

Milton Friedman – Health Care Reform (1992) pt 1/4 Milton Friedman – Health Care Reform (1992) pt 2/4 Milton Friedman on the Energy Crisis (and ObamaCare to come) By Robert Bradley Jr. — July 31, 2013 July 31st is the birth date of one of the great intellectuals of the freedom philosophy. Milton Friedman (1912–2006) would have […]

 

School Choice will improve U.S. Education!!!!

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Milton Friedman – Public Schools / Voucher System

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I’ve explained many times that an economy’s wealth and output depend on thequantity and quality of labor and capital and how effectively those two factors of production are combined.

Let’s look today on the labor portion of that formula. And since I’ve alreadyexpressed my concerns about the quantity of labor that is being productively utilized, now let’s focus on the quality of labor. In other words, we’ll look at the degree to which the workforce has the skills, knowledge, and ethics to be productive.

This is why education is very important, but also why we have big reasons to be concerned in the United States. Consider, for instance, the late Andrew Coulson’s famous (and discouraging) chart. It shows that politicians routinely increase the amount of money that’s being spent (on a per-student basis, American schools get more funding than any other nation), yet student test scores are both mediocre and flat.

But that’s just part of the story. We also have the national disgrace of substandard education for minority communities.

Here’s some of what Walter Williams wrote about the scandalous failure of government schools to produce quality education for minority children.

According to the National Assessment of Educational Progress, sometimes called the Nation’s Report Card, nationally, most black 12th-graders’ test scores are either basic or below basic in reading, writing, math and science. “Below basic” is the score received when a student is unable to demonstrate even partial mastery of knowledge and skills fundamental for proficient work at his grade level. “Basic” indicates only partial mastery. Put another way, the average black 12th-grader has the academic achievement level of the average white seventh- or eighth-grader. …In terms of public policy, what to do? …Many black parents want a better education and safer schools for their children. The way to deliver on that desire is to offer parents alternatives to poorly performing and unsafe public schools. Expansion of charter schools is one way to provide choice. The problem is that charter school waiting lists number in the tens of thousands. In Philadelphia, for example, there are 22,000 families on charter school waiting lists. Charter school advocates estimate that nationally, over 1 million parents are on charter school waiting lists.

The above excerpt from Walter’s column is scandalous.

The excerpt that follows is nauseating.

The National Education Association and its political and civil rights organization handmaidens preach that we should improve, not abandon, public schools. Such a position is callous deceit, for many of them have abandoned public schools. Let’s look at it. Nationwide, about 12 percent of parents have their children enrolled in private schools. In Chicago, 44 percent of public-school teachers have their own children enrolled in private schools. In Philadelphia, it’s also 44 percent. In Baltimore, it’s 35 percent, and in San Francisco, it’s 34 percent. That ought to tell us something. …Politicians who fight against school choice behave the way teachers do. Fifty-two percent of the members of the Congressional Black Caucus who have school-age children have them enrolled in private schools.

By the way, what happens when ordinary black children have a chance to escape the government’s monopoly school system?

Thomas Sowell has opined on the amazingly positive results that occur when black children have this opportunity.

We keep hearing that “black lives matter,” but they seem to matter only when that helps politicians to get votes… What about black success? Does that matter? Apparently not so much. We have heard a lot about black students failing to meet academic standards. So you might think that it would be front-page news when…ghetto schools not only meet, but exceed, the academic standards of schools in more upscale communities. …Only 39 percent of all students in New York state schools who were tested recently scored at the “proficient” level in math, but 100 percent of the students at the Crown Heights Success Academy school scored at that level in math. Blacks and Hispanics are 90 percent of the students in the Crown Heights Success Academy. The Success Academy schools in general ranked in the top 2 percent in English and in the top 1 percent in math. …Black students in these Success Academy schools reached the “proficient” level more than twice as often as black students in the regular public schools. What makes this all the more amazing is that these charter schools are typically located in the same ghettos or barrios where other blacks or Hispanics are failing miserably on the same tests. More than that, successful charter schools are often physically housed in the very same buildings as the unsuccessful public schools.

But Prof. Sowell echoes the point Prof. Williams made about poor children being trapped in bad schools because of limits on school choice.

If black success was considered half as newsworthy as black failures, such facts would be headline news — and people who have the real interests of black and other minority students at heart would be asking, “Wow! How can we get more kids into these charter schools?” …minority parents have already taken notice. More than 43,000 families are on waiting lists to get their children into charter schools. But admission is by lottery, and far more have to be turned away than can be admitted. Why? Because the teachers’ unions are opposed to charter schools — and they give big bucks to politicians, who in turn put obstacles and restrictions on the expansion of charter schools. …If you want to understand this crazy and unconscionable situation, just follow the money and follow the votes. Black success is a threat to political empires and to a whole social vision behind those empires. That social vision has politicians like Bill de Blasio and Hillary Clinton cast in the role of rescuers and protectors of blacks.

Notwithstanding everything written up to this point, the purpose of today’s column isn’t to argue in favor of school choice.

Yes, that’s critical for the nation and vitally important for minority advancement.

But I want to focus instead on the question of why school choice hasn’t become the civil rights issue of the 21st century. And to be even more specific, I want to explorethe scandalous decision by some people at the NAACP to betray black children.

The Wall Street Journal opined about this topic today.

The outfit that helped end segregation in public education now works to trap poor and minority kids in dysfunctional schools. Last month the National Association for the Advancement of Colored People introduced a resolution at its national convention in Cincinnati calling for a moratorium on charter schools… The resolution must be formally adopted at a board meeting later this year.

Here’s some very relevant data.

Some 28% of charter-school students are black, which is almost double the figure for traditional public schools. A report last year from Stanford’s Center for Research on Education Outcomes found that across 41 urban areas black students in charters gained on average 36 extra days in math learning a year and 26 in reading… Black students in poverty notched 59 more days in math. This is the definition of “advancement.” …A 2013 poll of black voters in four southern states by the Black Alliance for Educational Options found that at least 85% agreed that “government should provide parents with as many choices as possible.” …Another sign of support is the hundreds of thousands of black students nationwide who sign up for lotteries for a seat at a charter.

The conclusion is very unflattering.

The group’s real motive is following orders from its teacher-union patrons. …The National Education Association dropped $100,000 in 2014 for a partnership with the NAACP.

Jason Russell of the Washington Examiner was similarly scathing about the NAACP’s actions.

One of the few education reforms that has actually succeeded in helping African-American students get a better education is school choice, especially the growth of public charter schools. So it didn’t make much sense, to put it kindly, when the NAACP approved a resolution calling for a moratorium on new charter schools. …Jacqueline Cooper, president of the Black Alliance for Educational Options, told theWashington Examiner that…”The fact that the NAACP wants a national moratorium on charter schools, many of which offer a high-quality education to low-income and working-class black children, is inexplicable,”…Shavar Jeffries, president of Democrats for Education Reform, also criticized the NAACP in a statement. “The public charter school moratorium put forward at this year’s NAACP convention does a disservice to communities of color,” Jeffries said. …Steve Perry, founder and head of Capital Preparatory Schools,…said the national group is “out of touch even with their own chapters … This is more proof that the NAACP has been mortgaged by the teachers union and they keep paying y’all to say what they want to say.”

Since this has been a depressing topic, let’s end with an uplifting video from Reason TV about the success of various models of charter schools.

How To End Poverty in the South Bronx

P.S. Even though I’m not partisan, I understand that coalition politics are important. Reagan, for instance, had his three-legged stool of small-government libertarians, social conservatives, and military/foreign policy hawks. All three groups were united in the belief that their respective goals could be advanced by Reagan, even if they bickered with each other about the relative importance of various issues and occasionally had fights with each other (one of my first battles in Washington was advocating for a sequester during Reagan’s second term over the objections of the hawks, a battle that was repeated back in 2013).

With this in mind (and especially since the teacher unions bring a lot of campaign money to the table), I definitely understand why Democratic politicians are willing to sacrifice the interests of black families and their children by opposing education reform. I even partially understand why the NAACP feels pressure to accommodate the demands of teacher unions (and I fully understand, from the perspective of coalition politics, why the NAACP made absurd accusations against the Tea Party).

But surely there must be a point where coalition politics has to take second place and the interests of black families should be in first place (an issue addressed inanother great video from Reason).

P.P.S. Some folks on the left are willing to break ranks. Jonathan Alter wrote aboutcharter schools for the Daily Beast. Here are some excerpts.

…the backlash against education reform among liberals who should know better has been disheartening. …the top quintile of charters—the highly effective ones run by experienced and widely-respected charter operators—not only beat traditional public schools serving students in the same demographic cohorts, they often outperform them by 20, 30, or even 50 points on many metrics.

He cites New Orleans as an example.

New Orleans is a good example of where charters, which now educate 95 percent of New Orleans public school students, are working. A decade ago, New Orleans had the worst schools in the country…The results in New Orleans are impressive. Over the last decade, graduation rates have surged from 54 percent to 73 percent, and college enrollment after graduation from 37 percent to 59 percent. (There’s also a new emphasis on helping those who attend college to complete it.) Before Katrina, 62 percent of schools were failing. Today, it’s 6 percent. The biggest beneficiaries have been African-American children, who make up 85 percent of New Orleans enrollment. The high school graduation rate nationally for black students is 59 percent. In New Orleans, it’s 65 percent, which is also much higher than the state average. Test scores are still low overall, but thousands more African-American students are taking the ACTs and doing better on them.

And even Newark.

In Newark, where 25 percent of students attend charter schools, the percentage of African-Americans choosing charters is closer to 50 percent in some grade levels. Contrary to the claim that charters succeed only by “skimming” or “creaming” the students from more stable and middle-class families, Newark’s charters enroll a higher percentage of poor students than district schools.CREDO numbers show Newark charter school students gaining the equivalent of more than five months per year in performance in reading and math—a huge advantage over their counterparts in district schools. The percentage of black students in Newark who are doing better than the state average for African-Americans has more than doubled.

I guess this means I’ll have to add Mr. Alter to my collection of honest leftists.

As for the NAACP, I can’t even imagine how the advocates of the resolution can look at themselves in the mirror.

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Open letter to President Obama (Part 581) (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]

Public schools need more competition and vouchers is the answer

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Milton Friedman – Public Schools / Voucher System Published on May 9, 2012 by BasicEconomics The Machine: The Truth Behind Teachers Unions Published on Sep 4, 2012 by ReasonTV America’s public education system is failing. We’re spending more money on education but not getting better results for our children. That’s because the machine that runs […]

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The Machine: The Truth Behind Teachers Unions Published on Sep 4, 2012 by ReasonTV America’s public education system is failing. We’re spending more money on education but not getting better results for our children. That’s because the machine that runs the K-12 education system isn’t designed to produce better schools. It’s designed to produce more […]

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Brummett still resistant to vouchers because he wants us to save public schools at all cost

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On the Arkansas Times Blog the person using the username “Jake da Snake” noted, “Friedman also railed long and hard for school vouchers to be adopted, to little avail…” (June 11, 2011). Milton Friedman firmly believed, “competition is a way in which both public and private schools can be required to satisfy their customers.” Here […]

FRIEDMAN FRIDAY Milton Friedman on Immigration Part 2

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Milton Friedman on Immigration Part 2

Milton Friedman – Illegal Immigration – PT 1

Milton Friedman – Illegal Immigration – PT 2

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My previous post dealing with whether citizenship should be automatic for babies born to illegals generated a lot of commentary, so it is with some trepidation that I wade back into the issue. But the Wall Street Journal column excerpted belowseems to strike exactly the right chord and should (at least I think!) meet with approval from both sides of the immigration debate. And by “both sides,” I’m referring to the debate on the right (with some conservatives and libertarians on both sides of the issue) regarding the benefits of immigration generally and the treatment of illegals specifically.

…a larger welfare state is not conducive to comprehensive immigration reform. If foreigners start coming for handouts instead of economic opportunity, tighter restrictions will be justified. … A 2005 World Values Survey found that 71% of Americans see poverty as a condition that can be overcome by dint of hard work, while only 40% of Europeans share that viewpoint. …Belief in social mobility has informed welfare and immigration policy from colonial times. In 1645 the Massachusetts Bay colony was already barring paupers. And in 1882, when Congress finally passed the country’s first major piece of immigration legislation, it specifically prohibited entry to “any person unable to take care of himself or herself without becoming a public charge.” A problem that immigration reformers face is the public perception—fed by restrictionists and exacerbated during economic downturns—that the U.S. welfare state is already a magnet for poor immigrants in search of government assistance. It’s true that the U.S. attracts poor people, but it’s also true that they come here to work, not to go on the dole. We know this because the data consistently show that foreign nationals in the U.S. are more likely than natives to be employed and less likely than low-income natives to be receiving public benefits.  …While there’s no evidence that immigrants come here for public assistance, that could change as the U.S. welfare state grows. And one consequence could be less-welcoming immigration policies. The European experience is instructive. In countries such as France, Italy and the Netherlands, excessively generous public benefits have lured poor migrants who tend to be heavy users of welfare and less likely than natives to join the work force. Milton Friedman famously remarked, “you can’t have free immigration and a welfare state.” There is a tipping point, even if the U.S. has yet to reach it.

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FRIEDMAN FRIDAY Excellent Washington Post Editorial (Yes, Really) on School Choice September 3, 2013 by Dan Mitchell (with Milton Friedman video)

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FRIEDMAN FRIDAY Milton Friedman on Immigration Part 1

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Milton Friedman – Illegal Immigration – PT 1

Milton Friedman – Illegal Immigration – PT 2

Milton Friedman stated , “you can’t have free immigration and a welfare state.” Below Dan Mitchell links back to this quote in one of his earlier posts:

As a general rule, I like immigration and I don’t like redistribution.

As such, I share the late Milton Friedman’s concern about the risks of having a welfare state combined with open borders. And based on many conversations all over the country, I think that’s a big reason why many people oppose amnesty (augmented by Republican partisans who fear, probably with some validity, that changing the political landscape of America is the real reason Senator Schumer is a big advocate of amnesty).

So how can we reap the benefits of immigration without the risk of a bigger welfare state?

In part, we should have programsdesigned to attract people with skills and education.

I’m a big advocate and defender, for instance, of the EB-5 program that gives a preference for foreigners who invest in America’s economy and create jobs.

And if you peruse Mark Perry’s chart, we must be doing something right. Look at all these immigrant groups that are boosting per-capita income for the United States (including people from Lebanon, home of the Princess of the Levant).

I’ve always thought far more Americans would be sympathetic to immigration if they could be convinced that people were coming to America for the right reasons – i.e., to earn money rather than mooch off taxpayers.

With that in mind, Professor Tyler Cowen of George Mason University has aBloomberg column about Denmark that cites the great work of Nima Sanandajiabout how Americans of Nordic descent have much higher incomes than the people remaining in Nordic nations. Tyler’s entire article is worth reading, but I want to focus on a quasi-open-borders proposal that he puts forth in his conclusion.

For all the anti-immigrant sentiment that is circulating at the moment, would it hurt the U.S. to have fully open borders with Denmark? It would boost American gross domestic product and probably also improve American education. History teaches that serious assimilation problems would be unlikely, especially since many Danes already speak English. Open borders wouldn’t attract Danes who want to live off welfare because the benefits are so generous at home. How’s this for a simple rule: Open borders for the residents of any democratic country with more generous transfer payments than Uncle Sam’s.

I can’t think of any reasonable objection to this idea. Everything Tyler says makes sense. People like “Lazy Robert” won’t be lining up to get plane tickets to America. Instead, we’ll get the young and aspirational Danes.

For what it’s worth, I even think he understates the case since the type of people who would migrate to America wouldn’t just boost GDP. They almost surely would do something arguably more important, which is to boost per-capita GDP.

Just think of all the productive entrepreneurs who would take the opportunity to escape over-taxed Denmark and come to the United States. Along with ambitious and skilled people from nations such as Italy, France, and Sweden (though our welfare state is very expensive, so I admit I’m just guessing at nations which would be eligible based on Tyler’s rule about “more generous transfer payments”).

By the way, Denmark apparently has learned a lesson about the risks of being a welfare magnet.

A story from Spiegel Online has the details.

Denmark’s strict immigration laws have saved the country billions in benefits, a government report has claimed. …The extremely strict laws have dramatically reduced the flow of people into Denmark in recent years, and many government figures are delighted with the outcome. “Now that we can see that it does matter who comes into the country, I have no scruples in further restricting those who one can suspect will be a burden on Denmark,” the center-right liberal integration minister, Søren Pind, told the Jyllands Postennewspaper. Pind was talking after the ministry’s report — initiated by the right-wing populist Danish People’s Party (DPP) — came to the conclusion that by tightening immigration laws, Denmark has saved €6.7 billion ($10 billion) over the last 10 years, money which otherwise would supposedly have been spent on social benefits or housing. According to the figures, migrants from non-Western countries who did manage to come to Denmark have cost the state €2.3 billion, while those from the West have actually contributed €295 million to government coffers.

Sounds like Danish lawmakers don’t want to add even more passengers to the nation’s already-overburdened “party boat.”

And who can blame them. The nation already has a crippling problem of too many people depending on government.

P.S. If you want to enjoy some immigration-related humor, we have a video about Americans migrating to Peru and a story about American leftists escaping to Canada.

P.P.S. For those interested in the issue of birthright citizenship (a.k.a. anchor babies), I’ve shared some interesting analysis from Will Wilkinson and George Will.

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Milton Friedman on Immigration Part 2

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Milton Friedman on Immigration Part 2

Milton Friedman – Illegal Immigration – PT 1

Milton Friedman – Illegal Immigration – PT 2

 

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My previous post dealing with whether citizenship should be automatic for babies born to illegals generated a lot of commentary, so it is with some trepidation that I wade back into the issue. But the Wall Street Journal column excerpted belowseems to strike exactly the right chord and should (at least I think!) meet with approval from both sides of the immigration debate. And by “both sides,” I’m referring to the debate on the right (with some conservatives and libertarians on both sides of the issue) regarding the benefits of immigration generally and the treatment of illegals specifically.

…a larger welfare state is not conducive to comprehensive immigration reform. If foreigners start coming for handouts instead of economic opportunity, tighter restrictions will be justified. … A 2005 World Values Survey found that 71% of Americans see poverty as a condition that can be overcome by dint of hard work, while only 40% of Europeans share that viewpoint. …Belief in social mobility has informed welfare and immigration policy from colonial times. In 1645 the Massachusetts Bay colony was already barring paupers. And in 1882, when Congress finally passed the country’s first major piece of immigration legislation, it specifically prohibited entry to “any person unable to take care of himself or herself without becoming a public charge.” A problem that immigration reformers face is the public perception—fed by restrictionists and exacerbated during economic downturns—that the U.S. welfare state is already a magnet for poor immigrants in search of government assistance. It’s true that the U.S. attracts poor people, but it’s also true that they come here to work, not to go on the dole. We know this because the data consistently show that foreign nationals in the U.S. are more likely than natives to be employed and less likely than low-income natives to be receiving public benefits.  …While there’s no evidence that immigrants come here for public assistance, that could change as the U.S. welfare state grows. And one consequence could be less-welcoming immigration policies. The European experience is instructive. In countries such as France, Italy and the Netherlands, excessively generous public benefits have lured poor migrants who tend to be heavy users of welfare and less likely than natives to join the work force. Milton Friedman famously remarked, “you can’t have free immigration and a welfare state.” There is a tipping point, even if the U.S. has yet to reach it.

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Milton Friedman and Dan Mitchell on the Post Office!!!

Ep. 10 – How to Stay Free [3/7]. Milton Friedman’s Free to Choose (1980)

Pat Brennan became something of a celebrity in 1978 because she was delivering mail in competition with the United States Post Office. With her husband she set up business in a basement in Rochester, NY. Soon it was thriving. They charged less than the post office and they guaranteed delivery the same day of parcels and letters in downtown Rochester. There is no doubt now that they were breaking the law as it stood. The post office took them to court. The case against them was simply that they should not be handling letters. The Brennan’s decided to fight and local businessmen provided the financial backing.
Pat Brennan: I think there’s going to be a quiet revolt and perhaps we’re the beginning of it. That you see people bucking the bureaucrats where years ago you wouldn’t dream of doing that because you’d be squelched. Now, with tax revolts and with what we’re doing, people are deciding that their fates are their own and not up to somebody in Washington who has no interest in them whatsoever. So, it’s not a question of anarchy, but it’s a questions of people rethinking the power of the bureaucrats and rejecting it.
Friedman: The Brennan customers were clear about one thing. After all, the Brennan’s service was cheaper than the regular mail.
Thomas O’Donaghue (storekeeper): We’re not sure that they have done anything illegal and I’d like to know more about this and I hope that this gets further into the courts than it has already. And someone will listen to their appeal because when we use the Brennan’s we know for a fact that same day delivery is going to be happening day after day after day, whereas with the other guy, you’re not sure and you’re sure what kind of shape it’s going to get there in. So I am behind the Brennan’s 100% and anything I can do to help them, I will.
Pat Brennan: Well, the questions of freedom comes up in any kind of a business. Whether you have the right to pursue it and the right to decide what you are going to do. There is also the question of the freedom of the consumers to utilize the service that they find is inexpensive and far superior. And according to the federal government and the body of laws called the Private Express Statutes, I don’t have a freedom to start a business and the consumer does not have the freedom to use it. Which seems very strange in a country like this that the entire context of the country is based on freedom and free enterprise.
Friedman: The post office won the case. It went all the way to the State Supreme Court and the Brennan’s were closed down. Put out of the business of delivering mail.
What we’ve been looking at is a natural human reaction to the attempt by other people to control your life when you think it’s none of their business. The first reaction is resentment. The second is to attempt to get around it. And finally there comes a decline in respect for law in general. There’s nothing especially American about this. It happens all over the world whenever some people try to control other people. For example, take a look at what’s happening to the British.
For most of the past century Britain was known throughout the world for the respect which its citizens gave to the law, but no longer. Graham Turner (Author “Business in Britain) Nothing is perfect that we have become in the course of the last ten or fifteen years, a nation of fiddlers. How do they do it? They do it in a colossal variety of ways. Lets take it right at the lowest level. Take a small grocer in a country area, say Devon. Very small turnover. How does he make money? He finds out that by buying through regular wholesalers he’s always got to use invoices. But if he goes to the cash and carry and buys his goods from there, and the profit margin on those goods can be untaxed because the tax inspector simply don’t know he’s had those goods. That’s the way he does it. Then if you take it to the top end, if you take a company director, well there’s all kinds of ways they can do it. They buy their food through the company, they have their holidays on the company, the put their wives as company directors even though they never visit the factory. They build their houses on the company by a very simple device of building a factory at the same time as a house, it goes absolutely right through the range from the ordinary person, the ordinary working class person, doing quite menial jobs right to the top end, businessmen, senior politicians, members of the Cabinet, members of the Shadow Cabinet, they all do it. I think almost everybody now feels the tax system is basically unfair. And, everybody who can tries to find a way around that tax system. Now, once that happens, once there is a consensus that the tax system is unfair, the country in effect becomes a kind of conspiracy. And everybody helps each other to fiddle. You’ve no difficulty fiddling in this country because other people actually want to help you. Now 15 years ago that would have been quite different. People would have said, hey, you know, this is not quite as it should be. So that’s the first reason. A very high level of taxation. But I think personally there’s another fact that comes into it. And that is that over the years we’ve had a huge growth in bureaucracy, government expenditure, cotton wool, if you like, to protect people from the slings and arrow of ordinary life, you know, health service, all kinds of benefits of one sort or another. And I think this comes into the consciousness of people almost a sort of new factor feeling that things don’t quite have the value that they did that money is not a thing of value, if your short you get it from some government body or other

Postal Service: Return to Sender

I don’t mind being polemical on occasion, but I generally don’t accuse my opponents of being “socialists.”

American leftists generally focus on redistribution and regulatory intervention andsocialism technically means that the government directly owns, operates, and controls various sectors of the economy (think, for example, of the difference between Obamacare and the U.K.’s system, where doctors are public employees and the government operates the hospitals).

But we do have a few islands of socialism in the United States. Education is probably the biggest sector of our economy that is dominated by government. The air traffic control system is another unfortunate example.

Today, though, let’s focus on the Postal Service.

I wrote about this topic a couple of years ago, but we now have lots of additional evidence on why we should replace this costly and inefficient government monopoly with a system based on real competition and no subsidies.

My colleague Chris Edwards explains that, from an economic and taxpayer perspective, the postal monopoly is a dumpster fire.

The U.S. Postal Service (USPS) has lost more than $50 billion since 2007, even though it enjoys legal monopolies over letters, bulk mail, and access to mailboxes. The USPS has a unionized, bureaucratic, and overpaid workforce. And as a government entity, it pays no income or property taxes, allowing it to compete unfairly with private firms in the package and express delivery businesses. …the USPS needs a major overhaul. It should be privatized and opened to competition. But instead of reform, congressional Republicans are moving forward with legislation that tinkers around the edges. Their bill adjusts retiree health care, hikes stamp prices, and retains six-day delivery despite a 40 percent drop in letter volume since 2000. The bill would also create “new authority to offer non-postal products,” thus threatening to increase the tax-free entity’s unfair competition against private firms.

Amazingly, this is an area where European nations actually are more market-oriented than the United States.

Republican…timidity is particularly striking when you compare their no-reform bill to the dramatic postal reforms in Europe. …Since 2012 all EU countries have opened their postal industries to competition for all types of mail. A growing number of countries have privatized their postal systems, including Britain, Germany, Portugal, and the Netherlands. …On-the-ground competition is small but growing in Europe. In a dozen countries, new competitors have carved out more than five percent of the letter market, and in a handful of countries the share is more than ten percent. …the Europeans are giving entrepreneurs a chance. In response to even the modest competition that has developed so far, major European postal companies have “increased their efficiency and restructured their operations to reduce costs,” according to the EU report.

Veronique de Rugy of the Mercatus Center weighs in on the issue in a column forReason.

The Postal Service is a major business enterprise operated by the federal government. Thanks to Congress, it has something many business owners would love to have— protection from competition. Its monopoly on access to mailboxes and the delivery of first-class and standard mail means it doesn’t have to worry about someone offering a better service at a lower price. …unlike private businesses, the Postal Service has access to low-rate loans from the Department of the Treasury, effectively pays no income or property taxes, is exempt from local zoning rules and even has the power of eminent domain.

In addition to all these favors, the Postal Service is getting a huge indirect subsidy for it’s unfunded pension system.

Congress mandated that the Postal Service start making payments to fund the generous retirement health benefits it has promised workers. This was an important reform because the Postal Service has built up an unfunded liability for these benefits of nearly $100 billion. Ideally, postal workers should be paying for these benefits from payroll contributions rather than leaving the liabilities to federal taxpayers down the road. Sadly, Congress is too timid to take on special interests that benefit from the inefficient status quo, such as postal unions, and won’t support serious reforms… A few years ago, President Barack Obama called for a $30 billion bailout from the federal government, a five-day delivery schedule and an increase in the price of stamps. Unfortunately, that would be a bad solution from the perspective of customers and taxpayers. It also would perpetuate the blatantly unfair competition with companies such as FedEx and UPS.

Amazingly, some statists actually want to expand the Postal Service.

One bad idea that “reform” Postal Service supporters are pushing is to allow the government service to compete with private firms in other industries, such as banking. That would be hugely unfair to taxpaying private businesses, and do we really believe that such a bureaucratic agency as the U.S. Postal Service could out-compete private businesses in other areas if there were a level playing field?

The simple way to think about this issue is that an expanded Postal Service would be like Fannie Mae and Freddie Mac, only able to operate because of special privileges.

Shane Otten, writing for E21, has an “undeliverable” message for the Postal Service.

…the United States Postal Service (USPS)…an independent agency of the U.S. government, …has exclusive control over the postal system. Like every other government monopoly, it has lost money—$56.8 billion since 2007. The Postal Service is a smorgasbord of common government failures, including high labor costs due to unions (including the American Postal Workers Union, the National Association of Letter Carriers, and the National Rural Letter Carriers’ Association), congressional burdens restricting needed changes, unfunded pensions… Postal workers earn between 24 percent and 36 percent more than comparable workers in the private sector.  Because of this, labor costs represent approximately 80 percent of all expenses incurred by USPS. For comparison, private delivery service UPS’s labor costs only make up 62 percent of expenditures, even though UPS is unionized. And at union-free FedEx, labor costs come in at just 38 percent of total operating expenses.

Shane echoes Veronique’s argument about the Postal Service’s dodgy approach to pensions.

…the Post Office has not made a prefunding payment since fiscal year 2011. …the Postal Service pays nothing in federal, state, and local taxes on income, sales, property, and purchases. This saves the agency over $2 billion each year, giving it a major advantage over private competitors. The USPS is also immune from zoning regulations, tolls, vehicle registration, and parking tickets. …The Postal Service…can borrow money from the Treasury at a reduced interest rate. …borrowing at this artificially low rate is equivalent to a subsidy of almost $500 million.

By the way, I got castigated for saying it was a “bailout” when Congress said it was okay for the Postal Service to skip payments for employee pensions. I was basically correct, but should have referred to it as a “pre-bailout” or something like that.

The bottom line is that there’s no reason in a modern economy for a government to operate a business that delivers pieces of paper (and more than it would make sense to have government deliver pizzas). Indeed, this is such a slam-dunk issue that even the Washington Post is on the right side.

P.S. For what it’s worth, the Postal Service actually is constitutional. It’s one of thefederal government’s enumerated powers. But the fact that the federal government is allowed to maintain postal service doesn’t mean it’s obliged to do it.

P.P.S. Here’s my only example of Postal Service Humor.

P.P.P.S. Though if you have a very dark sense of humor, you may laugh at the “action” of this postal employee. I think he may deserve a retroactive promotion to the Bureaucrat Hall of Fame.

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Friedman & Sowell: Should Our School System Be Privatized?

No other nation in the world spends as much on education as the United States.

According to our leftist friends, who prefer to measure inputs rather than outputs, this is a cause for celebration. I guess it shows we have the best intentions. Or maybe we love our kids the most.

For those who prefer to focus on outputs, however, it’s very difficult to be happy about the results we’re getting compared to all the money that’s being spent. Heck, in some cases it’s almost as if we’re getting negative results when you compare inputs and outputs.

To paraphrase what Winston Churchill said about the Royal Air Force in World War II, never have so many paid so much to achieve so little.

Now we have more evidence that American taxpayers are paying a lot and getting a little (though I have to admit that non-teaching education bureaucrats have been big winners).

The Washington Post reports on some new research to see how America’s young adults rank compared to their peers in other nations.

The results aren’t encouraging.

This exam, given in 23 countries, assessed the thinking abilities and workplace skills of adults. It focused on literacy, math and technological problem-solving. The goal was to figure out how prepared people are to work in a complex, modern society. And U.S. millennials performed horribly. That might even be an understatement… No matter how you sliced the data – by class, by race, by education – young Americans were laggards compared to their international peers. In every subject, U.S. millennials ranked at the bottom or very close to it, according to a new study by testing company ETS.

There were three testing categories and Americans didn’t do well in any of them.

…in literacy, U.S. millennials scored higher than only three countries. In math, Americans ranked last. In technical problem-saving, they were second from the bottom. “Abysmal,” noted ETS researcher Madeline Goodman. “There was just no place where we performed well.”

Here’s the comparative data on literacy.

Here’s how Americans did on numeracy (which may explain why there’sconsiderable support for the minimum wage).

Last but not least, millennials didn’t exactly do well in problem solving, either (which may explain their bizarre answers to polling questions).

By the way, the researchers also sliced and diced the data to get apples-to-apples comparisons.

Yet even on this basis, there’s no good news for America.

U.S. millennials with master’s degrees and doctorates did better than their peers in only three countries, Ireland, Poland and Spain. …Top-scoring U.S. millennials – the 90th percentile on the PIAAC test – were at the bottom internationally, ranking higher only than their peers in Spain.  …ETS researchers tried looking for signs of promise – especially in math skills, which they considered a good sign of labor market success. They singled out native-born Americans. Nope.

At some point, we need to realize that decades of additional spending and decades of further centralization have not worked.

Maybe, just maybe, it’s time to shut down the Department of Education on the federal level and to encourage school choice on the state and local level.

After all, we already have good evidence that decentralization and competitionproduces better test scores. There’s also strong evidence for school choice from nations such as Sweden, Chile, and the Netherlands.

P.S. We’re never going to solve this problem by tinkering with the status quo. That’s like rearranging the deck chairs on the Titanic. This is why Bush’s no-bureaucrat-left-behind scheme didn’t work. And it explains why Obama’s Common Core is flopping as well.

P.P.S. Moreover, it will probably require big reform to deal with the brainless types of political correctness that exist in government schools.

P.P.P.S. If you want more evidence that the problem isn’t money, check out this research on educational outcomes in various cities. Or look at this data from New York City and Washington, DC, both of which spend record amounts of money on education.

P.P.P.P.S. I can’t resist sharing this correction of some very shoddy education reporting by the New York Times.

P.P.P.P.P.S. On the bright side, the inadequacies of government-run schools helped give birth to the home-schooling movement, which then led to this humorous video. And the political correctness that infects government schools results in a bizarre infatuation with gender performance, which helped lead to this funny video. And this bit of satire on the evolution of math training in government schools also is quite amusing.

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FRIEDMAN FRIDAY Milton Friedman’s FREE TO CHOOSE “The Tyranny of Control” Transcript and Video (60 Minutes)

Milton Friedman’s FREE TO CHOOSE “The Tyranny of Control” Transcript and Video (60 Minutes) In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 7 of 7 (Transcript and Video) “I’m not pro business, I’m pro free enterprise, which is a very different thing, and the reason I’m pro free enterprise”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 6 of 7 (Transcript and Video) “We are the ones who promote freedom, and free enterprise, and individual initiative, And what do we do? We force puny little Hong Kong to impose limits, restrictions on its exports at tariffs, in order to protect our textile workers”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 5 of 7 (Transcript and Video) “There is no measure whatsoever that would do more to prevent private monopoly development than complete free trade”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 4 of 7 (Transcript and Video) ” What we need are constitutional restraints on the power of government to interfere with free markets in foreign exchange, in foreign trade, and in many other aspects of our lives.”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 3 of 7 (Transcript and Video) “When anyone complains about unfair competition, consumers beware, That is really a cry for special privilege always at the expense of the consumer”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 2 of 7 (Transcript and Video) “As always, economic freedom promotes human freedom”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” Milton Friedman’s FREE TO CHOOSE Part 1 of 7 (Transcript and Video) “Adam Smith’s… key idea was that self-interest could produce an orderly society benefiting everybody, It was as though there were an invisible hand at work”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

Open letter to President Obama (Part 654) “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 7 of 7 (Transcript and Video) “I’m not pro business, I’m pro free enterprise, which is a very different thing, and the reason I’m pro free enterprise”

Open letter to President Obama (Part 654) (Emailed to White House on July 22, 2013) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you […]

Open letter to President Obama (Part 650) “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 6 of 7 (Transcript and Video) “We are the ones who promote freedom, and free enterprise, and individual initiative, And what do we do? We force puny little Hong Kong to impose limits, restrictions on its exports at tariffs, in order to protect our textile workers”

Open letter to President Obama (Part 650) (Emailed to White House on July 22, 2013) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you […]

_________

FRIEDMAN FRIDAY What if the NFL Was Run Like the Government School System? October 4, 2011 by Dan Mitchell (with video from Milton Friedman)

Friedman & Sowell: Should Our School System Be Privatized?

Regular readers know that the two things that get me most excited are the Georgia Bulldogs and the fight against a bloated public sector that is ineffective in the best of circumstances and more often than not is a threat to our freedoms.

So you will not be surprised to know that I am delighted that former Georgia Bulldog star Fran Tarkenton (who also happened to play in the NFL) has a superb piece in the Wall Street Journal ripping apart the inherent inefficiency of government-run monopoly schools.

Here is the key passage.

Imagine the National Football League in an alternate reality. Each player’s salary is based on how long he’s been in the league. It’s about tenure, not talent. The same scale is used for every player, no matter whether he’s an All-Pro quarterback or the last man on the roster. For every year a player’s been in this NFL, he gets a bump in pay. The only difference between Tom Brady and the worst player in the league is a few years of step increases. And if a player makes it through his third season, he can never be cut from the roster until he chooses to retire, except in the most extreme cases of misconduct. Let’s face the truth about this alternate reality: The on-field product would steadily decline. Why bother playing harder or better and risk getting hurt? No matter how much money was poured into the league, it wouldn’t get better. In fact, in many ways the disincentive to play harder or to try to stand out would be even stronger with more money. Of course, a few wild-eyed reformers might suggest the whole system was broken and needed revamping to reward better results, but the players union would refuse to budge and then demonize the reform advocates: “They hate football. They hate the players. They hate the fans.” The only thing that might get done would be building bigger, more expensive stadiums and installing more state-of-the-art technology. But that just wouldn’t help.

This sounds absurd, of course, but Mr. Tarkenton goes on to explain that this is precisely how government schools operate.

If you haven’t figured it out yet, the NFL in this alternate reality is the real-life American public education system. Teachers’ salaries have no relation to whether teachers are actually good at their job—excellence isn’t rewarded, and neither is extra effort. Pay is almost solely determined by how many years they’ve been teaching. That’s it. After a teacher earns tenure, which is often essentially automatic, firing him or her becomes almost impossible, no matter how bad the performance might be. And if you criticize the system, you’re demonized for hating teachers and not believing in our nation’s children. Inflation-adjusted spending per student in the United States has nearly tripled since 1970. According to the Organization for Economic Cooperation and Development, we spend more per student than any nation except Switzerland, with only middling results to show for it.

Actually, I will disagree with the last sentence of this excerpt. We’re not even getting “middling results.” Here’s a chart from an earlier post showing that we’ve gotten more bureaucracy and more spending but no improvement over the past 40 years.

So what’s the solution to this mess? Well, since government is the problem, it stands to reason that competition and markets are the answer.

Sweden, Chile, and the Netherlands are just some of the countries that have seen good results after breaking up state-run education monopolies.

Watch this video to get more details.

Economics 101: School Choice Example Shows Why Government Monopolies Are Bad

 

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FRIEDMAN FRIDAY Milton Friedman’s FREE TO CHOOSE “The Tyranny of Control” Transcript and Video (60 Minutes)

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FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 7 of 7 (Transcript and Video) “I’m not pro business, I’m pro free enterprise, which is a very different thing, and the reason I’m pro free enterprise”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 6 of 7 (Transcript and Video) “We are the ones who promote freedom, and free enterprise, and individual initiative, And what do we do? We force puny little Hong Kong to impose limits, restrictions on its exports at tariffs, in order to protect our textile workers”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

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In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 4 of 7 (Transcript and Video) ” What we need are constitutional restraints on the power of government to interfere with free markets in foreign exchange, in foreign trade, and in many other aspects of our lives.”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 3 of 7 (Transcript and Video) “When anyone complains about unfair competition, consumers beware, That is really a cry for special privilege always at the expense of the consumer”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 2 of 7 (Transcript and Video) “As always, economic freedom promotes human freedom”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” Milton Friedman’s FREE TO CHOOSE Part 1 of 7 (Transcript and Video) “Adam Smith’s… key idea was that self-interest could produce an orderly society benefiting everybody, It was as though there were an invisible hand at work”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

Open letter to President Obama (Part 654) “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 7 of 7 (Transcript and Video) “I’m not pro business, I’m pro free enterprise, which is a very different thing, and the reason I’m pro free enterprise”

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Open letter to President Obama (Part 650) “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 6 of 7 (Transcript and Video) “We are the ones who promote freedom, and free enterprise, and individual initiative, And what do we do? We force puny little Hong Kong to impose limits, restrictions on its exports at tariffs, in order to protect our textile workers”

Open letter to President Obama (Part 650) (Emailed to White House on July 22, 2013) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you […]

_________

FRIEDMAN FRIDAY Excellent Washington Post Editorial (Yes, Really) on School Choice September 3, 2013 by Dan Mitchell (with Milton Friedman video)

_

Friedman & Sowell: Should Our School System Be Privatized?

School choice should be a slam-dunk issue. There’s very powerful evidence that we can provide superior education for lower cost if we shift away from monopoly government schools to a system based on parental choice.

Yet some leftists oppose this reform, even though poor and minority kids would be the biggest beneficiaries. Here’s some of what I wrote last year about how the left deals with this issue.

…the school choice issue exposes the dividing line between honest liberals and power-hungry liberals. Regardless of ideology, any decent person will favor reforms that enable poor kids to escape horrible government schools. Lots of liberals are decent people. The ones who oppose school choice, by contrast, are…well, you can fill in the blank.

The Washington Post, to its credit, belongs in the “decent” category. Here’s some ofthe paper’s editorial on school choice in Louisiana.

Nine of 10 Louisiana children who receive vouchers to attend private schools are black. All are poor and, if not for the state assistance, would be consigned to low-performing or failing schools with little chance of learning the skills they will need to succeed as adults. So it’s bewildering, if not downright perverse, for the Obama administration to use the banner of civil rights to bring a misguided suit that would block these disadvantaged students from getting the better educational opportunities they are due.

The editorial eviscerates the nonsensical data that the Obama Administration is using as it puts the interests of powerful teacher unions above the needs of disadvantaged children.

The government argues that allowing students to leave their public schools for vouchered private schools threatens to disrupt the desegregation of school systems. …Since most of the students using vouchers are black, it is, as State Education Superintendent John White pointed out to the New Orleans Times-Picayune, “a little ridiculous” to argue that the departure of mostly black students to voucher schools would make their home school systems less white. …The government’s argument that “the loss of students through the voucher program reversed much of the progress made toward integration” becomes even more absurd upon examination of the cases it cited in its petition. …a school that lost five white students through vouchers and saw a shift in racial composition from 29.6 percent white to 28.9 percent white. Another school that lost six black students and saw a change in racial composition from 30.1 percent black to 29.2 percent black. “Though the students . . . almost certainly would not have noticed a difference, the racial bean counters at the DOJ see worsening segregation,”… The number that should matter to federal officials is this: Roughly 86 percent of students in the voucher program came from schools that were rated D or F. Mr. White called ironic using rules to fight racism to keep students in failing schools; we think it appalling.

Not only appalling, but also hypocritical. The President is sending his children to an ultra-expensive private school, but doesn’t want poor families to have any choice to get a good education.

Unfortunately, though, it is not a surprise from an administration that…has proven to be hostile — as witnessed by its petty machinations against D.C.’s voucher program — to the school choice afforded by private-school vouchers. …Louisiana parents are clamoring for the choice afforded by this program; the state is insisting on accountability; poor students are benefiting. The federal government should get out of the way.

Kudos to the Washington Post for urging a withdrawal of federal intervention. Now if we can get the Post to apply the same federalism lesson to Medicaid,transportation, and other issues, we’ll be making real progress.

For more information on the overall issue of school choice, I strongly recommend this video from the Center for Freedom and Prosperity Foundation.

Economics 101: School Choice Example Shows Why Government Monopolies Are Bad

By the way, don’t believe propaganda from politicians and union bosses about “underfunded” schools. The United States spends more per capita than any other country.

This isn’t an issue of money. The problem is that monopolies don’t deliver good results. Particularly monopolies controlled by self-serving union bosses that use political muscle to protect undeserved privileges.

P.S. Not surprisingly, Thomas Sowell nails this issue, as does Walter Williams, with both criticizing the President for sacrificing the interests of minority children to protect the monopoly privileges of teacher unions.

P.P.S. Chile has reformed its education system with vouchers, as have Sweden andthe Netherlands, and all those nations are getting good results.

P.P.P.S. There are some other honest and sincere liberals on this issue.

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FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 7 of 7 (Transcript and Video) “I’m not pro business, I’m pro free enterprise, which is a very different thing, and the reason I’m pro free enterprise”

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In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

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In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 4 of 7 (Transcript and Video) ” What we need are constitutional restraints on the power of government to interfere with free markets in foreign exchange, in foreign trade, and in many other aspects of our lives.”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 3 of 7 (Transcript and Video) “When anyone complains about unfair competition, consumers beware, That is really a cry for special privilege always at the expense of the consumer”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 2 of 7 (Transcript and Video) “As always, economic freedom promotes human freedom”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, […]

FRIEDMAN FRIDAY “The Tyranny of Control” Milton Friedman’s FREE TO CHOOSE Part 1 of 7 (Transcript and Video) “Adam Smith’s… key idea was that self-interest could produce an orderly society benefiting everybody, It was as though there were an invisible hand at work”

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Open letter to President Obama (Part 650) (Emailed to White House on July 22, 2013) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you […]

_________

Milton Friedman and Dan Mitchell on the Post Office!!!

Milton Friedman and Dan Mitchell on the Post Office!!!

Ep. 10 – How to Stay Free [3/7]. Milton Friedman’s Free to Choose (1980)

Pat Brennan became something of a celebrity in 1978 because she was delivering mail in competition with the United States Post Office. With her husband she set up business in a basement in Rochester, NY. Soon it was thriving. They charged less than the post office and they guaranteed delivery the same day of parcels and letters in downtown Rochester. There is no doubt now that they were breaking the law as it stood. The post office took them to court. The case against them was simply that they should not be handling letters. The Brennan’s decided to fight and local businessmen provided the financial backing.
Pat Brennan: I think there’s going to be a quiet revolt and perhaps we’re the beginning of it. That you see people bucking the bureaucrats where years ago you wouldn’t dream of doing that because you’d be squelched. Now, with tax revolts and with what we’re doing, people are deciding that their fates are their own and not up to somebody in Washington who has no interest in them whatsoever. So, it’s not a question of anarchy, but it’s a questions of people rethinking the power of the bureaucrats and rejecting it.
Friedman: The Brennan customers were clear about one thing. After all, the Brennan’s service was cheaper than the regular mail.
Thomas O’Donaghue (storekeeper): We’re not sure that they have done anything illegal and I’d like to know more about this and I hope that this gets further into the courts than it has already. And someone will listen to their appeal because when we use the Brennan’s we know for a fact that same day delivery is going to be happening day after day after day, whereas with the other guy, you’re not sure and you’re sure what kind of shape it’s going to get there in. So I am behind the Brennan’s 100% and anything I can do to help them, I will.
Pat Brennan: Well, the questions of freedom comes up in any kind of a business. Whether you have the right to pursue it and the right to decide what you are going to do. There is also the question of the freedom of the consumers to utilize the service that they find is inexpensive and far superior. And according to the federal government and the body of laws called the Private Express Statutes, I don’t have a freedom to start a business and the consumer does not have the freedom to use it. Which seems very strange in a country like this that the entire context of the country is based on freedom and free enterprise.
Friedman: The post office won the case. It went all the way to the State Supreme Court and the Brennan’s were closed down. Put out of the business of delivering mail.
What we’ve been looking at is a natural human reaction to the attempt by other people to control your life when you think it’s none of their business. The first reaction is resentment. The second is to attempt to get around it. And finally there comes a decline in respect for law in general. There’s nothing especially American about this. It happens all over the world whenever some people try to control other people. For example, take a look at what’s happening to the British.
For most of the past century Britain was known throughout the world for the respect which its citizens gave to the law, but no longer. Graham Turner (Author “Business in Britain) Nothing is perfect that we have become in the course of the last ten or fifteen years, a nation of fiddlers. How do they do it? They do it in a colossal variety of ways. Lets take it right at the lowest level. Take a small grocer in a country area, say Devon. Very small turnover. How does he make money? He finds out that by buying through regular wholesalers he’s always got to use invoices. But if he goes to the cash and carry and buys his goods from there, and the profit margin on those goods can be untaxed because the tax inspector simply don’t know he’s had those goods. That’s the way he does it. Then if you take it to the top end, if you take a company director, well there’s all kinds of ways they can do it. They buy their food through the company, they have their holidays on the company, the put their wives as company directors even though they never visit the factory. They build their houses on the company by a very simple device of building a factory at the same time as a house, it goes absolutely right through the range from the ordinary person, the ordinary working class person, doing quite menial jobs right to the top end, businessmen, senior politicians, members of the Cabinet, members of the Shadow Cabinet, they all do it. I think almost everybody now feels the tax system is basically unfair. And, everybody who can tries to find a way around that tax system. Now, once that happens, once there is a consensus that the tax system is unfair, the country in effect becomes a kind of conspiracy. And everybody helps each other to fiddle. You’ve no difficulty fiddling in this country because other people actually want to help you. Now 15 years ago that would have been quite different. People would have said, hey, you know, this is not quite as it should be. So that’s the first reason. A very high level of taxation. But I think personally there’s another fact that comes into it. And that is that over the years we’ve had a huge growth in bureaucracy, government expenditure, cotton wool, if you like, to protect people from the slings and arrow of ordinary life, you know, health service, all kinds of benefits of one sort or another. And I think this comes into the consciousness of people almost a sort of new factor feeling that things don’t quite have the value that they did that money is not a thing of value, if your short you get it from some government body or other

Postal Service: Return to Sender

I don’t mind being polemical on occasion, but I generally don’t accuse my opponents of being “socialists.”

American leftists generally focus on redistribution and regulatory intervention andsocialism technically means that the government directly owns, operates, and controls various sectors of the economy (think, for example, of the difference between Obamacare and the U.K.’s system, where doctors are public employees and the government operates the hospitals).

But we do have a few islands of socialism in the United States. Education is probably the biggest sector of our economy that is dominated by government. The air traffic control system is another unfortunate example.

Today, though, let’s focus on the Postal Service.

I wrote about this topic a couple of years ago, but we now have lots of additional evidence on why we should replace this costly and inefficient government monopoly with a system based on real competition and no subsidies.

My colleague Chris Edwards explains that, from an economic and taxpayer perspective, the postal monopoly is a dumpster fire.

The U.S. Postal Service (USPS) has lost more than $50 billion since 2007, even though it enjoys legal monopolies over letters, bulk mail, and access to mailboxes. The USPS has a unionized, bureaucratic, and overpaid workforce. And as a government entity, it pays no income or property taxes, allowing it to compete unfairly with private firms in the package and express delivery businesses. …the USPS needs a major overhaul. It should be privatized and opened to competition. But instead of reform, congressional Republicans are moving forward with legislation that tinkers around the edges. Their bill adjusts retiree health care, hikes stamp prices, and retains six-day delivery despite a 40 percent drop in letter volume since 2000. The bill would also create “new authority to offer non-postal products,” thus threatening to increase the tax-free entity’s unfair competition against private firms.

Amazingly, this is an area where European nations actually are more market-oriented than the United States.

Republican…timidity is particularly striking when you compare their no-reform bill to the dramatic postal reforms in Europe. …Since 2012 all EU countries have opened their postal industries to competition for all types of mail. A growing number of countries have privatized their postal systems, including Britain, Germany, Portugal, and the Netherlands. …On-the-ground competition is small but growing in Europe. In a dozen countries, new competitors have carved out more than five percent of the letter market, and in a handful of countries the share is more than ten percent. …the Europeans are giving entrepreneurs a chance. In response to even the modest competition that has developed so far, major European postal companies have “increased their efficiency and restructured their operations to reduce costs,” according to the EU report.

Veronique de Rugy of the Mercatus Center weighs in on the issue in a column forReason.

The Postal Service is a major business enterprise operated by the federal government. Thanks to Congress, it has something many business owners would love to have— protection from competition. Its monopoly on access to mailboxes and the delivery of first-class and standard mail means it doesn’t have to worry about someone offering a better service at a lower price. …unlike private businesses, the Postal Service has access to low-rate loans from the Department of the Treasury, effectively pays no income or property taxes, is exempt from local zoning rules and even has the power of eminent domain.

In addition to all these favors, the Postal Service is getting a huge indirect subsidy for it’s unfunded pension system.

Congress mandated that the Postal Service start making payments to fund the generous retirement health benefits it has promised workers. This was an important reform because the Postal Service has built up an unfunded liability for these benefits of nearly $100 billion. Ideally, postal workers should be paying for these benefits from payroll contributions rather than leaving the liabilities to federal taxpayers down the road. Sadly, Congress is too timid to take on special interests that benefit from the inefficient status quo, such as postal unions, and won’t support serious reforms… A few years ago, President Barack Obama called for a $30 billion bailout from the federal government, a five-day delivery schedule and an increase in the price of stamps. Unfortunately, that would be a bad solution from the perspective of customers and taxpayers. It also would perpetuate the blatantly unfair competition with companies such as FedEx and UPS.

Amazingly, some statists actually want to expand the Postal Service.

One bad idea that “reform” Postal Service supporters are pushing is to allow the government service to compete with private firms in other industries, such as banking. That would be hugely unfair to taxpaying private businesses, and do we really believe that such a bureaucratic agency as the U.S. Postal Service could out-compete private businesses in other areas if there were a level playing field?

The simple way to think about this issue is that an expanded Postal Service would be like Fannie Mae and Freddie Mac, only able to operate because of special privileges.

Shane Otten, writing for E21, has an “undeliverable” message for the Postal Service.

…the United States Postal Service (USPS)…an independent agency of the U.S. government, …has exclusive control over the postal system. Like every other government monopoly, it has lost money—$56.8 billion since 2007. The Postal Service is a smorgasbord of common government failures, including high labor costs due to unions (including the American Postal Workers Union, the National Association of Letter Carriers, and the National Rural Letter Carriers’ Association), congressional burdens restricting needed changes, unfunded pensions… Postal workers earn between 24 percent and 36 percent more than comparable workers in the private sector.  Because of this, labor costs represent approximately 80 percent of all expenses incurred by USPS. For comparison, private delivery service UPS’s labor costs only make up 62 percent of expenditures, even though UPS is unionized. And at union-free FedEx, labor costs come in at just 38 percent of total operating expenses.

Shane echoes Veronique’s argument about the Postal Service’s dodgy approach to pensions.

…the Post Office has not made a prefunding payment since fiscal year 2011. …the Postal Service pays nothing in federal, state, and local taxes on income, sales, property, and purchases. This saves the agency over $2 billion each year, giving it a major advantage over private competitors. The USPS is also immune from zoning regulations, tolls, vehicle registration, and parking tickets. …The Postal Service…can borrow money from the Treasury at a reduced interest rate. …borrowing at this artificially low rate is equivalent to a subsidy of almost $500 million.

By the way, I got castigated for saying it was a “bailout” when Congress said it was okay for the Postal Service to skip payments for employee pensions. I was basically correct, but should have referred to it as a “pre-bailout” or something like that.

The bottom line is that there’s no reason in a modern economy for a government to operate a business that delivers pieces of paper (and more than it would make sense to have government deliver pizzas). Indeed, this is such a slam-dunk issue that even the Washington Post is on the right side.

P.S. For what it’s worth, the Postal Service actually is constitutional. It’s one of thefederal government’s enumerated powers. But the fact that the federal government is allowed to maintain postal service doesn’t mean it’s obliged to do it.

P.P.S. Here’s my only example of Postal Service Humor.

P.P.P.S. Though if you have a very dark sense of humor, you may laugh at the “action” of this postal employee. I think he may deserve a retroactive promotion to the Bureaucrat Hall of Fame.

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