Tag Archives: Free Market

Republicans introduce new federal legislation to expand school choice

If I were giving advice to the Republican party about how to win in 2020, I would advise them to focus on three priorities. Lowering unemployment, reforming the criminal justice system, and expanding school choice. They should also paint the Democrats as the party of infanticide, Green New Deal and elimination of private health insurance.

So far, Trump has done an excellent job of encouraging private sector job creators to create millions of new jobs. Unemployment is at a record low, and that’s important for persuading Black and Hispanic voters to vote for smart policies instead of tribal identity and envy. I don’t agree with with reforming criminal justice to favor criminals, but that will help with minority voters as well. But what we really need to do is provide Black and Hispanic voters with a way to get their children out of failing public schools. Public schools are filled with lazy, unionized Democrat teachers and administrators who care more about indoctrinating kids with Democrat propaganda than teaching them job skills that will make them independent, self-sufficient adults.

The Republican party knows that school choice is a win for them, and they are doing something about it.

Here’s the latest from the American Enterprise Institute, a think tank that promotes fiscally conservative policies:

Today, Secretary of Education Betsy DeVos joined Senator Ted Cruz (R-TX), and Rep. Bradley Byrne (R-Ala.), to announce new federal legislation that would establish a federal tax-credit expanding school choice. The proposal would give dollar-for-dollar tax credits to individuals and corporations who donate to state designated scholarship granting organizations (SGOs). While its particulars bear scrutiny, the “Education Freedom Scholarship” (EFS) proposal’s overall design is a solid attempt to walk a tightrope of backing state efforts at school choice while protecting against federal meddling now and in the future. Unfortunately, a number of critics on the right are too quick to react on their fears, and too slow in remembering what is holding back school choice.

Some conservatives and libertarians worry that solving the problem of underforming schools from the top down is a political overreach, but the AEI policy analyst writing the article says that the Republican bill doesn’t have that problem:

As I wrote back in 2017, backing state developed tax-credit scholarships is the best, and probably only, way the federal government could support state efforts without overreaching.  It would not be a federal program, but a tax credit that supports programs where states are explicitly responsible for policy particulars.

[…]No doubt, the bill would need to be explicitly structured to ensure the states’ primary role, and durably prevent federal overreach; fortunately defending states’ role is a paramount feature of the bill’s design.

School choice is a nice issue for Republicans, because it allows them to point out the hypocritical nature of Democrat politicians. Democrat politicians are essentially hypocritical. They want to ban guns for you, but they have armed security to protect themselves. It’s the same thing for education. They want to ban private schools for your children, but their own children all attend private schools.

Top Political Contributors in 2016 election cycle
The top Political Contributors in 2016 election cycle includes two teacher unions

Democrats are obligated by teacher unions, (e.g. – the National Education Association and the American Federation of Teachers), to vote against parents who want their children to get a better education. That’s because teacher unions are some of the biggest Democrat donors. Teacher unions just want more salary and bigger benefits, despite the evidence that clearly shows that more education spending doesn’t produce better student achievement.

Education spending has tripled since 1970
Education spending has tripled since 1970

Here’s a study from 2012 published in the journal “Education and Urban Society“. It says:

The possibility is examined that school choice programs could be a means to reducing the achievement gap. Data based on meta-analytic research and the examination of nationwide data sets suggest that school choice programs that include private schools could reduce the achievement gap by 25%. The propounding of this possibility is based on research indicating that the achievement gap in faith-based schools is generally 25% narrower than one finds in public schools. Results of these studies suggest that both the racial achievement gap and the socioeconomic achievement gap are reduced by the same degree (25%). The significance of these results is discussed, especially as it pertains to the attitudes that people frequently have toward school choice.

Not only do children do better in non-public schools, but the competition forces public schools to focus less on leftist indoctrination, and more on reading, writing and math.

This study from the on-partisan National Bureau of Economic Research (NBER) explains why.

It says:

A school that is more productive is one that produces higher achievement in its pupils for each dollar it spends. In this paper, I comprehensively review how school choice might affect productivity. I begin by describing the importance of school productivity, then explain the economic logic that suggests that choice will affect productivity, and finish by presenting much of the available evidence on school choice and school productivity. The most intriguing evidence comes from three important, recent choice reforms: vouchers in Milwaukee, charter schools in Michigan, and charter schools in Arizona. I show that public school students’ achievement rose significantly and rapidly in response to competition, under each of the three reforms. Public school spending was unaffected, so the productivity of public schools rose, dramatically in the case in Milwaukee.

School choice makes public schools perform better because competition between providers always lowers the cost and increases the quality of services and products being provided to the consumers. Consumers always suffer when there is a monopoly. This is why people are more satisfied purchasing goods from Amazon and Netflix than they are lining up at the post office or the department of motor vehicles. The free market serves the consumer.

I was raised in a poor background, and I am a visible minority. If Republicans want to get the votes of people in my community, it makes sense to put in place policies that allow people like me to get a good education so we can get good jobs and do better than our parents did. Republicans should be all about equipping people to be independent and self-sufficient. These are conservative goals.

Wayne Grudem debates Richard Glover on the Bible, poverty and foreign aid

Two horses fight it out, may the best horse win!
Two horses fight it out, may the best horse win!

A great episode of the Unbelievable podcast. This is a great debate. I really enjoyed it. All three speakers were excellent putting forward their points. It’s nice to hear an American voice, a British voice and an Australian voice debating an important issue. HIGHLY RECOMMENDED.

Details:

Wayne Grudem is a theologian known for his conservative approach to both doctrine and economics. His new book “The Poverty of Nations: A Sustainable Solution” (co-authored with economist Barry Asmus) makes the case that pouring aid into developing countries is a failed strategy. Grudem debates whether the Bible supports free market, capitalist economics with Australian economist and theologian Richard Glover who wrote a critique of the book for the Australian Bible Society.

 The MP3 file is here.

Summary:

Grudem:

  • The Bible speaks to all of life, including economics, stewardship, government
  • The study of economics helps us to understand how to take care of the poor
  • My job is to apply the teachings of the Bible to all of life

Brierley:

  • What’s your thesis in the book?

Grudem:

  • A good system is one where the poor have the opportunity to earn and save from their labor
  • Book is a response to a Kenyan couple Grudem met at a London conference on business and Christianity
  • Book is not concerned with how individuals and groups can do charity to help the poor
  • Our church already does that and we support individuals and groups doing charity
  • The book is concerned with how should nations be transformed in order to grow economically
  • What should the laws, policies and cultural beliefs of a nation be in order for it to not be poor?
  • The book lists factors that have moved nations from poverty to prosperity in different times and places
  • The thesis of the book is this: government should set their people free to be able to produce more
  • We advocate freedom in economics: freedom to work, freedom to save, freedom to start businesses
  • We believe that this free enterprise view is consistent with the Bible in a number of places
  • E.g. – private property is good for prosperity (thou shall not steal) but forbidden by communism

Brierley:

  • What about the church sharing in communities in Acts 2 and Acts 4?

Grudem:

  • That is not redistribution of wealth among individuals and businesses by a secular government
  • Those passages showed that there was voluntary sharing among Christians, which is not communism

Brierley:

  • What’s wrong with Grudem’s book?

Glover:

  • The book emphasizes the Bible and the goal is to help the poor in poor countries
  • Criticism 1: the book doesn’t engage with non-free-market perspectives on economics
  • Criticism 2: the book doesn’t survey all that the Bible says about economics

Brierly:

  • For 1) what is one of the views that is not considered?

Glover:

  • Jeffrey Sachs says that nations need a leg up before they can grow economically
  • Ha-Joon Chang says that free enterprise was not how the wealthy nations became wealthy

Grudem:

  • We do engage with other points of view, especially Jeffrey Sachs in the book
  • The trouble with leftist views on economic development is that it does not work in practice
  • NO COUNTRY has even been lifted out of poverty by foreign aid
  • He says we don’t cite enough from the wisdom literature: we have 64 citations in the index
  • He says we don’t cite enough from the gospels: we have 42 citations in the index
  • He says we don’t cite enough from the epistles: we cite 22 of 27 epistles in the index
  • Some economists won’t criticize cultural and moral values that hurt prosperity
  • As Christians, we think that moral and cultural values are part of the problem that needs solving

Brierley:

  • What about foreign aid?

Grudem:

  • Foreign aid doesn’t help: a lot of the money goes into government and rulers can be corrupt
  • Instead of encouraging people to start businesses, it tells people to go into government to get aid money
  • Economists (lists 3) are saying that foreign aid entrenches corrupt government in power, does no good

Brierley:

  • If it’s not working, should we keep doing it?

Glover:

  • When there is an immediate need, we should do it, even if it is not a long-term solution: we need both

Brierley:

  • Should we stop foreign aid completely?

Grudem:

  • Voluntary charitable giving from individuals and churches to help poor countries is good
  • Me and my co-author are both active on our church board that helps poor countries with urgent needs
  • Food and doctors are urgent needs, and we should help, but it doesn’t lift countries out of poverty
  • We need a long-term solution that helps poor countries produce their own food and doctors
  • We are criticizing 1) government to government aid and 2) IMF/World bank to government aid
  • We have had pushback because 500,000 people make a living from this foreign aid industry
  • No country has ever been lifted out of poverty into sustainable prosperity
  • That’s the definition of insanity: continuing to do the same thing that has never worked

Brierley:

  • Does the Bible support free enterprise as a way of creating sustainable prosperity?

Glover:

  • When I said the Bible was absent from his book, absent was a bad choice of words
  • But the hundreds of references he listed were not dealth with *in depth*
  • In the Scriptures, God is the one who provides (e.g. – in Ephesians, Sermon on the Mount)
  • The Bible is less focused on his people making money, and more focus on sharing basics, like food
  • Secular governments should just take it from people who have food and give it to hungry people
  • In 2 Cor 8-9, Paul talks about voluntary sharing so everyone will be equal

Brierley:

  • Does 2 Cor 8-9 undermine the free enterprise system you champion in the book?

Grudem:

  • The sharing in the Bible solves cases of urgent need, it does not lift countries from poverty to sustainable prosperity
  • Some older translations say “equality” in 2 Cor 8:13-14, but newer translations (e.g. – ESV) say “fairness”
  • The Greek word is translated as “fairly” the only other place it appears in the NT (Col 4:1), in every translation
  • God uses the means of human work and productivity to provide (daily bread is baked, doesn’t just fall from Heaven)
  • In general, there’s no provision in Scripture for a person to be dependent on donations for their entire lives
  • God promises Israel fields and mountains to tend and mine, but prosperity is from work, not depending on others

Brierley:

  • Does the Bible support this focus on work?

Grudem:

  • Working is highly praised in Scripture, (lists Bible passages that favor work over dependency)
  • Countries that were exposed to this notion of work and productivity have been more prosperous

Glover:

  • Jeffrey Sachs and other development economists don’t say you can be prosperous through dependence
  • They say that it is a necessary part of leading to nations out of poverty into poverty

Grudem:

  • It’s never worked. What nation has become prosperous through foreign aid?

Glover:

  • There are lots of nations, especially in Africa, where foreign aid has helped lift them out of poverty

Grudem:

  • Name one country in Africa where foreign aud has lifted them out of poverty into sustainable prosperity

Glover:

  • I can’t think of one right now.

Grudem:

  • Our book contains a map of Africa and we looked at every nation’s per capita income
  • No nation has been able to rise out of poverty through dependence on foreign aid
  • The only close one is Botswana, but they have abundant freedoms, Christian morals, less corrupt government
  • So Botswana is the best case and they became prosperous through becoming productive, not foreign aid

Brierley:

  • Is he right to say that charity is a short-term solution, but that it’s not good long-term for prosperity?

Glover:

  • Yes, and work is a very important focus in the Scriptures as he says.
  • But since the Fall work has been much harder, and may not have the outcomes that we would like

Grudem:

  • I also believe in emergency aid for when catastrophies happen, like floods and famines
  • But dependence on foreign aid enriches corrupt rulers and does not create the productivity that leads to sustained prosperity

Brierley:

  • Can foreign aid be used to give poor nations a leg up on becoming prosperous?

Grudem:

  • Dambisa Moyo, Oxford-educated economist from Zambia, says stop the aid, it’s doing more harm than good
  • Jeffrey Sachs’ view is that foreign aid hasn’t worked yet, but just keep trying a bit more
  • What works: limited government, rule of law, fair courts, documented property rights, low taxes, stable currency
  • People are creative and want to work, we just have to get government out of the way and let people work, earn and save

Brierley:

  • Is this free enterprise system supported by the Bible?

Glover:

  • The wealthy nations of the world did not become wealthy through productive work and free enterprise policies
  • Ha-Joon Chang: free enterprise policies have never brought a country from poverty to wealth
  • E.g. – wealth is created through tariffs (not by innovating and by economic freedom?)

Grudem:

  • I’ve read Ha-Joon Chang’s book, and his examples are very selective and limited
  • Index of Economic Freedom: the freest countries are the most prosperous, the least free countries are the most poor
  • When you look at macro data, instead of very selective examples, the free enterprise system is best for prosperity

Glover:

  • The book doesn’t do enough to engage with leftist economists (he doesn’t say which ones)
  • Just because nations who are free are rich, doesn’t mean freedom causes productivity
  • There are parts of the Bible that doesn’t support the free enterprise system (he names none)

Grudem:

  • The Bible is focused on work not dependency, and charity not government redistribution
  • The best way to help the poor in other countries is by encouraging work and productivity

The pilgrims experiment with communism before the second Thanksgiving

The First Thanksgiving
Less than half the original pilgrims made it to the the first Thanksgiving

Here’s an article from The Stream about the second Thanksgiving, by Dante Witt. I like this article because it tells us so much about the character of the United States of America. Why are we so conservative about economics?

She briefly retells the story of how the pilgrims were helped by Squanto, which I blogged about in a previous Thanksgiving Day post, then she talks about the troubles they had next.

Excerpt:

Although Squanto’s farming techniques worked better than their old ones, the pilgrims still could not produce enough food. Was it bad luck? Bad soil? No. The Mayflower pilgrims were part of a joint stock company which stipulated that the pilgrims would pool their resources, and receive a share of the profit.

The strategy turned out to be deeply misguided, working about as well as various communist economic schemes hundreds of years later. The sad state of the colony after two years of communism, wrote William Bradford, “may well evidence the vanity of that conceit of Plato’s and the other ancients applauded by some of later times; that the taking away of property and the bringing of community into a commonwealth would make them happy and flourishing; as if they were wiser than God” (p. 121).

So the pilgrims amended their contract so that each family was now responsible for its own provision. The difference was stark. Bradford explained:

This had good success, for it made all hands very industrious, so that more corn was planted than could have been by any other means the Governor could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.

In fact, it’s estimated the colonists planted about six times the crops they would have planted otherwise.

That shows where Americans get their views of economics, but what about the praying and the gratitude?

More:

With new farming techniques and an amended government, the pilgrims did all they humanly could to ward off starvation. But they could not control the weather. A drought settled on the colony and threatened to kill the corn before the harvest. Recognizing with the Psalmist that “except the Lord build the house, they labor in vain that build it,” the colonists turned to God. According to Bradford, they “set apart a solemn day of humiliation to seek the Lord by humble & fervent prayer, in this great distress.” What was the outcome?

And he was pleased to give them a gracious & speedy answer, both to their own & the Indians admiration, that lived amongst them. For all the morning, and greatest part of the day, it was clear weather & very hot, and not a cloud or any sign of rain to be seen, yet toward evening it began to overcast, and shortly after to rain, with such sweet and gentle showers, as gave them cause of rejoicing, & blessing God. It came, without either wind, or thunder, or any violence, and by degrees in that abundance, as that the earth was thoroughly wet and soaked therewith. Which did so apparently revive & quicken the decayed corn & other fruits, as was wonderful to see, and made the Indians astonished to behold. (p. 131)

Seeing the speedy results of the Puritans’ prayers, an Indian named Hobanak said, “Now I see that the Englishman’s God is a good God, for he hath heard you, and sent you rain, and that without storms and tempests and thunder, which usually we have with our rain, which breaks down our corn, but yours stands whole and good still; surely your God is a good God.” (pp. 64-5)

Then William Bradford again proclaimed a day of Thanksgiving to God, the forerunner of the American tradition of Thanksgiving.

So, this story explains why the United States has this character that values the free enterprise system, hard work, individual achievement, prayer, and gratitude. These are the values that make us American, that made us into such a great nation.

Education Secretary Betsy Devos scores a victory against public sector union

Secretary of Education Betsy Devos
Secretary of Education Betsy Devos

Although you would never know it from the mainstream news media, Secretary of Education Betsy Devos is doing her best to advance a taxpayer-friendly agenda in education policy.

Here’s the latest from the American Enterprise Institute, a free-market think tank:

In a noteworthy development, DeVos’s team this month radically revamped the collective-bargaining agreement (CBA) that governs the 3,900 employees at the U.S. Department of Education. The new CBA, between the Department and Council 252 of the American Federation of Government Employees (AFGE), includes big changes from the 2013 agreement negotiated under the Obama administration.

The new agreement doesn’t address compensation or benefits, of course, since those are governed by federal law, but it does include a raft of sensible, taxpayer-friendly changes.

The new CBA eliminates the set-aside of “official time” for union business. Under the old agreement, designated union representatives were free to work on union business during normal, government hours — all on the taxpayers’ dime. The old CBA stipulated that “no fewer than 75” (!) union stewards across the country could work up to 40 hours a year on “official time,” while another three union officers would devote 100 percent of their time to union business. Henceforth, union business will be done on union time, rather than on the taxpayers’.

Under the old agreement, department employees were given only a solitary 48-hour window each year in which they could opt out of union membership; miss that, and they were automatically enrolled. Henceforth, employees who wish to be in the union each year will be free to do so, and they will have an extended period in which to enroll — but they will have to actively choose to join.

The revamped accord also removes the requirements for “pre-decisional consultation.” Under the previous CBA, the department was required to consult the union before every agency-wide decision that could be construed as affecting the work of employees (such as transferring employees from one office to another, or even shifting employees from one project to another within the same office). Now, the department needs only notify the union of such decisions.

Under the new CBA, the union will be charged “fair-market rent” for the use of government office space and federally furnished equipment to conduct union business. Under the Obama-era accord, taxpayers were required to provide space and equipment to the union free of charge.

More generally, the new agreement removes a number of provisions that added burdensome procedural directives above and beyond statutory requirements when it came to things such as telework and grievance procedures.

If there is one thing I expected from Betsy Devos, it’s taxpayer-friendly education policy.

Unfortunately, the Republican party didn’t help her very much in that massive $1.3 Billion spending bill that they passed, with Democrat support. Betsy wants to cut federal spending on education, and return control of education policy to the states and municipalities. But the GOP just gave the Department of Education a bigger budget. We really need to switch out some of these big government Republicans for authentic conservatives.

How much does the average American corporation make in profit?

How much profit does the average American corporation make?
How much profit does the average American corporation make?

A while back, there was a story about how Americans vastly overestimate how many people in the USA are homosexual. According to Gallup polls in 2011, Americans estimated that 25% of the people in America were homosexual. In 2015, it was 23%. The actual number is about 3%. So it’s very clear that Americans can have wildly inaccurate perceptions about reality. Why are Americans so wrong? I think it’s because they see a lot of gay people in high profile areas, particularly in the entertainment industry.

I thought about this failure to perceive reality when I saw a story about how much profit Americans think that corporations make. My guess was that the average corporation makes about 5-10% profit margin. I know this because I used to buy and sell stocks regularly and that’s one of the numbers I would look at. Most Americans own stocks, so I thought they most Americans would know the number as well. But it turns out that American perceptions of corporate profits are wildly off the mark.

Check out this article from the prestigious American Enterprise Institute:

When a random sample of American adults were asked the question “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” for the Reason-Rupe poll in May 2013, the average response was 36%! That response was very close to historical results from the polling organization ORC International polls for a slightly different, but related question: What percent profit on each dollar of sales do you think the average manufacturer makes after taxes? Responses to that question in 9 different polls between 1971 and 1987 ranged from 28% to 37% and averaged 31.6%.

How do the public’s estimates of corporate profit margins compare to reality? Not surprisingly they are off by a huge margin. According to this NYU Stern database for more than 7,000 US companies (updated in January 2018) in many different industries, the average profit margin is 7.9% for all companies and 6.9% for more than 6,000 companies excluding financials (see chart above).

[…]“Big Oil” companies make a lot of profits, right? Well, that industry (Integrated Oil/Gas) had a below-average profit margin of 5.6% in the most recent period analyzed, and separately, the Production and Exploration Oil/Gas industry is losing money, reflected in a -6.6% profit margin. For the general retail sector, the average profit margin is only 2.3% and for the grocery and food retail industry, it’s even lower at only 1.6%. And evil Walmart only made a 2.1% profit margin in 2017 (first three quarters) which is less than the industry average for general retail, possibly because grocery sales now make up more than half of Walmart’s revenue and profit margins are lower on food than general retail.

Sometimes, the government makes MORE from the sale of goods or services than the company that does ALL the work:

Interestingly, Walmart’s profit margin of 2.1% is actually less than one-third of the 6.5% the average state/local government takes of each dollar of Walmart’s retail sales for sales taxes. Think about it – for every $100 in sales for Walmart, the state/local governments get an average of $6.50 in sales taxes (and as much as $10.12 in Louisiana and $9.45 in Tennessee, see data here), while Walmart gets only $2.10 in after-tax profits!

I think that Americans are getting their false anti-corporation views from listening to the mainstream media. The mainstream media is overwhelmingly leftist according to recent studies of their political donations. I think that the anti-corporate views of the average American comes from their uncritical consumption of mainstream media propaganda. They think they are getting objective news reporting, but what they’re really getting is socialist propaganda.

Here is a short little video that explains more about profit margins, and what would happen if a socialist like Bernie Sanders were put in charge of a corporation:

If you’d like to help with this problem of anti-business economic illiteracy, please watch the video and share it, or share the AEI article, which contains the video. America will be a better country when Americans have accurate, informed beliefs about important issues.