Tuesday, January 20, 2009

Would you prefer a $100 in goods or $100 cash?

I am impressed with the plethora of opinions and perspectives among economists regarding the efficacy of positive fiscal policy shocks. Paul Krugman, the brilliant Nobel prize winner writes...
What’s been disturbing, however, is the parade of first-rate economists making totally non-serious arguments against fiscal expansion.
Krugman is uncharacteristically partisan for an economist and I think it hurts his credibility. Harvard economist Greg Mankiw notes the obvious - first-rate economists don't tend to offer non-serious arguments. There are simply many economists who are fiscal policy skeptics. I sense that ten years out there will be little clarity since a large part of the Obama fiscal stimulus will consist of tax cuts (credits). How much credit (blame) will a spending stimulus get compared to the tax cut stimulus?

Speaking of who spends the money, I heard Ben Cunningham speak last night along with Rep. Susan Lynn and Justin Owen of the Tennessee Center for Policy Research. Ben really impressed me - always refreshing when passion is combined with intelligence. He returned time and again to that which can unite the various flavors of conservatives, the question of who is better equipped to make decisions about how your money should be spent. Reasonable conservatives are not opposed to all government spending. They realize that there are public goods and that markets fail under certain conditions (typically when a business fails it is evidence that the market is working as it should). Even those who are not opposed to re-distribution in principle - Crunchy Cons come to mind - object when government dictates how money will be spent. Ask any reasonable person whether they'd rather be given $100 worth of merchandise, and in-kind transfer, or $100 cash. Why do we assume that lower-income people are not reasonable, would not prefer the cash-transfer? Cunningham used education to illustrate his point. Chelsea Clinton attended an expensive, private school. The Obama kids - an expensive, private school in Chicago and now in D.C. Phil Bredesen's son - an expensive, private school. Nashville Mayor Karl Dean's children - expensive, private schools. Yet each of these elected officials are dead set against education reform that would expand choice to those who can't afford to opt out of the public system. Why can't parents, poor and middle income, opt for a cash transfer in the form of a voucher and make their own decision with respect to education? Conservative reformers tend to focus on the school child while those who stand in the way are concerned with school systems, not that their own children are part of any school system.

In the recent Nashville magnet lottery a qualified child had roughly a one in four chance of getting a slot at an academic magnet school. But, it is not merely about getting one's kid into a high-powered school. There are myriad approaches and philosophies regarding education. It is a place where the market can work well, can provide options suited to varying tastes.

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