How should higher education funding be distributed?

Yglesias » Higher Education From 50,000 Feet:

I can think of two broad principles that would be more defensible than funding by exclusivity. One would be funding by need. This would say that teenagers whose parents have modest incomes need resources more than do teenagers whose parents have high incomes. So institutions that attract a disproportionately high income client base should attract little support from the public. That means reduced direct appropriations, and at a minimum social pressure on civil society actors not to donate to highly privileged institutions. Another would be funding by quality. Here you would say that resources ought to flow to institutions with a proven track-record of producing unusually large student learning gains. In our current system, I think that funding quality is what we think we’re doing. Yale is “better” than the University of Connecticut so funds flow to it. But in our current setup, better simply means more exclusive. It’s a measure of the quality of the inputs, not the quality of the instruction. The result is that both the public sector and the civic sphere are essentially acting to redistribute wealth and opportunities upwards.

Yglesias » Home Page

Yglesias » Home Page:

In his classic essay “The Perils of Presidentialism” (PDF) political scientist Juan Linz noted the striking fact that “the only presidential democracy with a long history of constitutional continuity is the United States . . . [a]side from the United States, only Chile has managed a century and a half of relatively undisturbed constitutional continuity under presidential government—but Chilean democracy broke down in the 1970s.” By contrast, many parliamentary democracies have managed to hold together for a long time.

Linz briefly treats the question of why presidential democracy, which basically doesn’t work, has managed to work in the United States:

"the uniquely diffuse character of American political parties—which, ironically, exasperates many American political scientists and leads them to call for responsible, ideologically disciplined parties—has something to do with it."

Linz’s article was published in 1990 at a time when the observation about the lack of ideological coherent and rigorous discipline had been true for the overwhelming majority of American history. And, indeed, as recently as 1988 one could have witnessed moderate Democrat Joe Lieberman successfully challenging incumbent liberal Republican Senator Lowell Weicker with the support of, among others, William F Buckley, Jr.

Yglesias » Earmark Ban

Yglesias » Earmark Ban:

But all that said, any kind of sensibly operationalized ban on earmarks really will, in a small way, be a good thing. Since members of congress are elected to represent specific geographical constituencies, it’s inevitable that parochial interests will be overrepresented in the legislative process relative to national interests. Any procedural rule that leans against that tendency is, in my view, a good thing. It’s good not because representation of local interests is a bad thing per se, but simply because our political system is very heavily weighted in that direction anyway.

If you look at the long-term budget projections, the fact of the matter is that the aging of the population and the growth of health care costs is set to increase federal spending above a sustainable level. That means we’ll need higher taxes. And it means will need better approaches to health care. But it also means that all public spending on everything that’s not health care for senior citizens is going to come under substantial pressure. Under the circumstances, if you care about the purposes advanced by domestic discretionary spending it’s important to make sure that pot of money is spent as efficiently as possible. Curtailing earmarks should advance that goal

Subsidizing Mansions

Should we give a tax subsidy to encourage wealthy people to buy bigger mansions? We could easily fix this hidden subsidy by capping the mortgage benefit at $200,000. That would preserve the benefit for the middle class and the wealthy would get the full benefit too, but we would stop subsidizing larger mansions.

Ezra Klein - Who does the mortgage-interest deduction benefit?:

Alex Hart has a good post examining whether the mortgage-interest tax deduction -- which will cost taxpayers $131 billion in 2012 -- is really a "middle-class tax break," as some people like to claim. The answer is no,
...the less money you make, the less the mortgage-interest tax deduction does for you. ... here's the same graph in raw dollars:

...the benefits for the bottom 40 percent of the income distribution are invisible. That's not because they literally don't exist, but because the deduction is worth $2 to people between in the bottom fifth and $32 for the quintile after that. As for the top 1 percent? They're getting a break of more than $5,000.

Yglesias » Israeli Airport Security

Yglesias » Israeli Airport Security: "the most sensible approach to airport security would be to simply accept a slightly higher risk that someone, somewhere might blow up a plane. Right now in the United States flying somewhere is orders of magnitude safer than driving their in a car. But it’s become a huge pain in the ass. Reducing the “pain in the ass” factor would be a good idea.

- Sent using Google Toolbar"

Yglesias » Home Page

Yglesias » Home Page:
raising the eligibility age for Medicare. ...Instead, everyone seems to want to raise the eligibility age for Social Security. This makes little sense to me for two reasons. One is that seniors can buy healthcare with money if they want to but can’t sell Medicare benefits in exchange for food or whatever. I’m not of the school of thought that believes cash benefits are always superior to in-kind benefits. But the merits of in-kind benefits, if any, are normally paternalistic in nature. And there’s really no reason to be paternalistic about senior citizens. Whatever total quantity of money we decide to dedicate to retirees, the retirees themselves should decide whether that money is used to buy hip replacements or presents for grandkids or whatever.... I suspect that part of the issue is that the implications of the Affordable Care Act haven’t really sunk in yet. Traditionally raising the Medicare eligibility age more than a teensy bit would be unthinkable, since absent Medicare an elderly person would be totally uninsurable. But under ACA that’s not the case. Of course subsidies will be needed for most retirees, but a workable highly progressive system would be in place to ensure that nobody has to go without access to health coverage....You add a public option with Medicare payment to the ACA exchanges and you raise the Medicare eligibility threshold. Basically we'd transition over time from a single-payer system for seniors and a crap for non-seniors, to a means-tested single-payer system for everyone.

There Is No Fun in Measuring GDP « Modeled Behavior

There Is No Fun in Measuring GDP « Modeled Behavior:
GDP is simply not welfare, even for market based goods. ...

Suppose I have an economy with two sectors that each use half of the workforce. One sector produces fish and the other produces beaded jewelry. (An economists mind always goes to desert islands when constructing these examples.) Both fish and necklaces cost $1 and the economy produce 1000 of each per year. The two sectors are equal in size and equal in their contribution to GDP.

Does that mean that they each make people equally well off? Do necklaces add as much to quality of life as food? Probably not. More likely the supply and demand graphs for each sector look like this.

GDP is the same

Welfare or the total benefit to society each market is quite different.

A steeper demand curve or a shallower supply curve can produce huge welfare gains at relatively small GDP gains. Indeed, some of the goods like running down a hill or reading new material posted to the web have a supply curve so shallow that they are provided at nearly zero cost. This is why they show up with such a disparity between GDP and welfare. This isn’t limited to free goods, however, my classic example is water. How much better is your life because of clean water vs. how much of your income do you devote to water cleansing.