Munchausen by Proxyocracy

February 4, 2009

I See Bankrupt People!

(Guest Post by Matthew Ladner)

Byron Schlomach and I had fun co-authoring this piece for the Goldwater Institute:

The supernatural thriller “The Sixth Sense” features a young boy who assists the ghost of a young girl in exposing her mother as her murderer. The mother, suffering from an uncommon mental disorder known as “Munchausen by Proxy Syndrome” had slowly poisoned her daughter to death.

While actual Munchausen by Proxy Syndrome (MBPS) is very rare, something much like it is sadly all too common in American policy-making.

MBPS involves a caregiver deliberately making another person sick. The caregiver may exaggerate, fabricate, or even induce symptoms. The perpetrator achieves a twisted satisfaction from deceptively gaining the attention and sympathy of doctors and others. Because the caregiver appears to be so caring and attentive, often no one suspects any wrongdoing.

In politics, many of our longstanding, serious policy problems are similarly inflicted upon us by our alleged caregivers. Two obvious examples of this political slow-poisoning: runaway costs in heath care and higher education. Simply put, government policies have spun heath care and higher education costs out of control.

These damaging cycles of cost inflation are the direct result of the MBPS-like policies administered by the federal government. When citizens raise concerns that health care or a college degree are financially out of reach for many, politicians show their compassion by administering more of the bad medicine that created the problems in the first place.

Consider health care. The problem is people can’t afford it. Although history shows medical care prices do not inevitably rise, medical inflation more than doubled general inflation from 1960 to 2006. If medical prices had not raced ahead of general inflation, health care would represent 7% of the American economy rather than the current 16% and growing. While many politicians want to make the availability of health insurance the issue, the real issue is that medical care is becoming increasingly less affordable, reducing accessibility.

Americans went from paying the lion’s share of medical costs ourselves to depending on government (Medicare and Medicaid) and employer-provided health insurance to pay for us. Consequently, price has become no object and we have become uninformed and unwise shoppers for medical care. Providers have become wasteful, often taking advantage of this distorted market, competing on a non-price basis.

All of this has occurred because government tax policy has encouraged employers to pay us in health benefits instead of cash. Add Medicare and Medicaid bureaucracy to the mix, and you’ve got a perfect prescription for out-of-control costs and increasingly reduced accessibility.

What are politicians offering as a solution? The Obama administration offers more of what got us here in the first place: expanded insurance, expanded market regulation, expanded Medicare, Medicaid, and SCHIP. As we pay even less out-of-pocket, medical prices will only get higher and medical services will only get more expensive and less accessible.

Amazingly, higher education costs have been rising at a rate even faster than medical cost inflation. Since 1982, the average cost of college tuition and fees has increased by 439% while median family income increased by a mere 147%. Think of it as compound interest for putting college financially out of reach and/or crushing families with debt.

Again, President Obama has proposed more of the same: a $4,000 tax credit for higher education expenses. Sounds great, but based on decades of bitter experience we have every reason to believe that if Obama’s tax credit plan passes, universities would simply hike their tuitions and fees. Congress has been chasing its own tail on college affordability for decades: while providing ever-increasing subsidies, costs continue to go up, so it repeats the process again and again.

Please- no more Congressional medicine!

Obama’s policy plans will simply add more fuel to the fire, leaving our very serious affordability problems in higher education and health care unaddressed. This is not change that we can believe in, but more of the same.

Like the MBPS abuser, politicians often come across as compassionate as they indulge their pathologies. If our politicians suffer from MBPS, we suffer our own sort of insanity in allowing ourselves to be victimized by it year after year. Our form of insanity could be referred to as Battered Taxpayer Syndrome, and it is time to call a halt to it.

It is a fallacy for the public to judge our leaders by their stated intentions, rather than the results of their decisions. Why is health care so expensive in the United States? Why the crushing debt for college educations of no greater worth than those obtained decades earlier at far less cost? Sadly, it’s because of federal policies whose follies have been repeatedly reinforced.

Rather than Munchausen by Proxy politicians, we need leaders who will follow the Hippocratic Oath: first, do no harm.

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Posted by matthewladner

Obama’s Higher Education Plan: Throw Money Now, Ask Questions Later?

August 28, 2008

(Guest Post by Matthew Ladner)

The final night of the Democratic convention is here, which seems like a good time to take a look at some of Senator Obama’s education plans. Here is the major Obama higher ed proposal from BarackObama.com:

Create the American Opportunity Tax Credit: Obama will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students. Obama will also ensure that the tax credit is available to families at the time of enrollment by using prior year’s tax data to deliver the credit when tuition is due.

Good politics to be sure, but a terrible idea, for a variety of reasons. At the most basic level, far and away the main beneficiary of a college education is the student-he or she knows more, usually earns more money, etc. Even if universities do provide positive externalities to society, the evidence of this is far, far weaker than that of it benefiting individuals. Many studies, for example, find no relationship between state or national economic growth and higher education spending. Ergo, a university education is a primarily a private good, not a public good.

As a society, we lavish resources on those students choosing to go to university, and ignore those who do not. Sooner or later, some bright young progressive will start to raise the equity issues involved in asking blue-collar folks to subsidize outlandishly expensive six year beer binges quests of self-discovery by rich kids.

More importantly, we now have a multi-decade long experience with public subsidies and higher education. One can only describe the higher education market as highly distorted, with costs out of control. Demand is inelastic (people think they must have a BA and will go into enormous amounts of debt to get it) and transparency is extremely poor (we literally have no way of knowing for sure whether a kid learns more at Harvard or Appalachian State).

For instance, a recent study by the Intercollegiate Studies Institute found a stunning lack of civic knowledge among our nation’s university students. Worse still, the authors found that some of the nation’s most prestigious universities had negative learning gains :

Generally, the higher U.S. News & World Report ranks a college, the lower it ranks here in civic learning. At four colleges U.S. News ranked in its top 12 (Cornell, Yale, Duke, and Princeton), seniors scored lower than freshmen. These colleges are elite centers of “negative learning.” Cornell was the third-worst performer last year and the worst this year.

Worse, much worse, is research on the reading skills of college students. American Institutes for Research (AIR) assessed the literacy of 1,800 graduating seniors from 80 randomly selected two- and four-year colleges and universities. What they found was not pretty.

The AIR study finds that 20 percent of U.S. college students completing four-year degrees have only basic quantitative literacy skills. That means they are unable to estimate if their car has enough gas to get to the next gas station or to calculate the total cost of ordering office supplies.

The study also finds that more than 50 percent of students at four-year colleges have only the most basic literacy skills, meaning they can’t do basic tasks like summarize the arguments in a newspaper editorial. On both measures, students at two-year colleges perform even worse.

The implications of this report are profound. Universities nationwide have been increasing taxpayer subsidies, tuition and fees for decades without anyone seriously questioning their return on investment.

Universities make outlandish claims about spurring economic development and leading the way to a new knowledge economy. At this point, we need to start asking if colleges are requiring students to read. To be sure, K-12 has much to answer for in this, but no one requires these universities to admit functionally illiterate students, and if they do so, they have an obligation to provide remedial education. Remedial courses of course are widespread, but apparently aren’t as widespread and/or as effective as needed.

The market does not discipline this type of failure, due to a lack of transparency. Instead, universities retain what looks to be close to unlimited pricing power. Higher education cost inflation has outstripped even that of health care inflation. Universities are much more expensive today than they were 20 years ago, but I am unaware of any evidence that they do a better job teaching students today than they did 20 years ago.

In short, we have every reason to expect, based on past experience, that if the Obama tax credit plan were to come to pass, that universities would simply hike their tuitions and continue on their merry way of ignoring quality issues in undergraduate education. The Congress has been chasing it’s own tail on “college affordability” for decades- providing more and more subsidies, watching costs go up and up, begin process again. Einstein’s definition of insanity certainly comes to mind.

Sadly, the Obama plan would simply add more fuel to the fire, and leave our very serious higher education problems unaddressed. We need to take a long hard look at higher education, not simply throw more money at the problem.

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Posted by matthewladner