State of Emergency

There is always hope.  The following is from a Detroit News article put out today:

Declaring an “academic emergency,” Detroit Public Schools Emergency Financial Manager Robert Bobb today announced the hiring of four private education firms that will immediately help overhaul 17 failing high schools.

The out-state firms have a proven track record of raising student achievement, Bobb said, and they will be held accountable if they don’t improve the test scores and academic culture at the schools. District officials touted the overhaul as the largest of its kind in the nation.

It is amazing how accountability is stressed for private enterprises, but when it comes to state dollars, the voices dull. When dollars can be seen going out-of-house, then the fact of necessary economy in spending becomes a reality.

This is not going to be the end of Detroit Public Schools problems, and the fact that the money to be paid to these private firms is from Federal stimulus funds does not help the chances of the program’s success.  Nonetheless, let us hope that Detroit will see that what it turned to in an emergency, it should have been looking toward all along.

Adam Rule – MCPP Intern

Rubber Rooms

Jarrett Skorup mentioned in a recent post that it was difficult to fire tenured teachers.  Some paces are having trouble getting rid of any teachers.

About 700 New York City educators are currently sitting in designated “rubber rooms” doing yoga, painting, and playing Scrabble all day.  And, they are getting paid to do so.

These teachers have all been accused of some type of misconduct ranging from insubordination to sexual misconduct. Currently, they are sitting in off-campus sites waiting for their disciplinary hearings.  It is not unusual for these teachers to spend 2-3 years waiting, and some have been  there for 6 years.

All the while they are collecting full salaries of $70,000 and up.  An estimated $65 million is being lost to by the city school district to pay these patient teachers.

Why the wait? There are only 23 arbitrators to hear the cases.  They work a mere 5 days a month. Union contracts are involved in making it extremely difficult to fire teachers.

The rooms’ name is a reference to the padded walls of insane asylums, and many of the teachers are said to be depressed, just sitting with little productive to do.  Other make use of the time to pursue graduate degrees, read, or even plan summer vacations.

Thanks to Marginal Revolution for the tip.

Adam Rule – MCPP Intern

You Can’t Have It Both Ways

-Jarrett Skorup

From the Free Press:

The Detroit Federation of Teachers today called 394 layoff notices the Detroit Public Schools sent to teachers in June a contract violation and demanded the district rescind them or face a lawsuit.

On the one hand, as pointed out in an excellent recent article from the Mackinac Center, the DFT fights for constant higher wages, more benefits, better health care, longer lunch breaks, less classroom time, and more members; on the other, they want to ignore that these things lead to unemployment.  To believe otherwise disregards economic reality.

To be fair, the DFT was arguing against the firings based on a technicality (allegedly the paperwork wasn’t done on time).  However, the union has opposed nearly every teacher firing at any time.  Millions around Michigan are tightening their belts and a stagnant bureaucracy doesn’t have to? 

The tragedy here is that some very good teachers are undoubtedly being fired (or will eventually, something has to happen to close that deficit).  Are all of them really worse than every single tenured teacher in the district?  As a result of the near-impossibility of firing tenured teachers (even bad ones) the district may save money, but also make itself worse in the process.

Money and Power

NEA general Council Bob Chanin explaining how and why the NEA is effective.  Priorities gone askew.

Adam Rule – MCPP Intern

We All Act In Our Own Self Interest

Kurt Bouwhuis, Mackinac Center Intern

Would it be inaccurate to say that every single individual acts within their own self interest?

If you are one who believes that self interest is the same as being greedy or selfish, then the above statement would indeed be inaccurate.  If, however, you view self interest as pursuing what you value most, then the above statement becomes very accurate.  Don’t believe me?  A simple example will help illustrate this point.

Suppose I am walking down the street with my girlfriend.  All of a sudden, a semi truck comes peeling around the corner out of control and I only have a few seconds to make one of two choices.  My first choice is to push my girlfriend under the truck in order to propel myself out of the way.  My second choice is to push my girlfriend out of the way of harm and, as a result, get hit by the truck.  Unfortunately, in this situation, you cannot be like Spiderman and save both yourself and your girlfriend (and the poor people hanging in the trolley car).

With either choice, I would be acting in my own self interest.  Here’s why: Regardless of the choice I make, I place a value on both my own life, as well as my girlfriends.  If I personally value my own life more, I will pursue my own self interest and save myself.  If I personally value my girlfriends life more than my own, I will once again pursue my own self interest and push her out of harms way and sacrifice myself.

In short, it is impossible for anyone to not act within their own self interest.  Some place high value on money, others place high value on the environment, and others place high value on the feelings of others.  An external observer may say one value is more valuable than the other, but all this person is really doing is comparing their own values to the values of others.

Unfortunately, governments around the world create a framework that allows a small group of individuals (mainly politicians and interest groups) to alter the costs and benefits of pursuing ones own unique values.

They Have the Right

People want. In fact we will never be able to meet all the wants of humanity. But more than any other system, markets do a wonderful job of fulfilling peoples desires, no matter how strange they may be.

TryingLiberty reported last August about the iPhone application I Am Rich, and today I bring you Smell of Books.  To quote from their site:

Does your Kindle leave you feeling like there’s something missing from your reading experience?

Have you been avoiding e-books because they just don’t smell right?

If you’ve been hesitant to jump on the e-book bandwagon, you’re not alone. Book lovers everywhere have resisted digital books because they still don’t compare to the experience of reading a good old fashioned paper book.

But all of that is changing thanks to Smell of Books™, a revolutionary new aerosol e-book enhancer.

Now you can finally enjoy reading e-books without giving up the smell you love so much. With Smell of Books™ you can have the best of both worlds, the convenience of an e-book and the smell of your favorite paper book.

While it may seem ridiculous to sell spray odorant for electronic devices(Possibly unbelievable?)  this example can at least illustrate the success of markets.

People should for the most part have the right to spend their money to fulfill their wants and needs. If a certain  product sells, a new niche market has been found and an undiscovered want fulfilled. If not, the resources used to make that product will be redirected to produce something more productive. Mmmmm… the smell of markets working.

PS: The product may or may not have come out on April 1st.

Adam Rule – MCPP Intern

The Protected Class (Part 2)

This is the continuation of a previous post regarding government emploment benefits:

Not only do government employees have greater job security, they also have quite the compensation package. The government and general public have gone back and forth about the ligitimacy of government salaries, which are on average much higher than those in the private sector. The argument has been made that government work requires more education than the standard private sector job, and therefore salaries for government employees should be higher.  The figure below shows the makeup of public and private sector compensation in Michigan with best data availible from the BLS.

This higher education argument does not seem to explain away all of the discrepancy however as the Mackinac Center argues. Mackinac’s “What Price Government” finds government workers earning more than similar private employees in several vocations including food service and corrections. Nonetheless, it is hard to quantify just how much of the difference in salaries is warranted and how much is splurge. A clearer picture can be drawn for benefits on top of wages.

In 2000, Michigan’s classified workforce received benefits worth an additional 37.95 percent of salary each year. By 2008, the figure grew to 58.15 percent. At the same time, Midwest private-sector benefits, the closest estimation for Michigan private-sector benefits available from the BLS, are worth only 43.62 percent of salary — meaning that government rates are 33 percent higher than private ones.

According to calculations based on data from the Bureau of Labor Statistics and figures from the Michigan Civil Service Commission, Michigan’s state and local government full-time employees are getting $5.7 billion more in benefits than they would if their benefits were equal to those of private-sector employees.

Even more surprising is the comparison of Michigan’s benefits to National government averages. While government salaries and benefits are inflated nationwide, Michigan’s are some of the highest. Doing calculations similar to those above, equalizing Michigan state and local government full time employee benefits to the national state and local government average would save the state nearly $1.5 billion annually. How can the higher education argument stand in light of these facts?

Michigan cannot afford to carry these extravagences, especially in light of an imposing $1.6 billion overspending crisis.

Adam Rule – MCPP Intern

The Protected Class (Part 1)

Some of my recent work for the Mackinac Center for Public Policy has been in regards to government employee compensation here in Michigan.  As I delved into the topic, I’ve found that Wendell Cox’s assessment is correct; government employees truly are a protected class.  Over the next few days I’ll be presenting my own case on this point, looking at both Michigan and National statistics. Some language will be pulled from a MCPP essay I helped write.

Today’s topic: Employment.

According to the BLS, Michigan’s private sector has shed 12.1 percent of its jobs since 2000. The number of jobs lost — 484,200 — is about the size of the total employment in Rhode Island. In fact there are nine states with whole private-sectors smaller than Michigan’s private-sector loss since the start of the decade.

Local government in Michigan on the other hand  only shed 6.1 percent of its workforce, while the state government and state enterprises like universities actually expanded their payrolls.

Nationally, similar trends have come to the surface.  The nation has grown its private ranks by 3.2 percent since 2000.  Not to be outdone, the government expanded by 8.2 percent over the same period.  This means that nationally, we have grown government employment over 2.5 times faster than the rest of the country’s workforce.

And these figures are just up to 2008.  What will 2009 tell with the increases to AmeriCorps and Obama’s mission to add oversight and regulation left and right?

We cannot continue to add to government ranks that do little to produce wealth, and do much to move around and waste it.  But not only are government employees wasting taxpayer money through bureaucracy, they are consuming more than their fair share of it in compensation. Stay tuned…

Part 2 ->

Adam Rule – MCPP Intern

Hmmmmm…..

Kurt Bouwhuis, Mackinac Center Intern

I was recently reading the Michigan Liberal blog, and came across an interesting sentence: “I just became aware of this, but it’s worth thinking about while also remembering that the construction of the other proposed coal plants likewise will get passed right along to customers.” Eric B. at Michigan Liberal

I think Eric is on to something.  When profitable businesses incur additional expenses, the costs are passed on to the consumer.  I wonder if high taxes on businesses have the same effect?

Work Harder, Get Paid Less

Good education comes from happy teachers.

It seems like a California cheese commercial, but instead of cheese and cows, its education and teachers.  Let me preface the remainder of this post with this statement: Charter schools are not the savior of education.  They are still riddled with problems and, while better than surrounding districts, still return rather pathetic results on standardized tests.  However, the freedoms given to charter schools and their employees are having a wide range of effects, one of which is saving money.

To cut costs some charters are practicing teacher leadership.  In essence, charter schools hire fewer than normal administrators and distribute leadership responsibilities among the teaching staff instead. As a result teachers are more involved in decisions about curriculum and school policy.

While money is being saved by hiring fewer administrators, money is also being saved with lower teacher salaries.  While charter teacher-leaders have more responsibilities than a normal educator, they are paid less than the average public school teacher.

Humans respond to intensives.  Economics is merely looking at how to allocate what resources we have to fulfill wants and needs.  In a free market, it is incentives, costs and benefits, that drive resource allotment.  While money is one incentive, so is interest and personal fulfillment.  This is why many faith-based organizations are run largely by volunteers; they get their incentives from personal fulfillment, and not money.

The same goes for charter school teacher-leaders.  Their leadership roles added to teaching responsibilities are more stimulating and fulfilling than just teaching alone. As such, they need less monetary incentive to provide a good education.

These educators also have a vested interest in the success of the whole school, not just their classroom.  There can be no more blaming of upper management when you are upper management. Providing freedom and responsibility has proved a win-win for many charters.

Adam Rule – MCPP Intern

Energy Moratoriums and Sci-fi

Warning! Spoiler Alert!!

In The Probability Broach, detective Win Bear lives in a world where oppressive government controls have turned America into a sleazy second-world country: Disney land, air conditioners and many mom and pop companies are declared illegal due to “conspicuous use of power during an energy emergency” (which was probably brought on by other government interventions); the air is polluted with out of date cars, as red tape created significant barriers to creating new vehicles; and meat rations have driven people to cannibalism.

While looking in a scientist’s laboratory for clues in a murder case, he is blasted into an alternate dimension in which these government interventions – and all other government interventions – never occurred. A complete lack of barriers to production and creative entrepreneurship had created a virtual utopia of the alternate-dimension America. There are small vendors and stores at every turn, and everyone buzzes along in pollution-free hovercrafts.

Meanwhile, back in our non-fiction dimension, the government is “picking winners” by pushing ethanol and imposing moratoriums to fix problems that for all we know, in the universe of sci-fi, might be its fault from day one.

Nat Hunt :: MCPP Intern

Rampant Deregulation and Greed

Here’s a letter I recently sent to the Midland Daily News.

To the editor:

Eric and Jodie Gardner recently stated that the economy was “destroyed through rampant deregulation and greed” (July 1).

“Saying that “greed” caused today’s problems is like saying that gravity caused the death of someone pushed from the top floor of the Empire State building. Some things are sufficiently constant in human affairs – and self-interest, even greed, is among them… it is the institutions and their accompanying incentives, rather than “greed,” that explain economic reality.”* In short, stating that greed caused our current economic conditions explains nothing.

According to David Henderson with the Cato Institute, there were actually increases in regulation leading up to the “destruction of the economy.” For instance, regulations averaged 71,590 pages annually during the Clinton years. During the administration of that great believer in laissez-faire, George W. Bush, we had an all time high of 75,526.

Between 1980 and 2007, the number of full-time employees of U.S. government regulatory agencies increased 63 percent, from 146,139 to 238,351. During that same time, the U.S. population increased only 33 percent.

U.S. government spending on regulation alone tripled, from $13.5 billion to $40.8 billion (all in 2000- year dollars.) As a percent of GDP, spending on regulation rose from 0.26 percent to 0.35 percent, a 35-percent increase.

The biggest growth came in so-called “homeland security,” where spending more than quintupled, from $2.9 billion in 1980 to $16.6 billion in 2007 (all in real 2000 dollars). The second-largest growth rate was in regulation of finance and banking, where spending almost tripled, rising from $725 million to $2.07 billion.*

The above information just goes to prove P.J. O’Rourke’s point: “The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn’t work and then they get elected and prove it.”

Sincerely,

Kurt Bouwhuis

* Donald Boudreaux, “Greed” Is Not an Explanation (October 04, 2008)
* David R. Henderson, Are We Ailing from Too Much Deregulation? (November/December 2008)

The second coming of Karl Marx

By David Pontoppidan, Summer Fellow at the Mackinac Center

Here is a letter I sent to the editor of the Financial Times a couple of days ago.

The second coming of Marx

Sir, on June 30 Ben Funnell engaged in editorial divination, channeling Karl Marx’s financial beliefs from the grave. In the pink pages of Financial Times, no less. Claiming that the benefits of economic growth go into the pockets of plutocrats and increases inequality, Funnell warned of impending revolution.

But what the rising Gini coefficients don’t explain, however, is that while the rich naturally gain most, everyone benefits from capitalism. A study from the U.S. Census Bureau published in 2003 examined various income groups in the years 1996-99. In this period, 38 percent of the people who were in the poorest fifth of the population climbed the social ladder. A similar study undertaken by the Sphere Institute in California, America’s largest economy, showed that out of 187,000 employees who were examined between 1988 and 2000, 80 percent who started in the poorest fifth had advanced socially.

Funnell mentions Société Générale’s study of the inflation-adjusted income of the highest-paid fifth of American earners in 1970, and that it has risen by 60 percent since then, while it has fallen by more than 10 percent for the rest. Actually, it islikely that the inflation-adjusted income of the highest-paid fifth of earners in 1970 is zero today. One earns the most money as one retires, and in the long run after, we all die as Keynes famously predicted.

While we are dead in the long run, we benefit in the short run. Take the mass distribution today of products that only a few years ago were luxury item: ipods, mobile phones, laptops, high speed internet connections and comfortable cars. All the result of financial innovation that is unique to the free market, and even in a financial crisis have not succumbed to a falling rate of profit as Marx would have had us believe.

Rolling Up Their Sleeves

The National congress has a full docket.  Apparently, it takes a lot of work to completely restructure the economy through unprecedented health care and environmental reforms.  Congressional leaders are coming out with the message that Its time to put in overtime. As an article in today’s Wall Street Journal notes:

It is a daunting schedule, and Senate Majority Leader Harry Reid (D., Nev.) and House Majority Leader Steny Hoyer (D., Md.) are keeping lawmakers in Washington for five-day workweeks in July, rather than their usual Tuesday-through-Thursday routine.

Hopefully, the standard private-sector full work week won’t be too taxing for them, especially with all the taxing they will be doing anyway.  According to the Library of Congress, the House of Representatives spent only 118 days in session in 2008.  Thats down from 136 in 2008, and 153 in 1980.

Its not just Federal workers that are getting luxurious schedules.  Accoriding to the Mackinac Center for Public Policy’s Michael LaFaive:

According to the “Michigan House of Representatives Guidelines and Policies” chart of benefits, House staffers earn one vacation day for every 10 days they work (26 days total per year), on top of 12 official holidays. They also receive two bonus days for every five years of service. In other words, a five-year veteran of the House gets two months paid leave annually. State classified employees receive 13 official holidays in even-numbered years because Election Day is an official holiday, ostensibly to make it easier for them to vote.

Also, 16.5%, nearly 1/6, of Michigan’s state classified employee payroll went toward vacation holiday and sick leave pay in 2008.  With already exorbitant salaries, more should be expected from our public servants.

Adam Rule – MCPP Intern

Unoins, Charters, Detroit, Oh My!

The Detroit Federation of Teachers monthly publishes a news bulletin entitled the Detroit Teacher.  May’s issue contained an interesting article by the DFT’s president Keith Johnson.  It opens:

Let’s dispel the rumors regarding DFT’s decision to organize charter schools in Detroit. The DFT does not support charter schools and/or the expansion of charter schools!

The DFT has agreed to organize and unionize charter schools in Detroit, offering its collective bargaining benefits to them in return for union dues.  Charter schools are given liberty by the state to pursue more inventive practices in instruction, and also are allowed to use private providers for pensions and health care plans, but those that wish to can unionize.

Mr. Johnson is the one who sold the DFT on the idea of organizing charters, but why the lack of support?  Why is he adding to his ranks those institutions he does not approve of?

Since charter schools in Michigan, unlike in most states, are not regulated by statute or collective bargaining agreements, charters are allowed to engage in an educational free for all with each deciding how it will operate and without any parameters to govern them other than the agencies that authorize the charter.

In short, Mr. Johnson sees it as his calling to help reform charter schools and bring them up to the standards of public schools.

In truth, the current oversight of charters by state universities has been quite successful and effective at shutting down ineffective and mismanaged organizations.  Also, charters are outperforming their local districts year after year on MEAP assessments, all while running on less funding.

By no means does the DFT have to offer its services to charter schools.  If the DFT thinks it can use its oversight to reform charters, it may have to think again.  As a march Detroit News editorial says:

To organize charter schools, the teacher unions will have to adapt to charters’ innovative school models — and be open to flexible, modern bargaining contracts.

Finally the editorial quotes Mr. Johnson as saying in regards to overseeing Detroit’s charters:

If we don’t do it, it would open the way for the MEA (the rival Michigan Education Association) to organize charters when our membership is shrinking.

If the DFT thinks it will be reforming charters, it will be breaking down the very freedoms that make charter schools sucessful.  If it is union dues they are after, the times must be tough that they need to go to their adversaries for funding.

Adam Rule – MCPP Intern