More on Foreign Aid

Following up on my post earlier today, there's a new book by Christopher Coyne of the Mercatus Center on alternatives to traditional foreign aid. I can't say I've read it, but the description complemented the AEI video well enough that it seemed appropriate for posting tonight:

"In place of the dominant approach to state-led humanitarian action, this book offers a bold alternative, focused on establishing an environment of economic freedom. If we are willing to experiment with aid—asking questions about how to foster development as a process of societal discovery, or how else we might engage the private sector, for instance—we increase the range of alternatives to help people and empower them to improve their communities. Anyone concerned with and dedicated to alleviating human suffering in the short term or for the long haul, from policymakers and activists to scholars, will find this book to be an insightful and provocative reframing of humanitarian action."

AEI on Poverty and Growth - Video

"How do you take down poverty? One toy block at a time. "

http://www.youtube.com/watch?feature=player_embedded&v=28PJPSms_xU

In this video, AEI explores the impact of a for-profit business setting up shop in an impoverished third-world country, and makes a persuasive case that economic growth inevitably does more to lift up the poor of such countries than one-time donations or aid grants can ever do.  More on AEI's work in this area here: http://www.aei.org/module/1/economic-growth.

Free Breakfast

Another good example of feel-good policies with bad results:

The Los Angeles Unified School District (LAUSD) announced last week that it will discontinue the free-school-breakfast plan it initiated last year.

Called "Food for Thought," the plan provides school breakfasts to about 200,000 students.
It was funded by the LAUSD and the non-profit Los Angeles Fund for Public Education, whose goal is to raise the number of participants to about 450,000 students (out of a total of 645,000 in the entire district).

***

Virtually everything the Left touches is either immediately or eventually harmful. The free-breakfast program is only one, albeit a particularly dramatic, example.

Why, then, do progressives advocate it? Because it meets three essential characteristics of the left wing: It strengthens the state; it has governmental authority replace parental authority; and, perhaps most important, it makes progressives feel good about themselves. The overriding concern of the Left is not whether a program does good. It is whether it feels good.

Read the column to find out how this program missed the mark, and to benefit from Dennis Prager's insights on the classic errors of progressive programs.

Incentives and Poverty

I've seen two good pieces lately on the impact of government incentives on the poor.  In the first, Abby McCloskey of AEI raises the work of Aspen Gorry and Sita Slavov (also of AEI) on high marginal tax rates as government benefits are phased out:

The tax code should incentivize work, not discourage people from earning a paycheck. Gorry and Slavov recommend transitioning to a proportional tax system to improve transparency and eliminate the variation in marginal and average tax rates within income groups. The system could be made progressive by adding a universal transfer payment or an income exemption.

In the second, Jonah Goldberg highlights the increasing number of Americans receiving disability benefits, with most who go on the disability rolls staying there forever:

That points to the even bigger parts of the story. As the nature of the economy changes, disability programs are sometimes taking the place of welfare for those who feel locked out of the workforce — and state governments are loving it. States pay for welfare, the feds pay for disabilities.

Both pieces are worthwhile.  Liberals are good at coming up with well-intentioned policies.  Conservatives are especially strong on how government policy affects incentives.  We have seen this in the way that lower tax rates on work and investment spurred growth in both areas (to the tremendous benefit of all Americans) between 1983 and 2008.  (We can leave for another blog what wound up derailing that growth.)  Conservatives need to keep focusing on how government policy causes and reinforces poverty.  Staying on welfare or on disability is no way out of poverty, no way to live, and no way to contribute to society, but many will do it if it is provided as the easy path forward for them.

Regulation and Unemployment

It's not just the cost of wages that depresses employment, as discussed in my last post.  It's also the cost of regulation, which increases for an employer with each new employee. 

Jobs exist for a simple reason. A job is created when a person is willing to do a task for less than the amount of money that labor can earn the employer. It is that simple. Employers are not interested in providing health care, life insurance, maternity or paternity leave, helping to correct past discriminatory behavior, or otherwise affecting social change. The employer wants a task done for a lower cost than what the output produced is worth. If the employer cannot make a profit through the addition of that employee, the employer will not hire the person. That is basic Economics 101.

In situations where a prospective employee is willing to work for less than the profit that she could earn the employer, there is room for negotiation with each party hoping to capture a larger share of the profit being produced. The problem with forcing employers to address social problems through employee benefits is that the cost of those benefits reduces the room for negotiation. As the cost of all these benefits (paid leave, health insurance, etc.) adds up, at some point there is no room left and the person does not get hired.

People with good intentions, thinking they are making the world a better place, have added so many mandatory benefits to the cost of an employee that companies are looking for any alternative to hiring more employees. Companies strive to produce and sell more each year while simultaneously reducing their number of employees. Doing more with less is the mantra of the day.

That's from Jeffrey Dorfman on Real Clear Markets, and he's exactly right.  Once again, well-meaning statists come up with programs to help people, motivated either by genuine desire to help or a more cynical desire to create political advantage.  The programs wind up helping some, but the net impact on society is negative.  Unfortunately, these programs can't be undone, because we're so focused on purported motives instead of actual results.  Conservatives need to shift the focus back to results.

Minimum Wage

Life is getting in the way of blogging with more and more frequency.  So I'm going to try quicker posts, in the hope I can get more up, more regularly.  President Obama's recent call for an increase in the federal minimum wage is a good topic with which to start.  Most conservatives and, as I understand it, most economists believe that an increase in the minimum wage will have some negative impact on employment.  Want less of something?  Make it more expensive.  That is true of a variety of things, including labor.

Of course, most of us want poorer workers to receive more for their labor.  We can imagine how difficult it is to live off the minimum wage.  It makes us feel bad to think of their plight.  And these feelings are good.  I likely wouldn't have started this blog if some emotional response to others' poverty didn't trigger my wanting to think through the issue.

But as my first post said, one of my operating principles here is that we don't help the poor just by feeling bad, and we don't help them by doing things that make us feel better.  We help by doing things that actually, you know, help.  Raising the minimum wage makes us feel good, and it helps those who keep their minimum wage jobs, but it seems likely to drive down employment in our country and unmistakably sends jobs to other countries with lesser wage regulation.

One fears that this is just another wedge issue for the President, rather than a real legislative goal.  That's harmless as far as it goes, but it distracts from measures that could really help the poor (and everyone else).

Here are some recent conservative responses to calls for a minimum wage increase, with an emphasis on its impact on the poor:

Mark J. Perry - AEI

John Fund - NRO

As Fund and even former Obama advisor Christina Romer (whom he quotes) suggest, the real way to help the poor is to promote economic growth, not to monkey around in the labor markets.

More on the Politics of Conservatism and Poverty

Life has been getting in the way of blogging for me, but conservative commentary on poverty continues.  Two good columns on the topic were published Monday.  Arthur Brooks of the American Enterprise Institute advanced a theory in the Wall Street Journal that's gotten some attention on this blog - namely, that talking about their approach to poverty issues would benefit conservatives politically.  Brooks starts by pointing out the perceived "caring" gap between President Obama and Mitt Romney during the recent presidential campaign, and then writes:

Conservatives are fighting a losing battle of moral arithmetic. They hand an argument with virtually 100% public support—care for the vulnerable—to progressives, and focus instead on materialistic concerns and minority moral viewpoints.

The irony is maddening. America's poor people have been saddled with generations of disastrous progressive policy results, from welfare-induced dependency to failing schools that continue to trap millions of children.

The column was an outgrowth of ideas set forth in Brooks' terrific 2012 book, The Road to Freedom.

Also on Monday, Matt K. Lewis wrote in The Week that conservatives are too quick to seek to be the opposite of President Obama at each turn, reactively embracing "radical individualism" and "selfishness" in response to his collectivism and plans to redistribute wealth.  Instead, Lewis writes, conservatives should embrace the "compassionate" wing of their camp, as the founders did:

Our founders believed self-imposed responsibility was essential to the preservation of freedom. An immoral majority will eventually discover that they can vote "themselves largess from the public treasury." But a nation's elite must also be moral — which is to say, not greedy. As Ed Morrissey noted, "Any society with a large class of exploited poor will have no end of social difficulties and instability, the costs of which in a properly ordered system would far exceed the assistance extended." That's the invisible hand at work.

Compassion isn't just right. It's also a matter of self-preservation.

Lewis seems to agree with Brooks (and me) that conservatives not only do right, but also benefit politically, by talking about poverty, evincing concern for the poor, and advancing the idea that conservatism is best for all 100% of our countrymen.