Archive for the 'politics' Category

Occupational licensing and ex-cons


Matt Yglesias has had a great series of posts up about how little sense it makes for state governments to require certification before someone can provide simple services like haircuts. The silliness of occupational licensing is one of my pet issues, and I’m stunned by how many intelligent people spend time justifying the status quo instead of applying the free market principles they otherwise claim to support.

For an indication of just how ridiculous some of this licensing gets, check out this list of occupations in North Carolina requiring government licensing. Along with Yglesias’s hobbyhorse, barbers, North Carolina also requires government charters for athletic agents, chick and egg dealers [presumably referring to chickens], geologists and soil scientists [but no other scientists], interpreters, landscape contractors, manicurists, refrigeration contractors, seed dealers, and scores of other workers.

Those of us who question the extent of occupational licensing in America usually argue that it is just a tool that helps currently-licensed providers limit competition and thus artificially raise prices and profits — all while hiding under the guise of consumer protection. To be sure, licensing is a good idea for certain classes of services in which market forces and lawsuits don’t provide sufficient deterrent to and remedies for harm. But how does “landscape contractor” fall into that category? Anyone who believes that landscape contractors clearly need a government license to operate, while gardeners are good to go without public imprimatur, is probably letting their preexisting beliefs and status quo bias guide their ‘principles’.

But back to Matt Yglesias. His final post in the series praises Barack Obama for making some positive moves towards liberalizing Illinois’ licensure regime.

And Yglesias is partly right. Barack Obama, as a state senator in Illinois, was the primary sponsor behind a bill that eased occupational licensing restrictions for convicted felons. The felon, after living crime-free for a period of time and documenting certain pro-social behaviors, could apply for a ‘Certificate of Relief from Disabilities’ (CRD) that would remove certain legal disabilities all felons face when released into the world. No longer would a single felony conviction bar someone from getting a license to cut hair; the licensing board would have to come up with some other excuse, instead.

Yglesias is skeptical about the broader impact of the CRDs:

“The problem here is that when you set up these boards, they have incentives to think up any kind of halfway plausible reason to bar people from entering the field.”

Remove the felony bar, the logic goes, and the boards will just come up with other flimsy excuses.

He’s almost certainly right about most licensing boards and most occupations. But in the particular case of Illinois, the problem isn’t that the licensing boards don’t approve ex-cons despite their Certificates. It’s that few ex-cons end up applying for licensing in the first place. As this report (PDF) indicates, only 47 applications for CRDs were made within the first 2 years of the program’s implementation. Of that extremely low number, 81% of applications for CRDs were approved. But none of those recipients ended up applying for occupational licenses within the observation period. That said, a very few ex-cons without CRDs did apply for occuptional licenses, and 67% of those applicants were eventually approved during the same period.

The bottle-neck in Illinois, then, isn’t necessarily the board rejecting felons, but qualified felons not knowing about or not applying for CRDs or occupational licenses in the first place.

I guess the take-home lesson here is that occupational licensing boards really can be nothing more than thinly disguised guilds covering their own economic interests. But occupational licensing reform isn’t exactly the key to rehabilitating felons. Connecting felons with existing benefits and procedures is the easy low-hanging fruit there. That doesn’t mean that making it easier for ex-cons to become barbers isn’t worth doing … it’s just not the kind of major reform that should get our blood pumping. It turns out that the actual benefit of CRDs may just be the perception among private employers that the state says these guys (and they are mostly guys) are safe(r).*

* No, I didn’t closely follow Barack Obama’s occupational licensing and recidivism reform policies in the Illinois state legislature. I came by this knowledge honestly, as part of a much larger research project this summer.

Liberal Caricature


Yesterday, co-blogger JSC7 linked to a bunch of new posts out there on the nets about how to effectively manage your online time and get away from destructive overconsumption. JSC7 ended the piece with a keen observation about the importance of models of healthy living, and how we basically don’t have any for internet use:

“We don’t yet really have a firm sense of what is living well or badly in the modern world, the way we do with say, alcohol consumption or other addictive vices.”

As a matter of societal consensus, I think JSC7 is right.

However, it seems to me that there actually is a sizable group of people who are seriously grappling with “what it is to live well or badly in the modern world”. Those people are hippies, or leftists, or ‘limousine liberals’, or ‘latte-sipping, volvo-driving elitist snobs’, or granola west coasters — at least, that how they get caricatured.  These are the people who self-consciously think about their diets and their impact on the world, go out of their way to avoid dumping their externalities on the world, and limit the time they spend in front of the TV or ditch the TV entirely. And they’re also the people who are trying to spend more time outdoors jogging or playing Frisbee golf than inside on the internet.

And, as we all know, those people are all caricatured and ridiculed by the rest of us. It seems like ‘we’ actually do have a fairly good model of what healthy, ‘good’ living is supposed to look like in the modern world: eat more local, organic produce; don’t light a barrel of oil on fire to keep your living room warm; get more exercise; spend less time staring at a screen and more time interacting with real live people. Healthy internet use seems like part of an entire lifestyle package.

And even though ‘we’ all know what the right thing to do is, we can’t imagine adopting that lifestyle entirely. The magnitude of the change frightens us. So instead of accepting the superiority of healthy internet and exercise choices and making incremental improvements to our lives, we end up bragging about eating at McDonald’s and not driving a Prius. The real shame there is that the markers of a healthy lifestyle — which have no business being a partisan issue — get turned into partisan markers in a weird, tribal way. It’s terrible for our society when the healthy model of modern living turns into a liberal caricature that no one feels like emulating.

gay marriage! controversy! slow down!

[by JSC5]

I’m a little late in getting to this, but a federal judge has ruled that California’s Proposition 8, which prohibited gay marriage in that state, is unconstitutional. I like to think of same-sex marriage is one of those “duh!” issues, like beer deregulation or early childhood education. We recognize, however, that despite how simple an issue it is for some, same-sex marriage has caused a great deal of controversy for other people. Orin Kerr had a post up recently over at Volokh Conspiracy that took this fact of controversy and conflated it with actual importance. He starts by quoting Judge Walker’s ruling, and then responds to it:

[Judge Walker’s opinion]: “Because the evidence shows same-sex marriage has and will have no adverse effects on society or the institution of marriage, California has no interest in waiting and no practical need to wait to grant marriage licenses to same-sex couples. Proposition 8 is thus not rationally related to proponents’ purported interests in proceeding with caution when implementing social change.”

[Orin Kerr’s commentary]: Whatever your views of same-sex marriage — or Judge Walker’s decision as a whole — I think this particular part of the analysis is pretty weak. First, the idea that same-sex marriage is not a significant social change strikes me as plainly incorrect. This is one of the more significant questions of social policy of our time: Whether you think it’s the greatest advance for civil rights in America or the end of the world, it seems pretty clear that it’s a big deal.

Now, gay marriage is certainly politically salient in that it stirs up emotions and seems to divide people into two camps. That said, I don’t think it’s nearly as polarizing as he makes it out to be. Who exactly is Kerr hanging out with to make him think that mainstream opinion runs from “the greatest advance for civil rights in America” to “the end of the world”? I know a lot of pro-gay marriage people, and I don’t think a single one thinks that gay marriage clearly outranks the civil rights movement for African-Americans or the women’s rights movement. Furthermore, I know many (though fewer) anti-gay marriage people,  none of whom think it will seriously end the world. In fact, mainstream opinion on this subject seems to stretch from “good idea/duh” to “I’m concerned about it/ewww”.

Either way, I’m not sure that the actual level of controversy even matters. It seems that Orin Kerr is confusing (1) political salience with (2) actual breadth or depth of change. What exactly is the evidence Professor Kerr would offer up in defense of his contention that same-sex marriage is “one of the more significant questions of social policy of our time”? The simple fact that Americans fall into two broadly equal pro and con camps isn’t enough. Lots of issues – both important and superficial – are politically salient in a similar way,  so the mere fact of salience can’t help us to distinguish actual importance.

Just how important and sweeping of a change would gay marriage be? Judge Walker;’s answer (quoting a bevy of experts who testified at trial) is that it’s pretty important for the gay couples who would get married, and not at all important for everyone else. In response, Orin Kerr says that the mere fact of political controversy proves Judge Walker wrong.

It’s an effective strategy for troglodytes trying to make sure that gay people don’t have the same rights as everyone else. They don’t even need to marshal any real evidence or reasons as to why the proposed reform would be bad or that implementing it right now would be dangerous; all they need to do is disagree, and the disagreement becomes the evidence.That is, until smart professors like Orin Kerr, along with the rest of us, some day stop believing the hype.

Do markets understand politics?

[by JSC7]

Ezra Klein weighs in on Tyler Cowen weighing in on the Krugman/Rogoff debate about what debt-to-GDP ratio America can stand before growth starts to feel a drag. Klein says that maybe we shouldn’t be worrying about the specific number, but rather how well our political system can deal with the problem in general. Money quote:

But the driver behind that question is not how much debt we have, it’s whether our political system can make the difficult choices to deal with that debt. So long as the political system is working reasonably well, we can get out from even quite a lot of debt. But the more it breaks… the more it has reason to worry.

What I think is worth asking, if that’s the case, is how well our business world understands the political system. We talk a lot about how politicians don’t understand economics, but what if the reverse is true? Even assuming no change in the system itself, it’s a pretty opaque system to someone who isn’t involved in it (not relevant to the budget, but all the stuff coming out of the Top Secret America report can’t be an anomaly). But, of course, you have to factor in the political systems ability to change itself, especially in response to crises (like a ballooning deficit). I don’t know how many people on Wall Street have a good sense of this.

Especially when it comes to the budget deficit, you can see the possibility of a self-reinforcing feedback loop. Businesses think that government will respond reasonably to a large deficit, and so U.S. Treasury prices stay low, but because Treasury prices stay low, the government doesn’t feel an imperative to fix the problem, and maybe even continues to make it worse. If that’s a threat, then I’m glad we’re having debates about what debt-to-GDP levels are feasible, because it at least gives us a chance to point to a concrete number and say, okay, now we have a problem, rather than relying on markets to correctly predict politicians or vice-versa.

How to end tax expenditures the right way

[by JSC5]

As per Ezra Klein in today’s Wonkbook, Martin Feldstein has a plan for decreasing the deficit: end tax expenditures.

Now, regular readers of the blog will remember tax expenditures from one of my old posts inspired by the craziness of Hawaii’s ‘Exceptional Tree’  tax deduction. The basic point to remember with tax expenditures is that they give people money through the tax code instead of by cutting them a check directly. In many ways, tax expenditures and direct spending are exactly the same: the net effect on recipients is the same (they get more money), and the net effect on the government is the same (it gets less revenue).

But tax expenditures come with a whole host of negative effects. By making Swiss cheese of the tax code, they make compliance overly complicated. They distort work and income incentives. They don’t need to be reauthorized, so they tend to persist for a long time without any legislator taking a look at them and making sure they’re still a good idea. Furthermore, most people miscategorize tax expenditures as tax cuts instead of spending, so they are easier to enact and harder to repeal than regular spending programs. Just about any economist would tell you that we should run spending programs through normal spending procedures while keeping our tax code standardized and simple.

So it’s unsurprising that veteran economist/conservative political operative Martin Feldstein has come out against tax expenditures. As a foe of tax expenditures myself, I heartily welcome the support. And yet I find it hard to really trust his plan. Let me explain.

Feldstein begins his argument for cutting tax expenditures by mentioning three areas in particular that rely on the tax code for spending: education, child care, and health insurance. One gigantic tax expenditure – the mortgage-interest tax deduction – doesn’t get a mention until the very end of the article, when Feldstein says it’s probably best to  slightly reduce (not eliminate) the deduction “to avoid economic disruptions.” Did you catch the pattern? Tax expenditures that liberals and Democrats support get the axe. Tax expenditures that conservatives and Republicans support are handled with kid gloves, since – gosh! – they’re particularly important!

The lesson I draw from reading Feldstein’s politically-opportunistic support for tax expenditures is this: if we’re really going to end spending programs through our tax code, then we need to do it all at once and for everything. If you take it issue-by-issue, then there’s always going to be a big lobby in support of that particular expenditure and a small minority whose primary concern is tax expenditures in general. Mr. X is a high income homeowner and votes yes on eliminating education tax credits and no on mortgage-interest deductions. Mrs. Y is a low-income renter and votes the opposite way. Nothing gets done.

My proposal is simple: pass one bill to eliminate tax expenditures as a way to run programs and automatically convert all tax expenditures into equally-sized direct expenditures. Everyone congressperson who dislikes tax expenditures as a tool of government can get on board — regardless of the actual content of any particular tax expenditure. Tax expenditures won’t get used as a political football by advocates with an axe to grind. Then we can leave decisions about actual levels of spending to a case-by-case review at Congress’s leisure.

We get the benefits of a vastly-simplified tax code, with easy compliance and standard, predictable incentives. And small government conservatives would still find plenty to like here. The calculus has changed: everyone now realizes that these are real dollars being spent, moving through the regular appropriations process.

That’s what real concern about tax expenditures looks like. And that’s why I doubt Professor Feldstein’s commitment to Sparkle Motion.

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This is a group blog. JSC5 currently writes from the US. JSC7 writes from behind the Great Firewall of China.

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