South China Sea tensions, population control, and a summit

It’s been a big week for East Asia. Earlier this week the US Navy completed its first freedom of navigation operation since 2012 in the Spratly Islands in the tension-ridden South China Sea. On Thursday, China announced that it would be reforming its One-Child Policy to allow two children per family, an effort to combat its aging population. And finally, this Sunday, China, Japan and South Korea will convene for a trilateral summit in Seoul – the first in three years. The talks resume amidst efforts to ease continued regional hostilities including heated territorial disputes and historical grievances, including the issue of comfort women, dating back to WWII. AEI scholars weigh in:

 

China military expert Michael Mazza on the South China Sea:

The Obama administration has, unfortunately, already taught Beijing that defending freedom of the seas is no longer automatic for the United States. That damage cannot be easily undone.

Unnamed Pentagon officials, however, have indicated that the transit was not a one-off. If that is the case, the Lassen patrol will mark the first step in demonstrating to a global audience that the United States will exercise the rights allowed it under both customary maritime law and under the United Nations Convention on the Law of Sea. Allies and adversaries alike, in all regions, must know that the United States, as Ashton Carter has put it, “will fly, sail, and operate wherever international law allows.”

Read more here: Destroyer in the Spratlys: Backing up tough talk in the South China Sea

 

Demography expert Nicholas Eberstadt on China’s new Two-Child Policy:

Beijing’s latest adjustments to population plans seem to have been prompted by economic concerns, yet these changes will have only modest demographic repercussions. Like other East Asian locales without forced population control, the average desired family size in China appears to be far below replacement. Beijing also can’t rely on immigration for demographic help. Even modest gains from the new policy will take decades to have an economic impact.

Read his full piece in the Wall Street Journal: China’s new Two-Child Policy and the fatal conceit

 

Former DoD official Dan Blumenthal on the upcoming trilateral summit:

A top priority for US policy is a strong trilateral alliance structure among Washington, Seoul, and Tokyo. Such an alliance would solidify Northeast Asian security by strengthening the containment and deterrence of a nuclear North Korea and pushing backing against China’s aggrandizement. South Korean leaders know that the peninsula is indefensible without Japan, just as Japanese leaders know that their security will be enhanced through cooperation with the ROK on nuclear deterrence. The pieces of a new alliance structure are in place, it will now take leadership to put it together.

Read more here: China, South Korea and Japan: What to expect from the trilateral summit

 

Japan expert Michael Auslin on the potential outcomes of the summit:

A trilateral approach is fine, but it is by definition going to be focused on lowest-common denominator issues. If the three leaders can agree on a free-trade zone, that would be a big move forward in tying them closer together. But there is little likelihood that any meaningful political or security agreements will emerge. For that to happen, it may well be that East Asia’s leading liberal nations – Japan and South Korea – will have to find a way to strengthen their own relationship before tackling the question of how to help ensure that China acts as a cooperative partner helping ensure Asia’s future prosperity and stability.

 

Read more here: A Trilateral in name only

 

To arrange an interview with an AEI Asia expert, please contact AEI Media Services at mediaservices@aei.org or 202.862.5829.

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The history and future of federal early care and education policy

To learn more, read “Renewing childhood’s promise: The history and future of federal early care and education policy“.

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Israel’s impressive economy

The Israeli economy, despite facing headwinds from a resurgence of terrorism, remains an incredible example of a developed country’s ability to achieve sustained economic growth. Israel’s continued growth is a strong testament to the powerful influence of a market-based, democratic economy and the virtues of a well-educated and disciplined labor market. It is a record built on strong foreign direct investment (FDI), an embrace of technology and entrepreneurship, and a capable labor force. But while its growth has been impressive, Israel must not rest on its laurels. An increasingly global economy where foreign investment flows can be easily redirected to the most welcoming economies means that Israel must remain vigilant in its efforts to attract investment.

Earlier this month, the International Monetary Fund (IMF) released its latest forecast for economic growth around the world. Among the 37 advanced economies identified by the IMF, only three did not experience a contraction in the aftermath of the global financial crisis: South Korea, Australia, and Israel. The IMF projects 3.3 percent growth for Israel in 2016, among the highest growth rates for all developed nations. Moody’s Analytics recently maintained Israel’s A1 government bond rating, noting both Israel’s lower debt-to-GDP ratio than pre-financial crisis (a rarity among advanced countries) and its below-target budget deficit for 2015 (at 2.5%). As the accompanying chart illustrates, Israel’s economy has doubled in size since 1996 while the U.S. economy has increased just 50 percent and the EU economy just 24 percent.

What drives this performance? In their book Start-Up Nation, Dan Senor and Saul Singer identified the positive effects of the Israel Defense Force (IDF) on work ethic, entrepreneurship, and social networks. But there are additional factors at play. Despite a huge defense budget, Israel maintains a strong infrastructure and excellent educational system while also achieving a tax burden lower than most OECD nations. Israel relies on consumption taxes more than most nations and, according to the OECD, has kept its VAT rate at 18 percent, slightly below the average for other developed nations.

Unfortunately, there are some negative economic developments in Israel detracting from these positive trends. In late 2013, the Israeli Knesset adopted increases in the Israeli corporate tax rate that will send the wrong signal to foreign investors seeking to build factories in Israel and to Israeli corporations contemplating whether to expand domestically or abroad. In fact, preliminary OECD data indicate that FDI into Israel dropped by nearly half from 2013 to 2014. As I’ve written previously and has been reported in the Israeli press, a pro-growth business tax system is more important to a small and open economy like Israel, which faces stiff competition from Ireland and other small countries, than it is to larger economies like the United States.

Similarly, political stability within Israel and in the region are necessary for Israel to attract and retain both high-quality human capital and essential foreign capital. Israel is fortunate in that it remains a global hub of high-tech research and its engineers are revered for their innovations. Intel, Microsoft, Google, and others are all major players in Israel’s high-tech economy. But Israel must seek to broaden and diversify its economic footprint. In addition to a globally competitive tax policy, Israel must continue to pursue a high labor force participation rate. Together, these two strategies – more capital and more labor – will help Israel continue to experience above-average economic growth and realize higher living standards for its citizens.

As the Israeli government works to ensure not only the physical safety of its citizens but their economic security as well, it needs support against efforts to inhibit the very trade and investment that has propelled its growth. Much as Israel must constantly pursue strategies to maintain global competitiveness, the rest of the global economy must work to thwart efforts to embargo Israel or limit its participation as an equal partner on the world stage.

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Renewing childhood’s promise: The history and future of federal early care and education policy

Key Points

• Today’s federal early care and education policies are fragmented, inefficient, and unnecessarily complex. Recent efforts to fix current policy have fallen into four categories—tinker, expand, add, and eliminate—none of which actually improve the lives and opportunities of disadvantaged children.
• Since the 19th century, the US has gone from one program to the next—orphanages, home care, child care, Head Start, and pre-K—by a circuitous, unintentional path. Over time, these policies have drifted from their core purpose.
• The best way to advance good early childhood policy is to facilitate, rather than constrain, states’ commitment and innovation, giving states additional flexibility with federal funds and shifting the ultimate control of resources to parents.

Read the PDF.

Executive Summary

Since 1935, the federal government has supported early childhood care and education for poor children to promote their healthy development and give them a fair opportunity to succeed. Informed by recent advances in brain science, our understanding of the lifelong importance of children’s earliest years has never been greater. But federal early childhood policy is in urgent need of reform.

Today’s federal early care and education policies are fragmented, inefficient, and unnecessarily complex. Federal policymaking is driven by coping with what exists rather than by what we are trying to accomplish. At the state and local levels, integrating incoherent federal funding streams with growing city- and state-funded early childhood programs is difficult to impossible.

In the dysfunctional landscape of federal early childhood policy, policymakers have gotten locked into choosing among three bad options: tinkering around the edges of existing programs, trying to cut them, or adding new ones on top of what is already in place. Yet none of these approaches will enable us to achieve the most important aim: giving America’s least-advantaged children a fair chance at a happy, productive life.

To move forward, we must begin by confronting a problematic legacy of federal policy. Its roots lie in the 19th century, when America first committed to improving the well-being of poor children. Since then we have gone from one thing to the next—orphanages, home care, child care, Head Start, pre-K—by a circuitous, unintentional path, implementing one solution after another to problems caused by previous solutions to previous problems. Over the course of this long, tangled history we have drifted far from our core purpose—indeed, we barely remember what it is.

This paper aims to provide a starting point by exploring how we ended up where we are today. It traces our evolving approach to early childhood care and education, sketching a brief, broad history of the three major federal funding streams: the Child Care Development Fund (CCDF), Temporary Assistance for Needy Families (TANF), and Head Start. Why are these our three major funding streams? Where did they come from? What does their history tell us about how to move forward? Key findings include:

• Aid to Dependent Children (ADC), enacted as a part of the Social Security Act of 1935, aimed to foster children’s healthy development by enabling widowed and abandoned poor women to remain at home to raise their children. But as the 20th century wore on, public and policy emphasis gradually shifted from child well-being to the financial welfare and self-sufficiency of adults. The 1935 program ultimately evolved into today’s welfare and child care systems: TANF and CCDF, both aimed to promote mothers’ work outside of the home.
• Over this period, the central goal of child care itself was redefined from ensuring children’s healthy development to ensuring that their mothers could go to work. As adult employment was foregrounded, child care increasingly came to be viewed as a work support for parents while its effects on children’s early development and well-being were deemphasized.
• At the same time, federal policy has evolved to reinforce a counterproductive, false distinction between “custodial” and “developmental” care for children. All programs for children from birth through age four have two important functions: supporting parents’ work in a 24/7 economy and fostering children’s healthy growth and learning during the most crucial period of human development. But current policy fails to recognize that those two aims are complementary, equally important strategies for building human capital in our nation’s most disadvantaged communities.
• As early nurture and care have been deemphasized, formal education through the public schools has come to dominate public and policy attention as the leading strategy to improve the well-being of poor children. Initiated by passage of President Lyndon Johnson’s Elementary and Secondary School Act and the establishment of Head Start 50 years ago, this is most recently reflected in today’s accelerating push for public pre-K.
• Our concept of child well-being has devolved to a narrow focus on children’s economic status and cognitive skills. The technocratic aims of increasing family income and children’s test scores have largely eclipsed a broader, once-held goal of advancing the overall welfare and life chances of poor children.
• The most promising path forward is to facilitate the work of leading, innovative states. A new, carefully planned state option could give special flexibility to states that have demonstrated ongoing commitment to providing high-quality early-learning programs for disadvantaged children from birth through age four, while shifting the ultimate control of resources from government officials to parents.

Understanding how we got to where we are now can help us remember what our true aims are and refocus on what we are really trying to do. That, in turn, will give us the foundation for making thoughtful, principled decisions about where to go next: setting children “upon surer paths to health and well-being and happiness,” in President Herbert Hoover’s words from almost a century ago.

Introduction 

Since 1935, the federal government has supported early childhood care and education for poor children to promote young children’s healthy development and give them a fair opportunity to succeed in life. Informed by recent advances in brain science, our understanding of the lifelong importance of children’s earliest years has never been greater. Yet, while the nurture and education of children from birth through age four is increasingly recognized as a crucial policy area, federal early childhood policy is in urgent need of reform.

Today’s federal early care and education policies are fragmented, inefficient, and unnecessarily complex. An outsider surveying the federal policy landscape encounters a daunting alphabet soup of disparate, uncoordinated federal funding streams: Head Start, Early Head Start, CCDF, TANF, IDEA, MIECHV, ESEA, RTT-ELC, and EHS-CCP, among others.

Head Start, along with Early Head Start for infants and toddlers, is the largest and most visible federal preschool program. The Child Care and Development Fund (CCDF) and Temporary Assistance for Needy Families (TANF) are also major funding streams, providing child care for poor and low-income working families. The Individuals with Disabilities Act (IDEA) offers funding for preschool children with diagnosed learning disabilities. The Maternal, Infant, and Early Childhood Home Visiting Program (MIECHV) funds 16 different home-visiting programs for children under five. Advocates are currently pushing for a bigger early childhood component to the Elementary and Secondary Education Act (ESEA). Over the last several years, the Obama administration has added Race to the Top-Early Learning Challenge (RTT-ELC), Early Head Start-Child Care Partnerships (EHS-CCP), and Preschool Development Grants to this unwieldy mix.[1]

Each of these programs has its own administration, rules, standards, monitoring requirements, and accountability frameworks. Further, the quality of children’s experiences often varies greatly depending on which funding stream they are attached to. A series of US General Accountability Office (GAO) reports over the last 20 years reflect this persistent problem: Early Childhood Programs: Multiple Programs and Overlapping Target Groups published in 1994, Early Education and Care: Overlap Indicates Need to Assess Crosscutting Programs in 2000, and Early Learning and Child Care: Federal Funds Support Multiple Programs with Similar Goals in 2014.[2]

At the state and local levels, integrating these multiple federal funding streams with growing city- and state-funded early childhood programs ranges from difficult to impossible. Entire offices in early childhood programs are staffed with experts dedicated to what the early childhood field calls “blending and braiding”: the complicated, bureaucratic task of combining incoherent federal funding streams into money that is actually useful to children and working families.

Everyone agrees that current policy is inadequate. But the question remains: how can we fix it? Recent efforts have fallen into four categories: tinker, expand, add, and eliminate. The problem is that none of those approaches will get us where we really want to go, which is improving the lives and life chances of poor children.

Reforming federal early childhood policy to help the children who need it most will be harder than growing existing federal funding streams, cutting them, or adding new ones. Twenty more years of GAO reports, funneling more money into the current system, or layering additional programs on top of what is already in place will not enable us to achieve the most important aim: to promote the flourishing of the nation’s youngest, most disadvantaged children.

To move forward, we must begin by confronting a problematic legacy of decisions and policies made long ago. The roots of our federal policies lie in the 19th century, when America first committed to improving the well-being of poor children. Since then we have gone from one thing to the next—orphanages, home care, child care, Head Start, pre-K—by a circuitous, unintentional path, implementing one solution after another to problems caused by previous solutions to previous problems.

Over the course of this long, tangled history we have drifted far from our core purpose—indeed, we barely remember what it is. Our current debates are confined to well-worn ruts in the early childhood policy road, when instead we should be taking a step back, defining our fundamental goals, and pursuing the most promising avenues to achieve them.

This paper aims to provide a starting point by exploring how we ended up where we are today. It does not recount a comprehensive history of federal early childhood policy; that would require several long books. Rather, its purpose is to sketch a brief, broad history of the three major funding streams for federal early childhood education and care: CCDF, TANF, and Head Start. Why are these our three major funding streams? Where did they come from? What are they trying to accomplish? Why are they designed the way they are? What does their history tell us about how to move forward?

Understanding how we got to where we are now can help us remember what our true aims are and refocus on what we are really trying to do. That, in turn, will give us the foundation for making thoughtful, principled decisions about where to go next: to set children “upon surer paths to health and well-being and happiness,” in President Herbert Hoover’s words from almost a century ago.

 Read the full PDF. 

Notes

1. In total, the federal government funds 45 programs that provide or support early-learning and child-care services. Of these, Head Start, the Child Care and Development Fund (CCDF), and Temporary Assistance for Needy Families (TANF) are by far the three major federal funding streams, together expending close to $15 billion for services to young children in 2014. See Kay E. Brown, Early Learning and Child Care: Federal Funds Support Multiple Programs with Similar Goals, US Government Accountability Office, February 5, 2014, http://ift.tt/1kp0Ncb.
2. US General Accounting Office, Early Childhood Programs: Multiple Programs and Overlapping Target Groups, October 1994, http://ift.tt/1MeAbFB; US Government Accountability Office, Early Education and Care: Overlap Indicates Need to Assess Crosscutting Programs, April 2000, http://ift.tt/1MeAekK; and US Government Accountability Office, Early Learning and Child Care: Federal Funds Support Multiple Programs with Similar Goals, February 2014, http://ift.tt/1kp0Ncb.

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Too few kids? Too little, too late

China released a communiqué on Thursday that scraps its three-and-a-half-decade long social experiment known as the one-child policy. This announcement begins a new and unknown chapter in China’s determined and forceful family planning policy. According to the statement from Communist Party leaders in Beijing, all married couples will be afforded the opportunity to have a second child, if they choose. The shift in policy does not abolish the state’s control over the family, rather it is an attempt to remedy the problems ultimately magnified by the one-child policy. But China’s change to a two-child policy may prove ineffective at increasing population growth.

During the 20th century, the world experienced dramatic population growth, with the global head count passing one billion at the beginning of the century and reaching six billion in 1999. During this period, fears began to proliferate about the crippling consequences of a population boom: food shortages, rampant poverty, and environmental degradation. These worries led some policymakers to believe that the solution to population growth was population control.

Concerned about food grain shortages, China’s leaders following the death of Mao began to question the stability of the country’s population growth. These neo-Malthusian worries took hold in China and resulted in the one-child policy, the Communist Party’s answer to a ballooning population, allocating one birth per couple.

However, China’s population was already changing prior to the enforcement of the one-child policy in 1978. Some estimates have China’s urban and rural total fertility rate (TFR) dropping significantly around that time, with urban TFR decreasing from more than 6 children per woman in the mid 1960s, to more than 3 children per woman in 1970 and fewer than 2 children in the late 1970s.

Even with these previous trends, the one-child policy has been wildly successful in limiting births and lowering fertility rates. According to China’s family planners, the policy has prevented around 400 million births. In addition, by UN Population Division (UNPD) estimates, China’s TFR is roughly 1.55 births per woman – though this number is difficult to calculate given some parents hiding out-of-quota births. China’s coercive family planning policy arguably has accelerated the decline of China’s fertility rate.

While the one-child policy has done an impressive – maybe too much so – job of controlling population growth in China, the program has had considerable consequences, including a sex ratio imbalance, aging population, and declining workforce – all of which were foreseen and considered resolvable by the Communist Party.

Today, China confronts these demographic headwinds in full force. China’s cultural preferences for male heirs coupled with the proliferation of ultrasound technology has led to sex selective abortion throughout the country. As of China’s 2010 census, the sex ratio at birth was 118 baby boys for every 100 baby girls (when it is normally 103-105 boys per 100 girls), creating a growing army of millions of unmarriageable men who cannot find a partner. (They are known as “bare branches” in China.)

China’s population will grow old before it grows rich. With nearly 120 million people over the age of 65 as of 2010, China’s elderly population is projected to more than double to nearly 300 million by 2035. China’s population aging is occurring at the most rapid pace and greatest magnitude in the world, surpassing that of Japan. Yet China’s GDP per capita on a purchasing power parity basis is only a fraction of Japan’s, barely one third; and the traditional family network, which supported China’s elderly in the past, has attenuated and will struggle to support such a large group of elderly.

Population aging is made more acute by fewer births. Fewer babies means a small cohort of young adults in the future available to work in the world’s second largest economy – China’s working-age (15-64) group started to decline this year, according to UNPD estimates. As the primary source of labor, this age group is critical for economic growth and in China it is expected to fall 4.3 million per annum from 2015 to 2035.

The Communist Party population planners hope that adjusting the policy from one to two births per couple will resolve these problems. But these demographic problems are already baked into the cake. An increase in births, even if it occurs, would not ameliorate China’s problems for many years.

China’s planners may also find that redirecting the path of family development upwards is more difficult than expected, meaning the new family planning rule is unlikely to result in the desired outcome. Prior to the announcement of China’s nationwide two-child policy, family planners adjusted the policy in 2013, allowing couples to have a second child if one of the couple was an only child. Of the estimated 11 million couples eligible, fewer than 12 percent of couples went through the complicated application process for a second child (and not all of them will necessarily have another child).

The complete repudiation of China’s family planning policy may not shift the current family structure in China. To understand why, one need only look at sub-replacement fertility rates in surrounding East Asian countries. The decline of China’s total fertility rate is similar to that of other developed East Asian countries, such as Japan and South Korea, which have also experienced drops in fertility and are currently sub-replacement fertility countries, with TFRs of about 1.4 and 1.2 in 2010, respectively. These other Asian countries do not have a birth control policy.

China’s grand social experiment with population control has had the intended effect of squelching population growth. But it has also resulted in serious consequences, which are not as easily mitigated as the Communist Party believed at the time the policy was introduced in 1978. Continued state control over the family continues, albeit with a different quota. Now we must wait to see what this chapter of China’s massive social experiment will bring.

Alex Coblin is a Senior Research Associate at the American Enterprise Institute.

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With this budget deal, GOP deserves Trump

Hey GOP establishment! Want to know why 59 percent of Republican primary voters are supporting outsiders, and the GOP electorate is so angry they don’t trust anyone who has ever held elective office?

Look no further than the disastrous budget deal outgoing Speaker John A. Boehner and Senate GOP leaders just negotiated with President Obama.

The deal raises discretionary spending by $112 billion over the next two years and suspends the debt limit through March 15, 2017, after Obama leaves office. The bill passed in the ostensibly Republican-controlled House only thanks to the near-unanimous backing of 187 House Democrats.

With deals like this, the GOP deserves Donald Trump.

Republican leaders claim that all the new spending is offset by spending cuts elsewhere. But according to the nonpartisan Committee for a Responsible Federal Budget, that is not true. “We estimate that when interest is added and gimmicks are removed, only half of the bill’s cost is truly paid for,” the committee declared.

For example, Republican leaders claim that part of the new spending is “paid for” by selling 58 million barrels of oil from the U.S. Strategic Petroleum Reserve between now and 2025. But when the Congressional Budget Office scored the bill, it was directed to assume that the oil would be sold for $87 per barrel – which is about twice the current price. According to the U.S. Energy Information Administration, oil won’t likely reach that price again until 2026.

In another gimmick, Republicans moved Pension Benefit Guaranty Corp premium payments forward by one month beginning in 2025, shifting them into the next fiscal year, a timing change which magically “saves” $2.6 billion.

This is the kind of budget trickery that drives Republican voters crazy — and rightly so.

What did the GOP get in exchange? The deal includes a desperately needed boost in defense spending, but this came at a cost of political capitulation. Obama took funding for our men and women in uniform hostage, refusing to raise defense spending unless Republicans agreed to commensurate increases in domestic spending. In this deal, Republicans cried uncle and gave him what he wanted.

The truth is the only thing Republicans got out of this deal was incumbent self-protection. Obama got his domestic spending increases, while Republicans got to avoid a debt ceiling or government shut down standoff before the next election.

GOP leaders were willing to give up principled governance for political gain. The budget deal’s stated purpose was to “clear the decks” for new Speaker Paul Ryan (R-Wis.) so he would not inherit tough political fights with Obama right after taking office. Boehner capitulated so Ryan would not have to.

No wonder GOP voters don’t trust their elected leaders, and are turning to outsiders in the presidential election. It is no coincidence that while the outsiders are surging, not one single current or former GOP elected official is in double digits in the Real Clear Politics polling average . Indeed, if you add up support for all the current and former elected officials — Marco Rubio, Ted Cruz, Jeb Bush, Mike Huckabee, Rand Paul, Chris Christie, John Kasich, Lindsey Graham, Bobby Jindal, George Pataki and Rick Santorum — together those 11 candidates have the backing of just 35 percent of GOP electorate.

Republican voters are fed up. They were told: “We need to win the House to block Obama!” So they elected a Republican House — and nothing changed. Then they were told: “That’s not good enough, we need to win the Senate, too.” So they elected a Republican Senate. And the result is this budget capitulation.

The message to the grassroots is clear: Elected Republicans care more about their own preservation than they care about principle.

If the Republican establishment wonders why Donald Trump has been surging in the polls, they need only look in the mirror. They are the Dr. Frankensteins that created the Trump monster that is now wreaking havoc on the GOP village. They have no one to blame but themselves.

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When irresistible voter anger meets immovable partisan division

Irresistible force meets immovable object. That’s one way to describe the 2016 presidential campaign.

The immovable object is the close and bitter partisan division that has prevailed in general elections for the last two decades. The irresistible force is the corrosive discontent of American voters, their sense that the nation is on the wrong track and that experienced leaders are more the problem than the solution.

The immovable object may prove, in the end, to be immoveable. In which case, it becomes easy to forecast the shape of the presidential race, but hard to predict the winner. In all of this century’s presidential elections, Republicans and Democrats have won between 46 and 53 percent of the vote. In the historical sense, that’s a narrow range. No nominee has come close to winning the 57 to 61 percent landslides registered by Democrats and Republicans in 1936, 1956, 1964, 1972 and 1984.

The same phenomenon has been apparent in congressional elections, which have been a good proxy for support of the president and his party since the middle 1990s. In nine of 11 elections starting in 1994, Republicans have won between 48 and 52 percent of the popular vote for the House, and Democrats between 44 and 49 percent. Again, a historically narrow range.

The two exceptions were in 2006 and 2008, when George W. Bush’s job approval plunged to 30 percent levels, when Democrats won 53 and 54 percent and Republicans 45 and 43 percent. Democrats hoped that would turn out to be a new normal, but in 2010, 2012 and 2014, the House popular vote swung back into the 1994-2004 range.

Some pollsters report an increasing percentage of voters identifying as independents. But fewer and fewer Americans vote that way. Straight-ticket voting, increasingly rare from the 1960s-1980s, has become more common today. In 2012, only 26 of the 435 House districts voted for a presidential candidate of one party and a House member of the other, the lowest number since 1920.

Presidential voting has become more predictable as well. Only three of the 50 states (Iowa, New Mexico and New Hampshire) voted for different parties’ candidates in the 2000 and 2004 elections. Only two states (Indiana and North Carolina) voted for different parties’ candidates in 2008 and 2012. You have to go back to the 1880s to find such partisan continuity.

A bigger swing in presidential voting occurred between 2004-08. But even then, only nine of the 50 states switched parties, and six of those had been carried only narrowly, with 50-52 percent of the vote, by George W. Bush. Of the other three, Indiana switched back to solidly Republican in 2012, North Carolina moved narrowly from Barack Obama to Mitt Romney and Virginia has, perhaps implausibly, become the national bellwether, with its percentages for the candidates matching national percentages more closely than any other state.

Hence, the now-familiar division between Republican “red states” (23 of them, with 191 electoral votes), Democratic “blue states” (16 states plus D.C., with 212 electoral votes) and “purple states” (11 states, all furiously contested in 2012, with 135 electoral votes). In this century, only one red state has voted Democratic (Indiana in 2008) and no blue state has voted Republican; few have ever been close.

So it’s reasonable to conclude that if the immovable object of stark partisan division remains immovable, the contours of the 2016 presidential vote will look much like those in recent elections. Particularly the most recent, 2012, since Barack Obama is president, with job approval slightly below 50 percent, and the near-certain Democratic nominee is his former secretary of state, Hillary Clinton. In that event, the race will be decided by voters in the 11 purple states.

And perhaps that number could be winnowed to the five states with the lowest Obama percentages in 2012. Each of them now has a Republican governor and a majority-Republican U.S. House delegation. Each presents different electoral challenges for the two parties.

• North Carolina, 15 electoral votes, 48.4 percent Obama. Blacks were 23 percent of the 2012 electorate and voted 96 percent for the first black president. Can another Democrat match those numbers?
• Florida, 29 electoral votes, 49.9 percent Obama. The nation’s third largest state, famously diverse and excruciatingly closely divided politically. Obama carried 60 percent of Hispanics and 66 percent of Jews, who together accounted for 22 percent of the electorate. Romney had higher percentages among panhandle and north Florida whites, who accounted for a similar percentage.
• Ohio, 18 electoral votes, 50.6 percent Obama. Blue collar whites, stirred by attacks on Romney’s business practices and many with union backgrounds, cast unusually high Democratic percentages.
• Virginia, 13 electoral votes, 51.2 percent Obama. Democrats depended on high margins from blacks, 20 percent of the electorate, and from young voters and Hispanic immigrants in Northern Virginia.
• Colorado, 9 electoral votes, 51.4 percent Obama. White voters narrowly favored Romney, but Hispanics, 14 percent of the electorate, went 75 percent for Obama.

These five purple states have 84 electoral votes; Obama won 69 of them. If he had lost all these states, Romney would have won 275 electoral votes and would be president. Can Clinton run as well as her former boss? Can the Republican nominee run better than Romney? The answers to those questions in these five states will determine the electorate, if the immovable object of partisan attitudes remains unmoved.

But what if the irresistible force scrambles the political map? This has always happened, sooner or later, in American politics. It has often been sparked by the rise of a disruptive candidate, running as an independent or as the nominee of a major party. Think Ross Perot, Ronald Reagan, George Wallace, Franklin Roosevelt, William Jennings Bryan, Abraham Lincoln. A disruptive candidate raises new issues, breaks across old party lines, brings new voters into the electorate.

Is something like that happening now? One piece of data suggests it is — the stunningly high viewership of the two Republican presidential debates: 24 million in August and 23 million in September. That’s nearly three times the previous GOP record of 8 million. Viewership of the third Republican debate, held on the night of a World Series game, fell to about 14 million, and viewership of the single Democratic debate so far was 13 million. But viewership for these still beat the previous record for primary debates, 10 million, set by Democrats in the heat of a furiously contested race in 2008.

Some, perhaps much, of this increase can be chalked up to the celebrity of Donald Trump. But not all. Much may be due to the seemingly irresistible force of public discontent. And that could have an impact on, perhaps smash, the seemingly immovable object of steady partisan attachments. Those patterns can be disrupted by the one factor pollsters have trouble projecting: turnout.

It has often been noted that Barack Obama’s victories benefited from increased turnout among non-whites and blacks. But the biggest surge of turnout in this century occurred not during the Obama years, but during the George W. Bush presidency. In 2004, presidential turnout increased by 17 million. Bush received 11.5 million more votes than he had four years before, and John Kerry received 8 million more than Al Gore.

In contrast, turnout in 2012 was down from 2008. Obama was re-elected, but with 3.5 million votes fewer than he had won four years before. Mitt Romney received 1 million more votes than John McCain, not enough to win. Similarly, off-year turnout declined from 2010 to 2014. The Obama campaign succeeded in getting enough of its voters to the polls to win, but it has failed to expand the electorate.

The sharp increase in debate audiences gives Republicans some hope that their party can expand the electorate, perhaps even more than they did 12 years ago. The much smaller but still significant increase in Democratic viewership gives their party some basis for hoping they may expand the electorate as they did in 2008, when Obama received 10.5 million more votes than Kerry.

But the force of discontent, if it proves to be irresistible enough to move the seemingly immovable force of partisan polarization, seems more likely to work against the party now holding the White House than against the party better positioned to cast itself as a force for change.

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The effect of public and private schooling on anti-Semitism

Many Jewish groups oppose school choice on the assertion that American public schools promote diversity and tolerance, whereas private — especially religious — schools may not do that as effectively. University of Arkansas professor Jay P. Greene finds that with anti-Semitism, the opposite may be the case.

In his new report, he administers the Anti-Defamation League’s anti-Semitism index to a large, representative sample of US adults and finds that having attended a private school as a child is associated with significantly more favorable attitudes toward Jews, on average, than having attended public school.

Please join AEI for a presentation of the paper, followed by an expert discussion of the study’s implications for school choice and civil society.

Join the conversation on social media with @AEIeducation on Twitter.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

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Republicans are being told to quit talking about entitlement reform. Should they listen?

Almost every Saturday I do a 30-minute segment on my pal Larry Kudlow’s national radio show. Often the other two guests are John McIntyre of RealClearPolitics and Steve Moore of the Heritage Foundation. During last weekend’s show, Kudlow asked whether Republicans were taking a risk talking about entitlement reform. McIntyre thought it was “politically dangerous,” and they would do better to focus on economic growth. And Moore had this to say:

I think the Republican message that we’re going to cut entitlements is a loser. I just think it’s a loser. If the Democratic message is, “We’re going to make your benefits,” and the Republican message is, “We’re going to make them worse,” I’m sorry, I don’t think that’s a winning message. … If we get this economy growing at three and a half, four percent a lot of these problems, especially with Social Security go away. … I think this message that we’re the root canal party, I’m worried about that. …

Thoughts:

1.) I don’t get this: So we’re going to grow our way out of the debt and entitlement problem … via faster economic growth …  enabled by tax cuts that would lose trillions of dollars? Why would voters believe that message, especially after (a) Republicans have spent the Obama presidency issuing apocalyptic warnings about the exploding national debt, and (b) the last time Republicans passed a big tax cut plan the economy ended up not booming? Whatever the correlation/causality, voters might remember that last one, nudged along by Democrats.

2.) Look, the average 10-year revenue loss from the GOP tax plans reviewed by the Tax Foundation is $6 trillion, under a static scoring analysis, and $3.5 trillion, assuming economic growth feedbacks. Again, would voters outside a GOP primary find these plans at all credible — especially when accompanied by a non-plan or hand wave to reform entitlements? I mean, would the smart messaging plan be to advocate entirely eliminating nondefense discretionary spending? Which is this stuff:

Examples of other well-known programs paid for by discretionary spending include the early childhood education program Head Start (included in Housing & Community), Title I grants to disadvantaged schools and Pell grants for low-income college students (Education), food assistance for Women, Infants and Children (WIC), training and placement for unemployed people provided by Workforce Investment Boards (in Social Security, Unemployment and Labor), and scientific research through the National Institutes of Health (NIH) and National Science Foundation (NSF), among many others.

3.) And some fiscal truth, via my colleagues Alan Viard and Mike Strain:

… entitlement reductions will be part of the fiscal solution, and the most growth-friendly approach to fiscal consolidation would go heavy on spending cuts and light on tax increases. But public and political attitudes make it clear that it will be possible to secure significant entitlement reductions only if they are accompanied by tax increases. Democrats’ opposition to entitlement cuts and Republicans’ ambivalence about them make a budget strategy that relies entirely on entitlement cuts politically unviable.

Therefore, revenue will have to rise to restore fiscal balance. Indeed, the only significant entitlement benefit reduction in recent years, the benefit cuts in the 1983 Social Security legislation, were part of a bipartisan agreement that also included tax increases, as further discussed below.22 Democrats strongly support increasing revenue as a share of GDP. And Republicans are starting to accept this as well. Ryan’s budget proposal calls for revenue to rise to 19.1 percent of GDP by fiscal 2023, significantly above the 1960-2013 average of 17.9 percent.

4.) This is proving prescient:

A few quick facts on entitlement spending: (a) CBO projects federal spending on Medicare and Social Security over the next 25 years will rise by roughly 3 percentage points of GDP,  to 11% from 8%; (b) an aging US population will be the prime driver of that projected higher spending; (c) a middle-class, one-earner couple retiring in 2030 will receive $1.3 million in lifetime Medicare and Social Security benefits having paid in just under $500,000.

To me, these numbers argue pretty strong in favor of reforming entitlements to spend less than projected and weighting that future spending more toward lower-income Americans. Now I have been worried that Republicans are backing way from reforming Medicare and Social Security in favor of cutting Medicaid and various income support programs. The former would be classified as “earned benefits” or as the WSJ’s Homan Jenkins as put it,  “… middle-class rewards for a life of hard work and tax-paying, against Mr. Obama’s vast expansion of the means-tested welfare state for working-age Americans.”

5.) We need faster economic growth, but setting such a high target and making it so dependent on tax policy leads to some really unbalanced proposals. We need a tax code that is economically efficient and scalable. And we need entitlement reform, maybe like this.

 

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Repeal of the Medicare Sustainable Growth Rate: direct and indirect consequences

In 2013, US health care spending totaled about $3 trillion, or more than $9,000 per person [1]. This corresponded to 17.4 percent of GDP, a much larger share than one sees in other countries [1, 2]. The largest financer of this medical care was the federal government: the Medicare program for the elderly and disabled accounted for 26 percent of all hospital expenditures and 22 percent of all outpatient care [1], and states’ Medicaid programs received $265 billion in federal funding [3]. Beyond this direct role, the federal government influences health care and health insurance markets through their tax treatment, subsidy arrangements, and regulation.

The federal government’s role as the largest financer of health care, which has expanded in recent years through the Medicare Modernization Act of 2003 and the Patient Protection and Affordable Care Act of 2010, positions it to substantively shape the sector’s long-run trajectory. As the single largest purchaser of health care services, its decisions regarding the generosity and structure of payments exert systemwide influence. In this context, we consider the implications of the recent repeal and replacement of the Medicare Sustainable Growth Rate (SGR) through the enactment of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) [4].

From SGR to MACRA
The SGR. The SGR, enacted through the Balanced Budget Act of 1997, was the product of a congressional effort to constrain growth in Medicare’s spending on physician services. The underlying formula was meant to generate reductions in fee-for-service payment rates when Medicare’s total spending on physicians’ services grew more quickly than a target growth rate. It made allowances for modest fee increases, changes in the number of Medicare beneficiaries, and GDP growth, among other factors [5].

For most of the SGR’s existence, actual expenditures grew faster than target expenditures. The SGR’s formula has thus typically called for reductions in Medicare’s fee-for-service payment rates [6]. Political pressure from physician organizations wary of reduced compensation [7] and from beneficiaries concerned about access to care [8] led Congress to enact a series of temporary measures to keep these cuts from materializing. These so-called “doc fixes” were typically legislated to last for a single year, making their renewal an annual or more frequent event. Because they did not alter the underlying SGR formula, the divergence between doc fix payments and those called for by the formula gradually widened. The reductions in Medicare fee-for-service payment rates that would occur if there were a lapse in the doc fix thus became increasingly dramatic over time, approaching 30 percent in some years [9].

The large size of the cuts implied by the SGR made permanent repeal look costly. Simultaneously, the implied cuts’ size made it unpalatable, to physicians and Medicare beneficiaries alike, for Congress to allow them to be implemented. It is precisely these forces that sustained the doc fix “ritual” for so long. Recognizing its annual inevitability, the Congressional Budget Office (CBO) incorporated these fixes into its (more realistic) “alternative” fiscal scenario for forecasting deficits and debt [6]. The CBO’s forecast of the cost of long-term repeal finally decreased, however, when the growth rate of medical spending declined in recent years. In 2015, Congress finally repealed the SGR (or, technically, turned it into a mechanism that produces fixed annual updates, explained below) [4].

The MACRA. What, then, replaces the SGR? There are two key elements of the MACRA that will directly affect physicians’ payments and practices. The first is a new procedure to determine the updates to Medicare’s physician fees: instead of annually improvised updates, fees are now scheduled to increase by 0.5 percent per year through 2019 and then to remain flat from 2020 through 2025 [4]. The SGR repeal thus brings an end to the recurring uncertainty in Medicare physician pay and the need for congressional intervention to avert sudden, large payment rate cuts.

The repeal’s second element is the introduction of a “merit-based incentive payment system” (MIPS). Starting in 2019, the MIPS will fold a number of current incentive systems into a single, modified approach to rewarding physician groups that excel according to its criteria for providing high-value care. These bonuses and penalties are cost-neutral; money flows from underperformers to outperformers [10]. The goal of these new incentive payments is, of course, to induce physician groups to provide higher-quality care without increasing resource usage. The measures upon which groups will be scored include the “meaningful use” electronic health record (EHR) program, the Physician Quality Reporting System (PQRS), and the Value-Based Payment Modifier (VBPM) program. The scoring will also incorporate an evaluation of clinical practice improvement activities [11]. As of September 2015, the secretary of the Department of Health and Human Services (HHS) had yet to announce more detailed implementation guidance and assessment criteria. But the size of bonus payments and penalties derived from MIPS scores is written into the law: they will grow to range from +27 percent to -9 percent in 2022. Physician groups will also be offered the chance to opt out of the MIPS. To do so, a large enough percentage of their revenue must come from qualifying alternative payment mechanisms (APMs). Qualifying alternative mechanisms must more tightly link physician income to performance and require “sufficient” quality reporting. The range of mechanisms that will be deemed qualifying remains to be fully determined by the secretary of HHS.

Presumably the MIPS will bear a significant similarity to Medicare’s Pioneer accountable care organizations (ACOs), which, thus far, appear to have delivered promising savings [12]. Because the Pioneer ACOs voluntarily participated in the initiative, however, the extent to which these first-movers’ successes will be replicated by later entrants is unclear [13, 14]. In general, of course, it is quite difficult to design mechanisms that make it pay to reduce revenue [15].

Probable Effects
The repeal of the SGR and the expansion of the MIPS will have direct, wide-ranging impacts on physician payments and practices. Importantly, these changes are likely to exert influence beyond the Medicare program.

As practitioners are well aware, Medicare’s fee schedule plays a central role in many contracts between physicians and private third-party payers [16, 17]. Specifically, contracted payments are regularly negotiated relative to Medicare’s payment menu, typically with relatively high payment rates for physician groups with substantial market power and relatively low payment rates for small group practices. Recent research [18] finds that, consistent with the conventional wisdom, Medicare’s payments do indeed exert significant influence over private payments. The study, conducted by one of us and another coauthor, investigated how private payments responded to Medicare’s substantial 1998 change in payments for surgical procedures relative to “other” medical services [18]. Using a large database of private sector claims, the study found that private payment changes tracked Medicare’s payment changes virtually dollar for dollar with essentially no lag. The relationship was particularly strong in markets dominated by relatively small group practices. Anecdotal evidence suggests that other sorts of reforms, for example Medicare’s Multiple Procedure Payment Reduction policy for diagnostic imaging services, have also been incorporated into private payment models [19].

It may only be a matter of time, then, until the elimination of the SGR and the introduction of the MIPS influence both the overall generosity and the underlying structure of private-sector payments. These changes in payments should, in turn, be expected to influence both the overall quantity and kinds of care physicians provide [20]. Further, it is likely that the reduced uncertainty about future compensation will induce higher levels of investment and an increased willingness to hire [21] (also S.R. Baker, N. Bloom, S.J. Davis, unpublished data, 2015).

That said, other elements of the law may make future policies and regulations less predictable. The changes packaged into the MIPS, for example, may affect physician incentives in subtle ways. Little can be said, however, until the components of the new incentive system have been more completely designed and revealed. Where significant revenues are at stake, one would certainly expect physicians’ practices to organize in ways that are likely to be rewarded. The system’s capacity to measure and reward true underlying quality, whatever one believes that is, will thus be crucial. The effectiveness of these efforts and their impacts on care quality for both the publicly and privately insured remain to be seen.

References

1. Centers for Medicare and Medicaid Services. National health expenditure data. Updated May 5, 2014. http://ift.tt/1kmn3mU Trends-and-reports/NationalHealthExpendData/index.html. Accessed September 4, 2015.
2. Congressional Budget Office. The Budget and Economic Outlook: 2014 to 2024. February 2014. http://ift.tt/1k4XGGH -2013-2014/reports/45010-Outlook2014_Feb_0.pdf. Accessed September 4, 2015.
3. Truffer CJ, Wolfe CJ, Rennie KE. 2014 actuarial report on the financial outlook for Medicaid. Centers for Medicare and Medicaid Services Office of the Actuary. 2014. http://ift.tt/1kmn4Y3 -topics/financing-and-reimbursement/downloads/medicaid-actuarial-report-2014.pdf. Accessed September 4, 2015.
4. Medicare Access and CHIP Reauthorization Act of 2015, Pub L No. 114-10, 129 Stat 87.
5. Centers for Medicare and Medicaid Services. Estimated Sustainable Growth Rate and conversion factor, for Medicare payments to physicians in 2015. April 2014. http://ift.tt/1k4XGGL SustainableGRatesConFact/Downloads/sgr2015p.pdf. Accessed September 4, 2015.
6. Congressional Budget Office. The 2012 Long-Term Budget Outlook. Congressional Budget Office. June 2012. http://ift.tt/1kmn4Y5 congress-2011-2012/reports/LTBO_One-Col_2_1.pdf. Accessed September 4, 2015.
7. Laugesen MJ. Civilized medicine: physicians and health care reform. J Health Polit Policy Law. 2011;36(3):507-512.
8. Seniors win fight to keep doctors. AARP. December 15, 2010. http://ift.tt/1k4XE1n. Accessed September 17, 2015.
9. Hirsch JA, Rosman DA, Liu RW, Ding A, Manchikanti L. Sustainable growth rate 2013: time for definitive intervention [published online ahead of print May 4, 2013]. J Neurointerv Surg. doi:10.1136/neurintsurg-2013-010776. http://ift.tt/1kmn3TM. Accessed September 17, 2015.
10. Aaron HJ. Three cheers for logrolling—the demise of the SGR. N Engl J Med. 2015;372(21):1977-1979.
11. Rees L. How payments, penalties will change post-SGR. AMA Wire. July 2, 2015. http://ift.tt/1k4XGGP /payments-penalties-will-change-post-sgr. Accessed September 4, 2015.
12. Pham HH, Cohen M, Conway PH. The Pioneer accountable care organization model: improving quality and lowering costs. JAMA. 2014;312(16):1635-1636.
13. McWilliams JM, Chernew ME, Landon BE, Schwartz AL. Performance differences in year 1 of pioneer accountable care organizations. N Engl J Med. 2015;372(20):1927-1936.
14. Nyweide DJ, Lee W, Cuerdon TT, et al. Association of Pioneer Accountable Care Organizations vs traditional Medicare fee for service with spending, utilization, and patient experience. JAMA. 2015;313(21):2152-2161.
15. Frakt A. A Medicare plan, if only health organizations would stick around. New York Times. June 29, 2015. http://ift.tt/1kmn4Y7 -plan-if-only-health-organizations-would-stick-around.html?_r=0. Accessed September 4, 2015.
16. Gesme DH, Wiseman M. How to negotiate with health care plans. J Oncol Pract. 2010;6(4):220-222.
17. Blue Cross Blue Shield of Michigan. BCBSM outpatient psychiatric care facility participation agreement. April 2013. http://ift.tt/1k4XE1q Providers/Documents/enrollment/OPC-TRAD-WP-12946.pdf. Accessed August 14, 2014.
18. Clemens J, Gottlieb JD. In the shadow of a giant: Medicare’s influence on private physician payments. National Bureau of Economic Research. October 2013. NBER Working Paper 19503. http://ift.tt/1kmn3TO. Accessed September 5, 2015.
19. BlueCross BlueShield of Texas. Blue Review: A Provider Newsletter. 2011;(6). http://ift.tt/1k4XE1s. Accessed September 17, 2015.
20. Clemens J, Gottlieb JD. Do physicians’ financial incentives affect medical treatment and patient health? Am Econ Rev. 2014;104(4):1320-1349.
21. Shoag D, Veuger S. Uncertainty and the geography of the Great Recession. American Enterprise Institute. July 2015. AEI Economics Working Paper 2015-07. http://ift.tt/1kmn5en. Accessed September 4, 2015.

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