Trade Ya!

One of the more positive recent federal developments was the signal that pending free trade agreements may be resurrected. Such deals are in place with South Korea, Colombia and Panama, with approval of the South Korea pact a logical place to start to boost a number of U.S. industries. The National Center for Policy Analysis offers:

The trade pact between the United States and South Korea, which would eliminate about 95 percent of tariffs on industrial and consumer goods within five years, has the usual advantages in promoting job-creating exports.  It would help domestic industries involved in telecommunications, technology, pharmaceuticals, farming and financial services gain access to an important market, say USA Today.

Even American manufacturing, a usual source of opposition to these types of deals, should have reasons to like this one. 

  • South Korea is a highly developed and educated nation with average wages approaching those in the United States and environmental standards that, in some cases, are more stringent.
  • What’s more, U.S. manufacturing, after decades of technology-driven productivity gains and related job losses, is highly competitive and showing signs of a rebound.
  • In large part this is a result of exports, which are healthy even as domestic consumption lags.

Another argument for the trade deal with South Korea is not economic but geopolitical.  A vibrant and prosperous South Korea is a check against the ambitions of the bizarre and belligerent regime to its north, says USA Today.

Who knows, this pact could be a harbinger of things to come, as an overly indebted U.S. economy begins to focus more on investment and savings, and sees trade with fast-growing emerging nations in Asia and Latin America as something to support, not fear.  In any case, ratification of the South Korea deal should be high on the Senate’s agenda for 2011.

Dead But Not Gone From Government Rolls

There’s the old joke (well, not really a joke in some cases) about dead people casting their ballots in elections. Now, it appears the dead are collecting taxpayer money in another example of government gone awry.

The National Center for Policy Analysis reported the following:

About $1 billion in taxpayer money goes to 250,000 deceased individuals, according to a review of reports by the Government Accountability Office, inspectors general and Congress itself.  How, might you ask?  According to Sen. Tom Coburn’s, R-Okla., office:

The Social Security Administration sent $18 million in stimulus funds to 71,688 dead people and $40.3 million in questionable benefit payments to 1,760 dead people.

The Department of Health and Human Services sent 11,000 dead people $3.9 million in assistance to pay heating and cooling costs.

The Department of Agriculture sent $1.1 billion in farming subsidies to deceased farmers.

But that’s not all, says the Washington Examiner:

The Department of Housing and Urban Development overseeing local agencies knowingly distributed $15.2 million in housing subsidies to 3,995 households with at least one deceased person.

Medicaid paid over $700,000 in claims for prescriptions for controlled substances written for over 1,800 deceased patients and prescriptions for controlled substances written by 1,200 deceased doctors.

Medicare paid as much as $92 million in claims for medical supplies prescribed by dead doctors and $8.2 million for medical supplies prescribed for dead patients. 

SRI Not as Good in ROI

Choosing stocks, bonds or mutual funds based on political, religious or social values is known as socially responsible investing (SRI). Research from the National Center for Policy Analysis says SRI delivers a lower return on investment.

The story, read here, worries about public pension funds being invested under such criteria. In other words, the bottom line may not matter most to those doing the investing, but it might to those whose dollars are being invested.

What do you think? Should SRI not be an option for pension funds? Should it only apply to individuals determining what to do with their own money? Let us know what you think.

Student Loans Based on Future Incomes: Can This Really Work?

Here at the Chamber, we like to spend our days delving in theory (and by "we," I mean people who possess a greater cognitive capacity than I do). And this concept of human capital and student loans struck some of us as intriguing.

What if students repaid loans with a percentage of their future earnings? The National Center for Policy Analysis tackled the subject. Check out their analysis, which links to the original article in the Dallas Morning News by Rebecca Tuhus-Dubrow:

Originally the brainchild of Milton Friedman, human capital contracts are seen as a way to remove the risk of overwhelming debt for students and mitigate the social costs of trying to repay it.  By gearing repayment to income, the contracts reduce those burdens sharply — a student who earns less money is obligated to pay less back. 

The Pros:

The potentially lower payments explain why human capital contracts would draw students, but there’s an attraction for investors, as well, says Tuhus-Dubrow:

  • An education fund offers investors a steady flow, protection against inflation and a more targeted hedge for large employers.
  • Investors could be motivated by philanthropic goals: wealth alumni might see this as a way to help students attend their high-priced alma maters.
  • Foundations and schools could require students to sign contracts stating that nothing is owed up to a certain point, but high-earning graduates would repay a percentage of their income, allowing the foundation to recycle that money into later classes.

 The Cons:

However, for all the benefits, the contracts pose multiple challenges in practice, adds Tuhus-Dubrow:

  • They create an incentive for graduates to hide their income and make it easier for them to not work, since no fixed payment is required.
  • Adverse selection and discrimination against low-income students could cause problems.
  • Further, it’s not clear how the contracts would be enforced, how the IRS would treat them and what would happen in the case of bankruptcy.

Americans Get an “F” in Civics

There is no political divide in the results from the Intercollegiate Studies Institute’s latest civics literacy test. Everyone earned a failing grade.

While the organization has focused on a lack of civics knowledge among college students in past years, it expanded its reach this time around. Randomly selected Americans earned an average score of 49 on the 33-question test. Amazingly, elected officials came in even lower at 44%. Breakout totals included: Republicans (52%), Democrats (45%), liberals (49%) and conservatives (48%).

So what didn’t these people know. How about:

  • Fewer than half could name all three branches of government
  • Only 54% could identify a basic description of the free enterprise system
  • 40% of those with a bachelor’s degree did not know that business profit equals revenues minus expenses
  • 30% of elected officials did not know that "life, liberty and the pursuit of happiness" are the unalienable rights referred to in the Declaration of Independence

There’s plenty more to amaze — and dismay — you. The National Center for Policy Analysis has a summary or take the quiz yourself.

What’s the solution? I don’t know. But these results and the prospects for what they mean down the road sure are depressing.