At the Weekly Standard, Chris Conover explains.

AEI’s Michael McShane writes that America’s “school choice” policies have thus far failed to live up to their hype and have not created real, vigorous education markets. That’s hard to argue with. As McShane rightly points out, existing programs are still very small, mostly filling empty places in non-profit private schools that predate the programs’ creation. The creative destruction of real market innovation has yet to make its presence felt, and the few new entrants to the marketplace usually look much like the old ones.

It’s not entirely clear what McShane is proposing as a solution, but he offers a few hints:

New schools and school models need to be incubated, funding needs to follow students in a way that allows for non-traditional providers to play a role, new pathways into classrooms for private-school teachers and leaders need to be created, and high-quality school models need to be encouraged and supported while they scale up. In short, policymakers, private philanthropy, and school leaders need to get serious about what’s necessary to make the market work.

This seems to suggest the need for some sort of new school development organization, the picking of “high quality” schools by philanthropists for scale-up funding, and revisions to teacher certification rules. The first two would likely do more harm than good and the third can be improved upon by simply getting rid of government certification rules for private school teachers altogether.

On the first point, consider the very successful “functioning markets” to which McShane compares education. “New providers,” he writes, “are constantly popping up up to replace enterprises that are not meeting the needs of consumers. Through that winnowing process we move from hulking black-and-white televisions that cost $269 in 1958 dollars — over $1,700 in 2012 — to flat-screen LCD HDTVs that cost $249 in 2012.”

Indeed. And yet, there has never been a New TVs Development Organization. All of this innovation is the result of the unmolested operation of the free enterprise system. No government dirigisme was required to spur the creative destruction that gave us better TVs, phones, computers, grocery stores, coffee shops, book retailers, garden implements, running shoes, bathroom scales, or suntan lotions. If it ain’t broke.…

And while philanthropy has likely played an important role in protecting the free enterprise system that gave us all this innovation, philanthropists were not involved in picking which products and services should be brought to scale. That was left to the marketplace.

Nor do we need to speculate as to what might happen if philanthropists did pick which schools should be deemed “high quality” and scaled-up. We can simply look at their existing track record in the charter school sector, where they have played a major role. I did this in 2011, looking at the relationship between charter school networks’ academic performance and their total receipts from philanthropic grants. Essentially, there isn’t a relationship. The correlation between charter schools’ name length and achievement is stronger—and it’s weak, too. To drive its conclusion home, I called this paper “The Other Lottery,” to evoke the random process by which oversubscribed charter schools must accept their students.

So, yes, we’ve yet to create a free educational marketplace at the K‑12 level anywhere in the United States. But the policy solution to doing so is rather simple: encourage the growth of school choice programs that do not suffocate private schools with regulation, then sit back and watch.

There’s a reason Adam Smith called it an invisible hand. You don’t need a lot of very visible committees or technocrats pulling at the levers of government or NGOs to make the free enterprise system work. You just need freedom and the rule of law (okay, respect for entrepreneurs, too).

Yesterday, President Obama went to what was perhaps ground-zero of the housing crisis: Phoenix. He laid out his vision for the role of housing in building a middle class, as well as his solutions for avoiding bubbles. 

On the rhetorical side, the president certainly laid out some principles that anyone would be hard-pressed to disagree with. For instance, he characterized the business mode of Fannie Mae and Freddie Mac as “heads we win, tails you lose”–which of course it was. The president was correct in calling it “wrong.” If only then-Senator Obama had aided the efforts to reform Fannie and Freddie by Senator Richard Shelby and others, perhaps this mess could have been avoided. But, hey–better late than never. 

The president is also correct in highlighting the issue of local barriers that increase the cost of housing. Both Cato’s Randy O’Toole and I have written regularly on this topic. You don’t get bubbles without supply constraints. But then every president since Reagan, at least, has pointed to this problem and yet it has only gotten worse. If the president has a substantial plan to bring down regulatory barriers in places like California, then I would love to see it.

Perhaps most importantly, the president recognized that what we had was a housing bubble, and the solution isn’t to “just re-inflate” it. As the president urged, we must “turn the page on the bubble-and-bust mentality” behind the housing crisis. That was the good, and again I applaud the president for recognizing those facts. 

Unfortunately, what details we have of his vision are not exactly consistent with these facts–which are bad and ugly. The president wants “no more leaving taxpayers on the hook for irresponsibility or bad decisions,” but then he implies that government should continue to stand behind risk in the housing market. The primary purpose of FHA, which the president commends, is to allow lenders to pass along the costs of their mistakes to the taxpayer. 

Mr. President, there is only one way to take the taxpayer off the hook: get the government out of the mortgage market. Anything short of that will continue to undermine the incentive for lenders to make responsible loans. 

That’s about how much the U.S. economy would gain from removing all sugar price supports and trade barriers right now.

But the sugar lobby, and their supporters in Congress and, sadly (not to mention confusingly), some conservative groups, are pushing a “Zero-for-Zero” sugar policy, which would essentially end U.S. sugar support programs only when other sugar-producing countries do the same. Seton Motley, president of Less Government puts it this way in an article for the Daily Caller:

It’s called zero-for-zero. Where we approach the planet and say “You get rid of your trade barriers, and we’ll get rid of ours.” In other words, we have zero protectionism — and so does everyone else. Right now, it’s being proposed for sugar…

Venezuela and Ecuador both have left-wing populist governments that have benefited tremendously from record high oil revenues. Both governments used those revenues to significantly increase public spending. However, there is a critical difference between these countries: while Venezuela has its own currency (the so called “strong Bolívar”), Ecuador adopted the U.S. dollar as its official currency in 2000. That means that, no matter how fiscally irresponsible the Ecuadorean government, it can’t print money to pay for its spending.

The result: Venezuela has the highest inflation rate in Latin America whereas Ecuador has one of the lowest rates in the region.

The Justice Department says it is reviewing the Drug Enforcement Administration’s “Special Operations Division”—the subject of an explosive report published by Reuters on Monday. The SOD works to funnel information collected by American intelligence agencies to ordinary narcotics cops—then instructs them to “phony up investigations,” as one former judge quoted in the story put it, in order to conceal the true source of the information. In some instances, this apparently involves not only lying to defense attorneys, but to prosecutors and judges as well.

DEA is taking a predictable “nothing to see here” stance in its public responses to the story, but on its face this seems like a fairly brazen violation of the right to due process. As several legal experts quoted in the Reuters article point out, the accused in our criminal justice system cannot effectively defend themselves unless they know how evidence against them was obtained, and this program is clearly designed to deprive them of that knowledge. Moreover, at least some of the information channeled to police derives from FISA electronic surveillance, and 50 USC §1806 explicitly requires the government to notify persons whenever it intends to use information “derived from” such intercepts against them in any legal proceeding. Flouting that requirement is doubly troubling because, in light of the Supreme Court’s recent ruling in Amnesty v. Clapper, the only way for any court to review the constitutionality of intelligence programs is for a defendant to raise a challenge after being informed that they’ve been subject to surveillance.

One way they’re able to get away with this is by exploiting the fact that our justice system relies so heavily on plea bargains. Prosecutors stack up charges against defendants in hopes of effectively coercing them into waiving their constitutional right to a jury trial and accepting a plea deal, which even for the innocent may make more sense than risking a conviction that could lead to an enormously longer jail sentence. Conveniently, avoiding a trial also greatly reduces the risk that one of these “phonied up” investigations will be exposed.

The Reuters report also suggests—though without providing any detail—that the NSA’s controversial phone records database is one source of leads provided to narcotics police. On face this might seem to conflict with repeated assurances from the administration that these records can only be used for counterterrorism purposes. But there are a few important loopholes. First, as the ACLU’s Patrick Toomey notes, NSA analysts may only submit “seed” queries to the database if they have a reasonable suspicion that the terms they’re searching—such as a phone number—is linked to a terror group specified in the court order authorizing the metadata program. But those queries then return the phone records of everyone within three degrees of separation, or “hops,” from the initial target number—which could easily sweep in thousands or tens of thousands of people—and dump them in a second database, called the “corporate store,” which can subsequently be accessed without restrictions or, indeed, without even creating an audit log of how it was accessed. Thus if a terror suspect’s cousin (one hop) calls a drug dealer (two hops), the phone records of that dealer’s suppliers (three hops) might automatically end up in the secondary database. There doesn’t appear to be anything stopping NSA analysts from then running algorithms against that database designed to detect call patterns characteristic of narcotics rings on behalf of their friends at DEA. From there, it is probably not too hard for government lawyers to justify the dissemination of the results to law enforcement: narcotics trafficking, after all, often funds the activities of foreign cartels engaged in “narco-terrorism,” and so ordinary enforcement of domestic drug laws can be classified as serving a “counterterrorism purpose” to the extent it disrupts those flows of funds.

Appropriately enough, this story comes just days after a New York Times report on how many govermnent agencies are greedily eyeing the vast stores of data collected by NSA. This should serve as a crucial reminder that you can’t build a massive architecture of surveillance “just for terrorism” and expect it to remain limited to that function: once the apparatus exists, there will inevitably be incredible pressure from other interests within government to expand its use. Once the data is already begin collected, after all, it seems a waste not to exploit its full potential. And indeed, we’ve seen again and again how—mostly because there just aren’t all that many terrorists out there—powers and programs justified by the need to fight the War on Terror end up getting coopted for the War on Drugs, from the Patriot Act’s “Sneak and Peek” searches (used almost exclusively in drug rather than terror investigations) to federally funded “fusion centers.”

For those interested in a more extended discussion, I joined a panel on HuffPost Live on Monday evening to talk about the story in depth.

A new section on the Social Security Administration (SSA) has been added to Cato’s Downsizing Government website. The SSA operates three large programs that provide benefits to millions of Americans: Old-Age and Survivors Insurance, Disability Insurance, and Supplemental Security Income. Total SSA spending will be $873 billion in 2013, which works out to an average of about $7,300 for every household in the nation. 

Essays: 

Social Security Retirement: Social Security faces a huge financing gap because of its pay-as-you-go structure and the aging of the U.S. population. It should be transitioned to a system of personal savings accounts, which would increase individual financial security and help to avert future tax increases.  

Social Security Disability Insurance: Growing numbers of Americans are receiving disability benefits, and the system is subject to major abuses. Policymakers should tighten eligibility for the program and explore ways to move it to the private sector.  

Supplemental Security Income: This program for low-income and disabled individuals suffers from similar abuses and overspending problems as Social Security Disability Insurance. The financing and administration of Supplemental Security Income should be devolved to the states.