February 12, 2013
THE MARRIAGE OF MANDATES AND MARKETS:
Several OECD countries have found ways to ensure widespread access to benefits and services without "socializing" the sectors in question. Australia, the Nordic countries, and most countries in southern Europe do all finance and provide health care through public agencies. However, in Canada, Japan, and much of continental Europe, although the government mostly pays for public health care, it is private actors and organizations that provide the health care itself. And in the continental European countries, private insurance either supplements a public insurance system (as in France and Germany) or is the dominant source of coverage (as in the Netherlands and Switzerland). In the Swiss system, for instance, all individuals have to buy insurance, insurers have to accept all who apply for coverage, and public subsidies ensure that coverage is affordable for all. (According to the Commonwealth Fund, about 30 percent of Swiss receive such subsidies.)In terms of family welfare, in Germany, child care is mainly the responsibility of municipal governments, which funnel subsidies to nonprofit organizations that run daycare centers. In Australia, the Netherlands, and the United Kingdom, most child care is publicly subsidized and is provided by either nonprofit or for-profit entities. In France, publicly subsidized babysitters care for nearly one-third of children under three. Even in the Scandinavian countries, where publicly provided daycare is most common, the state offers considerable benefits to parents who care for their children at home.The success of some public-private partnerships in Europe shows that generous, effective, and broadly accessible social welfare policies do not require large government bureaucracies staffed with armies of public servants. The government does not have to perform the work itself. But it does have to mandate its provision and monitor the agencies that perform it. Leaving social welfare up to private-sector employers without adequate public support or regulation ensures that many people will fall through the cracks. If Americans truly believe that basic social services are things that all citizens deserve, they should not be content with a social welfare system that often makes getting such services a matter of privilege or luck.For example, rather than leaving it up to employers and individuals to take care of pension benefits, the government could mandate their provision, making them a required supplement on top of existing Social Security benefits. Washington might also consider requiring all employers to provide three months of paid family leave, with the benefits paid for by a combination of employer and employee contributions. A similar measure could mandate that employers offer paid sick days to all employees. Or the federal government could provide incentives for states to formulate such policies themselves, encouraging local experimentation while helping families across the country get what is considered an unquestioned right almost everywhere else. California and New Jersey have adopted paid family leave funded by employee contributions, and although the benefits are fairly low, all new parents -- not just those with means or generous employers -- can take paid time off from work.Those interested in effective social policy could also look closely at the activities subsidized through the tax code. When budgets are tight and poverty is high, giving rich people thousands of dollars in tax breaks so they can buy expensive homes does not seem like a wise use of public resources. There is no reason why U.S. tax-based subsidies could not be adjusted according to income, with the deductions or credits getting phased out as citizens' incomes climb. Making more tax breaks refundable (instead of in the form of deductions), moreover, would guarantee that the benefits flowed to people who truly needed them, rather than to those higher up the income-distribution scale. Even after granting such subsidies, the government could continue to rely heavily on the private sector to deliver services, but it could do so at lower cost and to greater effect for a larger share of the population.
JUST ARGUING ABOUT PACE AND CREDIT:
As The Economist points out, Scandinavia's socialist image is badly out of date. Sweden is the largest of the Nordics and perhaps the best example of their embrace of market capitalism. Over the past 20 years, Sweden's public spending has declined from three-quarters of GDP to just over half. Its corporate tax rate is half of America's, its annual deficit a rounding error of just 0.3 percent of GDP.Late last year, the pro-free-enterprise Legatum Institute published its annual Prosperity Index, ranking major national economies on eight "foundations" of success, including economic fundamentals, entrepreneurship and opportunity, and governance. The top three finishers were Norway, Denmark, and Sweden, with Finland in seventh. And the U.S.? It finished twelfth, outside of the top ten for the first time. Legatum's damning assessment: "[America's] biggest fall is in entrepreneurship and opportunity, which has declined eight places in the last four years. Businesses' start-up costs are rising in the land of pioneers and patents. Fewer Americans believe that working hard will get them ahead."
HAD HE FAVORED FREE TRADE AND IMMIGRATION...:
During our wide-ranging interview, Shlaes discusses such topics as:
● The real version of Coolidge's "the business of America is business" quote.
● The surprising modernity of the 1920s and Coolidge himself.
● The tragic and untimely death of Coolidge's son, and how it impacted Coolidge himself.
● Coolidge's fear of where the unending expansion of government could lead.
● Who best fits the model of Coolidge today.
And much more. Click here to listen:
...he'd have been a great president.
RAISE THE SALES TAX AND CUT INCOME TAXES MORE:
The plan's centerpiece is a 20% cut over three years in all of the state's nine income tax rates. The top rate would fall to 4.725% from 5.925%. Ohio allows its cities to impose add-on income taxes, so the current rate in cities like Cleveland can reach 8.4%.The plan would also provide an income-tax deduction on half of all small business and Subchapter S income up to $750,000. This effectively cuts the tax rate on job creators in half, but the income cap sounds like something from the Obama White House. Businesses that earn more than $1 million are most likely to expand operations from such a tax cut and should get it too.To offset any lost revenue, Mr. Kasich wants to raise extraction taxes on drilling in the Utica Shale. The oil and gas industry hates the idea, but this makes more economic sense than taxing work and investment across the economy. The new severance tax would raise about $500 million a year and be in line with those of other energy-tax states. Drillers should note that extraction taxes in Alaska, North Dakota, Texas and Wyoming help to keep income taxes low, while funding schools and police, and creating a political constituency in favor of drilling.Mr. Kasich also wants to reform the sales tax, cutting the rate to 5% from 5.5% in exchange for taxing about 75 goods and services that are currently exempt. Barbers, accountants, lawyers, bowling alleys and funeral homes would now be taxed. An avalanche of lobbyists has descended on Columbus to protect these tax-free fiefdoms, and the Governor could get buried.