Free Markets, Free People

Right Policies: Opting Out

Yesterday Jon Henke challenged the Right to come up with policies that are popular, viable, workable, transformational and sustainable. (Follow the link to see what he means by each of those.) I’ve previously suggested a broad-based agenda that I thought could be sold as an alternative to the Democrats’ agenda, but I think a few of the specific policies are particularly strong, and they stick to a consistent theme.

Libertarian paternalism — which means that certain initial decisions are made for you, but you are left a way to opt out — can be a good or a bad thing, depending on the status quo. If the status quo is freedom, I’d just as soon not add in an element of paternalism in virtually any case. But if the status quo is paternalism, then libertarian paternalism is a step in the right direction.  Fortunately, giving people more options is much more popular than changing their status quo decision.

I propose that the Right should target existing paternalism and offer as many opportunities to opt out as we can devise. My main two examples are education and entitlements.

Education

I consider education to be any political coalition’s #1 long-term priority. If your opponents control education, chances are you will eventually lose on everything else. So, what policies should the Right pursue on education?

Vouchers aren’t a new idea, but we on the Right could be pursuing them in much more creative ways than we are now, to build a broad working alternative to state schools.  With variable-cost vouchers and pilot programs that target the “victim classes”, the Right can play full court press on vouchers in every school district.

Variable-Cost Vouchers

In every school district across the country, we should have vouchers at least equal to the variable cost of sending one extra child to public school. Democrats have argued for a long time that we need more spending per student to give kids smaller class sizes and better materials such as textbooks, and have used that to justify countless bond measures and tax increases to increase public school funding.

If a voucher just covers the variable cost of an extra student, then a voucher helps create smaller class sizes and increases the amount of money the public school can spend on each student.

You can see how a voucher for variable costs puts the Left in a Catch-22: Every extra dollar they want to spend per student is an argument for a bigger voucher, and an opportunity for the private sector to spend the dollar more efficiently than the public sector.

Make Friends in Low Places

We can do even better: pilot voucher programs should very openly target kids who are performing worst in the current system, in part because proposing vouchers for them undercuts the argument that vouchers just skim the cream of the crop.

Voucher proponents have already focused on several low-income and minority populations, using needs-based criteria and simple geography; the Right should be pushing this smart strategy much more aggressively – it undercuts Democrats’ arguments against vouchers beautifully, and makes a direct play for the Left’s base. The apparent success of the DC voucher system has made attempts to cut the program very embarrassing for Democrats; we need more of that.

Moreover, the Right should propose vouchers that help children who score on the bottom half of the test-score distribution. The research I’ve read indicates that these children show the greatest gains from voucher programs.  For the same reason, target kids with histories of disciplinary problems and special-needs children (paging Sarah Palin).

It would be a bridge too far for the Democrats to argue that these kids enhance the performance of public schools after using the opposite argument to fight vouchers for so long.

And finally, the Right should propose voucher programs to target the many minors who have already dropped out of school.  Kids who have outright given up on the public school system, or who rarely show up, aren’t doing anything to improve the performance of those schools.  If Democrats want to keep up the pretense that they care about these kids, they shouldn’t have any problem with helping these kids become part of a new private education market.

Those are just a small number of ways we can turn the Left’s most popular arguments against them and start to build a real market in education. In the meantime, the Right would be demonstrating that markets can work better than state-administered programs, and help the “little guy” who’s been screwed by the public system.

Where necessary to make the policy viable, the Right could be flexible on the matter of vouchers for church-founded schools (like Catholic schools); the first priority is building a broad education market outside of the state.

Entitlements

Here’s another place where reform would be truly transformational. The Right should push for an opt-out for the major entitlements – Medicare and Social Security. A reform doesn’t have to be a full privatization to accomplish a great deal of good.

Many people are currently collecting benefits from Medicare and SocSec, and we can assume that they will turn out to vote against anything that takes away those benefits. The Right can start making progress on reducing our crushing long-term obligations by (once more for effect) giving everyone as many opportunities to opt out as possible.

Social Security

Why not allow people to adjust their expected benefits, with higher or lower individual taxes to compensate for the change from the “standard” level?  The SSA could set a minimum level of contributions to guarantee its promised benefits, so that the legislation becomes non-threatening to beneficiaries, and thus politically viable.  To get the greatest tax cut, you opt out of all retirement benefits; you can change your mind later, but your benefit and/or tax level must be adjusted appropriately.  And the more people who opt out, the lower the minimum tax rate can go; that rate could be adjusted at periodic intervals, perhaps once a year.

Similarly, why not allow people to adjust their expected retirement age, again paying higher or lower taxes to compensate?

Both of these adjustments would introduce flexibility along with a price mechanism.

Yes, this means that some people might choose to pay the minimum tax and find themselves at age 67 regretting their earlier decisions, but everyone would know that they made a conscious choice to change from the status quo.  And in the meantime, those who opt out don’t feel like such direct stakeholders.

Medicare and other state medical benefits

To get more people off the rolls, allow them to opt out of Medicare eligibility and other state medical benefits in exchange for some mix of:

    • lower payroll taxes
    • tax-free health savings accounts
    • a tax cut on their individual health insurance
    • vouchers for private insurance and private disability coverage

… as long as the total cost of the mix is lower than the expected cost of Medicare benefits.  This way, the Right can not only cut into the massive expected costs on the near horizon, but also get fewer people to feel like stakeholders in the future of the state-administered system.

Conclusion

The most effective arguments against reform are allegations that people will lose the benefits they have now. Psychologically, we regret losing a dollar more than we regret not acquiring that dollar in the first place. That’s a big part of how the Right beat universal health care under Clinton: by telling the American people that they would lose their current insurance, with which most of them were satisfied.

Whether we like it or not, it is stupid to do a frontal assault on a hardened position. Instead, we should apply libertarian paternalism to divide and conquer by giving our opponents as many chances to defect as possible.

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5 Responses to Right Policies: Opting Out

  • Maybe “vouchers” should be rebranded as “scholarships.”  I mean, what bleeding heart would be against scholarships for the poor and disabled?

    Charter schools (which I like better than vouchers, because I happen to think a basic education is a public good) should be “sold” with the point that if you have a newfangled method that you think will work wonders, such as gold-plated benefits for teachers or having twice as many administrators as classrooms, you don’t have to persuade an entire district to adopt it before you can try it.  Let’s have Chairman Mao Charter School next to Margaret Thatcher Charter School, and may the best school win!

  • Good suggestions.

  • While I agree with your positions I find this one unworkable –

    “Yes, this means that some people might choose to pay the minimum tax and find themselves at age 67 regretting their earlier decisions”

    Any candidate that went on the campaign trail and said we will let old people die because of their earlier chooses wouldn’t stand a chance.

    I agree, that is the way it should be but it will never happen and would be a losing position.

    • You may be right, but I see some reasons to believe it could be viable.  If somebody consciously chose to benefit from lower taxes for 45-50 years and then decided he wanted to get the same benefits as those who stayed with the “standard” tax rate, most Americans would have little sympathy for that.  With the status quo having been set by the SSA, there’s a difference between failing to plan, and planning to fail.

      I agree that anything the Left can successfully frame as “let old people die” will be unpopular.  Suggestion: separate true disability pay from retirement pay.  Many people are still capable of working at 65 or 67 or 72, but Social Security pays them anyway.  We could have people opting out of retirement pay (which is triggered by reaching a certain age) but keep disability pay (triggered by being truly unable to do any kind of work).  This creates a difference in interests between those who can work and those who can’t.

  • This won’t make SS any easier …

    Reporting from Washington — Instead of seeing older workers staying on the job longer as the economy has worsened, the Social Security system is reporting a major surge in early retirement claims that could have implications for the financial security of millions of baby boomers.

    Since the current federal fiscal year began Oct. 1, claims have been running 25% ahead of last year, compared with the 15% increase that had been projected as the post-World War II generation reaches eligibility for early retirement, according to Stephen C. Goss, chief actuary for the Social Security Administration.