Social Security and Medicare Spending Growth: Is It Just More Seniors or More Per Senior?

Long-term federal budget forecasts show sizable increases in federal spending in the coming decades. This is concerning to those who worry that the growth of government will diminish incentives, reduce productivity, and limit economic growth. A large share of the forecasted increase in spending is due to Social Security and Medicare. This paper considers how much of this increase is simply due to the growth in the eligible population and how much is due to growth in spending per beneficially. The findings show both the former and the latter account for sizable shares of the growth. Thus, there is room to limit benefits without cutting them. Simulations show that capping real benefits per senior at their 2017 levels would have very sizable effects on limiting spending. In limiting benefits, it is important to avoid price controls and mandated coverage limits that cause shortages, non-price rationing, and political infighting over the programs

Facts and Trends Regarding Performance and Funding of K-12 in Kentucky

Kentucky’s K-12 experienced an 80% in increase in per pupil funds, after inflation, from 1990 to 2019. However, there have been only modest changes in its nationally-administered test scores, and no increases in the past decade. Moreover, per pupil funding seems to exceed that of all but the most exclusive private school tuition. Just over one-half of public funds goes directly to instruction and most funds to local schools come from Frankfort. Scoring on Kentucky’s own student assessment tests, the K-PREP, are higher than that of the comparable nationally-administered tests. Also, K-PREP shows improvement, while the other tests do not. About 20% of Kentucky students fall into the lowest K-PREP score category. For African American students, it is double that percentage. Kentucky’s K-12 system impedes teachers and other school personnel in devising suitable programs for the varied needs of children, and inhibits parental choice among possible alternatives. A system of robust school choice and competition enables the design of programs by teachers/schools and empowers parental choice among programs to suit their children’s needs

Some Basics of Capitalism and Socialism and Implications for Human Liberty, Morality, and Fairness

This essay outlines the big-picture aspects of capitalism and socialism, and uses this overview to discuss human liberty and economic liberty in each system. Additionally, I note that some have argued that capitalism is unfair or immoral and so I consider three specific and common moral standards in this regard. They are: (i) “From each according to his ability, to each according to his needs;” (ii) “People should get what they earn;” and (iii) “’Agreement without conformity’ or ‘conformity without agreement.’” Capitalism is centered on individual rights and private ownership, while socialism awards decision-making powers to government. The former is consistent with human and economic liberty while the latter is not. Moreover, socialism fares poorly in comparison to capitalism regarding the three moral standards

The Allocation and Exchange of Property Rights as a Way to Understand Comparative Economics Systems and Managerial Economics

This paper discusses how economic systems can be described by the manner that property rights are allocated to individuals, to the government, or to interests groups. Property rights entail control of use of assets, claim on the net income from an asset, and transferability of the previous two. Economics systems (e.g., capitalism, socialism, cronyism) are characterized by who holds these rights, in whole or in part, and this determines the success or failure of an economy. A related analysis is applied to understanding business organization, e.g., the corporate and non-corporate form, franchising, and employee compensation methods. Each entails a (voluntary) allocation of the three aspects of property rights to different individuals and each has benefits and costs. Several examples are discussed. Competition selects the most efficient form of organization. This illustrates the importance of the private ownership of property rights, where parties may trade and divide them, for the success of businesses and the economy as a whole

Educational Test Scores, Education Spending, and Productivity in Public Education: National Trends and Evidence Across States and Over Time, 1990-2015

We examine national trends in educational funding, test score outcomes, and productivity as well as variations in funding and test scores over time and across states to assess how changes in educational spending are (or are not) related to changes in educational test score outcomes for states. National trends show small increases in test scores, large increases in educational funding (until the last recession), and a continued fall in educational productivity. The cross-state, over time analysis indicates a statistically significant but very small association of state funding to test scores; so small that large changes in funding have little effect on scores. This is consistent with the continued decline in educational productivity. We also find similar results for black students, implying that the increased funding has not served to reduce racial inequality. We suggest that the continued decline in productivity of public schools adds further reason to question the ability of non-competitive, public organizations to improve educational performance and to look for alternatives that embrace or emulate private-sector, competitive organizations

Fiscal Policy and Property Values

Excerpt from the executive summary: The purpose of this study is to inform on the current state of knowledge of the economics profession of the impacts of state and local taxes on property values. Our goal is also to suggest how to interpret some of the findings of this literature as well as to provide some conceptual background to assist in interpreting these findings

Market Power and Price: Theory and Evidence on Labor Unions

We examine the effect of the market power of unions on the wage of unionized labor. Market power is measured as the percent of an industry's labor force that is unionized. Unique in this study is the simultaneous treatment of the union wage and extent of union organization as union choice variables. We model this choice in a setting of product market competition with unrestricted entry. An important empirical implication is that standard wage equation estimates of the effect of union coverage on union wages are biased upward. Empirical tests reject the exogeneity of union coverage in wage determination and we show that OLS overestimates the true relationship between wages and organization by over 25%.Union

Cost of government services: trends and comparisons for Kentucky and its neighboring states

Federal Reserve District, 8th ; Local government ; Kentucky

The Federal-Private Wage Differential: How Has It Evolved?

Federal, state, and local budget issues in the aftermath of the Great Recession stimulated a revival of interest in government worker pay. In the paper, we study the evolution of the federal-private pay differential from 1995 to 2017 using Current Population Survey data, enabling us to examine the current pay gap and how it has changed over time. Wage regressions are estimated by year for federal and private sector workers and used to calculate the yearly federal-private wage differential. To deal with unobserved heterogeneity, we adopt control function methods. We also estimate of the probability of receiving employer-provided health insurance and a pension plan each year for each sector. The findings imply that the federal pay differential is invariably positive, fell during the 1990s, rose in the early 2000s until 2013, then tended to decrease. There is evidence that the differential is related to federal spending relative to GDP, but not to the business cycle. Federal workers consistently have higher probabilities of having employer-provided pension plans and health insurance