WE’VE BEEN HAVING THE WRONG conversation about marriage in this country. While we’ve been debating whether and how to renovate marriage, we’ve been ignoring that the old institution is not only old, but actually quite sick: sick in a way that threatens some of our most basic values. We have been a little like doctors standing above a patient, squabbling about what unit he should be sent to without bothering to diagnose his disease.
I’m going to begin to try to diagnose that disease by reciting a number of key facts that most of you probably have heard before:
- Over 40 percent of all marriages end in divorce.
- A third of children are born to mothers who are not married; the Centers for Disease Control released a report recently showing numbers now appearing to be creeping up to 37 percent and likely to reach 40 percent in the next four or five years.
- There has been a threefold increase in the proportion of children growing up in single-parent families over the past 40 years.
All of this has been widely reported, and all of it is true. It’s also gravely misleading.
In recent years researchers have begun to disaggregate these numbers by income and education, and what they’ve found is the following. Fifty years ago, there was not much difference in the way high school- and college-educated women went about the marriage and baby business. Just about everyone got married before they had their children. That began to change by around 1960 when the percentage of unmarried women who became mothers inched up a bit.
By the late ’60s, those numbers began to march forward dramatically, but what’s striking is how different were the trajectories of college-educated women. College-educated women never went in for the Murphy Brown thing; their percentages of out-of-wedlock childbearing never rose much above 4 percent. Women without a high school education present us with an entirely different story. Their numbers soared.
There was a similar divergence in divorce trends. Around 1960, Americans fell in love with divorce. Women of all sorts began divorcing. But by 1980, the divorce rate among college-educated women tapered off. That was not the case with their less educated sisters. Though the rise slowed in the 1990s, their divorce rate continues to be about twice as high.
The upshot is what I call the Marriage Gap. By 2000, only 10 percent of mothers with college degrees or more were living without husbands. (I seem to be related to or friends with an unusual percentage of them.) Compare that to the 36 percent of women without a college degree. As Christopher Jencks and David Ellwood, whose research I’ve relied on, conclude: “The rise in single-parent families is concentrated among blacks and the less educated. It hardly occurred at all among women with a college degree.”
This would all be a curious though not highly consequential demographic fact, except for one thing: Children growing up in singleparent families don’t do as well as children of married families. For one thing, they are far more likely to be poor. Thirty-six percent of single female-headed families, and only 6 percent of married-couple families, are in poverty. Virtually all—92 percent—of children whose families make over $75,000 are living with their two parents. On the other end, only 20 percent of children living under $15,000 are living with both parents.
But it’s not just poverty that is at stake here. You can control for education, for income, for race, for number of siblings, but children from single-parent families—both as a result of divorce and as a result of non-marriage—are more prone to just about every social problem in the book: school failure, delinquency, crime, early pregnancy, emotional difficulties, and a host of other problems.
At this point, the evidence that family structure is perhaps the greatest risk factor is so powerful that, as James Q. Wilson has joked, even sociologists have come to believe it. Researchers have found that single mothers tend to be less child-centered; their children watch more television; and they don’t oversee homework as much as married mothers. The children of single mothers are less likely to go to college, and when they do, they are less likely to go to an elite college.
Jennifer Gerner, a Cornell professor, was puzzled some years ago when she noticed that only about 10 percent of her students were from divorced families. With a colleague, she went through the numbers at other top schools: same thing. Children who did not grow up with their two biological parents were half as likely to go to a selective college. As adults, they earned less and had lower occupational status. And here’s the clincher: They are more likely to become single parents themselves.
This is the meaning of the title of my book, Marriage and Caste. We are becoming a nation of separate and unequal families that threatens to last into the foreseeable future. On the one hand, well-educated women make more money. They get married, only then have their children, and raise them with their husbands. Those children are more likely to grow up to be well-adjusted, to do well in school, to go to college, to marry and only then have children. On the other hand, we have low-income women raising children alone who are more likely to be low-income, to drop out of school or, if they do make it to college, go to a less elite college, and to become single parents themselves.
Marriage, I think you can argue when you look at the numbers, now poses an even larger social divide than race. As I said, we’ve been having the wrong conversation about marriage.
In my book, I look at two questions about the Marriage Gap that I want to touch on briefly. First, why does marriage make such a difference in children’s lives? And second, how did we fall into the Marriage Gap?
The most commonsense answer to the first question—Why does marriage make such a difference for children?—is what I call the strength in numbers thesis. Married couples have two incomes, two sets of hands and eyes, two brains to problem-solve when Johnny has locked his little brother in the bathroom with the water in the tub running.
But there’s a problem: Children from step families don’t look a whole lot better than those from single-mother households. Those kids are not as likely to be poor, but they have more problems in school, with drugs, with early sexual activity, with going to an elite college, etc. Those kids have suffered through a divorce, but then how do we explain the inconvenient fact that children living with cohabiting parents also enjoy few of the benefits of intact parents?
The strength in numbers theory epitomizes a major reason we’ve been having the wrong conversation about marriage. Americans in particular think of marriage primarily as a relationship between two adults. Two adults decide to make public their love and commitment in a ceremony that these days makes Marie Antoinette look like a piker. The impact of the breakdown of marriage on children—and on the rest of society—proves that it is a great deal more than that. It is what social thinkers like to call a social institution but that I’ve begun to think of as a little like software for the human brain: It gives people megabytes of necessary info about how to live.
Let me explain what I mean. Marriage exists in every known society; it is what social scientists call a human universal. As a human universal, it defines the rights and responsibilities of parenthood. In addition, it has specific cultural meanings arising out of local history, economy, religion, and ideals. American marriage programs people to organize their lives according to a middle-class life script: childhood, adolescence, and early adulthood preparing for work through schooling, at least high school; marriage; and only then children.
The American marriage program also carries with it a set of ideals and beliefs that help promote our national identity: that children need their mothers and fathers and vice versa; that children need a great deal of nurturing; that parents need to devote themselves to their social and emotional and cognitive development—what I call the Mission; that people raise their children in a home which they will work absurd hours in order to try to own.
Western marriage, particularly Anglo-American marriage, has always been tied up with private property and the accumulation of wealth. Historically, to marry, young men had to have a plot of land to set up independent housekeeping; this was very different from other cultures where the young couple joined the clan and moved into the extended family home. In America, nearly 70 percent of households own their home, and the large majority of them are headed by married couples. In this sense, we might think of the Marriage Gap as consisting of an unmarried proletariat and married capitalists. According to a study by an Ohio State economist comparing married couples, singles, and divorced persons, the average net wealth of married couples increases 16 percent a year; after 15 years, their net worth is 93 percent higher than singles or divorced persons.
Let me give you an example of what happens when someone grows up without the program, a number of whom I describe in my book. His name is Ben, a young, 30-something African-American whom I spoke to at America Works, a welfare-to-work program.
Seven years ago, Ben, who had never finished school and had trouble holding down a job, had a casual affair with a Dominican woman. She needed a place to stay, and he decided to help her out and gave her a key, and one thing led to another. She had a child, a boy, and Ben, remembering his mother’s words—“when you make a baby, you raise a baby”—and also remembering his rage toward his own absent father, tried to stick around. But the relationship foundered. The couple broke up. They got together, and she became pregnant again. They broke up. They got back together. She had another child. Now Ben had fathered three children with a woman he had never married and whom he not only didn’t love, but also saw as an inadequate mother.
It should be evident that Ben was no thug. Ben is a very handsome, serious man who clearly had a sense of duty and responsibility. He struck me as bright, though deeply troubled by the situation he had created without meaning to. He had a dim sense of the Mission, though between his lack of money and his tumultuous relationship with his children’s mother, he was unable to see it through very well. He wanted to buy his kids toys—“I never had any toys as a child,” he told me—and take them to Boys Club, but his children’s mother had no interest in any of that.
I don’t think the problem is simply that Ben did not marry this woman, the mother of his children. Ben’s problem started way before he had his first child. He grew up without the program and without the script; and without those things, Ben drifted into an accidental family.
This is the situation for many single parents. When you ask a 24-year-old, low-income, single woman whether she planned to get pregnant, what you’ll frequently hear is “kinda, sorta.” When I asked the men I spoke to where they imagined themselves being in 10 years, they looked at me blankly.
What I’m suggesting is that without a program, people lose a way of organizing their lives, a life script, a means of orienting themselves toward the future, and a way to build wealth. It’s remarkable that only 8 percent of those who follow the script (that is, who graduate high school) are poor; 79 percent of those who do not are poor like Ben. The script is vitally important not just for people of marriageable age but also for children and adolescents. It tells them where they are going and what matters. The pursuit of a (hopefully) permanent partner is an essential project for the young. It forces them to try to know themselves, to consider how they want to live, to plan their careers, to think about how they want to build enough wealth for a comfortable life or, if the urge is there, for penthouses and limousines. It builds self-restraint and self-knowledge.
So what happened to create the Marriage Gap, to cause men like Ben to lose any inkling of a script that might have led them to a more stable life for their children, who might in turn have pulled their way into the middle class? In the 1960s, Americans began a radical, historically unique experiment. Marriage and childbearing were really two separate life phenomena. Marriage was about adult happiness. People started saying, “Don’t stay together for the sake of the kids.” Meanwhile, the question occurred to many: Why do you need to be married when you have children?
Some people conclude from this that Americans started to lose interest in marriage. Not really. Census Bureau numbers have it that 90 percent of American women will marry at some point in their lives, and close to the same percentage of men. In fact, compared to other Westerners, Americans are marriage-nuts. Ask them in surveys, and they say a good marriage and family life are extremely important to them.
No, what our out-of-wedlock birth rate means is not that people don’t care about marriage; it’s that they see marriage as simply a committed adult love relationship and not an arrangement for rearing children. You may want to get married, but that doesn’t mean you want to have children with the guy.
In other words, Americans took one of the most fundamental messages of the marriage program—that children should be born and raised by their two parents—and threw it into the dustbin of history.
Very few people questioned what was happening in the early decades of this revolution as the number of single-parent households began to rise. Those who did, like the late Senator Daniel Moynihan in his 1965 paper “The Negro Family,” whose aftermath I recount in Chapter 3 of Marriage and Caste, learned that they were going to be ridiculed and shunned. Even today, people are uneasy confronting the problem of the separation of marriage and childbearing with any honesty. They are willing to make education a national good, a route to a better life, but not marriage.
My final point is this: This lack of clarity and cultural consensus about the decline of the American marriage program is a dangerous mistake. Think of the past decades of rising divorce and illegitimacy as a kind of natural experiment testing what happens when you unravel the institution of marriage.
The results are now in. Changing the institution—specifically, erasing the bond between marriage and child rearing—leads to a weakening of our country’s ability to carry out its promise: its promise of fairness, equality, opportunity, and prosperity. Instead, we see separate and unequal families as far as the eye can see.
Ms. Hymowitz is a Senior Fellow at the Manhattan Institute and the author of Marriage and Caste in America: Separate and Unequal Families in a Post-Marital Age. This article is an edited version of a talk she delivered at The Heritage Foundation on January 30, 2007.
SOME PAINT A SOMEWHAT PESSIMISTIC and perhaps mildly alarming picture of the American economy. We learn that many Americans have not shared in our nation’s rising prosperity. The income and wage gap between the rich and the poor is growing. We are told we are becoming a more economically divided nation.
My message is somewhat more optimistic and skeptical of the analysis suggesting that vast portions of the American populace are languishing economically. Let me very briefly touch on three points. First, the conventional measures that are typically cited to denote greater inequality are fundamentally flawed and grossly overstate inequality in this nation, and the growth in it over time. Second, even if one accepts the proposition that America has insufficient equality of economic condition, history tells us that public policy efforts to deal with the problem are often ineffective. Third, some policies that conceivably might lower inequality as conventionally measured would, if adopted, have serious adverse consequences to the economy as a whole.
Turning to the first point, looking at conventional statistics on income distribution, three factors lead us to overstate inequality. First, and probably least important, those statistics are traditionally based on money income, excluding a variety of in-kind, noncash payments that primarily benefit lower income persons—Medicaid benefits, food stamps, and housing subsidies are three good examples. Any comparison of income levels or income inequality today with, say what existed in 1960 using published income data will tend to overstate any reported rise in inequality, and understate any estimate of income gains for lower income Americans, since non-cash payments have become relatively more important in the intervening time period.
A second factor is that what we should be truly interested in is the economic well-being of Americans, and a far better measure of that economic well-being is consumption spending. Dollar for dollar, people derive more joy from what they spend than from what they earn. As many elementary economics textbooks point out in the first chapter, the ultimate purpose of economic activity is consumption.
We know that in any given year, consumer spending is far more equally distributed than income. Comparing the income distribution statistics derived from the Current Population Survey with the BLS’s Consumer Expenditure Survey is revealing. For example, the poorest one-fifth year earned only slightly over 7 percent as much income as the richest one-fifth in 2002, but they consumed more than 24 percent as much. Using the most recent data for 2005, we see the richest one-fifth of the population earned 3.47 times as much as the middle quintile, but consumed only 2.31 times as much. Roughly speaking, conventional measures show consumption inequality is at least one-third less than for income inequality.
The third point relating to the overstatement of inequality relates to the remarkable income mobility of the American people. For example, at the request of this Committee, the Treasury Department in the 1990s provided data suggesting that the overwhelming majority of persons in the bottom quintile of the income distribution were in another quintile a decade later, and a large percent even moved up or down the distribution from one year to the next. Researchers at the Urban Institute and other organizations have made similar observations. This phenomenon helps explain the narrowness of the distribution of consumption spending relative to the distribution of income, as observed decades ago by the late Milton Friedman and in a different context by Albert Ando and Franco Modigliani. Failure to consider the income mobility of people contributes to the inadequacies of traditional measures of income distribution and also leads us to create some inequities and inefficiencies when devising tax policies based on singleyear definitions of income.
While we are talking about measurement problems, they are particularly prevalent in our discussions of changes in earnings over time. Go to page 338 of the 2006 Economic Report of the President (www.whitehouse.gov/ cea/pubs.html). We learn that average weekly earnings of workers in private non-agricultural industries in 2005 were over 8 percent less than they were in 1964, the year Lyndon Johnson announced his Great Society initiatives. Yet turn the page, to page 340. Looking at real compensation per hour in the non-farm business sector for the same time period, we learn it has risen 75 percent. Page 338 is consistent with a Marxian or even Malthusian interpretation of the economy—a tendency for wages to fall to near subsistence, and evidence of mass exploitation of the working proletariat by exploitive capitalists. Page 340 is consistent with the view that with economic growth, the earnings of workers have risen sharply, and also consistent with national income accounts data that shows per capita real consumption has increased about two percent annually.
Yet even the data on page 340 suffer from deficiencies. We learn that productivity per hour in the non-farm business sector in 2005 was 2.28 times as great as in 1964, yet compensation rose only 1.75 times, a pretty big difference that is inconsistent with the neoclassical economic theory of factor prices and suggestive that owners of capital are indeed deriving extraordinary profits as a result of paying workers less than what they contribute to output at the margin. This should have resulted in a significant decline in compensation of workers as a percent of national income. Yet the national income data taken from pages 314 and 315 of the same source show a radically different story. Compensation of employees actually rose from 60.75 to 61.51 percent as a percent of the national income. The share of national income accounted for by corporate profits fell slightly in the same time period.
I am making two points here. First, interpretations of economic data can be exceedingly misleading. Second, the analysis of broader measures of economic performance suggests that workers as a group have shared in our national prosperity of the past several generations. The original wage data I cited suffer from two enormous deficiencies. First, they fail to take account of non-wage forms of compensation, particularly health care and retirement benefits. These have soared in magnitude over time. Second, the calculation of changing values in constant dollars is fraught with peril, and the Consumer Price Index used in these calculations very significantly overstates inflation in the eyes of virtually every mainstream economist, liberal, conservative, vegetarian, Presbyterian, what have you. Similarly, analysis of wage changes by wage or income category suffers not only from these problems, but from the aforementioned phenomenon of the rapidly changing economic status of individual members of our opportunity society over time.
You don’t need a Ph.D. in economics to observe that never has a society had a middle class more used to what once were considered goods and services available only to the uber rich. Middle income Americans live in larger homes, buy more gadgets like iPods and cell phones, live longer, are more if not better educated, and take nicer vacations than either their parents did or do and their counterparts in any other major nation. I returned two days ago from a two-week cruise in the Caribbean, traveling less with top business executives or even elite Ivy League professors than with equipment salesmen, butchers, and teachers—ordinary folk. That simply did not happen even 30 years ago.
The Limited Impact of Policy
My second major point relates to public policy dealing with economic inequality. Time does not permit a detailed exegesis of past efforts. But a reminder of some historical experiences is sobering. Policy can come from the tax, spending, or regulatory side. I will ignore regulatory matters in the interest of time, although I would hasten to commend Senator Schumer for recent statements showing his concerns about the abusive use of the tort system as a growth-impeding way of redistributing income. Looking at taxes, attempts to make the system more progressive often have unintended effects. For example, sharp reductions in top marginal tax rates in the 1920s, 1960s, and 1980s, viewed by some as favoring the rich, actually led to sharp increases in the tax burden of the rich relative to the poor. I worked for this Committee during the 97th Congress in 1981 and 1982 in a political environment much like today with divided government, with the Republicans controlling the Executive while Congress was more under Democratic control, yet the two branches managed to work together to fashion a more growth-oriented tax policy with lower marginal tax rates that contributed mightily to the boom that has followed. I hope the 110th Congress is capable of similar accomplishments.
Taxes have behavioral consequences. The CBO greatly underestimated revenues that would arise from the reducing in the top capital gains rate to 15 percent, for example. Falling rates unlocked billions in unrealized gains that have helped fund our rapidly expanding government. Similarly, sharp reductions in the number of estates subject to death taxation as a result of reform in those laws has not led to a sharp decline in revenues from that source, as some had expected. It would be a tragedy to reverse the positive effects of the tax reductions of the past few years that, like the Kennedy tax reductions of the 1960s, have had a positive impact on economic activity.
On the spending side, history again shows disappointing results of many initiatives to help the poor or middle class. As the January 20 issue of The Economist notes, government job training programs have internationally been largely failures. Spending initiatives in the areas of education, medical care, and public assistance have usually brought about disappointing results. Despite spending far more in real terms per student than a generation or two ago, American students do not appear to be learning much more, and the education for lower income students is particularly deficient. A tripling of federal aid to college students since 1994 has been accompanied by a decline, not an increase, in the proportion of students from the lowest quartile of the income distribution attending and graduating from our finest universities, which are increasingly becoming taxpayer-subsidized country clubs for the children of the affluent. While Medicaid has brought some increase in medical care for the poor, it has done so at an enormous cost to society, and the cost pressures of a highly inefficient system are leading companies to cut back on health care benefits for working middle class Americans. As to public assistance, it is far greater today in real per capita or per poor person terms than in 1973, yet the current poverty rate is higher. The welfare reforms of the 1990s were an important achievement, but the overall picture is, at the very least, mixed.
Speaking of public assistance, I have to make one statement that may sound a bit callous or insensitive to some, but it is an important but often neglected truism. Comparing the rich and the poor, it is worth noting that the rich work a lot more. Of those persons in poverty, only a tiny minority work fulltime. We have relatively few working poor in America. And it is worth noting that employment creation is greatest in periods when the government allows the incredible job machine generated by the competitive private sector operating in a market environment to work. The job creation of the 1980s was stimulated by a halt to the growth in government’s share of GDP characterizing earlier decades and by tax reductions that stimulated the spirit of enterprise. The job creation of the 1990s was stimulated by an unprecedented decline in government expenditures as a percent of GDP for eight consecutive years—a reverse crowding-out phenomenon that propelled an enormous outpouring of American creative and entrepreneurial endeavor.
Don’t Sacrifice Growth
Turning to my final point, there is a temptation to do things in the interest of protecting middle- and low- income Americans that might have highly undesirable effects on the economy as a whole. In this regard, the rise in protectionist sentiment in Congress is appalling, particularly as is largely centered in a party which historically has favored free trade, a policy that has brought prosperity to almost all Americans while at the same time has contributed enormously to eliminating global disparities in the distribution of income and wealth. I hope the intelligent wing of the Democratic Party, represented by able persons such as those who preceded me on this panel, will be able to prevent a return to policies reminiscent of that old Democratic bete noire, Herbert Hoover. The Smoot-Hawley Tariff and rising taxes were a factor, along with Hoover’s inane wage policies, responsible for the Great Depression of the 1930s. Let us not repeat that today. I hope the Democratic Party will try to emulate Franklin D. Roosevelt, John F. Kennedy, and Bill Clinton in the area of trade policy, not Herbert Hoover.
At a macro level, I believe the biggest single factor in the modest slowdown in growth rates in this decade relative to the 1980s and 1990s is the sharp increase in government expenditures. From fiscal year 2001 to fiscal year 2006, total federal outlays rose by 42.4 percent, or $790.1 billion. By the way, the overwhelming majority of that was for nondefense or non-national security purposes. This was nearly double the percent growth in GDP. Receipts rose well over 20 percent or roughly equal to the growth in GDP, so the burgeoning deficit reflected a spending binge that resulted in some crowding out of private economic initiatives. Dollar for dollar, the evidence is crystal clear that private spending has more productivity-enhancing effects than public spending because of the discipline that competitive markets impose on market enterprise. The tax cuts largely corrected for the natural tendency for taxes to rise relative to national output. Raising taxes again would reduce the deficit but would have direct unfortunate disincentive effects on human economic behavior and would also reduce the political costs to Congress of incremental spending initiatives, which almost certainly would have severe economic effects. I hope some early indications of spending constraint are maintained in the months and years ahead. While I am not the financial guru that Secretary Rubin is, an analysis that I have conducted with Lowell Gallaway for this Committee in the past suggests that the two best determinants of the growth of wealth as measured in equity prices are the rate of inflation and government spending as a percent of GDP. Rising government spending is associated with falling market values and wealth, with all the adverse consequences that has for pensions. And stable prices are much better than inflation. The Fed has done a pretty good job on the inflationary front, but the Congress and the Executive are guilty of having shown insufficient constraint with respect to federal expenditures.
Dr. Vedder is a professor of economics at Ohio University and a visiting fellow at the American Enterprise Institute. This article is adapted from his testimony to the Joint Economic Committee of the United States Congress, January 31, 2007.
SOME TRANSPARENCY ADVOCATES argue that doctors, hospitals, and insurers must be compelled to fully disclose prices and quality measures. But the evidence suggests that where markets are competitive, transparency is a natural outcome. In normal competitive markets, the role of government with respect to price and quality is mainly the prosecution of fraud. In health care, the greatest barriers to transparency, innovation, and competition are government laws and regulations. Deregulating health care and equalizing the tax treatment of self-insurance and third-party insurance are important steps in the right direction.
Needed Change: Remove State Laws Restricting the Practice of Medicine
The courts have removed many anti-competitive restrictions on medical professionals, such as the prohibition on advertising, but the practices of physicians, physician assistants, nurses, and technicians are still highly regulated. The most widespread limit on health care professionals is the requirement that they must be licensed by each state in which they practice. This means there are 50 state markets for health care, rather than one national market. This creates inefficiencies that increase costs and limit patients’ access to care. For example, after Hurricane Katrina in 2005, thousands of doctors and nurses displaced to Texas were unable to legally treat evacuees until they received limited, emergency licenses from the state of Texas. Conversely, physicians, nurses and military-trained medics could not legally assist victims in Louisiana and Mississippi without special permission.
Insurers face a similar state restriction. Rep. John Shadegg (R-Ariz.) has proposed allowing health insurers licensed in any state to sell policies to the residents of any other state. The creation of a national market for health insurance would increase competition and thereby lower costs. Similarly, if physicians and other medical professionals licensed in any state were allowed to practice in any other state, labor markets for these professions would be more efficient, and patients would have more treatment options.
Needed Change: Remove Laws Inhibiting Price and Quality Disclosure
Congress and the Federal Trade Commission should create a safe harbor that would allow providers to share prices with third parties without fear of violating antitrust laws. Though every gas station posts prices, it is not legal for hospitals and doctors to report prices to third parties that have any conceivable tie to a trade group.
Similarly, medical errors and other quality indicators that are reported to regulatory bodies should be freely available on Web sites and distributed to Web-content providers such as Subimo.com and HealthGrades.com. The opposition of hospitals and physicians to public disclosure of this information could be overcome if there were state and/or federal safe harbor laws preventing the use of self-reported medical errors in lawsuits.
While there is widespread agreement on the need for quality indicators in health care, there is much debate on what criteria to use. Proponents of compelling health care providers to disclose prices have suggested that a federal regulatory agency should be established to define quality, collect the necessary data, and audit health care providers to ensure the information is correct. Creating quality indicators that everyone can agree upon is problematic at best. Fortunately, there is an alternative to government-enforced quality standards. There is no reason that health care consumers should not be able to choose among competing standards or quality indicators, as they do in markets for other goods and services. For instance, there are many comparisons of automobile quality by independent, third-party organizations: J.D. Powers rates automobiles on customer satisfaction and breakdowns per unit of measurement (generally number of miles), Consumer Reports rates reliability, and the Institute for Highway Safety performs crash tests on automobiles.
Needed Change: Remove State Laws Restricting the Corporate Practice of Medicine
The states should also repeal restrictions against the corporate practice of medicine. Ownership is not restricted as much in other industries where very low error rates are required for safety. Take the airline industry. If airlines were prevented from hiring pilots and owning airplanes, the industry would likely be very different. Rather than numerous carriers flying thousands of large airliners across thousands of regularly scheduled routes, the industry would likely be dominated by charter pilots flying small propeller-driven planes.
Corporate ownership of airlines has not reduced safety. In fact, the health care industry is increasingly looking to quality improvement procedures in the airline industry for insight into ways to improve patient safety. For instance, all flight crews receive training designed to break down the hierarchy that impedes communication by empowering all members of the crew to speak up in the event they feel safety is compromised. Many experts think the lack of communication among surgical staff in operating rooms leads to some preventable medical errors.
Corporate ownership also has the advantage of better access to capital markets, economies of scale, and the ability to integrate the expertise of other professionals (such as industrial engineers).
Needed Change: Remove Federal Laws Restricting Collaboration Among Health Care Providers
The federal Stark laws prohibiting self-referral should be modified to allow beneficial arrangements where care is coordinated and provided in a more efficient manner. Currently, a physician practice cannot recommend patients seek care in the most appropriate setting if the referring physician has a financial interest in the arrangement where the patient is being sent. With revised legislation, for instance, a traditional physician practice could offer integrated services, including disease management for chronic conditions, walk-in clinics for minor problems and discounted lab work.
Needed Change: Make Government Lead by Example
In markets where government is the primary third-party payer (Medicare, Medicaid, and the Federal Employees Health Benefits Plan), policymakers can use existing technology to give enrollees access to price and quality information. Some modest steps in the right direction are already underway. President Bush gave this effort a boost by signing an executive order requiring the Departments of Health and Human Services, Defense, and Veterans Affairs, and the Office of Personnel Management to make significant strides toward increasing price transparency and encouraging patients to make more informed choices about their health care by January 1, 2007.
The executive order instructs the agencies to do four things: 1) develop and use interoperable technology to share electronic health information, 2) develop quality and efficiency standards for all doctors and hospitals who work with the agencies, 3) provide pricing information for health care services to all beneficiaries of each agency and 4) nurture relationships with providers who can deliver consumer-driven health care options to agency beneficiaries.
Considering that a quarter of Americans with health insurance are covered by the four agencies affected, President Bush is giving more than 60 million people access to information to make better health care choices. This sets an example for the private sector.
Needed Change: Remove Tax Penalties on Self-Insurance
Traditionally, the tax law has favored third-party insurance over individual self-insurance. Every dollar an employer pays for employee health insurance premiums avoids income and payroll taxes. For a middle-income employee, this generous tax subsidy means government is effectively paying for almost half the cost of health insurance. On the other hand, until recently the government taxed away almost half of every dollar employers put into savings accounts for employees to pay their medical expenses directly. The result was a tax law that lavishly subsidized third-party insurance and severely penalized individual self-insurance. This has encouraged consumers to use third-party bureaucracies to pay every medical bill, even though it often makes more sense for patients to manage discretionary expenses themselves.
If the tax laws made it easier for people to self-insure instead of relying on third-party payers, competition would improve the efficiency of the medical marketplace. Currently, Health Savings Accounts (HSAs) are allowing millions of people to partly self-insure. However, congressional tax-writing committees have made decisions about the design of HSAs that more properly should be determined by the market. For instance, the amount of the HSA deposit and the accompanying health insurance deductible are set by law. Instead, the market should be allowed to answer such questions as: What is the appropriate deductible for which service? Should different amounts be deposited into the accounts of the chronically ill? In finding answers, markets are smarter than any one of us because they benefit from the best thinking of everyone. Further, as medical science and technology advance, the best answer today may not be the best answer tomorrow.
Mr. Herrick is a Senior Fellow and Mr. Goodman is President of the National Center for Policy Analysis. This article is excerpted from their paper “The Market for Medical Care: Why You Don’t Know the Price; Why You Don’t Know about Quality; And What Can Be Done about It,” NCPA Policy Report No. 296, published February 2007 by the National Center for Policy Analysis.
IDEAS ARE POWERFUL, but they’re also perishable. While they can change lives, they need to be defended and passed on to each new generation. The Fund for American Studies champions a core set of principles—freedom, individual responsibility, and free markets—which, we believe, define the essence of America. The Fund is celebrating its 40th anniversary this year, and, true to our mission, we strive to have a profound effect on the lives of our students by passing on the ideas that have made America free and prosperous.
Today, The Fund conducts nine programs, each presenting the principles of freedom in the context of a particular field of study. For instance, one such program studies government institutions, another concentrates on the media, while a third examines the role that nonprofits play in civil society.
Of our nine programs, five take place in Washington, D.C., and four are conducted overseas. We teach our students, who in our U.S. programs are typically juniors or seniors in college, how contemporary issues relate to the perennial questions and ideas of American democracy. We educate them to recognize how each branch of government has a proper and circumscribed role, how the media has a responsibility to report honestly, and how business must be an effective voice for a free economy. Our students study the Constitution’s vital check on the power of government and learn how it and other founding documents still illuminate the issues our nation faces.
We have been successful because each of our programs is unique. Our summer programs offer eight weeks of classes for academic credit, housing, social and cultural outings, and full-time internships at some of Washington’s most important institutions. Our semester-long programs offer the chance for students to come to Washington during the academic year and continue their education while they intern. Our international programs introduce promising foreign students to the ideas and principles that define America.
Once students recognize how the ideas of limited government, personal responsibility, and a free-market economy relate to a given policy question, they can apply these principles again and again throughout their careers and lives. This truly does change lives. It allows students to draw connections to the historical debates that have shaped America, and become better, more reflective citizens.
Of course, it is easy to assert that our work changes lives, but to truly appreciate the difference we can make, concrete examples work best.
The Fund was established in response to the political and social upheaval of the 1960s. As that decade was drawing to a close, there were widespread protests of government policy, and confidence in the American system of government was under assault. This was especially true among the college students of the time. The counterculture and many of the youth movements of the 1960s not only rejected the American tradition but also actively worked to undermine and subvert the ideas and principles on which America was built.
Surveying this political and social landscape, Charles Edison—former governor of New Jersey, Secretary of the Navy, and son of inventor Thomas Alva Edison—recognized that college students needed a balanced perspective on American political and economic institutions. In 1967, Edison’s realization led him to take the first steps in establishing the institution that today is known as The Fund for American Studies.
Edison recruited others who shared his concerns, but as they were discussing how best to reach the young people of that era, Governor Edison died suddenly in 1969. To honor him and carry his mission forward, the Charles Edison Memorial Youth Fund was created by founding members William F. Buckley, Jr., Dr. Walter H. Judd, David R. Jones, and Marvin Liebman. The newly organized institution’s inaugural Institute on Comparative Political and Economic Systems hosted 56 students during the summer of 1970.
The Charles Edison Memorial Youth Fund grew and matured, and in 1987, to honor Edison’s request that his name be used in association with the organization for only 20 years, the organization was renamed The Fund for American Studies. Since then, more than 8,000 students have graduated from The Fund’s various programs.
And while that is the story of The Fund’s institutional beginnings, our real successes come at the personal, individual level. Our accomplishments are best measured by how well we convey to our students the importance and substance of the ideas of liberty. To illustrate this point, consider the career and accomplishments of one of our alumni.
In the summer of 1978, Clint Bolick was an undergraduate student finishing his junior year at Drew University in Madison, New Jersey. That June, he arrived in Washington to attend The Fund’s program, a part of which entailed an internship in the office of then-freshman Senator Orrin Hatch (R-Utah).
“It was my introduction to real politics and government,” Bolick has said, “and it definitely changed my perspective.”
Although, as Bolick explains today, his first brush with the legislative process shocked him, his introduction to real-world government and politics kindled a fighting spirit.
“That summer with The Fund was the first time I really saw, in a concrete way, why we need to fight for these principles,” Bolick has explained. “Without that opportunity, who knows how things would have been different?”
After graduating in 1979, Bolick went on to the Hastings Law School at the University of California at Davis, and from there he returned to Washington to hold positions at the Equal Employment Opportunity Commission and the Department of Justice’s civil rights division.
In 1991, Bolick co-founded the Institute for Justice, serving as litigation director. He defended school choice programs, culminating in the landmark 2002 Supreme Court ruling in Zelman v. Simmons-Harris, upholding the Cleveland school voucher program. Bolick also successfully argued the 2005 Supreme Court case striking down regulatory barriers to direct interstate shipment of wine to consumers.
In 2006, Bolick was the recipient of a Bradley Prize, which recognizes outstanding contributions to the defense of freedom. His most recent nonfiction books are Voucher Wars: Waging the Legal Battle Over School Choice and David’s Hammer: The Case for an Activist Judiciary, which was published this year by the Cato Institute. Rounding out his intellectual interests, Bolick published his first novel, Nicki’s Girl, in 2007.
Bolick’s accomplishments are very distinguished now, but that first summer of 1978 was his introduction to the battle of ideas. The Fund encouraged Bolick to see the connection between the ideas that make freedom possible and the actual policies that can and should give these ideas real muscle.
In all of his jobs and with his writing and advocacy, Bolick has been a flesh-and-blood testament to The Fund’s belief that ideas matter and should guide decisions and lives.
It is impossible to say how Bolick’s life and career—and the lives he has touched—would have been different without The Fund. Thankfully, because of our commitment, he and many thousands of others will have had the opportunity to learn about the principles of freedom and the power of ideas.
Mr. Ream is President of The Fund for American Studies, a position he has held since 1998.
ISN’T FUNDRAISING JUST ONE DEGREE of separation from selling used cars?
Or would that be unfair to used car salesmen?
Come on, now. You can and should be involved in fundraising for your favorite cause. Let’s say you’re already dedicating some portion of your life to advancing the free society through support of various nonprofit institutions. Why wouldn’t you want to leverage your support by helping those institutions in-crease their available resources—so that they can improve their effectiveness and reach?
Let’s first dispel a few common misconceptions about fundraising and try to offer a proper definition of it.
Fundraising should not be about twisting the arms of wealthy individuals (and friends) and convincing them that they have some moral obligation to give. Nor should fundraising be about wealth redistribution and rewarding a sense of entitlement. What fundraising should be is the connection of philanthropically-minded individuals with the very causes they’d like to see advanced. Ideally, at its heart, fundraising is about offering effective nonprofit solutions to societal problems.
In fact, shouldn’t fundraising simply be an extension of the marketplace? In voluntary exchange, both parties to a transaction see themselves as gaining. Isn’t that what fundraising should be, too?
Enough of the soapbox. Let’s say you’re convinced you want to help with fundraising. Here are my Top 10 Steps for Fundraising Success:
1. Before you start to fundraise, spend a good bit of time trying to understand—and ultimately, to articulate—the problem you’re trying to solve. After all, isn’t that your raison d’etre? Frankly, too many nonprofits involve themselves simply with activities they deem to be important. But fundamentally, what is the problem you’re trying to solve? And is it credible, and perhaps timely?
2. What about your proposed solution? OK, so you’re clearly focused on solving an urgent problem, but is your proposed solution credible as well? Would your argument make sense to a prospective donor?
3. One more step: Are you the best solver of that problem? Let’s say you’re all about solving a problem many people see as big, troubling, and imminent. And let’s say the case you make for solving the problem is compelling, smart, and reasonable. But is your solution the best available? Or are you just another player in the game, maybe even late to the game, who won’t be distinguished from all the others out on the field?
4. You’ve made it this far. What next? What’s your plan? Potential donors would like to see your equivalent of a business plan. Detail and transparency are often rewarded. Timelines, and even a basic budget, can be helpful, too. Can a potential supporter see how their contribution will really make a difference?
5. Now draw up a list of potential supporters. Who do you think, particularly among the people you know, would be sympathetic to your pitch? These people should obviously have some capacity to give, but ideally they would seem to be interested in the problem you describe and would share your outlook on solutions. It doesn’t hurt if they also have a reputation for acting philanthropically—you won’t want to waste your time convincing someone to make their first-in-a-lifetime charitable contribution. When you’re done drawing up your list, rank the names in some priority order.
6. With your list in hand, arrange to meet these folks. Try to get a meeting where you can chat with them about the problem at hand. Often two is better than one. Team up with another in going to the meeting—perhaps you and a colleague from your favorite nonprofit.
7. In your meeting, work hard to listen. You’ve likely heard the old expression, “people don’t care what you know as much as they want to know that you care.” Besides, you might learn something from your discussion. At the right time, and once you’ve articulated your problem and solution, ask your potential supporter if he/she would like to join you in your efforts. Maybe you can suggest a specific contribution amount relative to what you think is right for your organization and for your potential supporter. Then—and here’s the tough part—wait quietly for the person to respond.
8. Say thanks! That’s right; let’s say that the individual embraced your proposition. Be sure to ex-press your gratitude- graciously and sincerely. And as you leave the meeting, write a quick thank-you note and drop it in that envelope you had hopefully and expectantly addressed and stamped just before the meeting!
9. You can repeat the process now, going to your next prioritized prospect. But at this juncture, as you relish the modest success you’ve enjoyed, strongly consider how you’ll communicate on a regular basis to your newfound supporter(s) the good results they help you achieve. That will make for an excellent long-term relationship.
10. And finally? Read! Add to your personal knowledge about fundraising and related subjects. Here are my top five:
● Influence: The Psychology of Persuasion, by Robert Cialdini. This professor of psychology from Arizona State offers an extraordinary account of what really affects people’s decision-making.
● Virtually anything by Al Ries and Jack Trout. Their work on branding, positioning, focus, the laws of mar-keting, etc., will really challenge how you describe your problem-solution framework.
● The Mercifully Brief, Real World Guide to Raising $1,000 Gifts by Mail, by Mal Warwick. That title probably sells itself, but it’s important for you to learn how the mail can leverage your now-developing fundraising skills.
● The Tipping Point, by Malcolm Gladwell. New and innovative forms of communication today give us re-markably effective tools for reaching potential supporters quickly.
● The Science of Success: How Market-Based Management Built the World’s Largest Private Company, by Charles Koch. This trailblazing book will change your world forever as you learn the fundamentals of how you can create value for society.
Good luck and happy fundraising. I’m sure you’ll do good work now for some really important causes. Now, go change the world!
Mr. Gentry is Vice President for Strategic Development at the Charles G. Koch Foundation.