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These reports prove aid doesn’t fuel tuition inflation… except they don’t – Neal McCluskey

In News on June 5, 2012 at 10:40 pm

Today we are once again treated to a declaration that there is simply no way the crazy Bennett Hypothesis — the theory that student aid helps fuel college price inflation — is true. This time, the end-all-debate pronouncement comes from David L. Warren, president of the National Association of Independent Colleges and Universities, who cites three apparently definitive reports as proving aid is not “driving up” costs.

Aside from the problem that the argument is really that aid fuels price increases rather than driving them — the aid is the gasoline, the colleges the car drivers — what do the studies offered by Warren really tell us?

First is the 2001 federal report everyone who wants to declare the Bennett Hypothesis dead loves to cite: “Study of College Costs and Prices, 1988-89 to 1997-98,” from the National Center for Educational Statistics. As Warren accurately cites, the report does say:

Regarding the relation between financial aid and tuition, the regression models found no associations between most of the aid packaging variables (federal grants, state grants, and loans) and changes in tuition in either the public or private not-for-profit sectors.

But, then, it also says this:

[T]here are considerable data limitations in these models: for example, the availability of only one year of financial aid data and a lack of comparably recent financial data (especially for private not-for-profit institutions). IPSFA data on loans include all sources of student loans; federal subsidizedand unsubsidized, institutional, and private loans cannot be disaggregated. In addition, the IPSFA aid variables focus on the packaging of various forms of student aid in terms of the percentage of students receiving aid and the average amount received, and therefore cannot be used to explore the possibility of a revenue interaction at the institutional level between federal aid and institutional aid. Due in large part to the accounting standards used by the institutions themselves, information on financial aid collected through the IPEDS system for the available years is incomplete, especially regarding student loan volume, which cannot be isolated from tuition revenue in the IPEDS Finance survey data. Finally, financial data such as instruction expenditures cannot be isolated to undergraduate students, making any comparison with undergraduate tuition inexact.

Essentially, the report contains a regression based on a change in student aid for just one year and can’t adjust for a whole bunch of important things. In other words, it tells us little and in no way closes the door on Bennett.

Next, Dr. Warren cites a February 1998 commission report in which the commission purports not to have found any evidence that student grants effect college prices, and no “conclusive” evidence that loans enable rising prices. Then again, the Commission did no meaningful empirical analysis of the question, and as dissenting member Francis McMurray Norris objected, “issues such as tenure, cost and value of research, duplication of facilities, teaching loads, and relationship of student loan programs and rising costs have not been addressed.” [Italics added]

Grounds for putting the Bennett Hypothesis in a pine box? Hardly.

Finally, Dr. Warren cites a 2011 GAO report that looked only at the effect of an increase in the federal student loan limit for first- and second-year students, and only tracked three years of prices and enrollment. It concluded that enrollment and prices rose at rates generally consistent with recent “prior years.” Of course, looking at the effect of such a narrow change in overall aid over such a short time period without controlling for myriad variables that impact prices tells us basically bupkis.

The fact is that several empirical studies do show student aid enabling schools to raise their prices, and I have listed many of them. It is also the case, as most studies point out, that it is very difficult to definitively isolate the effects of aid when so many factors — from school type to student characteristics – are in play. That’s when basic logic also has to come in: People in colleges are like everyone else, and will be happy to take more money if it’s available. Aid makes it available.

One thing that cannot be supported is insisting, as Mr. Warren does, that we know for certain there is no connection between student aid and rising prices. That is something that truly has been disproven.

via Cato.


Why the GOP can’t afford to ignore Ron Paul and his many fans – Brian Doherty

In News on June 5, 2012 at 8:50 pm

Ron Paul has stopped actively campaigning in forthcoming primary contests, and after Texas everyone agrees that Romney has the nomination effectively locked up. But Ron Paul’s people are still striving to rack up as many delegates as he can at state Republican Party conventions before the Tampa.

He’s continued to do it too—even after his May announcement that many in media spun as “Paul drops out,” the Texas Congressman cleanly won control of his second state delegation at Minnesota’s state convention.

This past weekend in a chaotic and divided state GOP convention in Louisiana, in which two Paul activists were injured by police, it appears likely that he controls the delegation in that state too. (Since the convention literally split in two, the national party will have to eventually decide between two competing delegations, but the Paulite convention had the majority.)

Paul also previously won Maine, and has strong hope of coming out of the state convention later this month in Iowa controlling their delegation as well.

Still, Paul’s campaign admits they know Romney will win the Republican Party’s presidential nomination. This has led many to wonder exactly what Paul’s trying to accomplish at the August GOP convention in Tampa. Prominent speaking slot? Platform influence? Sway over the vice presidential slot?

But what the GOP establishment needs to wonder is: what do his supporters want, and why?

Paul himself will likely not be a political player past 2013, when he leaves the House seat he’s held since 1997. But his supporters skew so young, they’ll be shaping the Party’s future far longer than Romney’s fans will.

Paul can attract over 7,000 students to come hear him speak, a level of enthusiasm no other GOP figure can muster. He’s now got 110,000 signed-up members for his “Youth for Ron Paul” group.

Why are they so passionate about this unlikely political champion? And why is their energy so hard to contain even by Paul’s own campaign, who talk of their desire for more “decorum” on the part of their often rowdy and contentious supporters?

Most politicians sell comfort—that American is the greatest, rich and mighty and right, and what small problems we have can be solved by electing our guy and getting rid of the other guy. Ron Paul wins passionate devotion selling a vision of great discomfort.

He tells us American foreign policy is misguided and understandably earns us enemies. He sees America not on the rise, but in decline because of Federal Reserve-primed booms and busts and a crushing debt burden.

He decries the American government for not protecting our liberties but rather unjustly oppressing its citizens over everything from medical marijuana to raw milk.

Unfortunately for Paul’s fans, the radical solutions the Paul worldview demands—an end to overseas military adventurism, ending government’s ability to manipulate paper currency, severe cuts in spending on all the myriad income-shifting promises Washington makes — don’t register as “practical solutions” to those who helped create the crises those policies have led us to. And that’s both the Democrats and Paul’s own Republican Party.

Even though Paul’s budget plan, with its three-year glide path to a balanced budget with no tax hikes, was found by U.S. Budget Watch, a non-partisan research group, to be the only budget plan offered by GOP candidates this year that would not balloon the national debt, the Republican Party is scared of him. Even though his supporters continue to win control of delegations (Maine, Minnesota, and Louisiana) or state party structures (in Iowa and Nevada), the Party doesn’t want to embrace him.

Because if Ron Paul is right about the dangers of government overextension both at home and abroad, it means the GOP has to actually be serious about this limited government, living-within-our-means stuff that is supposed to be the very marrow of conservatism.

If they have to swallow some sour apples about returning the U.S. military to its original goal of just actually defending the U.S. and make the government respect citizens’ civil liberties, that should be a small price to pay to attract the loyalty, votes and money of a rising generation of activists.

Paul’s people have given money and rallied in amounts and numbers far exceeding such other GOP hopefuls as Newt Gingrich and Rick Santorum. Paul’s fans gave nearly as much money to his campaign as those other two candidates combined.

The Goldwater movement in 1960 was seen as too young, too radical and too outside the mainstream by the GOP establishment of its day.

The religious right during the 1988 Pat Robertson campaign was seen as an overly loud and pushy minority.

But just as those minorities grew and dominated the GOP, the libertarian-leaning energy of the Ron Paul movement is primed to shape the future of the Republican Party. With their unique seriousness about reining in a government drowning in debt, neither the Republican Party nor the country can afford to ignore the concerns of Paul’s devotees.

via Fox News.

Ending the war on George Washington’s favorite crop – Nick Gillespie & Joshua Swain

In News on June 4, 2012 at 1:54 pm

“The main goal [of Hemp History Week] is to try to bring back hemp farming in the United States again,” explains Eric Streenstra, President of the nonprofit advocacy group Vote Hemp.

Once hailed as a “New Billion Dollar Crop” by Poplar Mechanics, hemp farming was effectively shut down in the United States over confusion with its genetic cousin, marijuana. Though hemp carries no psychoactive properties, the 1937 Marihuana Tax Act defined hemp as a narcotic and that wording was subsequently adopted into the Controlled Substances Act of 1970. Current laws allow the importation of industrial hemp from outside the U.S., leading to an ever expanding list of hemp related products, but denies would be hemp-farmers the ability to grow industrial hemp on American soil.

Steenstra sat down with Reason.tv’s Nick Gillespie to discuss the legislative fight to lift the ban on cultivation, hemp’s long history in America, and why hemp lube is just one of the many benefits associated with the plant.

A. Barton Hinkle on hemp.

via Reason.

Voodoo Pharmacology Literalized: The drug that turns people into flesh-eating zombies – Jacob Sullum

In News on May 31, 2012 at 3:40 pm

On Tuesday I noted that news outlets were uncritically regurgitating fact-free speculation that some sort of drug—”bath salts,” possibly, or imitation LSD, or maybe cocaine—made Rudy Eugene eat Ronald Poppo’s face on Miami’s MacArthur Causeway last Saturday. Since then, the coverage has become, if anything, more lurid and credulous, in the manner typical of drug panics, with one outlet after another recycling the same rumors, baseless pronouncements, and horror stories (some of which I have noted here before). One commendable exception: Writing in Time, which historically has not been known for calm, well-informed reporting on drugs (or pretty much anything else that scares people), Reason contributor Maia Szalavitz explains “Why Drugs Are Getting a Bum Rap in the Miami Face-Eating Attack.” Szalavitz notes that the vast majority of “drug-related” violence is in fact prohibition-related violence, resulting from black-market disputes rather than the malign psychoactive effects of prohibited intoxicants. She adds that, given all the millions of people who have used drugs said to cause murder and mayhem, you would expect to see a lot more violence if the allegations were even close to true. She points out that journalists routinely rely on police, who have a strong incentive to exaggerate the dangers posed by illegal substances and whose views are skewed by the sorts of drug users they tend to encounter, for expert advice about the effects of forbidden chemicals. Both cops and reporters, she observes, tend to focus on extreme examples that by definition tell us little or nothing about the behavior of the typical drug user. Whether or not it turns out that Eugene consumed “bath salts” before attacking Poppo (and it bears emphasizing that there are no toxicological results yet), it should (but sadly does not) go without saying that his behavior was highly unusual, if not unique, among people who consume these quasi-legal speed substitutes:

Stimulants of any type rarely lead to violence in people who don’t have a prior history of violent behavior. Typically, drugs enhance or disinhibit pre-existing tendencies, rather than provoking entirely new behavior. And drugs are far from the only reason that a person might strip naked and become violent, as the Miami man did.

Indeed, the best predictor of violent behavior is a previous history of violent behavior, which we now know that the Miami man had. He was apparently the first person ever to be tasered by North Miami Beach police. Why? He had beaten and was threatening to kill his mother.

Also, while overdoses of stimulants do overheat the body, they certainly don’t, as the Miami police representative suggested, “burn organs alive.” Blaming LSD for violent behavior is even further off base. No research has associated LSD or related psychedelic drugs with violence, and higher potency isn’t likely to change that.

Without detracting from the consistently thougtful and level-headed work produced by Szalavitz, who is almost singlehandedly atoning for Time‘s historical hysteria about illegal drugs, I would argue that there is less excuse than ever for the anti-drug alarmism that is still routinely peddled by reputable news organizations. Here are some of the more embarrassing headlines generated by the “Causeway Cannibal” story:

CBS News: “Bath salts, drug alleged ‘face-chewer’ Rudy Eugene may have been on, plague police and doctors

Reuters: “Did Drugs Make Rudy Eugene Chew on a Naked Miami Man’s Face?

U.S. News & World Report: “Miami’s ‘Naked Zombie’ Proves Need to Ban Bath Salts, Experts Say

Toronto Sun: “Miami cannibal may have been high on ‘bath salts‘”

National Post: “Highly addictive drug blamed for cannibal attack in Miami a growing threat in Maritime Canada

The Huffington Post: “Bath Salts: The ‘Cannibal’ From Miami’s Alleged Dangerous Drug Of Choice

In my book Saying Yes: In Defense of Drug Use, I call the persistently popular belief that drugs make people do evil “voodoo pharmacology,” a term I use because it calls to mind zombies animated by magic. Here you have a literalized example: a drug that supposedly turned someone (who may or may not have actually used it) into a flesh-eating zombie. And the press, rather than questioning this outlandish claim, amplifies it. Even if it weren’t easier than ever before to look up research and seek out alternative perspectives, how much sense does it require to be skeptical upon being told that an alarmingly popular drug commonly causes irrational outbursts of violence? How could such a drug ever gain a wide following? This is not rocket science; it is just journalism.

via Reason.

Justin Amash defends Congress’ only Libertarian seat – Garrett Quinn

In News on May 31, 2012 at 1:58 am

Rep. Justin Amash (R-Michigan), who rode to Congress in 2010 on the national wave of outrage over Obamacare and government spending, could face a tough challenge to his seat this November.

Amash scored a commanding win in a five-way Republican primary in 2010, and went on to win easily in the general election. Michigan’s Third Congressional District was heavily Republican and had a history of favoring libertarian Republicans like Amash.

Now the district has been redrawn with more Democrats, and Amash’s principled voting record in the House has alienated some members of his own party. Amash, who is described by many (includingReason.com) as the next Ron Paul, is looking at a potentially tough reelection fight in Michigan.

Democrat Steve Pestka, like Amash, has very deep roots in Michigan’s Third District.

Pestka spent most of his adult life in the public eye, as an assistant district attorney, elected county official, state representative, and most recently as a Michigan Circuit Court judge. During that time he practiced law on the side but eventually stepped down as a judge in 2009 to get more involved with his father’s real estate business. Now, three years later, the socially conservative Democrat is jumping back into the public eye and running for Congress.

Pestka’s campaign excites Michigan Democrats. “Pestka may have started late but he is definitely on people’s radar,” said Todd Cook of Mainstreet Strategies, a Michigan consulting firm.

“A lot of Democrats here in the state definitely see this seat as a potential pickup,” said Joe DiSano, Cook’s partner at Mainstreet.

The most recent fundraising numbers for the candidates in the Third show how Pestka’s run is picking up steam. Though he only entered the race in early March, Pestka raised over $218,000 in his first month. (That figure includes a personal loan to the campaign of $70,000, and substantial giving by a handful of people named Pestka.) Pestka has $195,509 on hand and $78,468 in debt.

Meanwhile, Amash’s war chest is light. In the first quarter of 2012 the freshman congressman raised $139,451. He has $200,551 on hand with $150,000 in campaign debt.

Amash does have the comfort of not facing a primary challenge. Pestka is being challenged by Trevor Thomas, a former local TV news producer and aide to former Michigan Governor Jennifer Granholm. (In order to skew its influence in the presidential primary, the Motor State now holds votes in February and August [pdf], a practice that, counting the November general election, will require voters to turn out to the polls no fewer than thee times this year.)

Thomas entered the race late, too, and raised slightly over $100,000, of which only $2,012 is from Thomas himself. Thomas has attacked Pestka for his positions on abortion and, in particular, a 2001 vote on funding for Planned Parenthood. He has picked up some attention from prominent liberal blogs nationally for his positions but he has some local Republican backers, too.

Former Kent County Republican Party Chairman Bob Eleveld is backing Thomas because of his pro-choice stance on abortion and his dissatisfaction with Amash.

“Amash is not loved by the party. He’s a strong Ron Paul guy, he’s really a libertarian in Republican clothing,” said Eleveld, a member of Thomas’ finance committee and self-described moderate Republican.

When asked whom he would back in a race is between pro-life Amash and pro-life Pestka, Eleveld said he wasn’t sure what he would do.

“Maybe an independent will get in,” he said.

Other Michigan Republicans are, as one would expect, brushing off the Democratic challenges to Amash.

“He might do some things that are untraditional but it is tough to see this really become a race.  If he faced a primary opponent it would be a different story,” said Stu Sandler of Decider Strategies, a Michigan consulting firm.

There were rumblings that Amash would face a challenger in the Republican primary, but none emerged.

“Most Republican primary challenges come from the right, not the center,” said Sandler.

The only polling on the race shows Amash up on Pestka by 11 percent but when those surveyed were presented with more information that gap closed to two percent.

Cook Political Report rates the race as competitive but rates it “Likely Republican” with a partisan voter index of +6 in favor of the GOP.

“Pestka will make him work hard and not take anything for granted but this race isn’t going anywhere. This contest is one step below a foregone conclusion. Still, Amash has not done enough to squash the talk of this race being competitive,” said Jake Davison of Advantage Associates, a Lansing based consulting firm.

The National Republican Congressional Committee said that they were watching the race but were not overly concerned. The bulk of their resources in Michigan are currently being deployed in the Upper Peninsula, helping reelect freshman Congressman Dan Benishek in the First Congressional District.

“It’s definitely on the watch list,” said NRCC deputy communications director Andrea Bozek.

via Reason.

Japan and China to start direct currency trading on Friday

In News on May 31, 2012 at 1:51 am

Japan and China will start direct currency trading this week, Tokyo said Tuesday, the first time Beijing has let a major unit other than the dollar swap with the yuan.

The move, which will scrap the greenback as an intermediary unit, comes as China introduces measures as part of a long-term goal of internationalizing its currency to rival the dollar.

The two-way trade will also be allowed to move in a wider range than the narrow band at which the dollar and yuan change hands, Dow Jones Newswires and the Nikkei business daily reported.

China will set a daily rate based on dealer quotes with trade allowed to move within a 3% band above or below that rate, the reports said, compared with a 1% band fixed to yuan-dollar trading.

The Chinese central bank earlier Tuesday introduced a rate of 7.9480 yuan for every 100 yen, Dow Jones said.

However, there will be no fixed rates in Tokyo trade with the currencies trading freely, according to the same media reports which provided no further details.

The yen does trade freely against other major currencies on global foreign-exchange markets, including the greenback, with the dollar buying 79.50 yen in Asian afternoon trade on Tuesday.

“From June 1, the yen-yuan exchange rate will be constantly indicated in both markets, facilitating full-fledged direct exchange trading,” Finance Minister Jun Azumi told a regular press briefing.

By not using the dollar as an intermediate currency “we can lower transaction costs and reduce settlement risks at financial institutions as well as making both nations’ currencies more useful”, he added.

The announcement comes as China introduces measures as part of a long-term goal of internationalizing the yuan to rival the dollar as the world’s benchmark currency.

Beijing’s tightly managed currency policy has triggered huge trade deficits in the United States, which accuses China of artificially undervaluing the yuan to boost exports, and has been a long-running source of friction between the world’s two largest economies.

On Tuesday, Beijing described yuan-yen trade as an “important step” in “strengthening cooperation between China and Japan in developing financial markets and mutually promoting direct trading between the two currencies based on market principle.”

China overtook Japan to become the world’s second-largest economy in 2010, and the neighbors are forging closer business ties despite frequent diplomatic spats over territorial claims and lingering historical animosities.

China is Japan’s largest trading partner, but about 60% of their mutual trade is denominated in U.S. dollars.

In March, Japan said it had won approval from Beijing to buy Chinese government bonds for the first time—Beijing does not allow investors to freely purchase its debt, requiring official approval instead.

Tokyo said it got the green light to buy Chinese government bond issues worth about 65 billion yuan ($10.25 billion), a relatively small amount that was seen as largely symbolic.

The economic powerhouses have also agreed to promote the use of their currencies in bilateral transactions—such as yuan-denominated foreign direct investment by Japanese companies in China—to reduce foreign exchange risks.

The yen, meanwhile, hit historic highs against the dollar last year, denting exporters whose products become less competitive overseas when the currency strengthens.

Japanese finance officials have vowed to step into foreign-exchange markets again to tame the value of the unit, which is increasingly seen as a safe-haven currency as the euro takes a hit owing to worries about the debt-hit eurozone.

via Japan Today.