Citizens are warmly invited to hear five national experts share research on the myths and truths behind federally funded transportation infrastructure. This is a joint regional/national event, bringing in speakers around the country from the national think tank, the American Dream Coalition.
Come to this free, half-day conference on transportation solutions, their trade-offs, how to effectively address congestion, costs and funding, efficient use of public funds, bus service systems that actually work and how enforcement has been used to alleviate crime issues often associated with transit.
Come and hear about what other communities are doing to solve urban transportation problems and how these solutions can be applied in our region.
|Tiffany Couch, Washington. Forensic Accountant & Financial Investigation, Acuity Group, PLLC||Forensic Accounting Update – How has $152M in Federal and State Tax Dollars been spent so far?|
|Wendell Cox, Illinois. Public Policy Consultant, Principal of Demographia||Improving economic growth and the quality of life in the Portland-Vancouver area|
|Tom Rubin, California. CPA, CMA, CMC, CIA, CGFM, CFM. Consultant for major transit capital projects||How Cost-Effective Are Buses and Light Rail?|
|John Charles, Oregon. President and CEO Cascade Policy Institute||Will Transit-Oriented Development Work in Vancouver?|
|Karen Jaroch, Florida. Licensed Professional Engineer. Co-founder of the Tampa 912 Project||How to Organize Ideas into Action|
|Randal O’Toole, Oregon. Cato Institute Senior Fellow, Founder of American Dream Coalition||What Are the Prospects for Federal Funding of the CRC?|
Please visit http://btgaps2-stevescare.eventbrite.com to register!
Online registration is encouraged, but not mandatory.
As a young environmental activist growing up in north Jersey in the 1960s, I took transit buses all over – into Newark, Elizabeth, and New York City. Later, as a college student in Pittsburgh, I took Greyhound across the state many times to get home.
For environmentalists, it was a badge of honor to abandon our 9 MPG autos and travel on a bus with 35-45 other passengers. The oil embargo was very real. We had odd/even license plate days for gas fill-up in 1973, so it seemed like a form of patriotism to be frugal.
Times have certainly changed. Cars have become more efficient, and chronic urban smog has permanently disappeared due to improved auto technology. That’s the good news. But the bad news is that many transit agencies are no longer content to merely provide a service to those unable or unwilling to drive in a private vehicle.
Portland is the poster child for this problem. In fact, TriMet doesn’t really care about transit service per se; the agency is obsessed with expensive trains that are supposed to recreate the way entire neighborhoods function, through “transit-oriented development.”
TriMet is so contemptuous of bus service that the agency is building massively expensive trains that simply replace cheap buses. And the replacement service is actually worse. The Milwaukie light rail line, now being built by TriMet (even though they have very little of the required funding in hand), is breathtaking in its sheer wastefulness. It will cost $205 million per mile for a train that will average 17 MPH. It will make the daily commute for current Milwaukie bus riders worse by forcing them to transfer to rail at Milwaukie. Rail will never offer express service; but there are already at least four bus routes on McLoughlin that offer a menu of local, limited-stop, and express bus routes.
Worse yet, the train will take 68 businesses and 20 residences. More than 60 mature shade trees on SW Lincoln Street near PSU are being cut down this week.
How can one government agency spend $1.5 billion for a mere 7.3 miles of train service, to provide a level of transit that is demonstrably inferior to bus service being replaced?
The answer is that TriMet is institutionally designed to fail. The agency has a monopoly on service and a monopoly on subsidies. Actual customers only account for about 25% of the agency’s operating revenue and none of the capital funds used for construction. So customers don’t really matter. TriMet does what its management wants, simply because it can.
I was down at Lincoln Street for an hour watching the trees getting cut. It was one of the saddest things I’ve ever seen a governmental agency do. The street is already served by the #17 bus. The train is simply unnecessary. Yet, for the 906-foot segment of Lincoln Street that is being wrecked, we will spend $35.2 million.
If you had $35 million to spend to improve three blocks of an urban street, how would you spend it? Not on light rail. Not if it was your own money. Not if you actually cared about the urban environment.
The Obama presidential bus only cost $1.1 million and rides on regular roads. Couldn’t we have just bought a few of those, run them up and down Lincoln Street, and saved the trees? I’m sure they would offer a much nicer ride than generic light rail cars.
The day the Portland City Council put private bus companies out of business in 1968 was a sad day in local history. Private companies could never get away with destroying a street like this or spending $1.5 billion on a pointless boondoggle.
TriMet is hopelessly corrupt. It’s time to admit that the agency is out of control and has utterly lost sight of its mission. Maybe in 2012 the legislature should consider abolishing this rogue agency, and starting fresh with a market-driven transit concept that focuses on actually serving customers with the best transit at the lowest public cost.
The politics of envy is alive and well. Too many Americans, including President Obama, propose to “tax the rich more,” even though the top one percent of earners already pay 38% of all federal income taxes and most really do pay higher rates than the rest of us. They argue that “obscenely wealthy” people such as Bill Gates and the Walton family somehow violate the American sense of fairness.
According to these misguided people, if only the wealthy paid their “fair share” and gave a bit of their “outrageous fortunes” back, everything would be fine.
Choosing the Walton family and Bill Gates as examples of the “obscenely wealthy,” however, are especially poor choices. Their creations, Walmart and Microsoft respectively, give millions of Americans more convenience, better prices and more productivity than we ever had before. Too many of us assume wealth can only come at the expense of others. In reality, most wealth comes from meeting the needs and wants of others in the marketplace.
Some point to new data that show poverty is growing. But it isn’t growing because some become wealthy. As Robert Sheaffer put it in his book, Resentment Against Achievement, poverty is the default condition of mankind. Nobody creates poverty; it is wealth that must be created. In a free society, wealth is created by helping others. The politics of envy will leave us all worse off. It’s time to grow up, and stop blaming our problems on those who succeed.
Join U-Choose exploring public education. Speakers will present information on the history and degradation of curriculum, sex education, censorship of children in the classroom, and parents’ rights. The impact on youth, adults and the family will be addressed. Solutions provided.
Progressive” Education: How did we get here? How John Dewey’s vision of progressive education was implemented, resulting in the weak “dumbed down” curriculum of today.
Rob Kremer, Host of Kremer and Abrams KXL Radio 101FM, Founder and President of Oregon Education Coalition, Principal Third Century Solutions
“Dumbing Down” of America’s Youth – Is this real? See examples of the watered down teaching in math, science and English that present day students are receiving in our schools compared to a century ago.
Dr. Chana Cox, Senior Lecturer in Humanities, Lewis and Clark College
Sex “Hyper” Education Indoctrination – Human Sexuality is a far cry from the biology of reproduction. Now by law students in Kindergarten through 12 grades will be taught everything from mutual masturbation to homosexual experimentation. Discover why this is important to government educators.
Suzanne Gallagher, Business Owner, Former Candidate for State Representative, Pro-Family Activist
Political Incorrectness and Censorship – What are your rights? Learn about “viewpoint discrimination” including Anti-Christian, and what you can do to defend your right to direct your child’s education.
Herb Grey, Esq.- Alliance Defense Fund Affiliated Attorney
America and our children face a bleak future. Their future depends on acting now!
When: Tuesday, October 18, 6:30pm- 9:00pm
Where: Word and Spirit Church, 6140 NE Stanton Street, Portland 97213, 503-771-0022
Child Care available. RSVP with number and ages to Suzanneuchoose@gmail.com.
$5 donation welcome at door.
If you can help with event publicity within Portland areas, please contact
Cascade Policy Institute is hosting Dr. Tom Palmer, senior fellow at CATO Institute, presenting on his book, The Morality of Capitalism: How Free Markets Create Justice and Prosperity.
Click here for a sneak peak at the book and his presentation here in Portland.
Click here for the PDF flyer of the event.
RSVP to Deanne Kastine at email@example.com or 503-242-0900.
The Wall Street Journal recently called 2011 “The Year of School Choice.” According to the July editorial:
“No fewer than 13 states have enacted school choice legislation in 2011, and 28 states have legislation pending….Louisiana enhanced its state income tax break for private school tuition; Ohio tripled the number of students eligible for school vouchers; and North Carolina passed a law letting parents of students with special needs claim a tax credit for expenses related to private school tuition and other educational services.”
It should be added that here in Oregon, our legislature passed a bill to allow open enrollment among public school districts. Starting in 2012, parents may enroll their children in another district as long as the receiving district is accepting transfers. This arrangement can promote increased enrollment in schools with empty seats while offering additional opportunities to out-of-district children.
A second bill eased enrollment restrictions for online schools. A third allows public universities and colleges to sponsor charter schools. All three bills have been signed into law by Governor John Kitzhaber.
It’s becoming increasingly evident that allowing families more freedom in educating their kids is the way of the future. In a pioneer state, Oregonians should be proud of the ways we are innovating to give students more diverse choices in education.
By Douglas A. Perednia, M.D.
Here’s a question for you. If you quietly take thousands of Oregonians hostage and then release them with great fanfare, does that make you a kidnapper or a hero? The answer, of course, depends on whether anyone remembers you kidnapped them in the first place. This happens to be exactly the scenario posed by the Oregon Health Plan’s newest innovation, the “Coordinated Care Organization,” or CCO.
CCOs are in the news because they now appear to be the state’s only strategy for saving the Oregon Health Plan (OHP). According to a recent article in The Oregonian, they are “poised to transform” health care. The CCO approach is said to “offer a glimpse of the future for the Oregon Health Plan’s 600,000 low-income and disabled people on Medicaid and Medicare.” As described in the article,
“The state budget assumes the transformed health plan will be up and running next summer—quickly enough to save $249 million in Medicaid costs in the second year of the 2011-13 biennium. If it doesn’t, the state will have to find money to fill the hole or cut Medicaid payments, already down 11 percent this year.”
Before we get too carried away with praising the solution, it’s worth recalling just how we got into this situation, who got us here, and exactly what, if anything, is “new” about CCOs.
It’s no secret that Medicaid in Oregon has been underfunded for decades. As documented by The Lund Report, depending on the contract, “…something like 60% or less of a doctor’s overhead is covered…,” and “an additional 19% cut on top of that is going to create problems with access.” Already, “[r]oughly a quarter of all primary care physicians in Oregon, and about 18% overall, refuse to accept additional Medicaid patients mainly due to low reimbursements….”
One predictable result is that large numbers of OHP patients headed to hospital emergency rooms for care. Indeed, the Oregonian article began by profiling one such patient who is now a CCO patient and advisor to the Governor’s CCO program:
“Wracked by diabetes, hypertension, asthma, spinal disease, allergies, depression and other ills, Amy Anderson felt she was near death when she found the Mid-County Health Center in 2007.
“She had lost her job and health care a year earlier and had been getting most of her health care in hospital emergency rooms. But at Mid-County in Southeast Portland, she was assigned her own team of health care providers that she saw at every visit. They got to know her; she grew comfortable with them.
“‘Any time I called, someone was there,’ says Anderson, 56. ‘I started to believe I was going to get good care.’”
That’s great, but how does the CCO do it? And what is a CCO anyway?
In basic terms, CCO is a medical clinic that has enough people, and a big enough budget, to do what any medical clinic would do if it could afford to do so: take care of its patients. Here is the Oregonian’s description:
“Each Mid-County clinic team has a doctor and family nurse practitioner, each with a clinical medical assistant; a registered nurse; a team clerical assistant; and a third clinical medical assistant to track appointments, preventative measures, prescriptions and other information for team patients.
“The team also has access to psychiatric nurse practitioners and social workers at the clinic. Team members work together in the same room and huddle twice a day….
“When a patient like Anderson shows up, the team knows her health history, her medicines she’s taking and what tests she needs. Sometimes the team will call her in for a test. She can call the team directly and often, if needed, get in to see someone on the same day.”
Doctors normally do most or all of those things for their private patients. So why don’t all doctors do this for their Medicaid patients? The answer, of course, is that they can’t. Medicaid doesn’t pay them enough to cover their basic overhead, let alone retain whole teams of social workers and administrative personnel. If it did, many doctors wouldn’t have stopped seeing Medicaid patients in the first place. Moreover, Medicaid doesn’t pay them for many of these activities (such as coordinating with other providers), at all. Adding insult to injury, Medicaid is notorious for its paperwork, administrative rules and reporting requirements. It’s not our health care providers who have failed these patients; it’s the insurance system that the government itself created.
All of which brings us back to the promised OHP transformation. Since the Oregon Health Plan’s own policies created the problem of underinsured patients who receive all of their care in emergency rooms, why should anyone expect that its new Coordinated Care Organizations will be any more successful?
It all comes down to money. CCOs are nothing particularly innovative or revolutionary. They’re just clinics with more resources than the typical clinic that accepts Medicaid patients. If the additional funding isn’t there, they will be held hostage to the same unsustainable business model that has characterized the OHP in the past.
In that event, Oregonians would do well to recall who got us into this mess in the first place.
Douglas A. Perednia, M.D. is a Portland-area physician and the author of Overhauling America’s Healthcare Machine – Stop the Bleeding and Save Trillions (Financial Times Press, 2011). He blogs at The Road to Hellth (www.roadtohellth.com). He is a guest writer for the Cascade Policy Institute, Oregon’s free market public policy research organization.
Americans for Prosperity and the I Spy on Salem Radio Show will be co-hosting the first Basic American Rights Series on Thursday, Sept. 22, from 5:30 to 9:00pm at the Portland Airport Shilo Inn. It will also be broadcast live around the state to: Shilo Inns in Seaside, Springfield, and Klamath Falls; the China Gorge Restaurant in Hood River; and the Salem Public Library.
This first in the series will focus on property rights, which are fundamental to the American Dream, and will draw attention to how our property rights are being eroded—by legislation, regulation, and even through the more extreme elements of environmentalism.
The town-hall style event will feature three very informative property rights experts, who will each address a different problem area and what can be done to prevent the loss of one of our most essential American rights. There will also be Q&A afterward.
Tom DeWeese, a national speaker on property rights and the UN’s Agenda 21, will discuss private property rights, local implementation of Agenda 21, and how cloaking restrictions in “sustainability” impacts our rights.
Karen Budd-Falen, a land-rights attorney from Wyoming, will discuss how the Endangered Species Act has been misused and methods environmental extremists use to fund themselves at taxpayer expense—such as Debt-for-Nature swaps. Finally, Jim Huffman will bring the evening around to Oregon and will speak about our private property rights, why they’re so important, and why our Founding Fathers fought for them.
The cost is $10 to cover expenses. Due to limited seating, guests are encouraged to pre-register by going to americansforprosperity.org/Oregon or ispyonsalem.com. There will be a social hour/mixer from 5:30 to 6:30 and the main event will begin at 6:30. For more information, contact firstname.lastname@example.org.
Last Thursday, President Obama asked Congress once again to extend unemployment benefits, allowing workers to continue receiving benefits for up to almost two years. His request may be at odds with his newly proposed chairman of his Council of Economic Advisers, Alan Krueger.
During Mr. Krueger’s career as a Princeton economics professor, he wrote about the effects of unemployment insurance on the unemployed. He, along with numerous mainstream economists, wrote that unemployment insurance increases the time that workers remain unemployed. More generous benefits lead to longer periods of unemployment. Thus, a bill aimed at helping the unemployed may actually have the opposite effect.
Many economic analyses have estimated that unemployment insurance has significantly increased the unemployment rate. For example, one recent publication from the Federal Reserve Bank of Chicago, conservatively estimated “[t]he extension of unemployment insurance benefits during the recent economic downturn can account for approximately 1 percentage point of the increase in the unemployment rate.”
Adding another 4% to the estimated 2012 deficit, the President’s requested extension would cost around 45 billion dollars. And what about the human cost? Is it right to delay so many workers’ reemployment? Is it right to artificially inflate unemployment? As with so many government programs, good intentions too often lead to bad results. In this case, those results can be measured in fewer jobs and in less personal dignity.
By Nick Sibilla
The Oregon Department of Energy (DOE) has unveiled a bold new plan to create green jobs: investing in human energy. With retrofitted bikes and elliptical machines, people can turn their workouts into renewable energy. Thirty minutes of exercise generate 50 watt hours of human energy, enough to charge a laptop for one whole hour.
Among other sources of green power, Oregon is also a pioneer in human energy. The University of Oregon has spent $22,000 on 20 human energy machines, while in March 2009, Oregon State University had the largest human power plant in the world. Those are some sweaty Beavers.
Inspired by these universities, the DOE will pay all 185,000 unemployed Oregonians to generate human energy. If each jobless Oregonian exercised eight hours a day, five days a week, we could produce 18.5MW[i] of clean power each year. That’s enough electricity to power 2,700 homes! All this is possible, for only $3.3 billion.[ii] Now that’s a bargain.
Since anyone with legs can bike or run, these are the ultimate “green collar” jobs. No skills required. Plus, by investing in human energy, even more jobs will be created: Machines break down—mechanic jobs. Athletes need food and water—concession jobs. Bikers need music to listen to—Steve Jobs!
As you can imagine, all this exercise will be great for our health. In fact, we could eliminate childhood obesity altogether by mandating that kids provide human energy. After all, our children are getting fat and corrupted by violent video games. Our children need to learn a sense of civic duty. What better way to teach them how the government works than by forcing them to do something that goes absolutely nowhere?
More jobs, more clean energy and lower health care costs—it’s a triple win!
Now, I know some free trade capitalists will hate this, but we need to make sure that only Oregonians can have these jobs. We can’t let the unwashed masses from Idaho or Seattle steal our human energy. We need to seal off the border. That’s the only way we can keep our energy local. Plus, think of all the jobs that would be created: construction workers, guards, moat diggers, you name it. Soon, we would have too many jobs—can you say negative unemployment?
But fiscally conservative nattering nabobs of negativity will say it’s insane to pay people to ride bikes to power Oregon. They say clean energy subsidies are completely unnecessary. After a Portland streetcar that costs $50 million per mile and a billion-dollar wind farm, they would have you believe Oregon can’t afford any more gimmicks.
But the DOE’s plan has two sources of funding. The first would be to raise taxes on the rich. Recently, Robert Reich proposed a 70% marginal tax rate. But that’s too low. Instead, that rate should be 100% of revenue. Why? 100% is bigger than 70%. Obviously. Better yet, make the rich give 110%. They can afford it. (And what’s this business calling taxes “marginal?” Too many hard-working, middle-class Americans have to pay taxes. Taxes aren’t marginal: They’re mainstream.)
Second, this plan would sell “human energy certificates” (HEX). Buying HEX would allow people to finance human energy without actually exercising. People who buy HEX receive the benefits of human energy, like sweat, a sexier body and an unflappable sense of moral superiority, all at low, low prices!
We must invest in human energy to save our economy and our planet. After all, people are the ultimate renewable resource.
Nick Sibilla is a research associate at Cascade Policy Institute, Oregon’s premier free market think tank. When he’s not being über-manly, he dabbles in political satire.
[i]100 watt hours per hour X 40 hour workweek = 4,000 watt hours (4 kWh per week)
4,000 X 50 weeks = 200,0000 watt hours per year (200 kWh per year, per person)
200 kWh X 185,000 unemployed Oregonians in May 2011 = 37,000,000 kWh (37,000 MWh)
37,000MWh = convert to MW (divide by the number of hours biked each year [2,000h (40h X 50 weeks)]
37,000MWh/2,000h = 18.5 MW QED!
[ii]$8.50 X 2,000 man-hours per year = $17,000 annual wage X 185,000 unemployed= $3.145 billion
$1100 per machine X 185,000 unemployed = $203.5 million
Total cost = around $3.35 billion
The following is an op-ed posted in the Oregonian. Weigh in on the comments by visiting TriMet’s War on Urban Livability.
To watch a video on this topic, visit Green to Gray: Trimet and SW Lincoln Street
Why does TriMet hate Lincoln Street?
Between First and Fourth Avenues in Southwest Portland, Lincoln is a quiet, tree-lined street that has everything urban planners say they love: high density with a mix of land uses, regular TriMet bus service, more than 65 mature shade trees, and a wonderful north-south pedestrian walkway bisecting the street.
Yet, on or before September 15, TriMet will destroy all of this. The trees will be clear-cut, the street shut down, and several businesses lost, including the popular Candlelight Café. The reason: TriMet is taking the right-of-way for the proposed Milwaukie light rail line.
If this goes forward, it will be one of the worst public decisions in Portland’s history. TriMet will wreck an entire neighborhood simply to replace the #17 bus line with a slow train, at a cost of $205 million per mile. There will be no new service, and a beautiful Portland neighborhood will be ruined.
This demonstrates one of the fatal flaws of light rail: The infrastructure needed is out of scale with quiet, pedestrian-oriented urban streets. Once the street is destroyed and redone as a set of rail tracks with ugly overhead wires and a huge station, the beauty of the neighborhood is permanently lost.
Anyone who thinks differently should visit some of the light rail stations on the 25-year-old Blue line. None of the neighborhoods along East Burnside are better off today due to light rail, and several are markedly worse. The recently redesigned Rockwood MAX Station is a particularly hideous example of TriMet’s aesthetic “enhancement.”
Not only is light rail going to obliterate SW Lincoln Street in Portland, it will actually degrade transit service for Clackamas County riders, who are the ostensible beneficiaries of this fiasco. Currently, there are nine bus lines stopping at the Milwaukie Transit Center, and five of them continue to Portland. Once light rail opens, all of these buses will no longer provide service north of Milwaukie. Bus customers will be forced to transfer at Milwaukie.
Riders hate transfers. Making them switch from bus to train will push some of them back into their cars.
Moreover, light rail will increase travel times for transit riders. A peak-hour trip from downtown Milwaukie to PSU on the #99 McLoughlin Express bus currently averages 17.5 minutes and sometimes makes it in 12 minutes. The forecasted time of travel for light rail is roughly 19 minutes for the same distance. Why are we going to spend $1.5 billion to provide a slower commute?
This is an absurd project, but fortunately there is still a reasonable alternative: Build the new Willamette River bridge, but cancel light rail. Portland needs a new bridge anyway, and by allowing cars and trucks on the bridge in place of light rail, the South Waterfront district will finally have an eastern portal.
It’s not too late to return common sense to transit planning. Governor Kitzhaber appoints the seven TriMet board members, and they have failed him. He should simply override their decision, save the trees on SW Lincoln Street, and chart a new course emphasizing improved bus service in Portland.
We know this can be done. Tom McCall once fired the entire TriMet board. Gov. Kitzhaber should do the same.
John A. Charles, Jr. is president and CEO of Cascade Policy Institute, a nonprofit policy research center based in Portland.
“It is said that adversity introduces us to ourselves,” said President Bush three days after the September 11 terrorist attacks.
“America is a nation full of good fortune, with so much to be grateful for, but we are not spared from suffering. In every generation, the world has produced enemies of human freedom. They have attacked America because we are freedom’s home and defender, and the commitment of our fathers is now the calling of our time.”
Freedom is America’s precious treasure―and never more than a few decisions away from being lost. External acts of war and terrorism can undermine a nation. But as Russian thinker Alexander Solzhenitsyn famously said, “the line separating good and evil passes not through states, nor between classes, nor between political parties either, but right through every human heart, and through all human hearts.”
With economic uncertainty, conflicts abroad, and an emerging political season, it’s heartening to remember that character is the first defense against the loss of freedom. Character is the thing for which each of us bears sole responsibility, while being our own greatest power for good. Character under pressure built America, brought us through tough times, and will keep our country “freedom’s home and defender.”
Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland at Cascade Policy Institute, Oregon’s free market public policy research organization.
Narration text below:
In the 1960’s, SW Lincoln Street, near Portland State University, was part of Portland’s first urban renewal district.
Dilapidated buildings were cleared, new development built, and thousands of shade trees planted.
Today, those trees tower over SW Lincoln Street… but not for long. Sometime on, or before September 15th, TriMet plans to cut down every single tree on the street… to put in light rail.
Most residents of the neighborhood are not happy with the decision.
The street is currently served by TriMet’s #17 bus line. If the goal is more transit, why not just run the #17 more often?
The Rockwood MAXX station was recently refurbished. Does SW Lincoln street really want to trade shade trees for concrete and art like this?
One silver lining of the burst housing bubble has been the increase in the personal savings rate. For many years prior to the recession, analysts furrowed their brows, bemoaning the nation’s poor savings rate, questioning the prudence of Americans. Both personal and business savings increased quickly after the recession hit. When individuals are nervous about the future, they save more; when they feel secure, they spend and invest more.
A logical extension of such reasoning, economists have long found that government safety nets decrease the amount individuals feel they need to save. Precautionary savings is that pool of money or other assets that individuals and businesses accumulate as a buffer against future stresses on income: unemployment, health problems or other unforeseen troubles. Unsurprisingly, unemployment insurance, among other safety nets, causes individuals to accumulate less precautionary savings.
Economists Eric Engen and Jonathan Gruber studied this effect and found that “[unemployment insurance] crowds out up to one-half of private savings for the typical unemployment spell,” decreasing overall asset accumulation.[i] Some may argue that this is not a problem since these workers may need less precautionary savings because of the government safety net. But such a simplistic justification neglects deeper implications.
Assets not only provide financial security, they actually change the way people behave. Asset owners tend to lead more stable lives, think in longer time frames and have more hope for the future.[ii] They are also more likely to be involved in community affairs and to plan for their children’s futures. For example, over a decade of research into the effects of assets indicates that the children of asset owners are more likely to succeed in school and to escape poverty. The effect of asset ownership on education and test scores is more significant than that of income.[iii]
Interestingly, research indicates that this relationship is likely causal, meaning that owning assets likely causes individuals to have greater expectations and those expectations cause them to accumulate more assets.[iv] Extending that logic, government programs like unemployment insurance (UI), which typically cause individuals to save less, probably damage inclinations toward long-term thinking, and consequently individuals’ stability, hope and children’s success. Along that vein, it also damages many individuals’ self-respect and confidence.
Personal savings has larger economic benefits, too. Though during recessions we hear frequently that individuals and businesses are “saving too much,” high savings rates are good in the long term. When people save more money, that creates a “greater supply of loanable funds” which tends to “stimulate capital investments.”[v] Under the current UI system, funds from unemployment taxes are “‘invested’ by the Treasury into the U.S. government debt obligations, which does little – to put it mildly – to help the economy grow.”[vi]
Those who like the perks of unemployment insurance are frequently afraid to experiment with something that they think works fine. Fortunately, Chile has already experimented with an alternative: Unemployment Insurance Savings Accounts. Chile’s system maintains the benefits of traditional UI, while harnessing the power of individual saving.
Chile’s workers and employers must pay a portion of wages into Unemployment Insurance Savings Accounts. Each worker has a full property interest in his account and will receive the remaining balance upon retirement. When a worker becomes unemployed for any reason (even if it is voluntary), he may draw 30-50% of the previous wage for up to 5 months. If a worker is laid off, small account balances are supplemented with a social unemployment insurance, funded with a small portion of the payroll tax.
These accounts offer an improved social safety net that preserves the benefits of personal savings. Workers can see their retirement and rainy day savings grow and with it, their expectations. Such expectations lead to long term planning and better lives.
These unemployment savings accounts also offer other benefits. While our unemployment compensation causes a well-documented lengthy increase in the time it takes the average worker to find a job and in the overall unemployment rate, the personal accounts system motivates workers to return to work faster so that they can have more money upon retirement.[vii] Chile’s system also broadens the pool of eligible recipients, since workers own their personal accounts. That means workers who can’t accept full-time employment (like a working mother or student), and workers who must quit their job for personal or professional reasons and are not covered under our system, would have some limited coverage under Chile’s system.
One recent state-specific study (commissioned by Cascade Policy Institute) by economists Stephane Pallage and Christian Zimmerman (now Assistant Vice President at the Federal Reserve Bank of St. Louis) showed that switching to a system similar to Chile’s unemployment accounts system would benefit 97% of Oregonians.[viii] Even those who are most likely to be unemployed or most likely to have empty asset accounts would benefit from the switch, according to the economic model.
Government safety nets give citizens a false sense of security and encourage short-term thinking. Incorporating private accounts into unemployment insurance not only would improve the system for most workers and decrease unemployment, but could transform the way many Americans think about their future.
[i] Eric M. Engen and Jonathan Gruber, “Unemployment Insurance and Precautionary Saving,” National Bureau of Economic Research Working Paper no. 5252 (Sept. 1995).
[ii] Michael Sherraden, Assets and the Poor (1991).
[iii] Zhan & Sherraden, “Assets, expectations, and children’s educational achievement in single-parent households,” 77 Social Service Review 191-211 (2003).
[iv] William Elliott III, Mesmin Destin and Terri Friedline, “Taking Stock of Ten Years of Research on the Relationship between Assets and Children’s Educational Outcomes: Implications for Theory, Policy and Intervention” (2011), available at http://cfed.org/assets/pdfs/CSD_Taking_Stock_of_Ten_Years_of_Research.pdf.
[v] David Honigman and George C. Leef, “It’s Time to Privatize Unemployment Insurance,” 45 The Freeman: Ideas on Liberty, (Sept. 1995).
[vii] Gonzalo Reyes Hartley, Jan C. van Ours and Milan Vodopivec, Incentive Effects of Unemployment Insurance Savings Accounts: Evidence From Chile, The Institute for the Study of Labor, Discussion Paper No. 4681 (Jan. 2010).
[viii] Stéphane Pallage, Ph.D and Christian Zimmermann, Unemployment Accounts: A Better Way of Protecting the Unemployed (Aug. 2010), available at https://cascadepolicy.org/wp-content/uploads/2010/08/UI_Reform_ Report.pdf.