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The problem with short-term economic thinking - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 01/04/2018 - 16:17

My latest Bloomberg View column is on short-term thinking. By downplaying a longer view in economic policy debates, we miss a lot of important considerations.

In the U.S., for example, many economic-policy arguments are about the tradeoff between creating a more equal society and increasing the rate of economic growth. The longer your horizon, the more growth wins the contest. Increasing the economy’s long-term growth rate by even a few tenths of a percentage point does dramatic things for our grandchildren’s living standards.

Even on issues like inequality:

A focus on the short term leads to inadequate thinking about how to attack income inequality. Higher taxes on the rich and more income redistribution would reduce inequality tomorrow, but the best solution — building skills and other productive attributes among workers that the labor market will reward with higher wages — operates on a much longer time horizon.

In addition, I discuss how a longer view makes me more optimistic going into 2018 about American institutions, and more pessimistic about our ability to recover a coherent national narrative. Read the column here. Your comments below are very welcome.

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Short-term thinking distorts economic policy - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 01/04/2018 - 14:49
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One of the most important things to happen in 2017 was the continued reduction in global poverty. Indeed, 2017 probably saw the lowest poverty rate on record. Over the past five decades, global poverty has plunged. This remarkable achievement has been driven by the spread of the free enterprise system and growing economies in the developing world.

It’s useful and bracing to think about 50-year economic trends like that one. Policy debates tend instead to focus intensely on what’s likely to happen next month or next year. That’s natural enough, but it also makes it too easy to miss important things that really matter.

In the U.S., for example, many economic-policy arguments are about the tradeoff between creating a more equal society and increasing the rate of economic growth. The longer your horizon, the more growth wins the contest. Increasing the economy’s long-term growth rate by even a few tenths of a percentage point does dramatic things for our grandchildren’s living standards.

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But a focus on the short term leads to inadequate thinking about how to attack income inequality. Higher taxes on the rich and more income redistribution would reduce inequality tomorrow, but the best solution — building skills and other productive attributes among workers that the labor market will reward with higher wages — operates on a much longer time horizon.

Give the College Board credit for acting on conservatives’ concerns - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 01/04/2018 - 14:00

The College Board, which has been in the process of updating its ubiquitous, influential Advanced Placement courses, recently released an extensive revamp of its AP European History framework. Last June, the College Board’s first attempt drew a blistering, 12,200-word critique from the National Association of Scholars (NAS), which charged it with “warping and gutting the history of Europe to make it serve today’s progressive agenda.” In response, the College Board released a revised version in late 2017. Has the College Board successfully addressed the problems?

The NAS sure doesn’t think so. In “Churchill In, Columbus Still Out,” David Randall, writing for the NAS, argues that, while modestly improved, the Fall 2017 AP European History framework still offers “an ideologically biased version of European history straightjacketed by progressive dogma.” In its initial critique, NAS compellingly argued that the 2015 AP European History revision “distorted or ignored” free markets, economic liberty, religion, and the role of Great Britain while downplaying “the evils of Communism and the brutal destructiveness of Soviet rule.” The College Board’s 2017 revisions sought to address the concerns. Indeed, Randall notes that the revisions incorporated a “great deal of our critique.” Yet he nonetheless concludes that they were generally “superficial” and failed to correct for ideological bias. Randall dismally concludes, on behalf of NAS, that the College Board is “not capable of reforming itself to provide a minimum level of quality” in AP European History.

Those who follow such things will remember a similar contretemps playing out a few years ago over the College Board’s AP U.S. History framework. In 2014, the revised U.S. History standards drew well-deserved criticism for sketching a politicized, ideologically skewed picture of American history. NAS played a crucial role in flagging the problems and pushing the College Board to act. To its credit, the College Board took the concerns seriously, engaging with critics and initiating a public review period of the standards — culminating in a meaningful and, ultimately, “flat-out good” rewrite.

Credit: Twenty20

Once again, we think that the NAS’s initial critique was appropriate and timely, and applaud the NAS’s invaluable role in calling out problematic history curricula. But we find the most recent criticism to be off-base and even counterproductive. To our eyes, the College Board engaged in substantial, appropriate revisions in response to the concerns that were raised.

Take, for example, the revisions made to the framework’s treatment of the Soviet Union. Previously, NAS blasted the 2015 framework for soft-pedaling “the revolutionary violence of the Socialist tradition” and “the evils of Communism, the brutal destructiveness of Soviet rule, and the aggressiveness of Soviet foreign policy.” Randall acknowledges that the 2017 framework has “modified its treatment of the Soviet Union to give a more accurate depiction of its horrific character.” He notes that “the standards now describe the ‘communist Soviet Union’ as ‘authoritarian’ and the Ukrainian famine of the 1930s as ‘devastating,’ and they acknowledge that Stalin’s ‘centralized program of rapid economic modernization’ had ‘severe repercussions for the population.’” It’s hard to dismiss these changes as superficial.

Similarly, the 2015 framework was knocked by NAS for excluding the “formative role” and “enduring particularities” of nations, their religions, and culture. The 2017 framework now adds a major theme on “National and European Identity,” which, notes Randall, places “nations and national cultures in the center of the [European History] examination.” Similarly, Randal concedes that the College Board “has removed a good portion of the tendentious language criticizing free markets and slanting historical analysis in favor of government intervention.”

Such improvements mean that NAS’s fresh criticisms of the revised framework frequently read like quibbles. For instance, while Randall concedes the “many small improvements” made to the treatment of free markets — with descriptions of capitalism and socialism “extensively rewritten” to be more impartial — he takes issue with the framework’s frequent use of capitalism (a “Marxizing abstraction”) rather than free markets. While we too like the phrase “free markets” — we work at the American Enterprise Institute, after all — capitalism is an economic system composed of free markets, and the two are routinely used interchangeably (and nonprejudicially).

When it comes to the Soviet Union, NAS slams the College Board for “retain[ing] the Communist euphemism ‘liquidation of the kulaks’ to refer to the indiscriminate mass murder and exile of peasants.” NAS says that describing “the landowning peasantry” effectively “endorses the Communist propaganda” that the Soviets “focused their slaughter on the richer peasants.” This strikes us as a bizarre complaint. For one, as a historical term, “kulaks” directly refers to landowning Russian peasants, and providing a clarification of a 20th-century Cyrillic class description doesn’t amount to an endorsement anything. For another, “liquidation of the kulaks” is a commonly accepted reference to Stalin’s policy of expropriation and mass murder. History is littered with euphemisms that have taken on an explicit meaning (e.g., Boston Tea Party), and using them strikes us as neither biased nor problematic.

None of this is to suggest that the new framework is without problems. The standards clearly do not “endorse” Soviet Communism, but the framing of concepts can feel a bit generous. For example, the framework appropriately notes that, in the Soviet bloc, “individual choices were directed by the state” but also that “basic needs were provided within an authoritarian context.” Any student of Eastern-bloc famine and poverty would likely challenge that bland assertion regarding the provision of basic needs. Similarly, there is an asymmetry in how free markets and socialism are discussed. While discussion of capitalism focuses on things like “consumerism” and “wealth distribution,” the discussion of socialism and Communism is repeatedly laced with reference to their putative commitment to “equality.”

But it strikes us that such complaints tend to be nitpicky and deal more with tenor than with any obvious problems. So, while the new framework could be improved, NAS’s critique of the revised framework is unduly harsh — and seems to presume that the College Board is incorrigible and operating in bad faith. That seems conducive to neither healthy debate nor good history. Indeed, it seems to us that the College Board has shown a willingness and ability to revisit its work to help ensure that American students learn history in a way that is challenging, fair-minded, and removed from today’s cultural agendas.

Now, a pressing concerns is why, each time the College Board’s takes on a history framework, the first cut is so consistently biased. The problem is one part academic bias, one part the College Board’s failing to engage with conservative scholars, and one part organizational blind spots. Addressing this requires that the College Board show that it is willing to constructively engage, and we believe it has, but it also means that conservatives have to be prepared to respond in kind. After all, if establishment entities are going to get blasted even when they engage in good faith, it’s hard to blame them for lapsing into the kind of smug, insular leftism that is all too common on campus and among historians today.

Given how few in academe, the discipline of history, or curricular design are inclined to solicit feedback from conservatives or act on it, it’s a mistake to casually reject a welcoming posture and good-faith revisions. As much as we respect the NAS’s vital work, we think here is a case where they look like an outfit that just won’t accept victory.

Fact-checking Mignon Clyburn’s net neutrality statement - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 01/04/2018 - 11:00

Democratic Federal Communications Commission (FCC) Commissioner Mignon Clyburn made a number of bold claims in a recent statement on net neutrality, but she made one point we can all agree with: On net neutrality, “The FCC does not have the final word. ‘We the People’ do.” Indeed, it would be a different world had the FCC respected the wishes of the people having spoken through Congress in 1996 that the internet should be free and unfettered from federal and state regulation. This blog reviews some specious claims made in the commissioner’s statement. For a review of the legal road ahead for net neutrality, see the recent blog from Dan Lyons.


To police broadband providers, is one authority better than four?

Clyburn claims that because of the Restoring Internet Freedom Order, broadband providers will be allowed to block and degrade lawful content, favor content of some companies over others, interfere with consumer and content provider communications, and engage in unreasonably interconnection practices. Before the 2015 FCC rules, harmful blocking and degrading of lawful content was always punishable under competition law, as was the harmful favoring of some content over others and harmful interconnection practices. Fortunately, the laws that deter anticompetitive behavior by broadband providers now apply once again.

For a commissioner who claims to support consumer protection, it is odd that she prefers a monopoly of enforcement by a single federal agency rather than the partnership of the FCC with the Federal Trade Commission (FTC), Department of Justice, and State Attorneys General, which was the status quo before 2015. Indeed the 2015 FCC rules not only deprived Americans of their online privacy protections, but also removed the ability of the FTC to police broadband providers — and the FTC had made some 500 prior cases on privacy and data security against broadband providers. Moreover, it eliminated the ability of America’s foremost authority for consumer protection to recover funds for consumers, a power that the FCC does not have.

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Now that the 2015 rules have been repealed, more cops are on the beat, not just the FCC. But the notion that a special set of rules are needed for “neutrality” of broadband providers alone, while the rest of internet actors are held to competition standards, doesn’t stand up to scrutiny. As the internet experienced unprecedented growth and success through 2015, broadband providers were governed by competition law, not FCC rules. It can’t be that there’s some systematic problem with broadband providers blocking content while at the same time Americans enjoy more content per capita than any other nation on earth, a number that has been increasing annually.

Does increasing government authority improve consumer privacy?

Clyburn also claims that broadband providers are now allowed to interfere in the communications of consumers and content providers. This was not allowed before 2015 and is not allowed today. It is true, however, that the 2015 rules gave the FCC, an agency whose leaders are appointed by the same president who selects security and intelligence officials, untethered power to regulate the internet. Americans should be concerned about government interference in their communications, particularly after numerous federal surveillance scandals, and some measure of skepticism should be applied to any federal agency saying it needs to increase its oversight of networks for the protection of people. In any case, the 2015 FCC rules were not a viable means of consumer protection. Broadband providers could legally evade them simply by offering curated service, but the power of the FCC to tax and surveil networks are important elements of Title II.

Politics is the answer to all questions

Clyburn waxes a tale of doom because the rules she favored were reversed. But she fails to acknowledge the harms suffered for the two years under the 2015 rules, notably an increase in the digital divide because plans for networks were delayed or canceled in marginal locations with vulnerable people, the constituencies Clyburn claims to represent. Clyburn does not want people to suffer, so why she willingly supports a harmful policy can only be explained by politics. For Democrats, internet regulation through Title II has become an article of faith, regardless of the lack of empirical evidence to support the policy. The party platform promises to “oppose any effort by Republicans to roll back the historic net neutrality rules that the Federal Communications Commission enacted.” Essentially what this says is that the party supports the brute force of 3-2 politics over the compromise of bipartisan legislation.

Clyburn suggests that there is one definition of net neutrality and one means to secure it, Title II. This isn’t true: There is no agreed-upon definition of net neutrality, nor is it codified in US law. The countries with net neutrality rules overwhelmingly created them by making specific net neutrality provisions in legislation. Strangely, Clyburn supports an instrument that no other country uses, that of administrative fiat, a rather undemocratic way to make rules.

The only way to get lasting net neutrality is to enshrine it in law through the people’s representatives in Congress. This is what some 50 nations have done. In fact, Congressional Republicans have been attempting to make a net neutrality law for some four years, a bill with provisions that exceed those of countries that have had rules for almost a decade. But it turns out that when it comes to net neutrality, Democrats do not seem as interested in “We the People” as their statements claim.

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The future of retirement is brighter than ever - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 01/03/2018 - 22:49

Over the holidays the Washington Post interrupted the good cheer to bring us “a preview of a U.S. without pensions.” Peter Whoriskey tells the story of 998 people who lost pension benefits when McDonnell Douglas closed a plant in Tulsa, Oklahoma, in 1994. It’s a story that features bankruptcies, lost homes and long-deferred retirements. It’s compelling, it’s sad, and it’s not a useful guide to the future of American retirement.

It is part of a journalistic genre that laments the decline of the traditional defined-benefit pension and the rise of defined-contribution plans such as 401(k)s. If you want to write an article in that genre, there are four rules that appear to be obligatory.

First, gloss over how rare defined-benefit pensions really were. Even at the mid-1970s peak of defined-benefit plans, fewer than 40 percent of private-sector workers had them. Today, decades after the shift to 401(k)s began, 61 percent of private-sector workers are participating in a retirement plan. The percentage of all workers vested in any kind of retirement plan has risen from 24 in 1979 to 43 in 2012.

Second, ignore the advantages that 401(k)s have over the old defined-benefit plans — even when the risks and flaws of the latter are staring you in the face. Referring to the McDonnell Douglas workers, Whoriskey writes, “Because their pension benefits accrued most quickly near retirement age, the pensions they receive are only a small fraction of what they would have had they worked until full eligibility.”

In defined-benefit plans, benefits typically depend both on years worked and final salary. If you lose your job in your 40s, that structure works against you. The connection the Post fails to make is that these workers might well have been better off if the shift toward 401(k)s had happened decades earlier.

Third, rely on misleading numbers that suggest we are in a “retirement crisis.” Almost half of families have no defined-contribution retirement accounts, the Post says. That’s true, but we’re still making the transition away from defined-benefit accounts. Count all retirement plans, defined-benefit and defined-contribution, and nearly three-quarters of near-retirees have them.

Fourth, never look at data on how retirees are doing overall and how their condition has changed over time, no matter how relevant this information would seem to be to your overall story. The median senior household of 2013 had an income one-third higher than the median senior household of 1989, even after adjusting for inflation.

Breaking these rules shouldn’t lead you to conclude that our retirement system is perfect. Some people ought to be saving more, and some policies need to be changed.

Too many workers, particularly low-income workers, do not have access to 401(k) plans; it might make sense to let them save money in the Thrift Savings Program for federal employees, as Senator Marco Rubio has proposed. Social Security should be reformed so that it does less to suppress saving and more to protect the elderly from poverty. A guaranteed minimum benefit above the poverty level could be more than paid for by reducing the growth of benefits for high-earners, and lower payroll taxes on older employees can encourage longer working lives.

These are changes that would build on, rather than attempt to reverse, the last few decades of developments in the American retirement system. Those developments, especially the rise of the 401(k), have largely been for the better. Thanks to them, the future of retirement is not going to look like the old age of those McDonnell Douglas workers.

Is premarital sex wicked? Changing attitudes about morality - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 01/03/2018 - 19:48

It is hard to imagine a pollster asking a question like this today, but in 1939, Elmo Roper did just that. The pollster asked whether sexual relations for young people before marriage were all right, unfortunate, or wicked. Interviews were done face-to-face then, so women interviewed women and men interviewed men. Only 10 percent of women said this was all right for young men, while 35 percent said it was unfortunate, and 47 percent wicked. Eleven percent of men said it was all right for young girls, 52 percent unfortunate, and 28 percent wicked. Today, the National Opinion Research Center asks about sexual relations before marriage for people in their early teens, say 14 to 16 years old. In 2016, 77 percent said they were always or almost always wrong; in 1986, 85 percent gave that response. Women remain slightly more likely than men to take that view, 80 percent compared to 75 percent in 2016. When asked about premarital sexual relations more generally, 26 percent of adults in 2016 described them as always or almost always wrong, down from 45 percent in 1972.

In the January edition of AEI’s Political Report, we examined Americans’ views on the country’s moral fabric. Americans have been persistently anxious about the state of moral values for a long time. Virtually every question asked over the past 80 years has found that people thought they were getting worse. In a 1938 Roper poll, 42 percent said the morals of young unmarried people were worse than ten years ago, while 37 percent said they were the same and only 13 percent said they were better. In 1968 and again in 1986, large majorities said life was getting worse in terms of morals. And in a 2017 Investors’ Business Daily poll, 74 percent said they were not very or not at all satisfied with the direction the country was going in terms of morals and ethics. This is a rare area of agreement among social liberals and social conservatives. In Gallup’s data, large majorities of both say the state of moral values is getting worse. When Gallup asked people in a May 2012 survey to describe what they viewed as the most important problem with the state of moral values, the most frequently named problem was lack of consideration of others, compassion, caring, tolerance, and respect (18 percent gave responses in that category). Ten percent said lack of family structure, divorce, and kids’ upbringing; and 10 percent lack of faith and religion.

Although we worry, we are more reluctant than in the past to want the government involved. Fifty-three percent in a 1993 Gallup poll wanted government to promote traditional values in our society. Today only 45 percent do, while 51 percent say government should not favor any particular set of values. In an NBC News/Wall Street Journal question asked in 1999, 60 percent said promoting greater respect for traditional social and moral issues is the more important goal while 29 percent said encouraging greater tolerance of people with different lifestyle and backgrounds is. Today, those responses are much closer, 50 percent and 44 percent, respectively. A question asked by the Public Religion Research Institute underscores today’s emphasis on broader acceptance of different standards. Seventy-seven percent in a 2013 survey agreed that we should be more tolerant of people who choose to live according to their own moral standards, even if they are very different from our own.

Looking at specific behaviors, Gallup finds some significant movement since the turn of this century in what people view as morally acceptable. Support for gay and lesbian relations in this poll (like many others) increased, moving from 40 percent who said homosexual behavior was acceptable in 2001 to 63 percent in 2017. So, too, did acceptance of having a baby outside of marriage, which moved from 45 percent in 2002 to 62 percent in 2017. The percentage who see divorce as morally acceptable rose from 59 percent in 2001 to 73 percent in 2017. Views on doctor-assisted suicide also shifted. Forty-nine percent thought it was morally acceptable in 2001; in the latest poll, a solid majority did (57 percent).

There are other areas that show some movement, but most people still say they are not morally acceptable. In 2003, 7 percent said polygamy was acceptable; 17 percent did in the latest poll. The acceptability of cloning humans doubled, from 7 percent in 2001 to 14 percent in 2017. Thirteen percent in 2001 and 18 percent in 2017 said suicide was morally acceptable. There are many areas in this extensive battery where views have not changed. One of these is a persistent hot button in our politics, abortion. Forty-two percent in 2001, and 43 percent in 2017 said it was morally acceptable.

The polls provide a unique window into our anxieties and our convictions. In this area, as in so many others, our views are complicated. Americans continue to take a negative view of the state of moral values in the country, even as their views on what behaviors are morally acceptable have changed. People with different ideologies are in agreement about the poor state of moral values even though they disagree about the morality of specific behaviors. After 80 years of consistently negative assessments, it is not clear what changes (if any) might improve Americans’ dim overall views of their country’s moral values.

Warren Buffett wins $1M bet made a decade ago that the S&P 500 stock index would outperform hedge funds, and it wasn’t even close - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 01/03/2018 - 17:53

In 2007, Warren Buffett challenged finance professionals in the hedge fund industry to accept a bet that Buffett described in his 2016 letter to shareholders of Berkshire-Hathaway (see p. 21-21):

In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund.

Subsequently, I publicly offered to wager $500,000 that no investment pro could select a set of at least five hedge funds – wildly-popular and high-fee investing vehicles – that would over an extended period match the performance of an unmanaged S&P-500 index fund charging only token fees. I suggested a ten-year bet and named a low-cost Vanguard S&P fund as my contender. I then sat back and waited expectantly for a parade of fund managers – who could include their own fund as one of the five – to come forth and defend their occupation. After all, these managers urged others to bet billions on their abilities. Why should they fear putting a little of their own money on the line?

Specifically, Buffett offered to bet that over a ten-year period from January 1, 2008, to December 31, 2017, the S&P 500 index would outperform a portfolio of hedge funds when performance is measured on a basis net of fees, costs, and all expenses. Hedge fund manager Ted Seides of Protégé Partners accepted Buffett’s bet and he identified five hedge funds that the predicted would out-perform the S&P 500 index over ten years.

As I reported last September on CD, Buffett’s now-famous bet was actually settled early and ahead of schedule, because the outcome was so one-sided in favor of the S&P 500 index over hedge funds:

The Oracle of Omaha once again has proven that Wall Street’s pricey investments are often a lousy deal. Warren Buffett made a $1 million bet at end of 2007 with hedge fund manager Ted Seides of Protégé Partners. Buffett wagered that a low-cost S&P 500 index fund would perform better than a group of Protégé’s hedge funds. Buffett’s index investment bet is so far ahead that Seides concedes the match, although it doesn’t officially end until Dec. 31.

The problem for Seides is his five funds through the middle of this year have been only able to gain 2.2% a year since 2008, compared with more than 7% a year for the S&P 500 — a huge difference. That means Seides’ $1 million hedge fund investments have only earned $220,000 [through 2016] in the same period that Buffett’s low-fee investment gained $854,000.

“For all intents and purposes, the game is over. I lost,” Seides wrote. The $1 million will go to a Buffett charity, Girls Inc. of Omaha. In conceding defeat, Seides said the high investor fees charged by hedge funds was a critical factor. Hedge funds tend to be a good deal for the people who run the funds, who pass on big bills to the investors.

“Is running a hedge fund profitable? Yes. Hedge fund managers typically demand management fees of 2 percent of assets under management,” according to Capital Management Services Group (CMSG), which tracks the hedge fund industry. “Performance fees for managers can be 20 percent to 50 percent of trading profits,” CMSG adds. By contrast, the costs of an average index fund are minimal. A fund that tracks the S&P 500 fund might have an expense ratio of as little as 0.02%.

Now that the ten-year betting period is officially over (December 31, 2017), Yahoo Finance reported yesterday that “Warren Buffett has won his $1 million bet against the hedge fund industry“:

With 2017 over, Warren Buffett has sealed his victory over hedge funds in a bet he made a decade ago. The Berkshire Hathaway chairman in 2007 bet $1 million that the S&P 500 would outperform a selection of hedge funds over 10 years.

As of Friday, his S&P 500 index fund had compounded a 7.1% annual gain over that period. The basket of funds selected by Protégé Partners, the managers with whom he made the bet, had gained 2.1%, according to The Wall Street Journal. Buffett agreed to give the prize money to Girls Inc. of Omaha, Nebraska, a nonprofit he has previously supported.

Buffett has long taken issue with hedge funds‘ promise of outperforming the market and their high fees that take away from the returns their clients earn. He has turned out to be right on both fronts. Actively managed funds have seen outflows while passive funds have gained since the financial crisis. Meanwhile, an abundance of exchange-traded funds has made it cheaper and easier for investors to buy into just about any group of stocks.

MP: The chart above shows the annual returns on the S&P 500 index and the average annual returns on a comprehensive index of thousands of hedge funds maintained by Barclay over the period of Buffett’s bet: From January 2008 through December of 2017. A $100,000 investment at the beginning of 2008 would have more than doubled to about $225,586 at the end of last year, compared to only about $148,000 invested in the average hedge fund. The average annual return for the S&P 500 index over that period was nearly 8.5%, or more than double the average annual return on the Barclay Hedge Fund index since January 2008 of 4%. And except for 2008, the S&P 500 index outperformed the Hedge Fund index in every other year: 2009 (26.4% vs. 23.7%), 2010 (15% vs. 11%), 2011 (2% vs. -5%), 2012 (16% vs. 8.25%), 2013 (33% vs. 11%), 2014 (13.7% vs. 2.9%), 2015 (1.38% vs. 0%), 2016 (12% vs. 6%), and 2017 (21.8% vs. 10.8%). Not. Even. Close.

At least over the most recent ten-year period, Buffett’s investment advice (also from the 2016 letter to shareholders) has  convincingly prevailed (emphasis added):

A lot of very smart people set out to do better than average in securities markets. Call them active investors. Their opposites, passive investors, will by definition do about average. In aggregate their positions will more or less approximate those of an index fund. Therefore, the balance of the universe—the active investors—must do about average as well. However, these investors will incur far greater costs. So, on balance, their aggregate results after these costs will be worse than those of the passive investors.

Costs skyrocket when large annual fees, large performance fees, and active trading costs are all added to the active investor’s equation. Funds of hedge funds accentuate this cost problem because their fees are superimposed on the large fees charged by the hedge funds in which the funds of funds are invested.

A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds.

Related: See WSJ article “Biggest Winner of Famed Buffett Bet? Girls Charity” and The Motley Fool’s Morgan Housel’s classic “Two Hedge Fund Managers Walk Into a Bar…

Play the long game on school choice - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 01/03/2018 - 17:00

Many academic papers fill their pages with dry and turgid prose that appears to value opacity and esoterica over wit, humor or the reader’s enjoyment. But every once in a while, a researcher cuts through the fog with a pithy question in the title, and the answer in the abstract.

For example, a 2011 paper speaking about physics concepts that I don’t understand in the slightest, titled: “Can apparent superluminal neutrino speeds be explained as a quantum weak measurement?” had a two word abstract beneath it: “Probably not.”

The full article will be available at on January 10, 2018. You can continue reading here

Making government services more efficient: Introducing the ‘evidence tool kit’ - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 01/03/2018 - 16:30

During my 20 years administering government social services programs in New York, I came to believe the day-to-day operations of government safety net programs can lead to less poverty and increased opportunity. Over the years, I have seen countless examples — in New York and across the country — of effective leaders making operational decisions which led to greater employment, less dependency, and stronger families and communities.

As Naomi Schaefer Riley explained in a recent story, improving access to data may contain answers for improving child welfare. Via Twenty20.

That is why I am particularly pleased with two recent publications that get deep into the operations of social services administration and point to solutions for hard problems.

The first is an “evidence tool kit” on data and integration which I wrote with my friends at the Evidence-Based Policymaking Collaborative at the Urban Institute. Much like a literal tool kit, this set of findings and recommendations about data access and integration is meant to be a guide for policymakers and program managers to improve social service delivery and ensure government efficiency. Bureaucrats like my former self need these tool kits for quick access to the government equivalent of wrenches and screwdrivers: specific guidance on how to improve access to data and encourage efficient data integration.

Jargon aside, these tools really can lead to serious change. It’s unfortunate that the documentation of these important tools can come across as a big snooze, especially for people who do not work in this field. But thankfully, we have Naomi Schaefer Riley’s recent piece, which compellingly makes the human case for how data may contain answers for improving child welfare. Child welfare refers to the set of programs (child protective services, foster care) which face the hardest dilemma in welfare policy: When should children be removed from their families? Frankly, we have much to improve upon in that area, especially with an ongoing opioid crisis increasing the number of children at risk of serious harm. Riley shows how data shared between government agencies can predict instances of child abuse and neglect, in order to more accurately identify which children need to be removed from their parents’ custody, and when.

Child welfare is just one field in which already-collected information tells us where we can spot problems and pinpoint solutions. My former New York City colleague Linda Gibbs and I described other applications in our guide for policymakers to unleash the power of administrative data. That document is also a slog for the uninitiated, which is why I am especially pleased that Riley has come to AEI to write about issues concerning struggling families. As an experienced journalist, she brings to the field writing ability most poverty experts (including me) do not have.

What I hope becomes clear through this work is that accessing and integrating information about how people live and where services are found inefficient is no trivial matter. It might not contain the grand solution to solving poverty — only big thinkers with big ideas can do that — but these small, behind-the-scenes steps toward better policy execution can make a significant difference.

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Turkey: Is secularism dead? | In 60 Seconds - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 01/03/2018 - 13:16


Can secular government and culture survive in Turkey? Fourteen years of rule by Recep Tayyip Erdoğan has certainly damaged those prospects. AEI’s Michael Rubin offers his take on what the future holds.

Populism: How should economic policy respond? I In 60 seconds - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 01/03/2018 - 13:12


How should conservatives respond to the rise of populism from both the Trump Right and the Sanders Left? AEI’s Michael Strain encourages conservatives to stick to certain traditional values, but recommends that they expand their focus to include issues they are not currently addressing.

My education resolution for 2018 - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 01/03/2018 - 13:00

I don’t know about you, but I’m happy to put 2017 in the rearview mirror. It was a year that seemed to bring out the worst in so many. It infused partisan politics into daily life in unhealthy ways. It colored discussions that are usually far removed from national politics. It expanded the sphere of the political, and made it hard to find reasoned middle ground.

I know not everybody sees it the way I do. I know some people are jazzed by the new politics. I know Trump loyalists who’ve been delighted by the chaos their man has wrought and by the chance to channel their bitterness. I know lefties who’ve been thrilled to unleash their rage, and by the hyperbole and kinetic insanity that have marked their “RESISTANCE!” In education, of course, outspoken Trumpers were few and far between, which seemed only to add to the self-regard, certainty, and bombast of the resistance crowd.

More than a few folks, for reasons which escape me, seem to think the politicization of daily life is a healthy thing and not a recipe for divisive, destructive strife. Some of these are the same people who have made once-esoteric educational questions—like school discipline, collegiate Title IX policies governing due process, school choice, teacher evaluation, and determination of testing subgroups—into hero’s journeys defined by bitter battles between those fighting “for the kids” (their side) and the forces of malice (the other side).

Anyway, I’m not really sure what one does about any of this—especially given that most people think the problem is the other side’s evil intentions, and thus feel justified in whatever norm-shattering, institution-torching nastiness their side engages in. Meeting bombast with bombast doesn’t help with that, and there’s not a lot of appetite nowadays for measured takes. Indeed, the more measured the take, the less likely I’ve found it is to be read, or discussed. It’s all left me at a bit of a loss. And, unlike my anti-Trump friends, I see no reason to think that electing Democratic politicians next fall will turn down the dial on the vitriol or polarization.

This all seems especially relevant to the stuff I think and write about every day, because education has been infected by many of the same dynamics that have corroded our politics. Not having any grand solutions to offer, I guess I’m going to have to settle for doing the little things that each of us can do. As I observed last year, in the conclusion of Letters to a Young Education Reformer:

I’ve been struck by the growing fascination with PR campaigns and political strategies. There’s a place for both substance and messaging, of course, but I’ve seen attention to political tactics come at the expense of deliberation and honest self-appraisal. Eager to draw attention and show funders an “impact,” reformers have found it ever easier to get caught up in the thrill of the hunt. This makes me think that it’s a good time to be more deliberate. To speak and write more selectively. To be more discerning about the gatherings we host and attend. We’re swimming in noise. There’s a yawning need for reflection and a willingness to listen to one another. It’s tough to listen, though, if we’re constantly chattering, and it’s even tougher if we’re shouting.

In 2018, I resolve to speak my mind while recognizing that plenty of smart, thoughtful, informed people are inevitably going to see things differently. I’ll do my best to resist groupthink, fads of the moment, and the temptation to suck up to funders; to avoid reflexively cheering my friends or imputing malice to those with whom I disagree; and to speak my truth as I see it. I’m sure I’ll fall short plenty of times, so feel free to help hold me to it. Meanwhile, here’s wishing you and yours a happy, healthy, and prosperous year.

This post originally appeared on Rick Hess Straight Up.

Cybersecurity and digital trade in 2018: Preliminary predictions - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 01/03/2018 - 11:00

Cybersecurity and digital trade issues are areas both in flux, so it would take a braver (and more foolhardy) blogger than I to make firm predictions. But here are a few possible challenges and issues that could well come to the fore in early 2018.

US President Donald Trump and Chinese President Xi Jinping, REUTERS.

FISA and Section 702 reauthorization

Within the next month (or not) this battle to renew the nation’s most important foreign intelligence surveillance program will be settled. As my earlier blogs have noted, the original authorization ended on December 31, 2017, but Congress kicked the issue briefly down the road to late January — and it is possible, though not likely, that at that point it will punt again with a temporary renewal. I will analyze the political divisions in more detail when the outcome is clearer, but the key battle lines to watch consist of the relative strength of the combined privacy and civil rights groups on the left and the libertarian groups on the right.

In Congress, going back to the 2015 fight over the terms of the USA Freedom Act (metadata), these groups and their Republican and Democratic allies in the House of Representatives have stymied security hawks in both parties. This past year, a split occurred over Section 702 and a compromise bill from the House Judiciary Committee that would have allowed continued Section 702 surveillance to go forward but would have forced the FBI to obtain a warrant for using such foreign intelligence data in domestic trials. Some libertarian-leaning House Republicans and privacy-supportive House Democrats opposed the compromise, still leaving a stalemate. It is unclear what this will ultimately portend as Congress attempts to achieve a final compromise.


It looks as if the Trump administration may be laying the groundwork for another run at forcing Silicon Valley companies (read Apple in particular) to provide some form of decryption solution for iPhones and other devices to aid the FBI and local law enforcement officials in heading off terrorist attacks and capturing domestic criminals. Back in October, Deputy Attorney General Rod Rosenstein charged that “warrant-proof encryption . . . (creates) law-free zones that permit criminals and terrorists to operate without detection.” After the Uzbek terrorist killed eight people in New York City with a truck, Attorney General Jeff Sessions harshly criticized technology companies that “refuse to cooperate with law enforcement or even comply with court orders.”

See also:

Rosenstein suggested that legislation would likely be necessary because the companies would not voluntarily change their policies. No such bill has yet appeared, but the administration could count on a willing legislative ally in Sen. Tom Cotton (R-AR), who has called the tech companies’ refusal to cooperate “a dangerous trend” and an “open invitation to terrorists, drug dealers, and sexual predators” to escape arrest.

US-China high-tech, internet clashes

It looks as if, after dawdling for almost a year, the Trump administration is moving to challenge China’s tangled protectionist web of rules and regulations that increasingly have undercut competition from foreign companies operating on the Mainland. Much of Beijing’s protectionist regime is aimed directly at US high-tech and internet-related companies. The president has tasked US Trade Representative Robert Lighthizer to come up with a set of proposals to counter Chinese trade aggression in the areas of intellectual property and forced technology transfer. The administration is considering a variety of retaliatory tactics, including invoking Section 301, a remedy in basic US trade law that allows the USTR to act as judge, jury, and executioner for unfair trade practices. The administration is also contemplating dusting off another little-used trade remedy, Section 232, which provides for action against nations whose trade practices imperil US national security.

Two points are important here: One, Beijing will certainly counterretaliate against any US action, potentially leading to a nasty trade war; two, US high-tech firms are deeply divided over the wisdom and consequences of any US action. Although they have complained with increasing urgency that competing in China has become nearly impossible, many still have hopes of exploiting the huge Chinese market. Assuming that President Trump does not blink, this will all play out early in 2018.

As the year advances, there undoubtedly will be other policy issues that will come to the fore — not least the possibility that Europe’s top court will overturn the US-EU Privacy Shield, leading to a crisis in cross-Atlantic data flows. But that’s grist for a later blog post.

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Discussing the geopolitical risk of the protests in Iran: Rubin on CNBC’s ‘Power Lunch’ - Discussing the geopolitical risk of the protests in Iran: Rubin on CNBC's 'Power Lunch' - AEI

Tue, 01/02/2018 - 18:10
Resident Scholar Michael Rubin discusses the impact of the ongoing protests in Iran, what led to the unrest, and how they have differed from past protests.

Kids don’t need a cellphone; they need a digital diet - Discussing the geopolitical risk of the protests in Iran: Rubin on CNBC's 'Power Lunch' - AEI

Tue, 01/02/2018 - 16:20

According to a recent survey by the toy company Melissa & Doug, 70% of parents want their children to spend less time watching electronic media and 62% want them to spend less time on electronic devices. They are right. After all, studies show that screen time is associated with higher levels of obesity, shorter attention spans and more psychological problems, including higher rates of depression. The new year is as good a time as any to rethink your house rules.

A media diet is just like a regular diet. If you’re not consistent in the first few weeks and months, you will fail. You can lay out a couple of exceptions for your kids ahead of time — car rides longer than two hours, trips to the emergency room. But if you start with no screen time on school nights, and then you make an exception because you need to do some work, you should expect that your kids will ask you for screens the next night and the one after that. If you let them play on your phone in the line at the supermarket, they will take note and expect you to supply them with screens when they are forced to wait anywhere for anything. They know how to wear you down.

Credit: Twenty20

But keep in mind, you cannot simply remove the devices and offer nothing in return. As any nutritionist will tell you, deprivation is not sustainable, substitution is. When you take away phones and tablets, you have to give your kids other things — more time outside, more low-tech toys or more time with you.

A significant temptation of technology is its portability. In a widely read rant in the Washington Post, Amanda Kolson Hurley wrote about our culture of “snackism” for kids: “We walk around with trail mix and Sun Chips stuffed in our bags like we’re mobile, no-fee vending machines.” The same is true of our digital devices. Kids used to sit too long in front of the TV. But at least once you got them out of the house, that was the end of it. Now the TV can be on perpetually and parents can dispense movies and video games like mobile, no-fee theaters and arcades. Snackism means children eat when they’re not hungry; on-demand screen time is no better for them.

Too often our diets are ruined by impulse buys. If we go to the grocery store with a list and stick to it, everything goes well. But confronted with a plate of hors d’oeuvres or brownies, we give in. When we dole out the devices after planning our kids’ screen time and thinking carefully (and even researching) how much time and what kinds of activities our children should be engaged in on screens, things go well. But when we feel pressured into handing over a phone or granting permission to watch or play something on the fly, they don’t.

You shouldn’t give your kids their own phone lightly, or for the sake of convenience. The McDonald’s drive-through is a more convenient option than cooking at home, but that doesn’t make it a good choice. A recently formed group called Wait Until 8th is suggesting parents hold off on kids’ phones until they’re in the eighth grade — and even then offering a flip phone, not a smartphone. The group points to research suggesting that having a cellphone interferes with sleep (parents confirm that 9-year-olds are regularly texting into the night) and the formation of relationships (taking phones away for even a few days seems to increase children’s abilities to read facial cues accurately). Along with all the other negatives, mobile phones are a distraction from schoolwork. And that’s not even considering the potential content that kids can be exposed to — cyberbullying and pornography.

One pediatrician told me that a number of parents have given their children phones simply because they’ve bought a new phone for themselves and, hey, what else are they going to do with the old one? Some parents just want to make sure their children are tethered to them at all times — “What if my daughter gets upset at a birthday party and needs to come home?” the mother of one 9-year-old with an iPhone asked me. Parents don’t have to be Uber. Kids can be given a watch and a time to meet after swim practice or gymnastics. If they need to leave an event early, kids can ask the adult present to contact you. This has the added advantage of teaching them independence and responsibility.

It’s OK to be a hypocrite about your own phone use versus theirs. Yes, we can all use a little less time on our screens — adults included — but rules can be legitimate, even if they aren’t the same for you and your kids. You don’t give your kids alcohol or the keys to the car. Why should they have the same access to devices you do?

Most adults know what they should be eating and they don’t substitute candy bars for vegetables. They also know the pleasure of shutting off distractions to read a good novel or to focus on the company of friends and family. But if you never experience getting lost in a good book all afternoon or enjoying time outside without worrying about checking your phone, will you be able to create these experiences as an adult? Kids would no doubt prefer a Milky Way to a salad for dinner, just as they’d like to do and see what they want on your phone or better yet, their own. Don’t budge.

Naomi Schaefer Riley’s latest book is the just-published “Be the Parent, Please: Stop Banning Seesaws and Start Banning Snapchat.”

Parenting with the Internet - Discussing the geopolitical risk of the protests in Iran: Rubin on CNBC's 'Power Lunch' - AEI

Tue, 01/02/2018 - 16:07

‘Start at the apocalypse and work back.” That’s how Mary Aiken describes her approach to her role as a forensic cyberpsychologist—an expert in digital behavior and crime. “My job, as I see it, is to be fully armed with real insights and information, both open-eyed and imaginative, about potential risks so I can be prepared for the worst-case scenario.” And so that she can prepare us, as parents, for it. In her book The Cyber Effect, recently released in paperback, Aiken pulls no punches, explaining, “The variety of unsupervised and age-inappropriate content to explore online is almost limitless. And the number of children exposed to it grows every hour.”

If those sentences make your heart beat a little faster, that’s the point. As Aiken notes, when a risk is “unpleasant to consider,” there is “often a strong desire to overlook it.” Some readers may dismiss Aiken’s views as too alarmist, but there is good reason to believe that her pessimism—she often presents the worst-case scenarios for online decency, morality, and safety—is justified.

Technophiles often defend the Internet on the grounds that it’s just another in a long line of innovations that have elicited unwarranted fear. Aiken argues that lives lived on screens are different:

Our instincts have evolved to handle face-to-face interactions, but once we go into cyberspace, these instincts fail us. We are impaired, as if we had been given keys to a car but not learned how to drive. We need more tools and more knowledge. Because if you spend time online, you are likely to encounter a far greater variety of human behavior than you have before—from the vulnerable to the criminal, from the gleeful and altruistic to the dark and murderous.

Credit: Twenty20

Indeed, Aiken notes that the places we tend to think of as physically and emotionally safest—our own bedrooms, our own homes, places where we are surrounded by our own families—are nowadays often the places where we err in letting down our guard. Two generations ago, even with televisions and landline telephones bringing the outside world into the home, it was still reasonable to feel relatively private and safe in the familiar, familial home environment. No more. Today’s communication tools bring us into instant contact with human behavior we would rarely or never encounter in the physical world. At best, this easy interface with varieties of strangeness can transform our interests and alter our personalities. At worst, it can warp our longings and deprave our moral judgment.

Consider: Would Anthony Weiner have gotten in trouble without the Internet? There’s no evidence he was flashing people on the subway before he started taking pictures of his private parts and sending them around from his phone. Maybe there really is, as Aiken argues, something about the way the Internet removes us from other people’s reactions that makes us more likely to engage in certain behaviors.

Another example: interest in bondage or sadomasochism. Two or three decades ago, “a person with a fetish or guilty pleasure of his or her own had to dig around in the public library for a copy of the Marquis de Sade’s writings, go to an art-house cinema,” or otherwise make an effort to get hold of the desired pornographic content. (In the 1980s, even pornographic magazines devoted less than 17 percent of their content to such imagery, Aiken writes, offering a statistic that makes the reader wonder how it was obtained.) But now, two crucial barriers have been lowered: It takes much less work to find very specific smut, and the social shame that might once have inhibited the search has all but disappeared. Today “there are more than 3.5 million members of the Fetlife community [a social networking site for the BDSM lifestyle], and they’ve shared more than 19 million photos and 172,000 videos, participated in 4.7 million discussions, and created 1.7 million blog posts.” Is there any doubt that modern technologies have not only sated people’s appetite for such content but also, paradoxically, whetted it?

Following the lead of the late psychologist Al Cooper, Aiken says it is the “anonymity, accessibility, and affordability” associated with the Internet that have been changing sexual interests and behaviors. Those three As also make it easier for people to engage in dangerous and illegal behavior. She describes places on the web that most of us are not willing to visit, let alone think about our kids visiting. Take the “dark web,” for instance. It is estimated that in the two years following the arrest of Ross Ulbricht and the shutting down of Silk Road in 2013, “the number of products available on Darknets” doubled to 50,000—from illegal drugs to fake birth certificates to alcohol, art, and counterfeit currency.

In short, Aiken argues that the Internet and today’s tools for instant, universal communication help to “normalize” a lot of behavior that otherwise would not be remotely acceptable. Whether it’s cyberbullying—the recent case of the young woman whose text messages encouraged her boyfriend to commit suicide comes to mind—or online piracy or the purchase of illegal substances or the consumption of hardcore pornography, online interactions are qualitatively different from their analogues in the physical world. It is easier to cross moral thresholds. And the new technologies are well suited to bring together groups of likeminded people who in the pre-Internet days would be too few and too dispersed to find one another; this means that we and our children can step unwittingly into “communities” of people we might never otherwise come into contact with.

The word “cyberspace” may strike some readers as fusty and dated, but Aiken uses it liberally. Cyberspace is “an odd and yet familiar” place, she writes. “And like all places, it has distinct characteristics that have the ability to affect us profoundly, and we seem to become different people, feel new feelings, forge new ties, acquire new behaviors, and fight new or stronger impulses.” We struggle to “keep pace with rapidly evolving behavior, new mores, new norms, new manners, and even new mating rituals.”

Aiken rightly argues it’s time that we slow things down—particularly we parents. Many parents act as though they are waiting for some conclusive proof that the time their kids spend on screens is harming them. If this were almost any other matter—from car seats to pajamas to breakfast cereal—parents would adopt a precautionary principle: Let’s not use X product until we know that it’s completely safe. But when it comes to computers, tablets, and smartphones, parents have taken the opposite view: Let’s keep using the tech until we have a 25-year, 1,000-person, peer-reviewed survey that tells us we are doing it wrong. As Aiken writes, “We don’t have time to wait for more new fields to arise and create their own longitudinal studies.”

This is where Jean Twenge comes in. Her new book does not start with the apocalypse and work backward—but then her job is not to investigate crimes. It is to understand a whole generation.

Twenge, a professor of psychology at San Diego State University, is most frequently cited for her work on millennials and particularly the high levels of “narcissism” she found in that generation. But her new book is about the generation born in 1995 and after—what she calls the “iGen.” Its members “grew up with cell phones, had an Instagram page before they started high school, and do not remember a time before the Internet.” The smartphone, Twenge says, has profoundly shaped their childhoods. “The average teen checks her phone more than eighty times a day.”

If Aiken’s work is meant to scare parents straight, Twenge’s sounds a quieter alarm. While Aiken started by asking questions about technology and what it can do to us, Twenge started by asking questions about human beings and then wondering how they became like this. And while Aiken’s work is generally devoted more to the content of what we will find when we go online, Twenge takes a closer look at the medium than the message.

Not all the news about this generation is bad, Twenge reports. The iGen kids have lower levels of teen pregnancy, fewer sexual partners, and lower rates of drunk driving. Compared with previous generational cohorts of teens, they are less likely to get into physical fights at school, less likely to argue with their parents, and more likely to spend time with their families.

But if you dig a little deeper to find out why it is that today’s teens’ lives seem to involve fewer risks and less outwardly dangerous behavior, the answers will dishearten you. When Twenge asks 17-year-old Kevin about what kinds of parties he goes to, he tells her that he almost never attends one. “People party because they’re bored—they want something to do. Now we have Netflix—you can watch series nonstop. There’s so many things to do on the Web.”

Parents have been lulled into believing that because their children are not out drinking and driving or contracting STDs or getting pregnant too young they are therefore safe. Up to a point, this is a reasonable supposition. Indeed, some parents have steered their children toward more time at home and online because they think it is safer and easier to monitor.

But this time online brings dangers of its own. Twenge draws on the findings of large-scale, longitudinal studies, writing that “the data from these surveys are stark: teens’ depressive symptoms have skyrocketed in a very short period of time. The number of teens who agreed [with the statement] ‘I feel like I can’t do anything right’ reached all-time highs in recent years, zooming upward after 2011.” Not only has there been a spike in the percentage who say “Many of my friends have a better life than me,” more teens simply agree with the statement “My life is not useful.”

Twenge goes to great lengths to isolate the causes of these trends. Indeed, by the time she is done trying to explain why it is that instances of all these mental health problems have shot up in the past decade, there can be little doubt as to their cause. She has looked at kids across racial, income, and geographic lines. Boys and girls from all kinds of families. If you want to know what has rocked their world, it is technology.

The use of social media is not only correlated with a high degree of depression, but it has also crowded out the activities that one might generally see as the antidotes. Teens are spending less time outside, less time in the company of friends, less time on schoolwork, on after-school jobs, on reading for pleasure, on sleep, on volunteer work, on political activism, on religious activities, and even on romantic relationships. Meanwhile, these teens are subject to kinds of peer pressure that are novel and powerful.

If we want to understand the effects of so much screen time—not just the apocalyptic scenarios of self-cutting, suicide, revenge porn, and sex trafficking—we have to understand the normal and healthy parts of life our children are giving up. All of the things that make them well-rounded people, able to try new things, interact with other people, and gain some satisfaction from their accomplishments are being pushed aside. Twenge says these young people “are both the physically safest generation and the most mentally fragile.”

The only question now is what parents are going to do about it.


‘This Is Us’ gets adoption and foster care right - Discussing the geopolitical risk of the protests in Iran: Rubin on CNBC's 'Power Lunch' - AEI

Tue, 01/02/2018 - 15:47

‘I’m always happy to discuss ‘This Is Us,’ ” says Jason Weber of the nonprofit Christian Alliance for Orphans. “Just don’t ask me if it makes me cry.” Mr. Weber, who directs the alliance’s efforts to recruit and train foster families, tells me the hit NBC show offers an extremely accurate portrayal of the “real tensions that exist” for anyone involved in adoption or foster care.

Now halfway through its second season, “This Is Us” follows three story lines that touch on fostering and adoption. In the first, a couple loses a child at birth and adopts an abandoned baby, Randall. In the second, the adult Randall meets and develops a relationship with his dying biological father. And in the third, Randall and his wife, Beth, bring a foster child to live in their home.

The show is heartwarming. Randall was abandoned by a drug-addled father after his mother died of an overdose. That he is adopted into a loving home is itself a kind of miracle. His reunion with his “bio” father brought many in the weekly viewing audience of 13 million to tears. “I think the relationship between Randall and his adopted parents and his longing for a relationship with his biological parents is spot on,” one woman wrote in a private Facebook group for adoptive mothers. “The emotional inner battle over loyalty to both is well represented.”

Cast member Sterling K. Brown attends a panel for the television series “This Is Us” during the TCA NBC Summer Press Tour in Beverly Hills, California, U.S., August 3, 2017. REUTERS/Mario Anzuoni

“This Is Us” doesn’t paper over the challenges these families face. Some viewers were shocked by a judge’s refusal to sign off on Randall’s adoption because he is black and his new parents are white. But this was not uncommon in the early 1980s, when the scene takes place. Congress didn’t outlaw racial considerations in adoptions until 1996. Randall and Beth’s foster child, Deja, has suffered abuse, and she flinches when Randall comes too close. She frequently acts out. Every time Randall and Beth feel as if they are gaining the teenager’s trust, things go south again.

Mr. Weber is planning to show clips from the show to potential foster families. “The tense conversation that Randall and Beth have with the social worker and the internal struggle Randall has about Deja’s mom are so real and portrayed so well,” he says.

An Indiana mother on the Facebook group wrote: “When [Randall and Beth] foster [Deja], I saw so many similarities with our teen in the beginning, especially the need to care for/give money to her mom. Or when the foster dad feels like he is the only one advocating for his foster daughters well-being and yells at the [social worker]! (I’ve literally had that exact conversation.).”

Terri Moore, who has with her husband Johnston fostered 10 children and adopted seven, says she “thought they handled the girl’s tension well . . . the fact that she was torn because she loves her mother, but was also growing attached to the foster family.” The Moores also work in this area—she as a court-appointed special advocate in Virginia and he as the founder of a foster-care advocacy group called Home Forever.

On her blog, Foster the Family, New Jersey foster mother Jamie Care writes: “Seeing foster care and adoption on the screen like this is a gift to foster and adoptive families.” But also: “It’s a gift to the people who’ve never considered adoption for their families. It’s a gift to the people who know that foster care exists but have never even considered it could have anything to do with them.”

Other Hollywood portrayals of foster care and adoption have not been received nearly as well as “This Is Us.” The 2009 film “Orphan,” about a childless couple that adopts, earned the ire of foster and adoptive parents. A letter signed by leaders of 11 adoption and child-welfare groups said that the film “may impede recruitment efforts by feeding into the unconscious fears of potential foster and adoptive families that orphaned children are psychotic and unable to heal from the wounds of abuse, neglect, and abandonment.”

It is not that foster and adoptive parents want TV shows and movies to present a rosy picture of their experiences. Many foster parents are simply not prepared for the reality. “When kids come home it’s so much more difficult, more than anyone can believe,” says Kelly Rosati, who oversees adoption and orphan care for Focus on the Family and is herself an adoptive mother. “Marriages start to fray. People wonder: ‘Why have we done this? We used to be happy.’ Their days consumed with chaos and trauma.”

For Ms. Rosati and the families who welcome these children into their homes, the answer is not to scare people or to deceive them, but simply to offer a realistic picture of the hardships and the joy that fostering a child can bring. Now they have one.

Congress’ expansion of 529 plans is modest but appropriate - Discussing the geopolitical risk of the protests in Iran: Rubin on CNBC's 'Power Lunch' - AEI

Tue, 01/02/2018 - 15:26

Shortly before Christmas, my friend and colleague Nat Malkus offered a hard-hitting critique of Congress’ move to expand the use of 529 college savings plans as part of tax reform. The inclusion of the “Student Opportunity Amendment,” offered by Senator Ted Cruz, means that families can now use funds stashed in 529 plans to pay for private K-12 schooling as well as for college.

The Student Opportunity Amendment is a constructive but quite limited change that could well cultivate an influential new constituency for the deductibility of private K-12 education. Via Twenty20.

Because a number of states allow taxpayers to deduct 529 contributions from state income taxes, Nat took to the New York Times op-ed pages to point out that this would reduce income tax revenue in those states. He noted, for instance, that additional 529 contributions are projected to reduce taxable income in New York by three billion dollars, reducing state income tax collection by a couple hundred million dollars.

Nat Malkus:

Nat slams this development as an attack on federalism. While I’m a big fan of Nat’s work, and while we frequently agree on a host of questions, that’s simply not the case here. I’m afraid I just don’t follow his logic. States are free to make 529 contributions deductible if they choose. They are also free not to do so, or to rescind or modify the credit as they like. None of this is affected one whit by the Cruz amendment. Whatever state legislatures opt to do, no federal inducements are being offered and no federal funds are at risk of being lost. That stands in stark contrast to Medicaid expansion under the Affordable Care Act, for instance, in which massive federal subsidies were wielded as a cudgel to compel even reluctant states to expand their plans.

It is true that the Student Opportunity Amendment will change the politics around 529 deductibility. Many affluent parents who reside in high-tax states and use private K-12 schools may suddenly find 529 plans more appealing than ever. Since a lot of these families are residents of urban areas in high-cost blue states and are politically engaged, it might have some intriguing consequences. But none of this constitutes an assault on federalism. Rather, it’s just a reminder that federal policy has ripple effects, even when it’s restrained and designed with due regard for the federal system.

As to whether expanding 529s in this way is good policy, that’s a separate question. On that, I tend to agree with Nat’s earlier observations noting the modesty of the amendment’s practical impact. He and Preston Cooper pointed out that the power of 529s is mostly in the tax-free compounding of interest — and that using these funds for elementary school (which is when most families use private schools) leaves little time for compounding to work its magic. This could be counterproductive if families wind up pulling out funds to use for elementary school, and are thus unable to take advantage of out-year compounding to pay for college — undermining the original purpose of 529s.

In other words, this is a modest win with some risks if used recklessly. But that doesn’t make it bad policy and it surely doesn’t make it an attack on federalism. Rather, the Student Opportunity Amendment is a constructive but quite limited change that could well cultivate an influential new constituency for the deductibility of private K-12 education.

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It’s time to start taking Bangladeshi jihadists seriously - Discussing the geopolitical risk of the protests in Iran: Rubin on CNBC's 'Power Lunch' - AEI

Tue, 01/02/2018 - 15:08

When it comes to Islamist terrorism, Bangladesh hardly figures on the mental map of most Americans. In my most recent Wall Street Journal column (read it here) I argue this must change. The world needs to start taking the threat from the South Asian country more seriously.

Bangladeshi Muslim activists of an Islamic group shout slogans as they gather in front of Baitul Muqarram National Mosque to protest against the deaths of Rohingya Muslims in the Rakhine state of Myanmar, in Dhaka, Bangladesh, December 18, 2016. REUTERS/Mohammad Ponir Hossain

So far the most high-profile attacks by Bangladeshis on American soil have been failures. Last month, Akayed Ullah, a 27-year-old immigrant from Dhaka, tried to blow himself up in a crowded Manhattan subway tunnel using a crude bomb fashioned from a piece of pipe and matchheads. The bomb misfired, and the only person seriously injured was Ullah himself. He told investigators that he carried out the failed attack on behalf of the Islamic State.

Five years ago, another Bangladeshi, then 21-year-old Quazi Mohammad Rezwanul Ahsan Nafis, tried to blow up the Federal Reserve Bank in New York with what he thought was a 1000-pound bomb in a van. Unfortunately for him, his co-conspirators turned out to be undercover Federal Bureau of Investigation agents. A court handed Nafis a 30-year prison sentence.

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These botched bombings may make us somewhat sanguine. The likes of Ullah and Nafis come across as bumbling rubes rather than deadly terrorists. Obviously a person who injures himself with a makeshift pipe bomb will not evoke the same degree of alarm as one who slams a Boeing 767 into a skyscraper. Over at National Review, Nicholas Grossman makes the sensible point that many would-be terrorists are incompetent, a detail that breathless media coverage often loses sight of.

Nonetheless, the jihadist threat from Bangladesh is real and growing. For starters, as Ali Riaz, a political scientist at Illinois State University points out, a new generation of militants are better educated, more tech savvy, and more globally networked than their predecessors, who tended to emerge from traditional Islamic schools.

In 2016, the Islamic State attacked an upscale restaurant in Dhaka and killed 20 hostages, 18 of them foreigners from Italy, Japan, the US, and India. Those implicated in the attack included a Bangladeshi-Canadian chemistry graduate from Ontario, a Bangladeshi Hindu convert to Islam who taught business administration in Japan, and privileged Bangladeshi students at the Malaysian campus of Australia’s Monash University.

As many as 100 Bangladeshis may have left the country to join the Islamic State in Syria and Iraq. This is a small number for a Muslim-majority nation of 160 million people — and both Bangladesh’s relatively moderate society and earnest counter-terrorism effort deserve credit — but it nonetheless marks a more serious transnational threat from the country than we’ve seen before.

Then there’s the Bangladeshi diaspora, especially in Britain. Riaz, the political scientist, estimates that as many as 100 of the 850-odd British jihadists who have traveled to Syria and Iraq may be of Bangladeshi origin. This likely pales compared to the number who are of Pakistani origin — Bangladesh was a part of Pakistan until it broke away to become an independent nation in 1971 — but it’s not a trivial number. More generally, Britain’s inability to get a handle on homegrown radicalism affects us all.

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Finally, there’s the Rohingya crisis. Attacks last year on the Muslim minority group by the Myanmar military have driven upward of 650,000 Rohingya into squalid refugee camps in Bangladesh. Not surprisingly, this humanitarian crisis is a draw for terrorist groups seeking both propaganda material and recruits.

Al Qaeda has vowed vengeance on behalf of its “Muslim brothers.” In Pakistan, the UN-designated terrorist group Jamaat-ud-Dawa has taken to the streets to collect funds for the Rohingya. Before the attempted subway bombing, Ullah traveled to a refugee camp near the Bangladesh border with Myanmar.

In September, Bangladesh Prime Minister Sheikh Hasina told me about the challenge the Rohingya influx poses for her country. Bangladesh has to look after a traumatized refugee population — the vast majority of Rohingya have nothing to do with terrorism — while ensuring that jihadists do not exploit the crisis to expand their footprint in the country.

In fairness, Bangladesh has done a better job of combating radicals in its midst than many countries, without always getting the credit it deserves. For instance, the Sheikh Hasina government has prosecuted alleged war criminals from the Islamist group Jamaat-e-Islami responsible for widespread atrocities against civilians in the run up to independence from Pakistan. Bangladeshi identity, rooted more in language than in faith for many people, provides a partial firewall against radical ideas.

Nonetheless the fight against terrorism remains an uphill struggle, especially against the backdrop of what the author and publisher K. Anis Ahmed calls the country’s “creeping Islamism.” For an outside observer, it’s hard not to conclude that Bangladeshi jihadists are becoming more sophisticated, ambitious, and networked than before. We should not let the botched bombing in New York distract us from this fact.

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