Exclusive - Peter Schuck Extended Interview Pt. 2

  • Aired:  05/06/14
  •  | Views: 26,426

Peter Schuck takes a look at American policy throughout history to make recommendations for building effective government programs. (4:34)

>> Jon: NOW, FIXING IT I BELIEVEIS CHAPTER 9, CHAPTER 8, IS THAT

WHAT IT WAS?

>> FIXING IT IS CHAPTER 12.

>> Jon: CHAPTER 12 WAS THEFIXING IT CHAPTER.

>> CHAPPTER 11 IS ABOUT THESUCCESS STORIES.

THERE ARE SOME SUCCESS STORIES.

>> Jon: GIVE ME SOME SUCCESSSTORIES TO GIVE US A LITTLE BIT.

>> OK, WELL, IT STARTS WITH THEHOMESTEAD ACT AND THE MORRILL

ACT WHICH ESTABLISHED THELAND GRANT COLLEGE SYSTEM.

>> Jon: RIGHT.

>> AND MUCH MORE RECENTLY, THEEARNED INCOME TAX CREDIT,

MUCH BETTER WAY OFINCREASING THE WAGES -- OR THE

INCOME OF WORKING CLASS PEOPLETHAN OTHERWISE.

>> Jon: RIGHT.

>> AIRLINE DEREGULATION HAS BEENA BIG SUCCESS.

BUT, OF COURSE, THAT WAS NOT APROGRAM BUT ENDING A PROGRAM.

>> Jon: THAT WAS ENDING APROGRAM. RIGHT.

WHAT ABOUT SOMETHING LIKE THECLEAN AIR ACT?

>> IT'S VERY COMPLICATED. THECLEAN AIR ACT HAS --

>> Jon: TOO CLEAN? THE AIR, ITGOT TO CLEAN? NEEDED A LITTLE

BIT OF GRIT IN THERE TO HELPPEOPLE OUT?

[LAUGHTER]

>> IT'S COMPLICATED BECAUSE THECLEAN AIR ACT GENERALLY COULD

HAVE BEEN ADMINISTERED AT A MUCHLOWER COST IMPOSING ON INDUSTRY.

BUT, THE CLEAN AIR ACT IS ONE OFRELATIVELY FEW EXAMPLES

IN WHICH CONGRESS HAS LET MARKETFORCES WORK ON BEHALF

OF THE ENVIRONMENT BY HAVINGTRADING PERMITS AND SO FORTH.

>> Jon: RIGHT. BUT,ISN'T THAT ONE OF THOSE

SITUATIONS, THOUGH, THAT SHOWSTHE NEED

OF GOVERNMENT OUTSIDE OF MARKETFORCES BECAUSE POLLUTION IS ONE

OF THOSE AREAS WHERETHERE'S AN EXTERNALITY.

THEY DON'T REALLY HAVE ANINCENTIVE TO CLEAN UP AND EVEN

WHEN SOMETHING GETS POLLUTED THETAXPAYER PICKS UP THE TAB FOR

THAT, THOSE SUPER FUND SITES, ETCETERA.

SO, THEY DON'T HAVE ANYINCENTIVE TO SPEND MONEY IN

PRESERVING RESOURCES THATWE MIGHT NEED LATER.

>> THAT'S RIGHT. SO, THAT'SA CLASSIC AREA IN WHICH YOU HAVE

TO HAVE GOVERNMENT. TO REGULATEEXTERNALITIES.

IN OTHER AREAS YOU NEEDGOVERNMENT FOR INFRASTRUCTURE.

>>Jon: RIGHT.

>> NOW, UNFORTUNATELY WHENGOVERNMENT PRODUCES

INFRASTRUCTURE LIKE AMTRAK IT'SVERY INEFFICIENT. EXTREMELY

INEFFICIENT. AMTRAK SERVESMAINLY THE NORTHEAST CORRIDOR

RELATIVELY UPPER INCOME PEOPLEWHO ARE TAX PAYERS GENERALLY.

SO THAT'S BEEN A REAL BUST.

>> Jon: WHAT DO YOU THINK ARETHE REASONS WHY?

WHAT ARE THE INEFFICIENCIES?

IS IT OVERHEAD?

IS IT ADMINISTRATIVE COSTS?

MEDICARE, FOR INSTANCE, THEYSAY HAS A LOWER ADMINISTRATIVE

COST THAN FREE MARKETINSURANCE PROGRAMS?

>> WELL, IT'S ALSO MORECOMPLICATED BECAUSE MEDICARE,

ALL GOVERNMENT PROGRAMS HAVECERTAIN ADVANTAGES IN TERMS OF

BUDGETING AND TAX AND SO FORTHTHAT PRIVATE MARKETS DON'T.

SO, IT'S REALLY UNCLEAR.

I'VE SEEN A STUDY WHICH SUGGESTSIT'S NOT CHEAPER

ADMINISTRATIVELY BUT WE CANARGUE ABOUT THAT.

>> Jon: WHY DON'T WE DO THATON TELEVISION?

[LAUGHTER]SO WE HAVE SOME PROGRAMS THAT

WORK.

WE HAVE SOME PROGRAMS --GENERALLY WHEN YOU SAY THEY

DON'T WORK, IT'S BASED ON --IT'S NOT COST EFFICIENT AND

IT -- ALTHOUGH IT HAS GOODINTENTIONS INCENTIVIZES THINGS

IN A WAY OF UNFORESEENCONSEQUENCES THAT ACTUALLY

CORRODE ITS ORIGINAL INTENT.

>> WELL, LET ME ADD A THIRD.

AND THEN COME BACK TO THEINCENTIVES PART.

>>Jon: YES, PLEASE.

>> THE THIRD IS THAT MANY OFTHESE PROGRAMS ARE POORLY

TARGETED.>> Jon: RIGHT.

SO, STUDENT LOANS, FOR EXAMPLE,WHICH IS A CALAMITY WAITING TO,

>> Jon: THE NEXT BUBBLE.

>> HUGE DELINQUENCY RATES ANDTREMENDOUS MORAL HAZARD WHICH IS

WHAT YOU ARE TALKING ABOUT WHENYOU TALK ABOUT WITH INCENTIVES.

IT'S ALSO POORLY TARGETED.MANY STUDIES HAVE SHOWN

THAT THE PEOPLE WHO BENEFIT FROMTHE STUDENT LOAN PROGRAM

ARE PRIMARILY PEOPLE WHO WOULDHAVE GONE TO COLLEGE ANYWAY AND

THEY'RE MIDDLE CLASS OR UPPERMIDDLE CLASS PEOPLE, NOT POOR

PEOPLE. GETTING BACKTO THE INCENTIVES POINT,

WHICH ECONOMISTS CALL MORALHAZARD, WE HAVE MANY

PROGRAMS, MANY PROGRAMSOF THAT KIND. SOCIAL SECURITY

DISABILITY, FOR EXAMPLE, HASINCREASED COSTS ENORMOUSLY

AND THE NUMBER OF PEOPLE ONDISABILITY ENORMOUSLY EVEN

THOUGH JOB CONDITIONS ARE MUCHSAFER THAN THEY USED TO BE.

>> Jon: RIGHT.

>> BECAUSE THE GOVERNMENT -->> Jon: CAN THEY STUDY MORAL

HAZARD?

AND WHY DO YOU THINK IT IS THATMORAL HAZARD IS NEVER APPLIED TO

CORPORATIONS? BECAUSE

I ALWAYS FIND IT'S ALWAYSAPPLIED TO THE SINGLE MORTGAGE

HOLDER, THE GENTLEMAN ONDISABILITY, SOMEBODY ON FOOD

STAMPS BUT NEVER TO AN OILCOMPANY THAT GETS HUGE SUBSIDIES

OR FARMERS THAT ARE PAID NOT TOGROW OR LARGE AGRI-CORPS THAT

ARE -- YOU KNOW, MORAL HAZARDNEVER ENTERS THAT CONVERSATION.

>> WELL, YOUR EARLIER SEGMENT ONBANKING.

>> Jon: THAT WAS TALES OF MORALHAZARD, THAT IS CORRECT.

>> A VERY GOOD EXAMPLE. TOO BIGTO FAIL, TOO BIG TO JAIL.

>> Jon: RIGHT.

>> SO THAT'S A TERRIBLE PROBLEM.FANNIE MAE AND FREDDIE MAC HAVE

INCREASED THAT KIND OF RISK.>>Jon: RIGHT.

HOPEFULLY IT CAN BE REDESIGNEDIN A WAY THAT WILL REDUCE THE

MORAL HAZARD.

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