Sometimes, a federal grant is worthless.  The federal government has the ability to attach enough costly provisions to its grants that the net value is less than zero.

A recent case in my home town of Tallahassee illustrates this.  The Tallahassee Democrat, May 21, page A1 (sorry, no link because a subscription is required) reports that project organizers who plan to build a $1.5 million homeless shelter have turned down $500,000 in funding because the money was to come from a federal grant.  The article said, “…stringent reporting requirements, mandates to exceed prevailing wages and required environmental assessments would have increased the cost and delayed the completion time of the project significantly.”

The bottom line: the project’s developers believed that the costs associated with accepting the federal grant would have exceeded the $500,000 the grant would have given them.

The good news in this case is that the grant wasn’t accepted, so the money wasn’t wasted.  But what if the project’s organizers had decided that accepting the grant would have imposed costs of only $400,000 on them?  They would take the $500,000, which would have only been worth a net of $100,000 when accounting for all the costs and benefits.  In this hypothetical case, the federal government would have taken $500,000 in tax revenues and produced a net value of $100,000 with it.

In this particular case in Tallahassee, the conditions lowered the value of the grant to below zero and it was refused, but in other cases grants are accepted even if they on net provide only a minimal value to recipients.  Federal grants forcibly take money from taxpayers to give to grant recipients who value them considerably less than the value of the revenues that finance the grants.  Federal grants destroy value.  Sometimes they destroy so much value that recipients who are offered grants refuse to take them.

The history of the growth of government is riddled with government programs driving out well-functioning arrangements for the private provision of assistance and social services, including welfare, healthcare and hospital services, unemployment assistance, disaster relief and more.

So it should come as no surprise that now Obamacare is doing the same. As reported in the New York Times story, “Hospitals Look to Health Law, Cutting Charity“:

Hospital systems around the country have started scaling back financial assistance for lower- and middle-income people without health insurance, hoping to push them into signing up for coverage through the new online marketplaces created under the Affordable Care Act.

As with previous examples of flawed public policy driving out well-functioning charity and mutual aid, unintended consequences will hurt those the policy was purportedly established to help:

The trend is troubling to advocates for the uninsured, who say raising fees will inevitably cause some to skip care rather than buy insurance that they consider unaffordable.

Let’s hope that the chart above showing how the decline in poverty flatlined once the feds declared “war” on it isn’t predictive of what will soon happen to healthcare for the poor. Unfortunately, recent news out of the V.A. isn’t encouraging.

The Food and Drug Administration recently approved a new drug for leishmaniasis, an extremely rare disease which is spread by sand flies in poor countries. Why would a for-profit company invest in inventing a drug for which there is no way to make a profit?

The FDA offers a prize to any firm that invents a therapy for one of sixteen rare diseases: a priority review voucher (PRV). A company that wins a license for a neglected drug wins a PRV that it can use to get priority review for another drug — perhaps a new treatment for depression or cancer that will bring in billions of dollars of revenue. In that case, the PRV will be worth between $150 million to $300 million. The company that invented the drug for leishmaniasis makes no bones about the value of the PRV to its business:

Knight Therapeutics, of Montreal, is eager to cash in on the voucher. “We’re going to try to sell it for as much as we can,” Jeffrey Kadanoff, Knight’s chief financial officer, tells Shots. “We’d love to make a big headline.” (Shots, NPR)

The PRV is best explained by one of the economists who thought it up, Professor David Ridley of Duke University’s Fuqua School of Business, in this video. The PRV is not perfect, but it is an excellent innovation. It reduces some of the deadweight loss of the FDA’s bureaucratic inertia by redirecting some of the energy devoted to overcoming it to the benefit of the world’s least-fortunate patients.

Now that the smoke has cleared after the collapse of efforts to push patent litigation reform legislation through Congress, pundits are busy discussing just what happened.  The President and members of both parties agreed that some reform was necessary.  Reform legislation seemed to be a sure thing.   Sources close to the negotiations on reform indicate that Sen. Majority Leader Harry Reid (D-NV) was the one who finally killed the bill.

Tech writer Joe Mullin, over at Ars Technica has this summary of what led to death of patent reform for 2014:

“This was entirely done by the pharmaceutical industry and the trial lawyers,” said one tech sector lobbyist.

Pharmaceutical and biotech firms are often plaintiffs in patent disputes and haven’t been hit hard by troll lawsuits. The bill was crafted in many ways to avoid treading on those industries’ interests, but the companies remained opposed to the bill.

Many law firms working in traditional plaintiffs’ areas like personal injury or securities class actions have added patent work as other sources have dried up. In Texas, there has been talk about how tort reform in that state had a hand in creating the patent litigation hotspots like the Eastern District of Texas, as lawyers went “from PI to IP.”

While this is disappointing, it should not be shocking.  Our out-of-whack patent system breeds litigation, large awards and threatens innovations.  Those who make money via the myriad lawsuits could not have been expected to go quietly into the night.

“Barbarians at the gate.” That’s what Arizona Superintendent of Public Instruction John Huppenthal called opponents of Common Core national standards earlier this month. His remarks are symptomatic of just how far elected officials within and outside Arizona have strayed from our Constitution, which doesn’t even contain the word “education.”

Supporters claim Common Core will provide a consistent, clear understanding of what students should know to be prepared for college and their future careers. On the contrary, many experts serving on Common Core review committees warn that academic rigor was compromised for the sake of political buy-in from the various political interest groups involved—including teachers unions.

Unsurprisingly, the curriculum is being used to advance a partisan political agenda, showcasing one-sided labor union, ObamaCare, and global warming materials, along with more graphic, adult-themed books under the auspices of promoting diversity and toleration. But the politicization doesn’t stop there.

Non-academic, personal information is being collected through federally funded Common Core testing consortia about students and their parents, including family income, parents’ political affiliations, their religion, and students’ disciplinary records—all without parental consent.  That information, including Social Security numbers of students in at least one state, is being shared with third-party data collection firms, prompting a growing number of parents to opt their children out of Common Core.

They’re not alone. Among the 45 states that adopted Common Core, Indiana recently became the first one to reverse course and implement state standards instead. This decision earned a threatening letter from the U.S. Department of Education about withholding funds and revoking Indiana’s waiver from onerous federal No Child Left Behind Act mandates.

Common Core is publicized as a state-led, voluntary initiative, but in reality it’s an offer states can’t refuse if they want their share of billions of federal dollars for education programs.

So much for Common Core being “voluntary” or “state-led.” So much, too, for the notion that federal education aid, which historically has averaged at around just 10 percent of all education funding, is “free.”

It’s a sad state of affairs when Americans striving to rid their children’s schools of educational barbarism are vilified for wanting to end federal intrusion in education. Elected state officials like Superintendent Huppenthal should recall that for decades the feds have been effectively bribing them with additional cash (which actually comes from their own constituents’ pockets) and far-fetched promises, including these whoppers:

• By 1984 they will eliminate illiteracy (p. 35). That didn’t work.
• By 2000 high school graduation rates would reach 90 percent. Nope. Wrong again.
• By 2000 again American students were supposed to be global leaders in math and science. Well, not so much based on recent results.
• Finally, by 2014 all students will be proficient in reading and math. Not even close.

Over-promising and under-delivering seems to be the legacy of the federal government’s “leadership” in education. With virtually no exceptions, major programs of the Elementary and Secondary Education Act of 1965 (ESEA), currently dubbed No Child Left Behind (NCLB), have not worked after decades of tinkering.

One Senator from Arizona certainly saw this coming. Nearly 60 years ago U.S. Sen. Barry Goldwater opposed the National Defense Education Act of 1958, which included 12 federal mandates on the states—a regulatory pittance by 21st century standards. He rightly predicted that “federal aid to education invariably means federal control of education” (p. 76, emphasis original).

Children need to learn the basics, but there are better ways to accomplish that goal than embracing a national curriculum developed by Washington.

Parental choice programs educate students to high standards, without limiting the diverse schooling options needed to meet their unique, individual needs. Importantly, unlike accountability initiatives involving rigid federal mandates, all parental choice schools face immediate rewards for success or consequences for failure, since parents are empowered to enroll or transfer their children in schools as they see fit.

Ultimately, Common Core rests on the faulty premise that a single, centralized entity knows what’s best for all 55 million students nationwide.  Raising the education bar starts with putting the real experts in charge: students’ parents.

The U.S. Department of Education recently released grade 12 results in reading and math  from the 2013 National Assessment of Educational Progress (NAEP), also known as the Nation’s Report Card. In a nutshell, performance stayed largely unchanged from the 2009 assessment. What’s more, experts worry that students are graduating largely unprepared for college or the workplace.

Alarming majorities of students are not proficient in reading and math. In math, just over one in four students scored proficient in math (26 percent); while less than two out of five students scored proficient in reading (38 percent). Across student racial sub-groups, less than 50 percent of students reached proficiency in reading and math.

The 2013 NAEP assessment is a nationally representative sample of 92,000 students from public and private schools in 13 states that participated.

Reaction to the results was grim. As Liz Klimas reported for The Blaze:

Education Secretary Arne Duncan said in a statement that even though there has been some good news related to graduation rates and scores in younger grades, high school achievement has been flat in recent years. ‘We must reject educational stagnation in our high schools, and as a nation we must do better for all students, especially for African-American and Latino students,’ Duncan said. The results come as community colleges and four-year institutions try to improve remedial education programs, given that only about one-quarter of students who take a remedial class graduate. It’s estimated that more than one-third of all college students, and more than one-half in community colleges, need some remedial help, according to research from the Community College Research Center at Teachers College, Columbia University. [See here.]

The disappointing grade 12 NAEP results come on the heels of a report last month that American high school graduation rates reached an historic high of 80 percent. Some experts speculate that this disconnect is the result of watered down classes and grade inflation, which make it easier for students to get high school diplomas but more difficult for them to do well on objective standardized tests because they don’t have a solid academic foundation.

But there is good news. A variety of parental choice programs are helping some 1.5 million students attend schools of their parents’ choice. Specifically, close to 850,000 families in seven states are benefiting from education tax credits and deductions that help them pay out-of-pocket tuition for private schools.  More than 300,000 students are also attending private schools through 41 parental choice programs in 22 states.

U.S. Department of Education analyses have shown “that students who had attended private school in eighth grade were twice as likely as those who had attended public school to have completed a bachelor’s or higher degree by their mid-20s (52 versus 26 percent)” (p. 24). Importantly, students from the most disadvantaged backgrounds (referred to as socioeconomic status or SES) who had attended private schools in eighth grade were more than three times as likely as their public school peers to have earned a bachelor’s degree by their mid-twenties (24 versus 7 percent) (p. 24). Based on its ongoing reviews, the U.S. Department of Education summarized, “For the past 30 years, NAEP has reported that students in private schools outperform students in public schools”  (p.2).

Available NAEP results for grades 4, 8, and 12 over the past decade reveal students attending private schools outperform their public school peers overall by as much as two grade levels, depending on the subject. Likewise, low-income and minority students also outperform their public school peers by as much as two and a half grade levels (pp. 19-23).

Gold-standard research of parental choice programs confirms that participating students, the overwhelming majority of whom are from socio-economically disadvantaged backgrounds, have higher academic achievement, high school graduation rates, and college-enrollment rates than their public school peers. A significant body of additional scientific research confirms those findings.

Parental choice programs also save money (pp. 29-31), and introduce powerful competitive pressure for public schools to perform better. In fact, in areas where public schools face competition for students from private and other types of schools, student achievement improves (see, for example, here and here).

Letting parents choose the education options they believe work best for their children is a tried and true way of overcoming academic stagnation and setting students up for success. Rather than limiting education options, policymakers should be expanding them.

President Obama has vowed to fix the intolerable mismanagement of Phoenix Veterans Affairs Hospital, which resulted in dozens of deaths and reports of patients put on secret waiting lists for care.  Thankfully Arizona is not waiting around to do the right thing for veterans and their families—and neither should any other state.

On April 23 Arizona Gov. Jan Brewer signed two bills into law making more children than ever eligible to participate in the state’s landmark education savings account (ESA) program, called the Empowerment Scholarship program, enacted in 2011 (SB 1553 and Ariz. Rev. Stat. §§ 15-2401-04).

Under Arizona’s ESA program, parents who don’t want to send their children to public schools simply inform the state education agency. They sign a form agreeing not to re-enroll their children during the current school year, and the state deposits 90 percent of what it would have spent on their children in public schools into an ESA instead. With those funds, parents can pay for a variety of education expenses, including private school tuition and fees, textbooks, tutors, online or home school curricula, standardized testing and college entrance exam fees, and college courses. Any unused funds can also be used for college expenses.

Arizona’s original program was limited to special needs students but was expanded in 2012 (HB 2622) to include students in or assigned to schools graded ‘D’ or ‘F’ under the state accountability system, children of Active Duty military members, and children currently in or adopted from the state foster-care system.

In 2013 annual auditing and other accountability measures were added (HB 2458), and the program was capped at 0.5 percent of the combined public school enrollment through 2019, about 5,400 new ESAs annually. Yet the program was further expanded (SB 1363) to include eligible students entering kindergarten, and the state base funding was increased by $1,600 to $5,300.

An official analysis conducted in 2013 found that in its first year the ESA program served about 130 students and distributed $1.6 million, growing to 302 students and distributing approximately $5.2 million the following year in 2012. Research also shows that parents are using their ESA funds to tailor their education options to their children’s unique needs. Satisfaction levels among participating parents are stunning with 91 percent reporting being satisfied or very satisfied. The remaining 10 percent were somewhat satisfied, and no parent reported being neutral or dissatisfied.

And, because each ESA student receives just 90 percent of what the state would have spent to enroll her or him in a public school, the savings of 5,000 students using ESAs is an estimated $12.3 million.

This March, Arizona’s ESA achieved another milestone when the constitutionality of the program was upheld against a court challenge by the teachers and school boards unions that dragged on for three years.

The following month, the definition of eligible student was expanded again to include siblings of current or former ESA students as well as youngsters eligible to enroll in a preschool program for children with disabilities (HB 2139). Another expansion makes children whose parents or guardians were military members killed in the line of duty eligible for ESAs (HB 2150).

According to the latest data from the U.S. Department of Education, there were nearly 15,400 Arizona preschool-age children receiving services under the federal Individuals with Disabilities Education Act (IDEA). Department of Defense data also indicate that an estimated 110 children statewide have parents who were killed in the line of duty.

The success of Arizona’s ESA program has inspired legislation to be introduced in several other states, including Iowa, Mississippi,  Missouri,  Montana, Oklahoma, and Utah. In fact, Florida’s legislature just passed ESA legislation called Personalized Learning Scholarship Accounts now awaiting Gov. Rick Scott’s signature.

Arizona’s ESA is a model program for American Active Duty military parents and their nearly 900,000 pre- and school-age children (by my tally for children ages 3 to 18, p. 132).

More than half of all public schools with military dependent enrollments of 5 percent or more are not meeting basic academic achievement benchmarks (p. 4). Children from military families also have higher rates of disabilities (here and here) and move more frequently. The GAO confirmed in 2011 and 2012 that oversight and education services provided by the federal government to military dependents needs improvement.

Not only should lawmakers in other states consider implementing ESAs, the federal government should let veterans deposit their unused GI Bill education funds into ESAs as well. That way parents, grandparents, aunts, uncles, and other family members could ensure their loved ones have the education that works best for them now—not years from now when they enter college.

Time reports that Sen. Pat Leahy, the chairman of the Senate Judiciary Committee, has pulled the patent reform legislation from the Senate’s agenda.  Here is a snippet from the article:

Needless to say, trial lawyers are among the groups that benefit the most from rampant patent litigation. Engine Advocacy, a non-profit group that works to advance the agenda of startups on Capitol Hill, expressed disappointment at Leahy’s action.

“This news is devastating to the welfare of startups who will continue to face the threat of patent trolls,” wrote Engine Advocacy executive director Julie Samuels. “That no agreement could be reached, especially in light of the efforts being made across the committee to find common ground, is also bad news for the economy where annual losses from patent troll litigation are billions of dollars.”

The trolls, with no desire to actually make a product or process, will continue to march on with litigation based on dated technology and the prospect of expensive lawsuits.

“In the socialist commonwealth every economic change becomes an undertaking whose success can be neither appraised in advance nor later retrospectively determined. There is only groping in the dark. Socialism is the abolition of rational economy.” —Ludwig von Mises

When I was driving to work earlier this week, I heard a fascinating story on NPR that discussed communal life under the Soviet Union. As part of the grand effort to completely reorganize Russian society under communal lines, the Soviet regime sought to abolish private kitchens!

Why? The NPR story reported that “Soviet authorities considered kitchens and private apartments dangerous to the regime was because they were places people could gather to talk about politics.” According to Russian writer and radio journalist Alexander Genis, “[t]he most important part of kitchen politics in early Soviet time was they would like to have houses without kitchens. Because kitchen is something bourgeois. Every family, as long as they have a kitchen, they have some part of their private life and private property.” Another Russian writer adds, “[c]ommunal kitchens were not places where you would bring your friends. I think that was one of the ideas for creating a communal kitchen. There would be a watchful eye of society over every communal apartment. People would report on each other. You would never know who would be reporting.”

The full article on NPR is worth reading and contains a number of revealing gems on the reality of communal kitchens in Soviet apartments and regimented life under communism. Here’s one striking episode:

Following the civil war, the shortages and the famine of the 1920s devastated whatever was left of the Russian kitchen. Stalin’s industrialization program included the industrialization of food. Completely new, mass-produced food appeared — foods like canned and processed soup, fish, meat and mayonnaise.

“The whole of the Soviet Union, all 120 different ethnic groups were suddenly being served exactly the same stuff,” says Grisha Freidin. “Choices for this or that food, the tastings, took place at the politburo level. The kinds of candies that were being produced was decided in a special meeting with Stalin and [Vyacheslav] Molotov.”

Time has a good story on the decision of Apple and Google to dismiss all the current IP lawsuits between the two companies.  They have also agreed to work together in some areas of patent reform.  No doubt patent trolls were sorry to see the two giants redirect resources.  The millions that went into litigation can now be devoted to innovation, securing patent reforms, and battling the real enemies of the intellectual property world—the trolls.

For more on possible reforms and the evils of the trolls, see the Independent Institute’s new book Patent Trolls: Predatory Litigation and the Smothering of Innovation.