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Saturday, July 16, 2011

Wasteful Programs

It is not possible to balance the federal budget simply by cutting wasteful programs. But such programs do exist, as recent articles suggest.

In Time, Joe Klein writes:

We spend more than $7 billion providing Head Start to nearly 1 million children each year. And finally there is indisputable evidence about the program's effectiveness, provided by the Department of Health and Human Services: Head Start simply does not work.

According to the Head Start Impact Study, which was quite comprehensive, the positive effects of the program were minimal and vanished by the end of first grade. Head Start graduates performed about the same as students of similar income and social status who were not part of the program. These results were so shocking that the HHS team sat on them for several years, according to Russ Whitehurst of the Brookings Institution, who said, "I guess they were trying to rerun the data to see if they could come up with anything positive. They couldn't." (See how California's budget woes will hurt the state's social services.)

Waste is not exclusively an American phenomenon, as Virginia Postrel writes at Bloomberg:

“Infrastructure” may be one of the least glamorous words in the English language, but with the right touch the concrete and steel of roads, bridges, tunnels, dams and railroads can look as alluring as a movie star. Witness the sleekly seductive illustrations produced for today’s California High-Speed Rail Authority or the midcentury pictures of effortlessly flowing superhighways, a genre that reached its apotheosis in Walt Disney’s “Magic Highway U.S.A.” in 1958.

This glamorizing extends not just to imagery but also to forecasts. Project promoters routinely overstate benefits and understate costs -- and not just a little bit.

“Cost overruns in the order of 50 percent in real terms are common for major infrastructure, and overruns above 100 percent are not uncommon,” Bent Flyvbjerg, a professor of major program management at the University of Oxford’s Said Business School, writes in the Oxford Review of Economic Policy. “Demand and benefit forecasts that are wrong by 20-70 percent compared with actual development are common.”

The American Enterprise Institute points to farm programs:

Today, farm policy consists of an array of subsidies, regulations, spending programs, and land-use restrictions that are widely blamed for the increased cost of food, environmental degradation, fiscal burdens, and the failure of global trade negotiations. These inefficient and outdated policies, subsidized by US taxpayers in the 2008 Farm Bill at a cost of $307 billion, are once again up for approval.

AEI has commissioned academics with extensive knowledge of agricultural policy from all over the country to write papers on specific aspects of the Farm Bill, including their recommendations for reform. SEE THE PAPERS HERE.