-Caveat Lector- ------- Forwarded Message Follows ------- Date sent: Mon, 20 Sep 1999 08:51:46 -0500 To: [EMAIL PROTECTED] From: "John C. Goodman" <[EMAIL PROTECTED]> Subject: NCPA Policy Digest 9-20-99 National Center For Policy Analysis POLICY DIGEST Monday, September 20, 1999 PointCast can automatically load NCPA's Policy Digest summaries on your desktop for easy reading. For information go to http://www.ncpa.org/pointcast.html IN TODAY'S HEADLINES o TRADE WORRY-WARTS USE BUDGET SURPLUSES to claim monetary policy must be tightened....NCPA o VOUCHERS TO HELP TITLE I STUDENTS obtain after-school help or private tutoring are among the proposed reforms....INVESTOR'S BUSINESS DAILY o IMF AID IN SMALLER DOSES IS PREFERABLE TO HUGE BAILOUTS, says a foreign policy task force....COUNCIL ON FOREIGN RELATIONS/WALL STREET JOURNAL o IBM TO GIVE OLDER EMPLOYEES A CHOICE OF CASH BALANCE PENSIONS or a traditional defined benefit plan....WALL STREET JOURNAL o POSSIBLE FRAUD ACCOUNTS FOR 64 PERCENT OF DISABILITY CLAIMS under the Supplemental Security Income program....GENERAL ACCOUNTING OFFICE/WASHINGTON TIMES o RETURNING REGULATORY CONTROL TO THE STATES is opposed by some businesses concerned about a patchwork of state laws, say observers....WASHINGTON POST o GUN CONTROL MEASURES WOULD NOT HAVE STOPPED RECENT SHOOTINGS, and raise privacy concerns, advocates purportedly admit....WASHINGTON POST o A SHORTAGE OF FORMAL DAY CARE SLOTS is due to better paying jobs for child care workers elsewhere....WASHINGTON POST IN TODAY'S NEWS CURRENT ACCOUNT DEFICIT UNRELATED TO BUDGET SURPLUS During the Reagan years, liberals whined that the budget deficit -- which they claimed was due to the 1981 tax cut -- was causing the U.S. to run a large current account trade deficit. This meant the U.S. was becoming indebted to foreigners, which would ultimately reduce American living standards. For a time, the data seemed to support the so-called Twin Deficits theory. o From 1980 through 1989, the budget deficit moved with the current account deficit -- which includes the trade balance for both goods and services plus remittances on U.S. investments abroad and foreign investments here. o However, in the 1990s, the current account and the budget are moving in opposite directions; as the budget has moved out of deficit and into surplus, the trade deficit and the current account deficit have reached record levels (see figure http://www.ncpa.org/pd/gif/pd092099a.gif ). o Last year, while the federal government ran a budget surplus of $73 billion, the trade deficit rose to $164 billion and the current account deficit reached $221 billion -- both record levels. Since the budget is in surplus, these trade balance worry-warts can't use the old Twin Deficits theory any more to push for tax increases. So instead they are now arguing for further Fed tightening to forestall the inflation that the current account deficit supposedly is fostering. In the 1980s these same people claimed budget deficits caused the trade deficit by raising interest rates, which raised the value of the dollar, which makes imports cheaper and exports more expensive. If that is true, then further Fed tightening will only make the current account deficit worse. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, September 20, 1999. For text http://www.ncpa.org/oped/bartlett.html For more on Trade Deficits http://www.ncpa.org/pd/trade/trade9.html USING TITLE I TO FUND SCHOOL CHOICE Some members of Congress are pushing a plan to let states and school districts use some federal education money for "portable" vouchers. The funds would be provided under Title I -- the federal government's largest education program -- which provides $8 billion a year to local schools. Title I is up for renewal this year and the voucher plan is included in a bill to be introduced soon by Sen. Judd Gregg (R- N.H.). Title I funds currently go straight to schools with allocations based on the number of low-income students who attend. o Under the new proposal, states choosing to participate would give poor students a voucher to buy extra services -- such as after-school help at any public school or private tutoring. o States that offer students portable vouchers under Title I would receive enough money to serve all students -- rather than the two-thirds of children who now get the aid. o States that take part would have to let all parents choose the public schools their offspring attend. o States would be required to set goals for raising student achievement and provide performance data on Title I students. Republican staffers are trying to craft legislative language that would attract reluctant Democrats. But political observers say that will not be an easy sell. Source: Tyce Palmaffy, "Big Boost for School Choice?" Investor's Business Daily, September 20, 1999. For more on Federal Education Programs http://www.ncpa.org/pi/edu/edu9.html#a For more on Public School Choice http://www.ncpa.org/pi/edu/edu3.html#b IMF URGED TO AVOID LARGE LOANS Instead of huge bailouts, a blue-ribbon panel of experts wants the International Monetary Fund to make more modest loans to countries that encounter financial difficulties. A task force of the Council on Foreign Relations made the surprising recommendations -- which fly in the face of current policy. Here are some of the group's suggestions: o Rather than the multibillion dollar rescue loans the IMF has made in recent years, it should provide less ambitious public financing so that the recipient country could restore its access to long-term private money. o The IMF should provide loans at more generous terms to countries whose economic policies are judged worthy. o Countries should follow Chile's example and tax the inflow of short-term foreign capital -- so as not to gorge themselves with these loans and then be plunged into crisis when nervous lenders snatch their money back. Source: Damian Milverton, "Task Force Says IMF Should Avoid Big Loans," Wall Street Journal, September 20, 1999. For more on International Monetary Fund & World Bank http://www.ncpa.org/pi/internat/intdex13.html COMPANIES RE-THINK NEW PENSION PLANS AS IBM REVERSES IBM has announced significant revisions to its proposal to adopt a so-called cash-balance pension system. About 300 companies have adopted such plans. IBM's reversal came amid an uproar of complaints from its older workers. It also followed involvement by Sen. James M. Jeffords (R-Vt.) and his Health, Education, Labor and Pensions Committee, the Internal Revenue Service, the Equal Employment Opportunity Commission and the Labor Department. IBM said any employee age 40 or older with at least 10 years of service could remain in the old plan. o Traditional "defined benefit" pension plans allow employees to earn as much as half their ultimate benefits in the last five to 10 years on the job. o Under cash-balance plans, employees accrue benefits at a steady rate throughout their years of employment. o The switch from the traditional to the cash-balance system angered older IBM workers who stood to lose anywhere from 20 percent to 50 percent of the value of their pensions. o Cash-balance pension plans were devised in the late 1980s and began really catching on in the 1990s as a way to modernize companies' plans for today's highly mobile work force. The IRS is trying to determine whether the plans qualify for favorable tax treatment. Although it has approved favorable treatment for several hundred plans in the past, the agency last week put a moratorium on the approval of any more until it sorts out the issues. Efforts are also under way to determine if cash-balance plans amount to violations of federal age-discrimination laws. Source: Ellen E. Schultz, Jon G. Auerbach and Glenn Burkins, "Controversy Besetting New Pension Plan Rises with IBM's Retreat," Wall Street Journal, September 20, 1999. For more on Nonwage Compensation http://www.ncpa.org/pd/economy/econ7.html IN OTHER NEWS SSI VULNERABLE TO FRAUD AND ABUSE Nearly two-thirds of people collecting Supplemental Security Income benefits from the government claim disabilities that experts say can be readily faked. A report from the General Accounting Office says the SSI program is "vulnerable" to "fraud and abuse." o Of the 4,051,310 adults and children receiving SSI checks, 22.2 percent say they have psychoses and neuroses -- ailments that are difficult to verify. o Another 25.7 percent claim they are mentally retarded. o Alleged schizophrenia sufferers comprise 8.5 percent of the total. o Some 7.6 percent claim physical ailments such as back disorders; muscle, ligament and fascia disorders; sprains and strains; epilepsy; vision problems; and chronic pulmonary insufficiency -- all of which can be feigned. These add up to 64 percent of all SSI claimants. The GAO report says that thousands of recipients "used suspicious medical providers to gain access to the program." Ninety-six percent of the 158 program officials interviewed said they believed that "middlemen," especially interpreters, were continuing to play a significant role in SSI fraud and abuse. A single person on SSI receives $500 a month, plus Medicaid. The combined cost of these benefits over 10 years is $122,000 per person. SSI cost taxpayers $29 billion in 1998. Source: Cheryl Wetzstein, "Many SSI Recipients May Be Faking," Washington Times, September 19, 1999. For more on Welfare go to http://www.ncpa.org/pi/welfare/welfare.html BUSINESS LOBBY DERAILS FEDERALISM BILL The U.S. Chamber of Commerce, the nation's largest business lobbying group, has joined with environmentalists, public interest groups and federal agencies to throw off track a House bill that would have strengthened the prerogatives of state and local governments. The Federalism Act of 1999 aimed at curbing the power of Congress and federal agencies to preempt state laws and regulations. Its sponsor, Rep. David M. McIntosh (R-Ind.), has abandoned his efforts to push the bill. o The chamber complained that giving states broader authority to challenge federal laws and regulations would create a patchwork of state laws and lawsuits. o Businesses, for example, want uniform product-labeling requirements or mortgage requirements. o They also contend plaintiffs in lawsuits could claim companies are negligent in the design of a product if they only meet federal standards -- rather than a more stringent state standard. McIntosh says he still hopes the chamber and interests representing state and local governments can reconcile their differences and agree on legislation that could advance next year. Source: Cindy Skrzyski, "The Chamber Reached a Sticking Point," Washington Post, September 17, 1999. For more on Bureaucratic State http://www.ncpa.org/pd/regulat/reg-3.html GUN CONTROLS WOULDN'T HAVE STOPPED RECENT SHOOTINGS Gun control advocates and adversaries alike agree that none of the gun legislation now before Congress would have averted the recent massacre in a Texas church -- or any similar recent gun- related calamity. o In that string of violence, all the killers had either bought their guns legally or found an easy way to get around state and federal laws. o The provisions now on the table -- from child safety-locks to stricter regulation of gun shows -- would not have stopped the sales or saved the people who died in the attacks. o Gun control advocates admit that Congress can do nothing to prevent a mentally unstable person who has legal access to guns from using them. o Determining the mental health of a would-be buyer is a thorny problem, says Adam Eisgrau, chief lobbyist for the Center to Prevent Handgun Violence and Handgun Control -- who adds that providing federal authorities or gun dealers with mental health records raises "substantial privacy issues." Source: David B. Ottaway and Barbara Vobejda, "Gun Control's Limited Aim," Washington Post, September 19, 1999. For more on Gun Control Myths http://www.ncpa.org/pi/crime/crime51.html GROWING SHORTAGE OF DAY CARE WORKERS In areas across the nation, working parents are finding it increasingly difficult to find day care centers open to new enrollees. For example, one mother in the Washington, D.C., area was told by one center that it had a waiting list of 100 names, and at another center that the wait would be 16 months. She concluded that she should have signed up before she got pregnant. o Day care workers are being lured away by better paying jobs in other sectors of the economy, at a time when there is an influx of an estimated 1.5 million children of former welfare recipients who are now holding jobs. o Los Angeles County officials recently projected a shortfall of 150,000 day care slots because of staff shortages, while the national YMCA -- which runs programs before and after school for 350,000 children -- has stopped expanding because it can't find workers. o In Colorado, more than 1,000 providers have quit in the last year. o Turnover among day care workers averaged 30 percent in 1997. National median earnings for family day care providers are $4.69 an hour, while child care center workers get $7.03. Source: Jacqueline L. Salmon, "For Many Children, Nowhere to Go," Washington Post, September 19, 1999. 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