Ezra Klein

By Dylan Matthews

Today, John looked at how online political participation breaks down by class, I discussed kindergarten research with Raj Chetty, Suzy highlighted the backlog in immigration courts, and Justin argued that home prices need to fall still further to correct for the housing bubble.

1) Public defenders are just as effective as private attorneys.

2) The RNC is distancing itself from the Arizona immigration law.

3) The CBO has released its latest estimate of the stimulus' effectiveness.

4) China's nine-day traffic jam.

5) An elephant-shaped city.

By Suzy Khimm

Advocates for greater immigration restrictions often compare America (unfavorably) to other Western industrialized countries that have tried to tighten up their policies for accepting newcomers. In fact, a strikingly similar immigration debate is playing out right now in Australia and Canada, which both have a profile akin to the United States as young nations built up on centuries of immigration.

In place of targeting illegal Latino immigrants, conservatives in Canada have recently seized upon Tamil asylum-seekers from Sri Lanka who have been arriving in large groups via boat -- a phenomenon that began in Australia during the 1990s. They allege that some of the Tamil immigrants are falsely claiming to be refugees, having paid thousands to human smugglers, and are being used by the Tamil Tigers to build up terrorist networks abroad.

Such arguments have inflamed the Australian immigration debate for years -- and they also echo the attacks that the American right has made on illegal immigrants for allegedly exploiting the system and sending "terror babies" over the border. Fueled by the continuing controversy over asylum-seekers, immigration emerged as a major political issue in the Australian elections this year, which happened this past weekend and could end up empowering some immigration hawks.

But while the similarities to the current U.S. debate are notable, so
are some of the differences. In Australia, business groups have rushed to make the economic case for a pro-immigration policy. The Wall Street Journal quotes Katie Lahey, chief executive of the Business Council of Australia:

"Population growth, and immigration as part of it, are an important and positive part of our nation's history. … There's a temptation around election time to pitch to perceived short-term self-interest rather than the long-term national interest."

Ms. Lahey argues population growth will offset the effects of Australia's aging population and ensure future governments have the tax revenue to fund health care, education, infrastructure and
environmental measures.

It wasn't that long ago that big businesses were making the same argument here in the United States after President George W. Bush convinced the business community to support his immigration reform bill. American business leaders acknowledged that immigration — managed correctly — would be a key part of the country’s long-term economic competitiveness, not a hindrance to it, keeping the labor pool young and attracting talent who might opt to go to Canada or Australia instead.

That such voices have all but disappeared shows just how far the U.S. immigration debate has shifted to the right. Just imagine how
different the tone of the current discussion would be if, say, the
Chamber of Commerce rebutted restrictionist fear-mongering about unchecked population growth and anchor babies.

Suzy Khimm is a political reporter in the Washington bureau of Mother Jones.

By Dylan Matthews

jackie_chiles asks:

What's the geographic distribution of the top one percent of wage earners across the U.S.? What about the top .01%? I suspect that when people in, say, Nebraska hear that Democrats want to tax the top 0.1% they think of the wealthiest in their own community without realizing that the vast majority who make that kind of money are located in a few major metropolitan areas.

The Census Bureau helpfully puts out data (see 690) on household income distribution by state, but unfortunately the highest category they include is households making over $200,000 a year. However, this is the group that will face higher rates if Obama's tax proposal succeeds, so it's worth examining.

About 3.96 percent of American households make over $200,000 a year. Thirty-eight states have lower percentages than that, and twelve and the District of Columbia have higher ones. Seven states have a percentage of less than 2 percent (West Virginia is lowest with 1.36 percent), 21 have a percentage between 2 and 3 percent, 11 have one between 3 and 4 percent, and four have one between 4 and 5 percent. New York and Virginia are both at about 5.6 percent, and California and Massachusetts are around 6.2 percent. Maryland is at 6.8 percent, New Jersey at 7.46 percent, Connecticut at 7.95 percent, and D.C. tops the list with 8.37 percent. Here's a handy map showing where states fall:

The states with the highest proportion of wealthy households tend to be large (New York, California) or suburban (Virginia, Maryland, New Jersey, Connecticut) while large plains states and most of the South fall on the very low end; both of the Dakotas and Montana are under 2 percent, as is Mississippi, with Alabama just over. Perhaps surprisingly, only two Republicans -- Judd Gregg and Scott Brown -- were elected from the 12 states above the national average, which would benefit the most from GOP-backed efforts to extend the Bush tax cuts in their entirety.

Dylan Matthews is a student at Harvard and a researcher at The Washington Post.

By Justin Fox

The big economic news of the day, and probably the week, was the big drop in existing-home sales in July reported this morning by the National Association of Realtors. This was to a certain extent expected after the expiration of the home-buyer tax credit in the spring, allowing NAR chief economist Lawrence Yun to offer up the delightfully sunny spin we have come to expect from NAR chief economists:

Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. ... However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.

But the drop was a lot sharper than expected -- sales were at their lowest level in 15 years -- and the economy is not yet consistently adding jobs. CalculatedRisk has a more believable forecast:

I expect house prices to fall further later this year as measured by the Case-Shiller and CoreLogic repeat sales house price indexes, although I  don't expect huge declines like in 2008. My expectation is further price declines of 5% to 10% on the repeat sales indexes.

Whether or not that turns out to be exactly right, the main point is that we're still a long way from working through the aftereffects of housing bubble. And while the do-anything-possible-to-boost-housing-prices-and-keep-all-the-banks-from-going-under philosophy that has guided policymaking in Congress and at the White House, Treasury and the Fed over the past couple of years made a certain amount of sense in the midst of a financial crisis, it doesn't anymore. House prices need to fall some more (in real terms, at least) to lure in enough buyers to pull the housing market out of its depression. So why not accept that reality, and push policies that help people cope with the effects of it, rather than continuing to prolong the inevitable?

Justin Fox is editorial director of the Harvard Business Review Group and author of "The Myth of the Rational Market."

By Suzy Khimm

The lawsuit against the Arizona immigration law aside, Obama has devoted nearly all his efforts on immigration to ramped up enforcement, and his administration is on track to deport a record number of illegal immigrants. The Immigration and Customs Enforcement agency expects the number of deportations to increase by 10 percent above Bush's 2008 total -- and 25 percent above the 2007 total. But this number would be far higher were it not for the record number of immigrants who remain in legal purgatory, as there's an unprecedented backlog of deportation and asylum cases that have yet to be heard. The Center for Investigative Reporting explains:

There were nearly 248,000 cases pending by the middle of June this year, a whopping 33 percent higher than where the figure stood at the end of fiscal year 2008. … TRAC also found that the average length of time it’s taken to conclude immigration cases during 2010 reached 459 days, a number higher than any year since at least 1998. By state, California remains the leader in average wait times with more than 640 days. One hearing location in San Diego posted an extraordinary average wait time of nearly 1,300 days, or to put it another way, more than three years.

The massive backlog is partly the result of more aggressive enforcement, as the administration has moved swiftly to conduct audits of businesses that hire immigrants, expand programs like Secure Communities -- which allows local law enforcement to target illegal immigrants with criminal records -- and target illegal immigrants with alleged gang ties. And the number of immigration cases will continue piling up in the absence of a comprehensive immigration overhaul and a pathway to legal status for illegal immigrants. Political gridlock has kept Congress from even debating such a bill, according to the Democratic leadership. The pressure to tackle immigration issues hasn't let up, however, and the White House has decided that increased enforcement is the most feasible and politically palatable alternative in the meantime.

By Dylan Matthews

Raj Chetty is a professor of economics at Harvard University. His most recent paper, "How Does Your Kindergarten Classroom Affect Your Earnings?" (PDF), co-authored with John Friedman, Nathaniel Hilger, Emmanuel Saez, Diane Schanzenbach and Danny Yagan, examines Project STAR, a landmark education experiment conducted in the 1980s in Tennessee, which randomly assigned students to classes of different sizes and to different teachers for kindergarten through third grade. Past studies have focused on the effect of teachers and lower class size on test scores; Chetty et al stand out for focusing on adult outcomes, such as earnings. Read David Leonhardt's column on the study for more context. A lightly edited transcript of our conversation follows.

Do you want to describe what the initial experiment in Tennessee was, in the ’80s?

Sure. So what we studied in this paper is a famous education experiment called Project STAR, which randomly assigned roughly 12,000 students in Tennessee to different classrooms from grades kindergarten to third grade. And because of random assignment, you can interpret any of the effects that you see of these classrooms on later outcomes, like test scores or adult earnings, as the causal effect of being assigned to that classroom. So, for instance, some students were placed in small classes, some were placed in larger classes, some students had more experienced teachers, some had less experienced teachers, and we can evaluate the causal effect of all of these features of the early childhood education experience on later outcomes using this experiment.

One of the most interesting things about your results is some of the findings on teacher quality. As you laid out, most of the experimental design seems focused on classroom size, but you found some significant effects of the quality of teachers involved as well.

The experimental design actually allows you to evaluate both the effects of class size and the effects of teachers, because students were randomly assigned to classrooms within a school. So the way it worked is, your child shows up at a school, and there's seven different classes, let's say classrooms, and your name is picked out of a hat and you're randomly assigned to one of the seven classes. So seven classes of course have different teachers, and they're also different sizes, so you can evaluate the effects of all of these things. And what we find is that if you, for instance, have a more experienced teacher, that is, a teacher who's taught for more years, you are likely to be earning more as an adult than a student who was randomly assigned to a novice teacher.

One of the limitations of the study is that we don't have that much data on teacher characteristics, so that's why I emphasize experience. The idea is not that experience is the only thing that matters, it's just that we can't measure that many other aspects of what makes a good teacher. So for instance a teacher who relates well to students, or is a good communicator, or is compassionate -- we don't have data on those measures.

So the way we try to capture all that is using a summary measure of the quality of a teacher, which is your peers' test scores. So the idea here is if everybody else in your class is learning a lot from the teacher, they are going to have high test scores, so what we look at is whether, if you are randomly assigned to a class where all the other students are doing well on tests and getting high test scores, do you do better as an adult? And that's where we find really powerful effects. If you're randomly assigned to a group where the peers are scoring high on tests, you're earning more as an adult, you're more likely to go to college, you attend a better college, you're more likely to be saving for retirement, you're more likely to own a house, etc.

And you have found similar benefits to being in small classrooms.

That's right. Being in a small class also yields a variety of improvements on outcomes.

One thing I found interesting about the effect of test scores as relates to earnings is that it seems like some of the gains you find in early childhood, that might not show up on later test scores, later emerge when you're looking at earnings data.

RC: Yes, and that's in fact, I think, the most striking finding and perhaps the most surprising finding from the study, which is if you had just, past education studies just look at test scores, and you see as you had mentioned the effects of these early childhood interventions, like being in a better kindergarten class, they fade out over time. So kids who had better teachers and were in smaller classes in kindergarten aren't doing all that better, really, on tests in middle school and high school. But what's surprising is that those effects reemerge in adulthood. And I can talk about why we think that is.

by John Sides

The Internet provides people new ways in which to participate in politics.  But does it help new kinds of people participate in politics?  That is the question addressed in a new paper by Kay Lehman Schlozman, Sidney Verba and Henry Brady.  (A gated version is here.  An earlier, ungated version is here.)

Schlozman, Verba and Brady want to know whether political participation on the Internet is less stratified by the usual factors, especially socioeconomic status (SES) and age.  Using a 2008 survey, they asked respondents whether they had taken a series of on- and off-line political actions, such as signing a petition or contacting a representative -- and they then compared the percentage of actions taken by respondents of different SES levels and ages.

The graph above shows the amount of political activity for different levels of SES.  Online political activity is as stratified by socioeconomic status as is off-line activity.  The line for "offline act" ascends about as steeply as the line for "online act."  And this is not simply a function of Internet access -- i.e., the "digital divide."  The line for online acts among Web users ascends almost as steeply.  A similar finding emerges when the focus is donations to campaigns.  Those donating online are doing so in smaller amounts, but these small donors are no less affluent than small donors giving offline.

Online political participation is less stratified by age, as young people are, unsurprisingly, more likely than older Americans to participate in this way.  However, this is due almost entirely to the digital divide: Among Web users, the young are actually slightly less participatory than seniors. 

Scholzman and colleagues conclude:

If we began this inquiry hopeful that the political possibilities of the Internet might disrupt long-standing patterns of participatory equality in American politics, what we have found has, by and large, showed these expectations to be unfounded.

John Sides is an assistant professor of political science at George Washington University.  He blogs at the Monkey Cage.

By Justin Fox

University of Michigan strategy professor Anil Karnani had a piece in Monday's Wall Street Journal that began like yet another admiring riff on Milton Friedman's famous 1970 essay, "The Social Responsibility of Business is to Increase its Profits":

Can companies do well by doing good? Yes -- sometimes.

But the idea that companies have a responsibility to act in the public interest and will profit from doing so is fundamentally flawed.

By the end, though, Karnani had taken this argument to a more interesting place. Because it's often not in corporations' interest to act in the public interest, he wrote, "The ultimate solution is government regulation ... with all their faults, governments are a far more effective protector of  the public good than any campaign for corporate social responsibility."

This actually isn't diametrically opposed to Friedman's contention that corporations should do whatever they can to make money "within the rules of the game" -- rules presumably set by government. It's just that Friedman was so suspicious of government and of regulation that he seldom permitted himself to say a good word about it.

Felix Salmon argues pretty convincingly that the data point that inspired my post yesterday on stock market cycles -- a big outflow from domestic stock mutual funds so far this year -- is bogus. When you add in exchange-traded funds and mutual funds focusing on foreign stocks, there appears to have been no outflow at all.

I still think we're caught up in one of those major market cycles where the bear market won't truly end until retail investors have completely thrown in the towel on stocks. We just appear to farther away from that turning point than the headlines -- and my post -- would indicate.

So, uh, buy bonds! Or stuff your cash in a mattress. Or become a financial blogger. I hear there's a future in that.

Justin Fox is editorial director of the Harvard Business Review Group and author of "The Myth of the Rational Market."

By Dylan Matthews

Usually this is where Ezra would relay some Chuck Norris-esque fact about me, but that would be unseemly. What have we got today?

Dylan Matthews is writing Wonkbook while Ezra is on vacation.

The Federal Reserve's monetary policy body was split down the middle on its latest decision. Meanwhile, the Obama administration is leaning toward financing federal support for mortgages through fees on lenders. And despite the administration's push, school overhaul plans in many states are not being implemented in time for the new school year.

Welcome to Wonkbook.

Top Stories

The Federal Open Market Committee was split on its recent, mild quantitative easing measure, reports Jon Hilsenrath: "In one camp, Mr. Dudley, and the presidents of the Boston and San Francisco Fed banks, Eric Rosengren and Janet Yellen, were distressed that the Fed was far from its objectives of low unemployment and stable inflation. ... Fed governor Kevin Warsh, a former Wall Street investment banker who worked closely with Mr. Bernanke during the crisis and who attends many Washington Nationals baseball games with the chairman, worried that a decision to reinvest mortgage proceeds into Treasurys would confuse investors and lead many to believe the Fed was paving the way to resume major purchases before it had decided to do so."

The administration is considering levying fees on lenders to fund government support for mortgages, report Deborah Solomon and Nick Timiraos: "The industry appears prepared to pay some type of premium to get the government's backing. Under proposals floated by two trade groups, the Financial Services Roundtable and the Mortgage Bankers Association, new private-sector entities created to securitize and insure mortgages would pay a fee into a government-insurance fund. Researchers at the New York Federal Reserve Bank, writing on their own behalf, have proposed creating lender-owned cooperatives that would replace Fannie and Freddie."

By Dylan Matthews

Today, John questioned whether Americans really want to govern themselves, Justin expressed uncertainty about the long-term future of the stock market, I talked to Sara Mead about early education policy, and Suzy criticized new fees on companies employing high-skilled tech workers.

1) Every country using the Westminister model now has a hung parliament.

2) Ben Miller and Phuong Ly investigate "dropout factories" -- colleges and universities where a majority of students leave without a degree.

3) HAMP is still running into the same problems.

4) Former Bush NEC chair Keith Hennessey responds to Paul Krugman's criticisms of the Bush tax cuts.

By Justin Fox

There's a whole crop of financial-crisis-related books out this summer and fall that pin at least part of the blame for what happened on income inequality. I know because I reviewed several of them for the September issue of the Harvard Business Review. On Sunday, the New York Times (I hereby apologize to this blog's proprietors for all the Times links, but I just can't help myself) looked into the same question via the work of Harvard Business School historian David Moss. As Louise Story paraphrased Moss:

Mr. Moss said that income inequality might have complicated links to financial crises. For instance, inequality, by putting too much power in the hands of Wall Street titans, enables them to promote policies that benefit them — like deregulation — that could put the system in jeopardy.

Inequality may also push people at the bottom of the ladder toward choices that put the financial system at risk, he said. And low-income homeowners could have better afforded their mortgages if not for the earnings gap.

This is a topic Ezra has discussed before, and so far there's nothing even remotely close to conclusive evidence that there is a link. But it does at least feel like there's something to it. And it's striking just how little the mainstream economic research of the past 50 years has to say about it. Inequality was seen as a side effect (unfortunate or not, depending on your political leanings) of Great Economic Forces, not something that itself had an impact.

One of the many things that's great about Jacob Hacker and Paul Pierson's "Winner-Take-All Politics," the best of the new inequality books, is how it quickly dispenses with Great Economic Forces as the sole explanation for rising inequality and offers an alternative explanation that has far more to do with politics. That's still a long ways from making a case for how inequality caused the crisis. But it's a hint that the answers may end up coming from historians like Moss and political scientists like Hacker and Pierson, not necessarily from economists.

Justin Fox is editorial director of the Harvard Business Review Group and author of "The Myth of the Rational Market."

By Suzy Khimm

Well before passing Arizona's controversial immigration law, Arizona lawmakers were treating the state as a laboratory of sorts for the criminal justice system. Last year, state legislators passed a bill that would have privatized almost all of Arizona's correctional system for $100 million upfront -- an unprecedented move by a state government. The main argument was economic, as private operators claimed they could run more cost-efficient facilities, which supporters said would help close a billion-dollar budget gap in Phoenix.

The bill wasn't ultimately signed into law, but Arizona has still put a growing number of inmates into private prisons each year, who now account for 20 percent of the state's prison population. Nationally, there's been a similar surge in private prison construction as the inmate population has tripled between 1987 and 2007: Inmates in private prisons now account for 9 percent of the total U.S. prison population, up from 6 percent in 2000.

Although private prisons have been sold on economic grounds, a study this year by Arizona's own Corrections Department questions whether such facilities can even deliver in terms of cost savings, reports the Arizona Republic. The state's cost study showed that it's often more expensive to incarcerate inmates in private prisons than in state-run facilities, despite the savings that private operators typically promise. "The cost of housing a medium-security inmate is $3 to $8 more per day in a private prison, depending on what assumptions are made about overhead costs to the state," according to the story. How did this happen? According to some observers, it's because private operators often low-ball their operating costs when presenting their case to the state. The Republic lays it out:

According to the National Institute of Justice, private prisons tend to make much lower estimates of their overhead costs to the state for oversight, inmate health care and staff background checks.

Officials at public prisons often argue that the state winds up paying a higher cost for those services than is advertised, mitigating savings that private prisons are built to deliver. …

To maintain profit margins, [Arizona State University professor] Pratt said, companies often cut back on staff training, wages and inmate services. "Cost savings like that don't come without consequences," Pratt said. "And that can present a security risk that's elevated."

By Dylan Matthews

ncgators asks:

A discussion broke out at lunch today about flex-spending accounts. In the new healthcare bill is an item reducing FSA limits to $2500. Of course the right-wing side of the table (most of my colleagues) complained at how the government is taxing them even more to help pay for the un-insured. But isn't it true that most "middle-income" (< $250k) families use these and they'd technically be the ones paying more (if even a little) in taxes?

An FSA is a flexible spending account, in this context a medical flexible spending account, which allows employees to set aside a portion of their earnings to pay for medical expenses not covered by an insurer. The funds are exempt from income or payroll tax but must be used by March 15 or the balance of the FSA is forfeited. Currently, there is no maximum contribution to FSAs.

The Affordable Care Act introduces a cap on FSA contributions, allowing only $2,500 a year starting in 2013. It also prohibits FSA holders from using the funds to pay for over-the-counter medication not prescribed by a doctor, and doubles the penalty -- from 10 percent to 20 percent -- for using the funds for non-medical purposes.

By Dylan Matthews

Sara Mead is a senior associate partner at Bellwether Education Partners, and specializes In early childhood education issues, especially pre-K through third grade. You can read more about her policy prescriptions for early education in her report, "A Next Social Contract for the Primary Years of Education," and on her blog, Sara Mead's Policy Notebook. We talked about the problems with current government policies regarding early childhood education, and how they can be remedied.

When people like you and other early-ed people talk about high-quality preschool as opposed to normal or regular preschool or day care, what's the distinction, and why does it matter?

The distinction between what we call preschool and early childhood education versus just child care is that preschool or early childhood education is a program that has the specific goal of helping kids learn so that they're ready to succeed at school and beyond, whereas child care's something that's primarily supposed to help parents be able to work or go to school. And that doesn't mean that childcare can't be educational or that pre-K can't provide child care, but it's useful to think about what the purpose of the program is. So when we think, then, about what does it mean for preschool or child care to be high-quality, mostly it has to do with, and the research shows that this is what's important for kids, the quality of the interactions between the adults and the children in the childcare setting or the preschool setting.

By Dylan Matthews

The best policy measures are those that address more than one major problem at once. Health-care reform expanded access to underserved patients while improving the United States' long-term fiscal picture. Cap-and-trade would reduce the risk of catastrophic climate change while reducing our dependence on oil from unsavory regimes. And adopting a comprehensive child care and early education system would allow millions more parents -- mostly mothers -- to enter the workforce while helping reduce the achievement gap between rich and poor students.

Two of these three policies have gotten plenty of attention on blogs like this one. Child care and pre-K policy, however, has not. This week, I'm going to try to remedy that. I'm no expert on the subject, but I've spent last week and this one talking to a lot of people who are, and I'll be posting interviews with them throughout the week. There are two main facets to the topic -- pre-K education policies designed primarily to benefit students, and child care policies designed primarily to let parents work -- and you'll be hearing from experts on both, as well as from people intimately familiar with the political challenges involved in achieving a universal child care and early education system.

The first interview will be posted shortly, so stay tuned.

Dylan Matthews is a student at Harvard and a researcher at The Washington Post.