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Friday, April 18, 2008

“Easy” Real Change, by Newt Gingrich

As promised, here is my review of Newt Gingrich's latest book, Real Change.

This was a frustrating read for me. For starters, Newt's premise is how we need to move past "red and blue" and "partisan shrillness" to get to real change. Then he launches into attacks on Democrats. He goes on to criticize the use of campaign consultants that tell candidates/lawmakers what their priorities should be. His solution? Lawmakers should do what public opinion polls say are popular – he proceeds to list a number of these policies with the poll numbers to back it up.

His overall plan is to "transform government", but his premise that "transforming government" involves using more technology and collecting more data. He doesn't discuss reducing the size or role of government (or for that matter, new government programs), he doesn't offer free-market solutions, and he lacks any notion that Government may not be the solution to our all problems. All of the "change" he presents are non-controversial (and supported by polls)—essentially he isn't offering "Real Change" at all but "Easy Change", which is what this book should be named.

Gingrich points to the response to Hurricane Katrina as a failure of government; no one would question that. Gingrich's lesson: government bureaucrats didn't use data. (Here is a better analysis of why government fails to respond to natural disasters).

Gingrich feels that public education is another example of the failure of government, and that "the crisis is not about money." Again he has the diagnosis right. His prescription – we need "a new set of metrics" so we can understand if children are learning along with "modern learning systems". Now performance measures, whether it be test scores or graduation rates, don't measure student performance very accurately. But they do tell us enough to know that our public schools aren't doing an adequate job of educating a large proportion of students. Having "new metrics" won't improve schools, changing the incentives will.

Gingrich goes on to hold Giuliani's administration in New York as a model for "transforming government" – for using metrics to evaluate performance and creating "evidence-based government." Giuliani, while running for president, touted his use of data as well. But Giuliani also campaigned on (and Gingrich ignores) the role of tax cuts in bolstering the NY economy, the role of welfare reform in getting individuals off dependency on government, and community policing and the "broken-windows" strategy in reducing crime.

Gingrich's chapters on immigration and tax reform/economic prosperity are no doubt the strongest in the book, and he does propose some "real changes" in those areas. But he quickly reverts back to the theme of "easy change."

He suggests personal accounts in Social Security – but with government guarantees (i.e. the government will reimburse individuals if their invested personal accounts lose money). And he proposes making personal accounts optional—people can chose to stay in Social Security and get the same guaranteed benefit, even though the system is already going bankrupt and many individuals will opt out, paying less into the system. His "real change" is a slight tweak, watered down to pander to the AARP.

His balancing the budget section is weak. He suggests eliminating pork projects and earmarks, but beyond that he proposes "prioritizing spending" and "smarter spending". Essentially he is back to the technocrat, efficient government idea, rather than recognizing that government is spending in areas it should not be involved in at all. He also recommends cutting taxes "to increase revenue". He falls into the trap of overstating the Laffer Curve effect. In the words of Milton Friedman, "If a tax cut increases government revenues, you haven't cut taxes enough."

In talking about space exploration and energy policy, Gingrich proposes "large prizes" for breakthrough technologies. Does Gingrich really think that "prizes" are needed to persuade researchers to come up with solutions that would make them rich without the prize? And he continues to push tax credits for ethanol, even though ethanol has largely been discredited as an energy solution. Indeed, it doesn't matter whether we are talking direct subsidies, tax credits, or "prizes", government does a poor job of picking winners and "investing" in the future.

Finally, he proposes "transforming" health care. He proposes mandating that everyone have coverage (a bad idea, based on a flawed premise). Much of his "transformation" revolves again revolves around new technology, better data, and more information. While price and quality disclosure and electronic medical records are among the reforms needed, they won't transform health care. In contrast, if we were to transform health care with market-based, consumer-driven solutions, the information revolution would follow.

In short, save your money, don't buy the book, you can basically get the gist by watching his speech at last year's Pennsylvania Leadership Conference.

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