During the industrial age, federal spending and federal assets (like the government’s ability to borrow money at low rates) were continually deployed in the effort to build up the middle class and the industrial economy on which it rested. The construction of the interstate highways, most of which were then opened to toll free travel; the role of Fannie Mae in making a market for securitized home mortgages that reduced borrowing costs and standardized and lowered credit qualifications for aspiring homeowners; and the construction of a large entitlement state primarily oriented to middle class needs—all these were ways of feeding the people on the wealth of the state.That in some cases these policies are unsustainable and need to be reformed is clear, but it should also be clear that mass prosperity and an active state have not been incompatible through long periods of American history. In today’s world, feeding the state to the people needs to take a somewhat different form: turning bureaucratic government institutions into voucher-based programs will both stimulate the rise of a new type of service-oriented industry and provide better tailored government services at a reasonable cost.We’ve seen the beginning of this trend in the charter school and school voucher movement. Students and parents have more choices, and a mix of community based enterprises and larger businesses are competing on what used to be state-owned space.We need to do this with a wider range of government services. Instead of monopoly government enterprises operating bureaucratic services, Americans should be able to choose their service provider from a variety of competing firms. If you become unemployed, you would have the choice of which firm would both process your benefits and help you find new work. Firms would specialize in different fields, offer different kinds of services, and would work with an incentive structure that rewarded them for helping clients find new jobs fast and get off the dole. Veterans could choose from among competing health and other benefit providers.
News from Asia this week was dominated by Japan’s PM Shinzo Abe, whose “Abenomics” have produced a minor economic miracle after decades of stagnation. Elsewhere, the Game of Thrones continued as the Philippines beefed up its navy to fight Chinese bullying, buying ships from Japan. All in all it was a rotten week for China: A new poll shows that Indians view China as their second greatest threat and the US as their greatest ally, North Korea hijacked a Chinese fishing vessel demanding ransom money, and in the background, the US-China cyberwar continued with little sign of abating.Syria was front and center in Middle East coverage this week, and for good reason: Hezbollah is beginning to play a greater role in the conflict, which is spreading to neighboring countries like Lebanon and Iraq. Iranian troops are also getting in on the action, and the steady influx of foreign troops is making the Syrian Civil War resemble of Spanish Civil War of the early 20th century. Bad news came from North Africa as well, where Algeria’s President Abdelaziz Bouteflika’s is looking like the next leader to fall, while US popularity continues to decline in Egypt. In one piece of bright news, however, we may be witnessing the beginnings of an Islamic Counter-Reformation in Turkey.In a rare turn, Sweden looked like the most raucous country in Europe this week, as immigrant riots dragged on for a full week, revealing some strains on the country’s generous welfare state. Meanwhile, controversy is brewing in France over a measure to teach more college courses in English, while the EU is paying for its green energy policies with skyrocketing electricity prices.News from California was good, for a change. In Los Angeles, Eric Garcetti defeated his union-backed challenger in the mayoral election, while Governor Jerry Brown fought off demands that the state’s surplus money be used to expand services. In New York, however, things were as bad as ever, as a sex scandal revealed the true depth of NY machine politics, while city regulations are making it difficult for popular services like Airbnb to operate.Senator Warren, President Obama, and a host of other lawmakers all introduced plans this week to forestall the July 1 rate hike on government-backed student loans, and push more cash in the direction of colleges. Georgia State is trying to fight the trend of rising tuitions with micro-grants and Big Data, but this approach also treats the symptom, not the illness: college tuition is way too high. One way to deflate the student loan bubble is to stop encouraging everyone from attending college. Some people don’t need to go to school, and others won’t succeed when they get there.We saw more evidence this week of how broken our health care system is, after news came out that the decidedly blue-collar, working-class town of Bayonne had the highest hospital costs in the nation. But we should feel grateful for this knowledge, because hospitals typically hide the prices of their services from the public.[Obama photo courtesy of Getty Images. Assad photo courtesy of Wikimedia Commons]