Taxpayer Costs Research Articles

Breaking the Barriers to Innovation in Kidney Care: The Time is Now.

Breaking the Barriers to Innovation in Kidney Care: The Time is Now.

A scalable empathic supervision intervention to mitigate recidivism from probation and parole

Incarceration is a pervasive issue in the United States that is enormously costly to families, communities, and society at large. The path from prison back to prison may depend on the relationship a person has with their probation or parole officer (PPO). If the relationship lacks appropriate care and trust, violations and recidivism (return to jail or prison) may be more likely to occur. Here, we test whether an "empathic supervision" intervention with PPOs-that aims to reduce collective blame against and promote empathy for the perspectives of adults on probation or parole (APPs)-can reduce rates of violations and recidivism. The intervention highlights the unreasonable expectation that all APPs will reoffend (collective blame) and the benefits of empathy-valuing APPs' perspectives. Using both within-subject (monthly official records for 10 mo) and between-subject (treatment versus control) comparisons in a longitudinal study with PPOs in a large US city (NPPOs = 216; NAPPs =∼20,478), we find that the empathic supervision intervention reduced collective blame against APPs 10 mo postintervention and reduced between-subject violations and recidivism, a 13% reduction that would translate to less taxpayer costs if scaled. Together, these findings illustrate that very low-cost psychological interventions that target empathy in relationships can be cost effective and combat important societal outcomes in a lasting manner.

Jurisdictional Competition, Market Power, and the Compensation of Public Employees

Jurisdictional competition can encourage government efficiency but may also lead to collective action problems (e.g., bidding wars) that increase taxpayer costs. The net effect is particularly consequential for the cost of public employee compensation, which accounts for more than half of local government spending. Examining two decades of U.S. teacher salary data and changes in local teacher labor markets over time, I show that jurisdictional competition is associated with lower teacher salaries. One mechanism consistent with the evidence is that competitive markets help encourage lower spending through yardstick competition.'' The findings may help explain why government consolidations designed to promote economies of scale and efforts to take advantage of coordinated buying power do not always produce the expected savings.

Market Segmentation and Competition in Health Insurance

In the United States, households obtain health insurance through distinct market segments. We explore the economics of this segmentation by comparing coverage provided through small employers versus the individual marketplace. Using data from Oregon, we find households with group coverage spend 26% less on covered health care than households with individual coverage yet face higher markups. We develop a model of plan choice and health spending to estimate preferences in both markets and evaluate integration policies. In our setting, pooling can both mitigate adverse selection in the individual market and benefit small group households without raising taxpayer costs.

Are the Outcomes of Low-Income Housing Programs Consistent with their Rationales?

Traditional rationales for low-income housing assistance imply that a housing program is not successful unless it induces recipients to occupy better housing than they would choose if given equally costly cash grants. The general assumptions of economic theory do not imply that current housing programs would lead to that outcome. The few existing studies of this matter are dated and ignore the cost-ineffectiveness of project-based housing assistance. The purpose of this paper is to determine the extent to which different housing programs are consistent with traditional rationales. Based on data from the 2013 American Housing Survey and evidence on the cost-effectiveness of different types of housing assistance, the results indicate that public housing tenants had lower aggregate housing consumption than they would have chosen with equally costly cash grants and most public housing tenants and a substantial minority of recipients of each other type of housing assistance occupied worse housing than they would have chosen with this alternative policy. Indeed, about half of public housing tenants, a third of occupants of HUD-subsidized privately owned projects, and more than a fifth of recipients of the hodgepodge of other programs of project-based housing assistance occupied worse housing and consumed less of other goods and services with their housing assistance than with equally costly cash grants. Of the programs considered, tenant-based housing vouchers induced a larger fraction of recipients to occupy better housing relative to an equally costly cash transfer and provided the greatest increase in the market value of total consumption relative to taxpayer costs than any of the forms of project-based housing assistance. In fact, vouchers outperform project-based assistance across all metrics used in this study.

Slippery scales: Cost prompts, but not benefit prompts, modulate sentencing recommendations in laypeople.

Do people punish more than they would if the decision costs were more transparent? In two Internet-based vignette experiments, we tested whether juvenile sentencing recommendations among U.S. adults are responsive to variation in the salience of the taxpayer costs and public safety benefits of incarceration. Using a 2 Cost (present vs. absent) x 2 Benefit (present vs. absent) factorial design, Experiment 1 (N = 234) found that exposure to information about the direct costs of incarcerating the juvenile offender reduced sentencing recommendations by about 28%, but exposure to the public safety benefits had no effect on sentences. Experiment 2 (N = 301) manipulated cost-benefit salience by asking participants to generate their own list of costs of incarceration, benefits of incarceration, or an affectively neutral, unrelated word list. Results revealed a similar selective effect whereby sentencing recommendations were reduced in the cost condition relative to the benefits and control conditions, but sentences in the benefit condition did not differ from the control. This combined pattern suggests that laypeople selectively neglect to factor cost considerations into these judgments, thereby inflating their support for punishment, unless those costs are made salient. These findings contribute to the debate on transparency in sentencing.

Evaluating and designing student loan systems: An overview of empirical approaches

To understand and design student loan systems, realistic earnings and/or income projections for current and future graduates are crucial. In this paper, Current Population Survey (CPS) data from the US is used to demonstrate empirical approaches that can be exploited to simulate lifetime income and earnings profiles for graduates which are needed to understand and design effective and sustainable student loan systems. The crucial element in getting this analysis correct is having reliable simulations of the whole distribution of future graduate earnings and income. Typically, in this literature, the repayment burdens (RBs) of student loans are calculated at different quantiles of the graduate income or earnings distribution. Often, unconditional quantile regression (UQR) is used to calculate age–earnings profiles for different quantiles of the income or earnings distribution. The paper shows that this approach has limitations when evaluating student loans and that simple raw quantile estimation by age with some age smoothing is preferable. This approach can also be used when income is censored and recorded in income bands as occurs with relevant data in some countries. The paper shows a simple way of incorporating dynamics utilizing these age–earnings profiles by quantile even when only very short panel data is available. This involves using copula functions. Having reliable dynamic estimates turns out to be important in assessing not only the taxpayer costs of designing an income-contingent loan (ICL) but also for correctly assessing the extent of loan repayment hardship for individuals.

Income contingent student loan design: Lessons from around the world

The use of income contingent loans (ICLs) for Higher Education (HE) students is becoming increasingly prevalent around the world. Using a model of simulated lifetime earnings for graduates, in this paper we show that the impact of the design of ICLs on the magnitude and distribution of government subsidies is highly dependent on the institutional setting. In particular, the average debt level as a share of average earnings is a key determinant of the impact of various policy parameters. The variance of earnings within the graduate population is also shown to be a determinant of ICL taxpayer costs. This paper is the first comparative exercise of impact of the design of ICLs in different settings, and the findings are highly relevant to countries looking to implement or reform their student loan systems.

Recent evidence on political brinkmanship and Treasury yields

PurposeThis paper aims to analyze how political brinkmanship impacted Treasury yields during the debt ceiling debate in 2015. The results show that the resignation of the House Speaker John A. Boehner caused a significant decrease in Treasury bill yields of one- and three-month maturities. The authors robust analysis indicates that these lower yields have saved US taxpayers several billion dollars in extra tax expenses. This paper provides evidence that lack of political brinkmanship can be very advantageous for the taxpayers. This has considerable implications for lawmakers in this post-election year.Design/methodology/approachThe authors examine the differences in yields between equal maturity short-term Treasury securities and commercial paper using t-tests, non-parametric tests and a robust regression model based on earlier empirical studies.FindingsThis study provides evidence indicating that between September 25, 2015, and up to October 30, 2015, relatively lower Treasury yields resulted from the lack of political brinkmanship, and this has saved the US taxpayers several billion dollars in interest expenses in 2015.Research limitations/implicationsThe study showed that lower yields will result from a lack of political brinkmanship, and this resulted in savings of several billions of dollars in interest payments. Considering that both the White House and Congress will be controlled by the same political party, this gives lawmakers a unique opportunity to have less acrimonious debt ceiling debates. The limitation of the study is that it does not consider the impact on foreign exchange markets and other factors which could play a major role.Practical/implicationsUnlike earlier scenarios where default risk increased, followed by credit rating downgrades, there was a quiet confidence this time about a quick resolution. Markets were stable, and this allowed money market participants to invest more confidently even when an upcoming debt ceiling debate is on. Corporations that invested additional cash in money markets for short-term could do it more confidently at that time without fear of default or interest rate risk which could potentially harm the market value of their investments.Practical/implicationsIt implies that there will be lower taxpayer costs because of debt ceilings and avoidance of shutdowns of the federal government. It also implies that there could be more confidence in the dollar.Originality/valueSeveral earlier studies have examined Treasury default caused by political brinkmanship. This is the first study to examine an event where political brinkmanship appeared possible and then suddenly dissipated in a single day. Political brinkmanship is bad news because it increases taxpayer interest burden as seen from several of the studies above. Therefore, it should be considered good news if no disagreement is evident. This argument serves as our motivation for this paper. As an increase in the chances of default causes an increase in the yield of Treasury bills as earlier studies showed, a decrease in the chance of default caused Treasury bill yields to be that much lower based on the results of this study.

Finance and Growth at the Firm Level: Evidence from SBA Loans

ABSTRACTWe analyze linked databases on all SBA loans and lenders and on all U.S. employers to estimate the effects of financial access on employment growth. Estimation exploits the long panels and variation in local availability of SBA‐intensive lenders. The results imply an increase of 3–3.5 jobs for each million dollars of loans, suggesting real effects of credit constraints. Estimated impacts are stronger for younger and larger firms and when local credit conditions are weak, but we find no clear evidence of cyclical variation. We estimate taxpayer costs per job created in the range of $21,000–$25,000.

Sarcopenia in Orthopedic Surgery.

Sarcopenia is a loss of skeletal muscle mass in the elderly that is an independent risk factor for falls, disability, postoperative complications, and mortality. Although its cause is not completely understood, sarcopenia generally results from a complex bone-muscle interaction in the setting of chronic disease and aging. Sarcopenia cannot be diagnosed by muscle mass alone. Diagnosis requires 2 of the following 3 criteria: low skeletal muscle mass, inadequate muscle strength, and inadequate physical performance. Forty-four percent of elderly patients undergoing orthopedic surgery and 24% of all patients 65 to 70 years old are sarcopenic. Although dual-energy x-ray absorptiometry and bioelectrical impedance analysis may be used to measure sarcopenia and are relatively inexpensive and accessible, they are generally considered less specific for sarcopenia compared with computed tomography and magnetic resonance imaging. Sarcopenia has been shown to predict poor outcomes within the medical and surgical populations and has been directly correlated with increases in taxpayer costs. Strengthening therapy and nutritional supplementation have become the mainstays of sarcopenia treatment. Specifically, the American Medical Directors Association has released guidelines for nutritional supplementation. Although sarcopenia frequently occurs with osteoporosis, it is an independent predictor of fragility fractures. Initiatives to diagnose, treat, and prevent sarcopenia in orthopedic patients are needed. Further investigation must also explore sarcopenia as a predictor of surgical outcomes in orthopedic patients.

Finance and Growth at the Firm Level: Evidence from SBA Loans

We analyze linked databases on all SBA loans and lenders and on all U.S. employers to estimate the effects of financial access on employment growth. Estimation exploits the long panels and variation in ease of access to SBA lenders. The results imply an increase of 3 to 3.5 jobs for each million dollars of loans, suggesting real effects of credit constraints. Estimated impacts are stronger for younger and larger firms and when local credit conditions are weak, but we find no clear evidence of cyclical variation. We estimate taxpayer costs per job created in the range of $21,000 to $25,000.

Right Sourcing in Nebraska: Growing Government or Private Industry?

This study focuses government sourcing decisions in Nebraska, including the benefits and costs of government performance (insourcing) versus contracting with the private sector (outsourcing). The study generally concludes that government insourcing is likely to increase taxpayer costs and produce lower quality outcomes as compared to outsourcing to a competitive private sector provider. It also recommends changes in the assessment and evaluation of government activities to increase transparency and critical evaluation of potential savings from outsourcing whenever the government competes with the private sector.

Bank equity risk under bailout programs of loan guarantee and/or equity capital injection

We analyze the implication of a bailout package including a loan guarantee and a direct equity capital injection on the equity risk of a distressed bank at the taxpayer costs. The lending function with a loan guarantee of the bank creates the need to model equity as a down-and-out call (DOC) option with a capital injection due to the bank in distress. We provide validation of the DOC model by showing that the values of down-and-out call at various levels of bailout are economically significant for the distressed bank. We show that a loan guarantee, a capital injection, or a combination of the two tends to be successful in improving bank equity return. From an equity-return perspective, the bank prefers the combined package to either the solo bailout. Alternatively, from an equity-risk perspective, the government (and thus the taxpayers) prefers either the solo bailout to the combined package. The results may cast doubt on the effectiveness of the combined rescue program to simultaneously exert equity return-increasing and equity risk-reducing effects on the distressed bank.

The impact on taxpayer costs of a jail diversion program for people with serious mental illness

Mental illness is prevalent among those incarcerated. Jail diversion is one means by which people with mental illness are treated in the community – often with some criminal justice system oversight – instead of being incarcerated. Jail diversion may lead to immediate reductions in taxpayer costs because the person is no longer significantly engaged with the criminal justice system. It may also lead to longer term reductions in costs because effective treatment may ameliorate symptoms, reduce the number of future offenses, and thus subsequent arrests and incarceration. This study estimates the impact on taxpayer costs of a model jail diversion program for people with serious mental illness. Administrative data on criminal justice and treatment events were combined with primary and secondary data on the costs of each event. Propensity score methods and a quasi-experimental design were used to compare treatment and criminal justice costs for a group of people who were diverted to a group of people who were not diverted. Diversion was associated with approximately $2800 lower taxpayer costs per person 2 years after the point of diversion (p<.05). Reductions in criminal justice costs drove this result. Jail diversion for people with mental illness may thus be justified fiscally.

Increasing the Value of MTO Research for Housing Policy Development

The Moving to Opportunity for Fair Housing Demonstration Program (MTO) has estimated the effects of two concrete reforms of low-income housing policy on one important group affected by them. Reforms of this type have received, and will continue to receive, serious consideration in housing policy debates. At this stage, it is not feasible to estimate the effects of the MTO reforms on all of the people significantly affected by them. However, it is feasible and desirable to estimate the effects of two similar reforms that would have almost the same effect on the families studied in MTO. These reforms would have no effect on the number of families that receive housing assistance. Instead, they would affect the nature of the housing assistance offered and the taxpayer cost of providing it. One alternative would almost surely have generated cost savings and additional revenue exceeding the cost of the vouchers, thereby providing greater benefits than the current system at a lower taxpayer cost. The MTO results supplemented with estimates of their taxpayer cost would provide a reasonably comprehensive analysis of their effects. This commentary suggests how the taxpayer costs of the alternative reforms might be estimated. Doing it would significantly increase the value of MTO research for housing policy development.

The Law of Unintended Consequences: How the U.S. Biofuel Tax Credit with a Mandate Subsidizes Oil Consumption and Has No Impact on Ethanol Consumption

With a mandate, U.S. policy of ethanol tax credits designed to reduce oil consumption does the exact opposite. A tax credit is a direct gasoline consumption subsidy with no effect on the ethanol price and therefore does not help either corn or ethanol producers. To understand this, consider first the effects of each policy alone (a mandate and a tax credit). Although market prices for ethanol increase under each policy, consumer fuel prices always decline with a tax credit and increase with a mandate except when gasoline supply is less elastic than ethanol supply. To achieve a given ethanol price, the gasoline price is always higher with a mandate compared to a tax credit. A tax credit alone is an ethanol consumption subsidy but most of the benefits go to ethanol producers because ethanol is typically a small share of total fuel consumption. Fuel consumers benefit indirectly to the extent gasoline prices decline with increased ethanol production. With a tax credit or mandate, gasoline consumption declines but more so with a mandate (for a given ethanol price and production level). However, a tax credit with a binding mandate always generates an increase in gasoline consumption, the extent to which depends on the type of mandate. If it is a blend mandate (as in most countries outside the United States), the tax credit acts as a fuel consumption subsidy. Ethanol producers only gain indirectly with the increased ethanol demand resulting from the increase in total fuel consumption. Most of the market effects are due to the mandate with the tax credit only exacerbating the ethanol price increase and causing an increase in the gasoline price but a decrease in the consumer fuel price. For a consumption mandate (as in the United States), the tax credit is even worse as it acts as a gasoline consumption subsidy. Market prices of ethanol do not change, even as the price paid by consumers for gasoline declines (while gasoline market prices rise). A tax credit is therefore a pure waste as it involves huge taxpayer costs while increasing greenhouse gas emissions, local pollution and traffic congestion, while at the same time providing no benefit to either corn or ethanol producers (or in promoting rural development) and fails to reduce the tax costs of farm subsidy programs but generates an increase in the oil price and hence wealth in Middle East countries. These social costs are huge because the new mandate calls for 36 bil. gallons by 2022, to cost over $28 bil. a year in taxpayer monies alone. Even if the mandate is not binding initially, the elimination of the tax credit will cause the mandate to bind or the mandate can be increased so our results still hold.

The unpaid part of the health service

The growing population of older people and the rising prevalence of chronic illness has consequences not only for health services but also for partners and families. There has been much focus upon how health services can be reconfigured to minimise taxpayer costs but if health services are to reduce their contribution to care then others including families will have to increase their care contribution.

Refinancing the College Dream: Access, Equal Opportunity, and Justice for Taxpayers (review)

Reviewed by: Refinancing the College Dream: Access, Equal opportunity, and Justice for Taxpayers Dongbin Kim and Jenny J. Lee Refinancing the College Dream: Access, Equal opportunity, and Justice for Taxpayers Edward P. St. John in collaboration with Eric H. AskerBaltimore: Johns Hopkins University Press, 2003, 272 pages, $44.95 (hardcover) Given rising tuition costs and decreasing student grant aid, postsecondary access for low-income students is one of the greatest challenges facing higher education policy makers today. Written by one of the most influential financial aid analysts in higher education, Refinancing the College Dream: Access, Equal Opportunity, and Justice for Taxpayers,is timely and well addresses this major and growing concern. With his extensive experience and expertise, Edward St. John offers a significant contribution in our understanding of the role of financial aid policy in accessing higher education over the past decades. Beyond the economics of education, the author discusses financial aid within the context of social responsibility and justice. The book is broadly divided into two parts. In part 1, "Understanding the Access Challenge," St. John draws upon John Rawls' theory of justice and develops three indicators to evaluate the effects of finances on college access. The three indicators are: (a) access to higher education, as represented by college enrollment rates for high school graduates; (b) equal opportunity, as represented by the disparity in college enrollment rates across race/ethnic or income groups; and (c) tax payer costs, as represented by tax expenditures per student enrolled in postsecondary education. Using these indicators, St. John analyzes the impact of financial aid policy changes at different periods throughout higher education finance history. The 1970s are defined the period of "equalizing educational opportunity." During this period of time, providing equal educational opportunity was considered a social goal, thus expanding federal and state roles in funding for higher education is justified. His research evidence supports that financial aid in the 1970s sufficiently increased college participation in the 1970s and early 1980s. St. John argues that it was the availability of grants that improved equal opportunity while the availability of loans increased total college participation rates. Higher education finance experienced significant change in the 1980s, which are defined "middle-class assistance." Beyond focusing on federal and state roles in funding for higher education, policy debates on increasing access and equity moved toward reforming K-12 schools. St. John explains that the increased emphasis on loans in the 1980s expanded the access to postsecondary education for the middle-class and increased efficient use of taxpayer dollars, but it also increased disparity in college enrollment rates across race/ethnic and income groups. The 1990s, "justice for taxpayers," show a shift on the burden to pay for college from taxpayers to students and their families. Coupled with the rising costs of attending college, the expansion of merit-based programs, the introduction of tax credits, and the decline in federal grants and state support in higher education, further eroded the equity indicator in the 1990s, while middle and upper classes benefited from the policies. Understanding the importance of academic access along with financial access, St. John provides a "balanced access model" which offers a more complete way of viewing [End Page 130] the effects of policy on access. St. John charges that the National Center for Educational Statistics (NCES) analyses, which have been the main propellers in driving national debates on access from financial policies to academic preparation, failed to consider the role of finances and thus reached misinformed conclusions about the causes of the greater inequality in access to postsecondary participation. The greater disparity in postsecondary participation was not caused by the failure of school reform, but by the reduction in need-based grants. After analyzing the access challenge in part 1, St. John proposes a contingency approach to "meet the access challenge" in part 2. The contingency approach is to inform policymakers about financial and educational reform strategies that can improve access and equalize opportunity in colleges, in states, and at the federal level. The contingency approach is based on the author's effort to balance different values, interests, and concerns as represented in the three indicators: (a) improving access for majority to postsecondary education; (b...

A California Conundrum: Tradeoffs Among Rates, Reliability and the Environment During California’s 2000–2001 Energy Crisis

The 2000–2001 California energy crisis was a public policy problem of huge complexity and scope. Once considered a national and international electric restructuring model, the California system veered far off course in 2000 and 2001 as demand increases, supply shortages, a poorly designed market and abuses of market power led to exorbitant wholesale electricity prices, ongoing threats of blackouts and threats to the environment. The purpose of the paper is to consider actions of policy makers that were undertaken in 2000 and early 2001 to address policy objectives of rates, reliability and the environment within the context of the unfolding energy crisis. The paper develops a theory of how these three objectives can be addressed in a crisis. The paper then examines the actual behavior of policy makers as they developed and implemented various programs to fix or limit the consequences of the electricity crisis. Finally, the paper compares theory to practice. The paper concludes that policy makers prioritized improved reliability over low rates and environmental improvement, and prioritized low rates over environmental improvement. Based on information and predictions available at the time, policy makers’ choices reflected the expected level of degradation of each objective: policy makers believed reliability would suffer more than rates might increase and more than the environment would degrade. However, policy makers’ choices increased taxpayer and ratepayer future costs by billions of dollars.