Wednesday, April 18, 2012

What I Read Today - Wednesday April 18, 2012

From: TaxVox Blog

The Turbo Tax Paradox


Howard Gleckman
Posted on April 17, 2012, 1:23 pm

Like many of you, I just finished my 2011 tax return. Counting worksheets, it was 59 pages long.

It occurs to me that our current insanely complex tax rules are made possible by technology. Yes, computer software makes filing easier (both for professionals and civilians). But that may be the problem.

The relative ease of filing, made possible by programs such as Intuit’s Turbo Tax, also makes it easier for Congress to write incomprehensible tax law.

Have you ever read, for example, Form 6251, the paperwork millions of middle-class households must complete just to figure out whether or not they owe the dreaded Alternative Minimum Tax? The IRS instructions for the form are 12 pages long.

Here, in part, are the instructions for Line 11:

Your ATNOL for a loss year is the excess of the deductions allowed for figuring the AMTI (excluding the ATNOLD) over the income included in the AMTI. Figure this excess with the modifications in section 172(d), taking into account your AMT adjustments and preferences (that is, the section 172(d) modifications must be separately figured for the ATNOL).

Seriously.

In truth, if voters actually had to navigate this gibberish, we’d have a revolution that would make the tea party look like the League of Women Voters. But we don’t. In 2009, 92 percent of us got help, either from a third-party preparer or tax software, the IRS estimates.

We spend $59.95 for software, mindlessly answer questions that often seem entirely disconnected from the specifics of the law, and assume the answer that comes out the other end is correct.

Or we just bundle up of our W2s and 1099s and send them to a professional preparer, who does even more opaque stuff and presents us with a return to sign. Sure, the record keeping is annoying, but we miss the real fun.

In this way, technology both inoculates us from much of the complexity of tax filing and reduces compliance costs. But, more importantly, it immunizes the politicians from the consequences of their decisions that lead to this madness.

Tax complexity isn’t just about the number of forms and their incomprehensible instructions (btw, no criticism intended towards the folks at the IRS who write them. They do the best they can, given the loony law Congress hands them).

The real price of complexity is the very opaqueness of the Tax Code itself. Because we don’t understand the law, we are convinced we are paying more than we owe and that everyone else is paying less.

Yet, tax software allows politicians to add ever more complexity, which we accept with little complaint. Think about the Buffett Rule endorsed by President Obama. The version debated in the Senate this week would create yet another minimum tax that would result in even more complex forms. But, of course, the households making $1 million or more who’d owe this tax would likely never see the forms. They’d just pay the accountant.

Often, critics of tax complexity say the pols themselves should have to fill out their own returns. I disagree. It would be much more effective if the rest of us had to do it. If we did, I predict tax simplification would be more popular than Dancing with the Stars.

So I’m starting a new movement: Ban tax software and professional preparers for just one year. And see what happens.

Happy tax day.

What I Read Today - Wednesday April 18, 2012

From: The New York Times

One for the Country


By THOMAS L. FRIEDMAN

I had to catch a train in Washington last week. The paved street in the traffic circle around Union Station was in such poor condition that I felt as though I was on a roller coaster. I traveled on the Amtrak Acela, our sorry excuse for a fast train, on which I had so many dropped calls on my cellphone that you’d have thought I was on a remote desert island, not traveling from Washington to New York City. When I got back to Union Station, the escalator in the parking garage was broken. Maybe you’ve gotten used to all this and have stopped noticing. I haven’t. Our country needs a renewal.

And that is why I still hope Michael Bloomberg will reconsider running for president as an independent candidate, if only to participate in the presidential debates and give our two-party system the shock it needs.

President Obama has significant achievements to his record. He has done a solid job stemming the economic crisis he inherited and a good job managing national security and initiating important reforms — from health care to auto mileage standards.

But with Europe in peril, China and America wobbling, the Arab world in turmoil, energy prices spiraling and the climate changing, we are facing some real storms ahead. We need to weatherproof our American house — and fast — in order to ensure that America remains a rock of stability for the world. To do that, we’ll have to make some big, hard decisions soon — and to do that successfully will require presidential leadership in the next four years of the highest caliber.

This election has to be about those hard choices, smart investments and shared sacrifices — how we set our economy on a clear-cut path of near-term, job-growing improvements in infrastructure and education and on a long-term pathway to serious fiscal, tax and entitlement reform. The next president has to have a mandate to do all of this.

But, today, neither party is generating that mandate — talking seriously enough about the taxes that will have to be raised or the entitlement spending that will have to be cut to put us on sustainable footing, let alone offering an inspired vision of American renewal that might motivate such sacrifice. That’s why I still believe that the national debate would benefit from the entrance of a substantial independent candidate — like the straight-talking, socially moderate and fiscally conservative Bloomberg — who could challenge, and maybe even improve, both major-party presidential candidates by speaking honestly about what is needed to restore the foundations of America’s global leadership before we implode.

Mitt Romney can’t do that because of his ludicrous opposition to any tax hikes. President Obama, who has a plan to cut, tax and invest — albeit insufficiently — could lead, but, for now, he seems preoccupied with some rather uninspiring small ball, preferring proposals like “the Buffett tax” over comprehensive tax reform that would lower all rates, eliminate deductions and raise more revenue. Sebastian Mallaby, a global economy expert, was right when he wrote in The Financial Times last week that the rich should pay higher taxes, but “a clever campaign gambit is a poor substitute for a serious proposal. By focusing his rhetoric on the Buffett tax, Mr. Obama is fumbling his best chance to win a mandate for intelligent reform — reform, moreover, that ought to be the centerpiece of a second term.”

Bloomberg doesn’t have to win to succeed — or even stay in the race to the very end. Simply by running, participating in the debates and doing respectably in the polls — 15 to 20 percent — he could change the dynamic of the election and, most importantly, the course of the next administration, no matter who heads it. By running on important issues and offering sensible programs for addressing them — and showing that he had the support of the growing number of Americans who describe themselves as independents — he would compel the two candidates to gravitate toward some of his positions as Election Day neared. And, by taking part in the televised debates, he could impose a dose of reality on the election that would otherwise be missing. Congress would have to take note.

“The right kind of independent candidate would explain that the real question on taxes, once the economy is back on track, is this: Given that taxes have to rise, how should we raise the revenue we need in ways that are best for the economy?” wrote the columnist Matt Miller in The Washington Post last week. “The answer would involve lower taxes on payrolls and corporate income, and higher taxes on dirty energy and consumption.”

After his mayoral term is over in 2013, Bloomberg will apparently spend more time running his foundation. That’s commendable. But the single greatest act of philanthropy he could do for the country is right now: run for president as an independent, at least long enough to participate in all the debates. If he doesn’t, and this turns into a presidential race to the bottom, he could donate every dollar he has to fix things in America and they’d be wasted, or, more accurately, overwhelmed by our mounting problems. The most patriotic thing Bloomberg could do is become an unpaid lobbyist for the country — and for the next generation of Americans.

Tuesday, April 17, 2012

What I Read Today - Tuesday April 17, 2012

From: The New York Times

April 16, 2012


The White House ArgumentBy DAVID BROOKS

I’ve been critical of President Obama’s budgets. I’ve argued that while I like the way Obama preserves spending on things like scientific research and programs for the vulnerable, he doesn’t do enough to avoid a debt crisis.

I’ve based that argument on certain facts. President Obama’s 2013 budget will add roughly $6 trillion to the nation’s debt over the next 10 years. By 2022, Americans will be spending $915 billion on interest payments on the debt alone, a number far larger than that year’s entire defense budget.

If you look further out, the situation is worse. According to the Committee for a Responsible Federal Budget, by 2050, Representative Paul Ryan’s budget would cut total public debt to 10 percent of G.D.P. Current law would put debt at 42 percent of G.D.P. Under the Obama budget, debt would skyrocket to 124 percent of G.D.P.

Extremely senior members of the administration believe these sorts of criticisms are completely unfair and vastly underestimate their fiscal hawkishness. In this column, I thought it only fair that I provide you with a summary of their arguments.

First, their goals. They argue that it’s foolish to try to solve the debt problem with some drastic magic bullet all at once. It’s smarter to stabilize the debt while also looking after other needs, like protecting the vulnerable and investing in things that boost growth and mobility.

They argue that the president’s 2013 budget is a step toward fiscal stability that will also pave the way for bigger steps in the years ahead. They estimate that their budget would produce $5 trillion in budget savings over a decade. It would raise $1.5 trillion in new revenue by raising taxes on those making more than $250,000 a year.

There would also be a broad range of spending cuts. These include the $1.7 trillion in cuts the administration agreed to in the budget deals with Republicans over the summer, and several others (including the somewhat gimmicky $617 billion “cut” by not fighting the wars in Iraq and Afghanistan for another decade).

Further, the president is parsimonious when it comes to domestic spending. The White House has prepared a series of charts to illustrate the administration’s fiscal discipline. The most interesting concerns domestic discretionary spending, which is spending on things like education, welfare and social support. Going back to 1962, domestic spending has hovered around 3.3 percent of G.D.P. In big-spending years (the Jimmy Carter years), it rose to about 4.4 percent. In low-spending years (Ronald Reagan’s and Bill Clinton’s second terms), it fell to about 2.9 percent of G.D.P.

During Obama’s presidency, domestic spending topped out at 4 percent of G.D.P. But, in the Obama budget, over the next 10 years, that spending would fall to 2.2 percent, much lower than anything Reagan achieved. Under Paul Ryan’s budget, by the way, that spending would fall to 1.8 percent, which the Obama administration regards as savagely low.

These officials say the administration has also made modest but important progress in controlling Medicare spending, the biggest debt driver. The budget raises some Medicare premiums on high-income retirees and increases some deductibles. White House officials say they have taken enormous heat from the left for putting some structural Medicare reforms on the table — cutting benefits, raising eligibility ages and changing cost-of-living adjustments. Republican leaders, they point out, have not done anything that brave.

Over all, they continue, the president’s budget stabilizes the debt in a way that is relatively gimmick-free. Annual federal deficits, which are at about 8 percent now, would come down to around 3 percent between 2015 and 2022.

The total federal debt is now at about 74 percent of G.D.P. Under Obama’s plan, it would rise to 78.4 percent of G.D.P. in 2014 and then stabilize at about 76.5 percent from 2018 to 2022.

Basically, what we’re looking at is a period of stability, administration officials say, which would soothe credit markets and give us time to make further adjustments. This, they conclude, is responsible prudence.

I’m not going to pass my own comprehensive judgment on this here. I’ll just say that my conversations reaffirm my conviction that Obama is a pragmatic liberal who cares about fiscal sustainability, who has been willing to compromise for its sake, but who has not offered anything close to a sufficient program to avoid a debt crisis.

But we have a campaign in front of us. If the president is truly committed to a strategy for progressive fiscal stability, as Bill Clinton was, he’ll make that the center of his campaign. He’ll earn a mandate. He’ll win over independents who want fiscal discipline but worry about the way Republicans get there.

If he doesn’t have a passion for fiscal stability, he’ll campaign on side issues and try to win by scaring everybody about the other side.

We’ll see.

Friday, April 13, 2012

What I Read Today - Friday April 13, 2012

From: The Wall Street Journal

It's Over. What Have We Learned? The GOP still practices primogeniture, but much else has changed in politics.

By PEGGY NOONAN


So what have we learned? The GOP presidential contest of 2012 is over. Mitt Romney will be the Republican nominee. What do we know now that we didn't know in 2011, when the campaign began? Or what do we know that we already knew, but now we've been reminded?

We learned that primogeniture is still a force in the GOP. The next king is the firstborn son of the current king. In political terms, the guy who came in second in the last presidential cycle stands most likely to be crowned and anointed in the current one. Republicans, for all their drama, still tend toward the orderly and still credit experience.

Running for president is serious business. You need money, fund-raising networks, organization, a campaign. You have to get on the ballot in Virginia, you have to field full slates. Mitt Romney learned all this in 2008. He was the only non-newbie in 2012.

Rick Perry, Herman Cain and Michele Bachmann did not fully comprehend what goes into the process. Newt Gingrich didn't care.

We learned the system is newly open to vanity productions—Messrs. Cain and Gingrich, Donald Trump. We learned Super PACs allow freelancers, and freelancers feel no loyalty to the party brand. They'll say anything, the larger impact isn't their problem. They are there to sell books, to further their personal project. We will see more of this, on both sides. It will not leave the process ennobled.

We learned that proportional representation is a bad idea when you're up against a sitting president. It drags the system out, robs state victories of meaning, makes everything more common and dreary, and leaves serious candidates open to ceaseless attacks from all quarters. Mr. Romney's negatives are up, not down, as the contest ends.

The Republican Party is a conservative party. All its front-runners held conservative views on taxing, spending, regulation, the power of the state. There is no national GOP market for liberal or liberalish Republicans. There is little market for national candidates who don't adopt the tropes, simulate the resentments, or feel some of the anguish of the base. Mr. Gingrich worked the resentments—at one point he made fun of Mr. Romney for using the word "resolute" because it's fancy and not plain like all us regular folk. (At other times he bragged of authoring 24 books. He was hard to keep up with.) Rick Santorum captured some of the anguish, both culturally and economically. Jon Huntsman was hobbled because he didn't seem to identify on any level with Republicans on the ground, or particularly like them. Voters don't take to you when they know you don't take to them. Sarcastic tweets about global warming were not the beginning of his campaign, but the end.

Affection matters.

We learned that rescue fantasies were fantasies. Mitch Daniels, Chris Christie and Jeb Bush stayed out. The people who said, "Don't look for salvation from the sidelines," were correct. Newton's third law of political physics: People running for president tend to run for president, people not running tend not to run. Believe them when they tell you for the third time that they won't.

Evangelicals are an ever-dominant part of the base, but they don't march in lockstep. Like all huge blocs they encompass all levels of affluence, education, attainment and aspiration. But one thing was clear this year: The old evangelical reserve, or animosity, toward Catholics is dead. It was the Mormon who carried the Catholic vote. The Catholic Mr. Santorum drew evangelical Protestants. America is great in part because it's always scrambling its categories and changing its clichés.

We learned Mitt Romney is not a greatly improved candidate from four years ago. He has endurance and discipline: He wants this thing. The reason why is still not fully clear. His political instincts and sense of subject matter are not much better than they were in 2008. The awkwardness continues. A major if largely unspoken Republican criticism of Mr. Romney is exactly like a major if largely unspoken Democratic criticism of President Obama: He'll meet with you, he's polite and appropriate, but he gives no sign afterward that he heard you, that he absorbed or pondered what you said. Nor is his campaign greatly improved. It gets the job done but it is stolid, unimaginative, small-bore. There's a managerial tightness. People are afraid to make decisions, and pass the buck upward. A major surrogate calls the campaign "the Romney labyrinth."

Mr. Romney has a woman problem? "Romney was saved by women, and they buried Newt," notes former George H.W. Bush aide Lloyd Green, who studies voting tables. After Mr. Gingrich won his blowout in South Carolina, women went for Mr. Romney in Florida by 24 points. He won men by only five. In Ohio, women voted 40% for Romney to 37% for Mr. Santorum, who won men by one point. In Michigan, Romney won women again. "Personal probity matters in the GOP," said Green. "Newt and Herman Cain are Exhibits 1 and 2."

What is the biggest gift Romney has been given this year by the Democratic party? Hilary Rosen's ill thought, ill-spoken, snotty remark that Ann Romney "never worked a day in her life."

Ann Romney raised five children with a husband who sometimes traveled. A mother of five will be suffering from exhaustion, not laziness, and certainly not a lack of engagement in the realities and stresses of life. Where do the Democrats get these spokesmen who are so unsympathetic, so narrow in their vision and understanding of women's lives? What are they launching, a war on women?

Finally, in foreign affairs the Republican candidates staked out dangerous ground. They want to show they're strong on defense. Fine, we should have a strong defense, the best in the world. But that is different from having an aggressive foreign policy stance, and every one of the GOP candidates, with the exceptions of Ron Paul and Jon Huntsman, was aggressive. This is how their debates sounded: We should bomb Iran Thursday. No, stupid, we should bomb Iran on Wednesday. How could you be so foolish? You know we do all our bombings on Monday. You're wrong, we send in the destroyers and arm the insurgents on Monday.

There was no room for discretion, prudence, nuance, to use unjustly maligned terms. There was no room for an expressed bias toward not-fighting. But grown-ups really do have a bias toward not-fighting.

They are allowing the GOP to be painted as the war party. They are ceding all nonwar ground to the president, who can come forward as the sober, constrained, nonbellicose contender. Do they want that? Are they under the impression America is hungry for another war? Really? After the past 11 years?

The GOP used to be derided by Democrats as the John Wayne party: it loved shoot-'em-ups. Actually, John Wayne didn't ride into town itching for a fight, and he didn't ride in shooting off his mouth, either. He was laconic, observant. He rode in hoping for peace, but if something broke out he was ready. He had a gun, it was loaded, and he knew how to use it if he had to.

But he didn't want to have to. Which was part of his character's power. The GOP should go back to being John Wayne.

Tuesday, April 10, 2012

What I Read Today - Tuesday April 10, 2012

From: The New York Times

April 9, 2012


The Two Economies
By DAVID BROOKS

The creative dynamism of American business is astounding and a little terrifying. Over the past five years, amid turmoil and uncertainty, American businesses have shed employees, becoming more efficient and more productive. According to The Wall Street Journal on Monday, the revenue per employee at S.&P. 500 companies increased from $378,000 in 2007 to $420,000 in 2011.

These efficiency gains are boosting the American economy overall and American exports in particular. Two years ago, President Obama promised to double exports over the next five years. The U.S. might actually meet that target. As Tyler Cowen reports in a fantastic article in The American Interest called “What Export-Oriented America Means,” American exports are surging.

Cowen argues that America’s export strength will only build in the years ahead. He points to three trends that will boost the nation’s economic performance. First, smart machines. China and other low-wage countries have a huge advantage when factory floors are crowded with workers. But we are moving to an age of quiet factories, with more robots and better software. That reduces the importance of wage rates. It boosts American companies that make software and smart machines.

Then there is the shale oil and gas revolution. In the past year, fracking, a technology pioneered in the United States, has given us access to vast amounts of U.S. energy that can be sold abroad. Europe and Asian nations have much less capacity. As long as fracking can be done responsibly, U.S. exports should surge.

Finally, there is the growth of the global middle class. When China, India and such places were first climbing the income ladder, they imported a lot of raw materials from places like Canada, Australia and Chile to fuel the early stages of their economic growth. But, in the coming decades, as their consumers get richer, they will be importing more pharmaceuticals, semiconductors, planes and entertainment, important American products.

If Cowen’s case is right, the U.S. is not a nation in decline. We may be in the early days of an export boom that will eventually power an economic revival, including a manufacturing revival. But, as Cowen emphasizes, this does not mean nirvana is at hand.

His work leaves the impression that there are two interrelated American economies. On the one hand, there is the globalized tradable sector — companies that have to compete with everybody everywhere. These companies, with the sword of foreign competition hanging over them, have become relentlessly dynamic and very (sometimes brutally) efficient.

On the other hand, there is a large sector of the economy that does not face this global competition — health care, education and government. Leaders in this economy try to improve productivity and use new technologies, but they are not compelled by do-or-die pressure, and their pace of change is slower.

A rift is opening up. The first, globalized sector is producing a lot of the productivity gains, but it is not producing a lot of the jobs. The second more protected sector is producing more jobs, but not as many productivity gains. The hypercompetitive globalized economy generates enormous profits, while the second, less tradable economy is where more Americans actually live.

In politics, we are beginning to see conflicts between those who live in Economy I and those who live in Economy II. Republicans often live in and love the efficient globalized sector and believe it should be a model for the entire society. They want to use private health care markets and choice-oriented education reforms to make society as dynamic, creative and efficient as Economy I.

Democrats are more likely to live in and respect the values of the second sector. They emphasize the destructive side of Economy I streamlining — the huge profits at the top and the stagnant wages at the middle. They want to tamp down some of the streamlining in the global economy sector and protect health care, education and government from its remorseless logic.

Republicans believe the globalized sector is racing far out in front of government, adapting in ways inevitable and proper. If given enough freedom, Economy I entrepreneurs will create the future jobs we need. Government should prepare people to enter that sector but get out of its way as much as possible.

Democrats are more optimistic that government can enhance the productivity of the global sectors of the economy while redirecting their benefits. They want to use Economy I to subsidize Economy II.

I don’t know which coalition will gain the upper hand. But I do think today’s arguments are rooted in growing structural rifts. There’s an urgent need to understand the interplay between the two different sectors. I’d also add that it’s not always easy to be in one of those pockets — including the media and higher education — that are making the bumpy transition from Economy II to Economy I.

Tuesday, March 27, 2012

What I Read Today - Tuesday March 27, 2012

From: The New York Times

Step to the Center


By DAVID BROOKS

On May 23-24, 1865, the victorious Union armies marched through Washington. The columns of troops stretched back 25 miles. They marched as a single mass, clad in blue, their bayonets pointing skyward.

As Wilfred McClay wrote in his book, “The Masterless,” spectators were transfixed and realized that the war had changed them. These troops had gone to war as a coalition of states, with different uniforms in different colors. But they came back as a centralized unit, with a national identity and consciousness.

American history can be seen as a series of centralizing events — the Civil War, World Wars I and II, the Progressive Era, the New Deal and the Great Society.

Many liberals have tended to look at this centralizing process as synonymous with modernization — as inevitable and proper. As problems like inequality get bigger, government has to become more centralized to deal with them. As corporations grow, government has to grow to counterbalance them.

Many conservatives have looked at these inexorable steps toward centralization with growing alarm. Complicated problems, many have argued, are best addressed by local people on the ground. Centralized government inevitably leads to oligarchic government. The virtue of the citizenry depends on local control, personal initiative and intimate connections. These things are being bleached away.

The Obama health care law represents another crucial moment in the move toward centralization. With its state insurance exchanges, Obamacare is not as centralized as a single-payer system. Still, it centralizes authority in at least four ways.

First, while government has always had the power to regulate contracts and business activity, Obamacare compels people to enter into activity so that it can regulate them. This new ability to compel activity opens up vast new powers.

Second, Obamacare centralizes Medicare decisions — and the power of life and death — within an unelected Independent Payment Advisory Board. Fifteen experts are charged with controlling costs from the top down.

Third, Obamacare would continue the centralization of the nation’s resources — absorbing an estimated $1.76 trillion over the next 10 years.

Finally, it would effectively make health care a political responsibility. When you go to a campaign town hall in, say, Britain, you discover that many of the questions are about why somebody’s back or dental surgery didn’t go well and what the candidate can do to fix it. Once voters assume that national politicians are responsible for their health care, national politicians become more active in running the health system.

So this is a big moment. Obamacare forces us again to have an election about how centralized government should be.

Those of us in the Hamiltonian tradition sit crossways in this debate. Alexander Hamilton was not shy about concentrating power in Washington if he thought centralized authority was necessary to achieve national goals. On the other hand, he did not believe central decision-makers had the ability to direct an infinitely complex and changing world. He centralized goal-setting while decentralizing decision-making.

In that tradition, my own view is that the individual mandate is perfectly acceptable policy. We effectively have a national health care system. We all indirectly pay for ill, uninsured people who show up at emergency rooms. If all Americans are in the same interconnected health care system, I think it’s reasonable for government to insist that all Americans participate in the insurance network that is the payment method for that system.

But I think the Obama administration made a disastrous error in centralizing so many of the cost-control elements of the new health care system. I don’t care how many comparative effectiveness research studies are commissioned, there is no way centralized dirigistes can keep up with a complex, innovative system. There is no way government can adapt quickly to failure.

There is no way planners can know how many employers will drop coverage, how many doctors will refuse to see patients in expanded Medicaid, how to write uniform rules governing the state insurance exchanges, how many people will or won’t enter high-risk pools, how Congress will undermine any painful cuts the executive branch does make, how doctors will evade efforts to control their revenue, how doctor shortages will pop up, how spending is best controlled.

From a Hamiltonian perspective, the decentralized premium support model is a better way to control costs: government insists everybody has coverage but then encourages companies, families and Medicare beneficiaries to engage in a regulated process of discovery to find the best care at the lowest cost.

So, yes, let’s have another round in the debate about how centralized American government should be. Let’s watch liberals and conservatives duke it out. But remember there has always been a Hamiltonian alternative: centralize the goals, but decentralize the means people take to get there. Universal coverage is a worthy goal. Decentralized competition is the way to make it affordable.

Friday, March 23, 2012

What I Read Today - Friday March 23, 2012

From: The New York Times

The Relationship School


By DAVID BROOKS

Usually when you visit a school you walk down a quiet hallway and peer in the little windows in the classroom doors. You see one teacher talking to a bunch of students. Every 50 minutes or so a chime goes off and the students fill the hallway and march off to their next class, which is probably unrelated to the one they just left.

When you visit The New American Academy, an elementary school serving poor minority kids in Crown Heights, Brooklyn, you see big open rooms with 60 students and four teachers. The students are generally in three clumps in different areas working on different activities. The teachers, especially the master teacher who is floating between the clumps, are on the move, hovering over one student, then the next. It is less like a factory for learning and more like a postindustrial workshop, or even an extended family compound.

The teachers are not solitary. They are constantly interacting as an ensemble. Students can see them working together and learning from each other. The students are controlled less by uniform rules than by the constant informal nudges from the teachers all around.

The New American Academy is led by Shimon Waronker, who grew up speaking Spanish in South America, became a U.S. Army intelligence officer, became an increasingly observant Jew, studied at yeshiva, joined the Chabad-Lubavitch movement, became a public schoolteacher and then studied at the New York City Leadership Academy, which Mayor Michael Bloomberg and the former New York Schools chancellor, Joel Klein, founded to train promising school principal candidates.

Just another average résumé.

At first, he had trouble getting a principal’s job because people weren’t sure how a guy with a beard, kippa and a black suit would do in overwhelmingly minority schools. But he revitalized one of the most violent junior high schools in the South Bronx and with the strong backing of both Klein and Randi Weingarten, the president of the teachers’ union, he was able to found his brainchild, The New American Academy.

He has a grand theory to transform American education, which he developed with others at the Harvard School of Education. The American education model, he says, was actually copied from the 18th-century Prussian model designed to create docile subjects and factory workers. He wants schools to operate more like the networked collaborative world of today.

He talks fervently like a guerrilla leader up in the mountains with plans to take over the whole country. For the grandly titled New American Academy, he didn’t invent new approaches, as much as combine ones from a bunch of other schools.

Like the Waldorf schools, teachers move up with the same children year after year. Like Hogwarts, students are grouped into Houses. Like Phillips Exeter Academy, students are less likely to sit at individual desks than around big tables or areas for teacher-led discussions.

The students seem to do a lot more public speaking, with teachers working hard to get them to use full sentences and proper diction. The subjects in the early grades (the only ones that exist so far) are interdisciplinary, with a bias toward engineering: how flight, agriculture, transportation and communications systems work. The organizational structure of the school is flattened. Nearly everybody is pushed to the front lines, in the classroom, and salaries are higher (master teachers make $120,000 a year).

The New American Academy takes a different approach than the other exciting new education model, the “No Excuses” schools like Kipp Academy. New American is less structured. That was a problem at first, but Waronker says the academy has learned to get better control over students, and, on the day I visited, the school was well disciplined through the use of a bunch of subtle tricks.

For example, even though students move from one open area to the next, they line up single file, walk through an imaginary doorway, and greet the teacher before entering her domain.

The New American Academy has two big advantages as a reform model. First, instead of running against the education establishment, it grows out of it and is being embraced by the teachers’ unions and the education schools. If it works, it can spread faster.

Second, it does a tremendous job of nurturing relationships. Since people learn from people they love, education is fundamentally about the relationship between a teacher and student. By insisting on constant informal contact and by preserving that contact year after year, The New American Academy has the potential to create richer, mentorlike or even familylike relationships for students who are not rich in those things.

It’s too soon to say if it will work, especially if it’s tried without Waronker and the crème-de-la-crème teachers he has recruited, but The New American Academy is a great experiment, one of many now bubbling across the world of education.