‘Virginia Shouldn’t Enable Federal Takeover of Health Care’
Bart Hinkle has an excellent column in the Richmond Times-Dispatch about why Virginia—and all states—should refuse to create one of Obamacare’s health insurance “exchanges”:
Any state exchange will have to abide by the Obama administration’s directives… If Washington is going to dictate the terms, why should Virginia foot the bill?
The Laffer Curve Works, Even in France
One year ago, I wrote about how the French government was getting unexpected additional revenues following the implementation of lower tax rates.
This is the Laffer Curve in action, and it’s happening again in France, only this time because the government reduced the wealth tax.
Here’s part of the story at Tax-news.com.
France’s solidarity tax on wealth (l’impôt de solidarité sur la fortune – ISF), which was radically reformed by the government in June last year, has served to yield much greater fiscal revenues for the state than initially predicted.
…[T]he government agreed that the solidarity tax on wealth would in future comprise of only two tax brackets: a 0.25% tax rate imposed on individuals with net taxable wealth in excess of EUR1.3m (USD1.7m), and a 0.5% tax rate levied on individuals with net taxable assets above EUR3m. Previously, the entry threshold at which wealth tax was applied was EUR800,000, with the rates varying between 0.55% and 1.8%. To alleviate any threshold effects, a discount mechanism was also instated applicable to wealth of between EUR1.3m and EUR1.4m, as well as to wealth of between EUR3m and EUR3.2m. Although the new provisions provide for lower tax rates and for the abolition of the first tax bracket, effectively exempting around 300,000 taxpayers from the tax, according to latest government figures, the tax yielded around EUR4.3bn in 2011, almost EUR60m more than originally forecast in the collective budget.
This is not to say that France is an example to follow. There shouldn’t be any wealth tax, and income tax rates are still far too high.
And it’s also worth remembering that tax policy is just one of many factors that determine economic performance.
That being said, nations that shift from terrible tax policy to bad tax policy will enjoy better economic performance, just as nations that go from good policy to great policy also will reap benefits.
In other words, incremental changes make a difference. That’s even the case when the politicians impose a “Snooki tax” on indoor tanning services.
The most dramatic Laffer Curve effects, though, occur when there are big changes in policy. The video after the jump looks at some of the evidence.
Romneycare & Free Riders
During last night’s GOP presidential debate, Rick Santorum and Mitt Romney had a polite disagreement over Romneycare’s impact on free-ridership in Massachusetts. The short version: Santorum was right. Romney and even FactCheck.org disputed Santorum’s claim, but they misunderstood it.
The exchange comes 2:15 into this video from Kaiser Health News:
Here’s the Kaiser Health News transcript:
SANTORUM: Just so I understand this, in Massachusetts, everybody is mandated as a condition of breathing in Massachusetts, to buy health insurance, and if you don’t, and if you don’t, you have to pay a fine.
What has happened in Massachusetts is that people are now paying the fine because health insurance is so expensive. And you have a pre-existing condition clause in yours, just like Barack Obama.
So what is happening in Massachusetts, the people that Governor Romney said he wanted to go after, the people that were free-riding, free ridership has gone up five-fold in Massachusetts. Five times the rate it was before. Why? Because…
ROMNEY: That’s total, complete…
SANTORUM: I’ll be happy to give you the study. Five times the rate it has gone up. Why? Because people are ready to pay a cheaper fine and then be able to sign up to insurance, which are now guaranteed under “Romney-care,” than pay high cost insurance, which is what has happened as a result of “Romney-care.”
ROMNEY: First of all, it’s not worth getting angry about. Secondly, the…
(APPLAUSE)
ROMNEY: Secondly, 98 percent of the people have insurance. And so the idea that more people are free-riding the system is simply impossible. Half of those people got insurance on their own. Others got help in buying the insurance.
The First Amendment Protects Students’ Rights to Speak on Religious Subjects
If the First Amendment means anything, then school officials cannot prohibit students from handing out gifts with Christmas messages due to the religious content of those messages. Nonetheless, the Fifth Circuit held en banc that student speech rights are not “clearly established,” and that, therefore, two Plano, Texas officials could invoke qualified immunity to shield themselves from liability for doing so.
Yesterday Cato filed an amicus brief supporting the students’ request that the Supreme Court hear their case—our third brief in this long-running saga. We argue that educators have fair warning that viewpoint-based discrimination against student speech violates the First Amendment and thus may not invoke qualified immunity.
While the Fifth Circuit held that a constitutional right must have previously been defined with a “high degree of particularity” in a case that is “specific[ally] and factually analogous” to be clearly established, the Supreme Court has repeatedly said that neither “fundamentally similar” nor “materially similar” cases are required and that general statements of law can give fair warning. Indeed, if the Fifth Circuit’s qualified-immunity standard is upheld, it will be so difficult to establish fair warning for unconstitutional actions that qualified immunity will cease to be “qualified.”
Student speech rights were clearly established by the foundational student-rights case of Tinker v. Des Moines School District (1969), wherein the Court held that student speech cannot be suppressed unless the speech will “materially and substantially disrupt the work and discipline of the school,” subject to limited exceptions. Such exceptions include lewd or vulgar speech, or speech that may reasonably be viewed as advocating unlawful drug use. Certainly the student speech at issue here, which included Christmas greetings written on candy canes, and pencils and other small gifts with messages like “Jesus loves me, this I know, for the Bible tells me so,” does not fall under those exceptions.
We further argue that the same standard for determining whether a law is clearly established should determine whether a court can look to nonbinding precedent; if Supreme Court and relevant-circuit precedent is on point, courts should not look to authority from other jurisdictions. These standards maintain the proper balance between providing officials with fair notice of behavior that could result in civil liability and ensuring that individuals have legal recourse when their rights are violated.
The Supreme Court will decide later this winter whether to take the case, Morgan v. Swanson, and hear argument in the fall.
Thanks to Cato legal associate Anastasia Killian for her help with this post, and with our brief.
What Ron Paul Talks About
The New York Times has an interesting graphic, under the heading “Choice Words,” that shows how differently Ron Paul talks about the role of government from all the other candidates. There’s a complete version here, but I’ve excerpted a section. The Times notes that the graphic depicts “selected words used by President Obama in his State of the Union addresses, and by Republican presidential candidates in their debates, television interviews and major speeches since May.”
Obama Is Avoiding the Tough College Course
College prices truly are ridiculous. But someone needs to tell President Obama that the root problem isn’t the colleges, which he is expected to announce today will be the targets of proposed sanctions should they raise prices too fast. No, the problem, Mr. President, is a federal government that wants to play Santa Claus by giving everybody, no matter how poorly qualified or unmotivated, money for college.
As I itemized in How Much Ivory Does This Tower Need? What We Spend on, and Get from, Higher Education, total aid in the form of federal grants and loans (I didn’t even get into tax credits and deductions) ballooned from inflation-adjusted $29.6 billion in 1985 to $139.7 billion in 2010. That is mammoth, and it probably helped not just colleges to enrich themselves, but enrollment to expand from 8.9 million full-time equivalent students in 1985 to 15.5 million in 2010.
But that latter part is good, right? Doesn’t that giant enrollment increase mean we’ve been “educating ourselves to a better economy,” to steal a favorite Obama administration catch phrase?
It might, if all those people were attaining important skills and graduating. But they haven’t been. You can get more details in my paper — and yes, some of the following stats are probably somewhat low because they’re for first-time, full-time students — but the higher ed outcomes appear dismal no matter what:
- The most recent six-year graduation rate for students in four-year programs was 57.3 percent
- The most recent three-year graduation rate for students in two-year programs was a minute 27.5 percent
- Roughly a third of people who manage to get bachelor’s degrees are in jobs that don’t require them, up from about 11 percent in 1967
- According to recent research by Richard Arum and Josipa Roksa, 45 percent of students learn nothing in their first two years of college, and 36 percent nothing in four years
- Between 1992 and 2003, the percentage of bachelor’s holders proficient in prose literacy dropped from 40 to 31 percent, and in document literacy from 37 to 25 percent, on the National Assessment of Adult Literacy
What does all this — and more that’s in the paper — tell us? That millions of the people taxpayers are sending to college are getting little if anything out of it, while the colleges rake in heavy dough. But that means the root problem isn’t the colleges — they are just taking the people government sends them — it is the federally dominated funding system that insists on giving dollars to almost any warm body that declares it wants to experience ivy-covered walls and frat parties.
In light of this depressing reality, if the president really wants to rein in costs he will call for significanlty reducing student aid, both the amount available to individual students, and the numbers of students eligible.
That, though, will probably not happen. Not only did the president talk up keeping aid cheap and casting an even wider net in his State of the Union, but taking the right course — cutting aid — means taking the politically tough course. And neither this president, nor almost anyone else in Washington, has ever signalled real willingness to do that. It’s just much easier to keep giving money away.
‘Professor Cornpone: Ethanol Lobbyist Newt Gingrich—and the Future of the GOP’
The title is from a Wall Street Journal editorial in January of 2011. I commented on Gingrich’s response to that editorial in the following excerpt from a chapter I wrote for a recently published book by Robert E. Looney, ed., Handbook of Oil Politics, Routledge (2012):
Even if draconian belt-tightening by U.S. motorists could significantly reduce the world price of oil (which is highly doubtful), the benefits of cheaper oil would by definition accrue to other countries. If the U.S. allowed its own industries and consumers to benefit from the supposed drop in world oil prices (as a result of breaking the oil cartel), that would undo the effort to cut imports. Most petroleum consumed in the U.S. is not used by passenger cars and demand for petroleum among commercial, industrial and non-auto transportation sectors would rise if any induced reduction in the world oil price was allowed to be matched by a lower domestic oil price (rather than being offset by taxes or rationing).
Consider the protectionists’ old idea that money spent on buying something useful from another country is just lost to the U.S. economy, so we would be much better off buying everything close to home (regardless what it costs, though they never say that).
Attempting to defend ethanol subsidies and mandates, for example, former Speaker of the House Newt Gingrich wrote, ‘It is in this country’s long-term best interest to stop the flow of $1 billion a day overseas. . . . Think of what $1 billion a day kept in the U.S. economy creating jobs, especially energy jobs which cannot be outsourced, could do.’ That is, of course, a totally false choice. Apologists for subsidies and mandates are not proposing to pay the same price for domestic fuel as we could otherwise pay for an energy-equivalent amount of imported oil – replacing $1 billion of imported fuel with $1 billion of domestic fuel. They are talking about paying much more for domestic fuel than we pay for imported oil. Why else would they be asking for subsidies, tariffs and mandates?
Paying much more for something as important as energy, whether directly or through taxes, makes an economy poorer, and being poorer is no way to create ‘green jobs.’ Money wasted on something like ethanol which politicians favor is money that could otherwise have been spent on something else that consumers favor.
The School Buildings Are Crumbling!!!!!!!!
From the-more-things-change-the-more-they-don’t files, I bring you alarming claims that our nation’s school buildings are crumbling and will soon crush the educational aspirations and physical bodies of children everywhere if more money is not spent, NOW.
In March of 1997, Education Week reported on the growing crisis in the condition of school facilities and inadequate spending:
The stories are familiar to school administrators: gaping holes in school roofs, crumbling walls etched with lead paint, heating systems that don’t work, and other serious structural problems that have become commonplace in many districts. . .
These stories certainly are familiar! Why, President Obama advanced the same tired line in his remarkably forgettable “jobs” plan of late last summer:
And there are schools throughout this country that desperately need renovating. How can we expect our kids to do their best in places that are literally falling apart? This is America. Every child deserves a great school – and we can give it to them, if we act now. The American Jobs Act will repair and modernize at least 35,000 schools. It will put people to work right now fixing roofs and windows; installing science labs and high-speed internet in classrooms all across this country.
Education Week gives voice to fears for the future in 1997:
Unless school leaders can persuade wary voters to pass bond referendums or raise local taxes, there’s often little hope of change . . . Some education leaders say it is getting tougher to pass bond issues when local residents, many of whom do not have school-age children, want lower taxes and are wary of how districts will manage the funds. . . And even if a bond passes, it rarely provides enough money to meet the needs of districts with fast-growing populations, said Carole Kennedy, the president of the National Association of Elementary School Principals.
The funny thing is, spending on school facilities increased at a rapid rate before 1997 and continued on afterward, increasing more than 150 percent in constant dollars from 1989 to 2008.
Government school lobbyists like Carole Kennedy, President Clinton, and President Obama have been successfully squeezing money out of taxpayers for decades based on false claims of crises. And not just for construction. Take a look at this video for everything you need to know about public school spending:
‘We Are Not Deciding between Regulation and Autonomy, We Are Deciding Whether or Not We Want a Puppet Government’
That’s how Charlie Arlinghaus, president of New Hampshire’s Josiah Bartlett Center for Public Policy, describes the decision confronting states about whether to create an ObamaCare Exchange in this op-ed for the New Hampshire Union-Leader.
Filed under: General; Government and Politics; Health Care; Political Philosophy
Headline of the Week: “Consumer Chief Richard Cordray Promises Not to Abuse His Power”
From the Los Angeles Times.
It works on so many levels.
Biennial Budgeting: Baloney Budget Reform
I don’t recall ever agreeing with the left-liberal Center on Budget and Policy Priorities (CBPP), but their new paper on the drawbacks of the federal government switching to biennial budgeting is a good read. Congressional Republicans, including House Budget Committee chairman Paul Ryan (R-WI) and Senate Budget Committee ranking member Jeff Sessions (R-AL), are the chief proponents of switching to a biennial budget cycle. By providing (qualified) support to the CBPP paper, I’m hoping to demonstrate to would-be GOP naysayers that criticism of biennial budgeting isn’t confined to one area of the ideological spectrum.
I don’t agree with everything in the paper and I don’t share some of the authors’ concerns, but here are three solid points that the paper makes:
- In 1940, 44 states practiced biennial budgeting. Currently, only nineteen do. In addition, larger states typically have an annual budget cycle. The authors correctly ask, “if large state governments find that biennial budgeting is not the best approach given the responsibilities they shoulder, is it likely to prove appropriate for an entity with the far more extensive domestic and international responsibilities of the U.S. government?”
- The authors call the claims made by proponents that biennial budgeting will free up more time for oversight “overstated.” Authorizing committees can conduct oversight anytime they want. The appropriation committees conduct oversight when they review agency budget requests each year. What’s the benefit of having oversight conducted by the appropriations committees every two years? (For the record, I think the value of congressional oversight is overstated for public choice reasons, but I’ll play along for today.)
- The authors explain what I consider to be the fatal flaw with biennial budgeting:
The desire of many lawmakers to rein in such supplemental appropriations and reassert meaningful control over all annually appropriated funds — and the practice the Obama Administration has followed of including war funding within the regular defense appropriations bill, which has improved budget transparency — would become much harder to fulfill if biennial budgeting were implemented. It is not possible for Congress effectively to plan ahead for unexpected needs in the second year of a biennium. Large supplemental appropriations to meet such needs outside of the two-year budget plan would almost certainly become a regular part of the budget process and could further erode budget controls and accountability.
(Note: A recent paper from Cato adjunct scholar Veronique de Rugy explains that supplemental appropriations are already a problem.)
As a former budget official in a state that uses biennial budgeting, I just don’t understand what congressional Republicans think they’re going to accomplish. The cynic in me thinks that at least part of the support stems from the unwillingness of most Republicans to get specific on what they’d eliminate from the federal budget. Like the Balanced Budget Amendment, I think a lot of Republicans are simply using biennial budgeting as political cover.
The President’s Spilled-Milk Joke
One of President Obama’s better applause lines the other night came when he stepped into the unaccustomed public role of a deregulator:
We got rid of one rule from 40 years ago that could have forced some dairy farmers to spend $10,000 a year proving that they could contain a spill — because milk was somehow classified as an oil. With a rule like that, I guess it was worth crying over spilled milk.
I will note for the record that we had made a bit of a hobbyhorse of EPA’s dairy-oil-spill controls, taking note of them in no fewer than four posts as the sort of regulatory overkill the Obama administration should disavow. House Republicans complain that the president is now putting himself at the head of someone else’s parade, since their members had long urged repeal of the rules and the Obama EPA under administrator Lisa Jackson had dragged its heels about going along. But I’m not going to complain. The ability to get out in front of the other side’s parades served President Bill Clinton well, and I just wish President Obama would use it more often.
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