Archive for August, 2009
This I Don’t Get
While the Immigration and Customs Enforcement agency constantly raids factories and workplaces looking for peaceful and hard-working undocumented immigrants to kick out of the country, the same federal government agency brings to the U.S. dangerous Mexican drug traffickers who—while continuing their criminal activities in Mexico and the U.S.—also serve as informants to the federal authorities in their war on drugs.
Can someone explain this to me?
HUD Helps to Set the Ground for Next Round of Mortgage Fraud
Just when you were thinking it was safe to go back into the mortgage market, today’s Wall Street Journal is highlighting the next source of mortgage fraud, the Federal Housing Administration’s (FHA) reserve mortgage program. In a typical reverse mortgage, the bank sends the borrower a monthly check (or a lump sum payment at the beginning of the loan).
It seems that some creative individuals have figured they could deed a run-down house to an elderly individual, and then get a reserve mortgage on that property; leaving them with the cash and the government with the run-down worthless property. Of course, this requires getting an appraiser to go along with the value of the home, but since the Clinton HUD decided to do away with FHA control of appraisers and let the lender pick the appraiser, that sadly hasn’t been much of an obstacle.
The great thing for lenders is that if the loan goes bad, or the value of the house falls below the mortgage amount, FHA – backed by the taxpayer – picks up the tab. Of course, the borrower is required to pay an insurance premium to cover any potential shortfalls. But just like in any other federal insurance program, when these’s a shortfall beyond funds collected via premiums, we taxpayers are left on the hook. I could go on about what a great job Washington does running insurance programs; suffice to say, Washington does a pretty poor job.
If Washington were serious about cracking down on predatory lending and mortgage fraud, Congress should end the practice of allowing lenders to put 100% of their losses to the taxpayer. Maybe that would provide the correct incentives for the lender to actually make sound loans.
Meghan Cox Gurdon: Doesn’t Understand Terrorism
In goading victim states to overreact, one of the things terrorists seek is confirmation of their ideological narrative. The story Islamist terrorists tell themselves and others is that the United States is a wicked power, an occupier, a Crusader, and an exploiter of Muslims. Terrorists are energized, and they have an easier time with recruiting and maintaining support, when the United States does things that make these charges look true.
Lacking this insight, Washington Examiner columnist Meghan Cox Gurdon interprets recent events wrongly in almost every respect. Her column is called “These are Good Times for Terrorists.”
Rather than scoring a terrorist “win,” the compassionate release of Lockerbie bomber Abdel Basset al-Megrahi doesn’t square with Western cruelty. Thus—to the extent it matters to terrorists—it confounds their version of events. Terrorists don’t really do a “how much time will I serve” calculation, so the release probably doesn’t matter much. In terms of individual justice, it may have been wrong, but not in terms of counterterrorism strategy.
Gurdon cites flagging U.S. will in Afghanistan as a sign of terrorist success, and it would provide short-term gains to the Taliban if the United States exited the field. But with lessened U.S. violence in the area, and with the recent election giving a stronger toehold to legitimate government, U.S. military caution stands to deal terrorism strategic setbacks.
Where Gurdon really gets it wrong—and purposefully so—is in her interpretation of Attorney General Holder’s move to investigate allegations of torture by U.S. authorities: “[M]ilitants now know that, should they be apprehended, American interrogators cannot so much as wave a loaded gun or blow cigar smoke in their faces lest they face the disciplinary wrath of their own authorities.”
These slights are not the gravamen of the torture allegations, and Gurdon undoubtedly knows that. What she may not know is that abuse of terror suspects is good for terrorism: It confirms the ideological narrative holding that the United States is an evil, abusive power. Meticulous fair treatment of terror suspects, on the other hand—as ordinary criminals—is the fate terrorists loathe. This robs them of their claim on moral authority and makes their struggle boring.
Recall that the first of the “five demands” in the 1981 IRA hunger strike was the right not to wear a prison uniform. Treating them as ordinary criminals would sap their legitimacy and the strength of their challenge to incumbent power in the eyes of key audiences.
It would have been far, far better for the United States and CIA interrogators not to have lost their cool after the 9/11 attacks. We handed terrorism many swords with our responses. But exposing error to light and punishing proven wrongdoing confirms our ideology: fealty to the rule of law.
Meghan Gurdon doesn’t understand terrorism. And she takes a real header with her flabby attempt to associate alleged CIA torture and other missteps with the constitution:
The Republic rests on the Constitution, but the reverse is also true; the Constitution and all the benign and enlightened principles it embodies rest on the continued strength and moral will of the Republic.
No, Meghan. The republic, its strength, and its moral will all rest on the constitution.
British Economic Suicide
A Bloomberg story on one cause of the ongoing British economic disaster under Prime Minister Gordon Brown:
Andrew Wesbecher moved to London from New York in 2006 to sell software to banks and hedge funds. This month he joined the exodus of American expatriates fleeing high taxes and the city’s shrinking financial industry . . . Americans are heading home as Britain plans a 50 percent tax rate for those who earn more than 150,000 pounds ($248,000) a year and employers cut benefits for workers living abroad, reducing the allure of London. That comes a year after the U.K. said foreigners who have lived in the country for more than seven years must pay 30,000 pounds annually or give up the special status that shields overseas income from British taxes.
Since the 1980s, London has boomed as an international city open to the world’s entrepreneurs and their wealth, and perhaps home to more billionaires than any other city. The British economy as a whole has done quite well, pulled ahead by London and driven by a new free-market spirit in the wake of Margaret Thatcher’s privatization, deregulation, and tax cuts. Thatcher rightly argued that her cuts to income tax rates “provided a huge boost to incentives, particularly for those talented, internationally mobile people so essential to economic success.” High tax rates at the top end were a “symbol of socialism” that she wanted to scrap.
Brown is killing the free-market goose that laid the golden eggs of Britain’s success. I really don’t understand the vision of such politicians — don’t they know what they are doing? I want people to be successful. I want entrepreneurs to create wealth. I love growing, vibrant cities. Why do some people want to destroy all that?
Is $19,000 Per Student Enough to Run a School?
Time for another “THE SCHOOLS HAVE NO MONEY!” report from the WaPo:
The largest-ever infusion of federal cash is flowing into public school classrooms this year in the form of new programs and thousands of restored jobs. The stimulus package — $100 billion over two years — comes with similarly sized expectations. . .
Even with the extra cash, the survey found, many schools are focused on survival. . .
In Fairfax County, stimulus funding saved about 274 positions, but class size ratios still increased by half a student
Poor schools!
And Fairfax. Desperate, struggling Fairfax only has about $3.3 billion to play with this year. How are they supposed to keep the system running with just $19,000 per student?
Considering the fact that the estimated national median private school tuition is around $4,800 $6,200, maybe they could just let parents and taxpayers keep, say, a third of that money to spend on education themselves.
Voila, no budget problem!
FTC to Protect Us from Multi-Colored Beer Cans
Recently Anheuser-Busch hit upon the marketing idea of selling Bud Light beer in cans decorated with the college-team colors. As the Federal Trade Commission (FTC) doesn’t have much else to do - it’s not like there’s been say fraud going on in the mortgage market – it quickly turned its attention to the issue, expressing “grave concern” that these team-colored cans would encourage underage and binge drinking.
As quoted in the Wall Street Journal, FTC attorney Janet Evans said “this does not appear to be responsible activity.” What’s not responsible is the FTC wasting taxpayer resources wondering what color beer cans we are drinking out of. When I was an underage drinker, the last thing on my mind was the color of the can. The ultimate purpose of the marketing campaign is to shift demand away from boring, non-team color beer cans toward team color cans. If beer drinkers (or can collectors) get some pleasure out of a certain colored can, where’s the fraud or deception in that?
The real purpose of FTC’s interest is revealed in the comments of the Licensing Resource Group, which represents the colleges in protecting their logos. Almost all the colleges that have asked Anheuser-Busch to stop selling the cans have cited trademark concerns. Yet none of the cans have any team logos. While no one would dispute the right of a college to control the use of its team logo, is it really reasonable to conclude that the colleges also own the rights to the use of certain colors?
The Real Cost of College Aid
I’ve been giving a lot of attention to the Student Aid and Fiscal Responsibility Act lately (including in this new interview and Monday’s daily podcast) because it is the biggest thing going on in education right now. Even more important, it is a revolting example of bankrupting, political business as usual that is flying below most peoples’ radar.
Touted as miracle legislation that will reduce the deficit and create or expand numerous government programs — including increasing Pell Grants at a rate faster than inflation – CBO estimates show that SAFRA would actually end up costing taxpayers tens-of-billions of dollars over the next decade. And now, it turns out, even those estimates may be too conservative.
Today, Inside Higher Ed reports that buried in the OMB’s “mid-session review” — the document released yesterday predicting a record-destroying $1.6 trillion federal deficit for FY 2009 — is the projection that Pell Grant funding will cost $27 billion more over ten years than predicted just a few months ago. That’s based, importantly, on big recent increases in college enrollment that could very well decline as the economy recovers. But with President Obama pushing to get more and more people into college, it offers yet another, powerful reason to conclude that far from saving taxpayers money as the bill’s supporters claim, SAFRA is going to cost them bundles.
More here:
Federal Pay: Response to the Critics
My post yesterday on federal worker pay generated a large and aggressive response from federal workers, both in my inbox and on websites such as Fedsmith.com. (See also Federal Times and Govexec). Here are four points raised in criticism:
First, people accuse me of producing distorted data somehow. Actually, it’s essentially just raw Bureau of Economic Analysis data, but the data is usually overlooked by the media because I don’t think the BEA puts out a press release on it. Anyway, the average wage data is from BEA Table 6.6D. The average compensation data is simply total compensation (Table 6.2D) divided by the number of workers (Table 6.5D).
Second, people argue that reporting overall averages for wages and compensation is somehow illegitimate. People email me comments like “my federal salary is only $50,000, yet you claim that federal workers make $79,000.” All I can say to folks like this is that there must be a federal worker out there making $108,000 who balances you off.
Third, people argue that a better analysis would be to compare similar jobs in the private and public sectors, rather than looking at overall averages. I agree that that would be very useful. Unfortunately, the BEA data is not broken down that way. At the same time, the BEA data provides the most comprehensive accounting for the value of employee benefits of any data source. Benefits are a very important part of federal compensation, and so that’s why I look to the BEA data.
Fourth, many people argue that the federal government has an elite workforce with many highly educated people. Certainly, that’s an important factor to consider. However, that is the reason why I focused on the pay trend over the last eight years. The federal worker compensation advantage rose from 66 percent in 2000 to 100 percent in 2008. Has the composition of the federal workforce really changed that much in just eight years to justify such a big relative gain? I doubt it.
A final consideration is to look at a “market test” of the adequacy of compensation in the public sector–the quit rate. The voluntary quit rate in the federal government is just one-third or less the quit rate in the private sector (Table 16 near the bottom here).
That is strongly suggestive of ”golden handcuffs” in federal employment. While many federal workers probably grumble about their jobs (as many private sector workers do), they know that the overall package of wages, benefits, and extreme job security (Table 18 here) is very hard to match in the competitive private market, and so they stay put.
U.S. to Share Biometric Data With Foreign Countries
In the name of fighting identity fraud, the U.K. Home Office has entered into a biometric data-sharing agreement with Canada and Australia.
“The USA will be joining the agreement shortly, and New Zealand is considering legislation to join in the near future,” they say.
It would be nice to learn what commitments have been made to the U.K., justifying this statement.
LA School District Vote Shows Further Cracks in Education’s Berlin Wall
America’s large urban school districts are often the lowest performing, least efficient, and most resistant to change. The poster children for this reality are perhaps Detroit and Washington, DC, but the Los Angeles Unified School District (LAUSD) has long been in the running as well.
Yesterday, there was a sign that LAUSD would like to get out of that race for the bottom: the district’s school board voted 6 to 1 in favor of a plan that would hand up to a third of its public schools over to private management. Ignoring for a moment the question of how well this policy will work, it is categorically, undeniably, a sign of change. In the past, such private contracting arrangements in large districts have usually been the result of state or mayoral takeovers. This is the first case that comes to mind in which the plan was the product of an elected school board that has just had enough with its own administrators’ unsatisfactory performance.
Keep in mind that school board elections suffer low-turnout, and that support for candidates is dominated by public school employee unions looking out for their own members’ salaries and job security. If THAT process can produce such a clarion call for parental choice, competition, and diversity in educational provision, times ARE changing.
A New Book from David Boaz? Tax Tips for Democrats
Okay, well maybe Tax Tips for Democrats won’t ever make it to the publisher, but while speaking at Cato University this summer, David Boaz offered a few tips to any more Democrats with tax problems who are thinking about joining the current administration.
“Some people say the best thing about electing a Democratic president is all the back taxes we collect from their appointees,” says Boaz. “It helps to balance the budget.”
C-SPAN 2 will air Boaz’s talk on the state of freedom in America this Sunday at 11:30 AM EST.
Have Mexican Dishwashers Brought California to Its Knees?
An article published this week by National Review magazine blames the many problems of California on—take a guess—high taxes, over-regulation of business, runaway state spending, an expansive welfare state? Try none of the above. The article, by Alex Alexiev of the Hudson Institute, puts the blame on the backs of low-skilled, illegal immigrants from Mexico and the federal government for not keeping them out.
Titled “Catching Up to Mexico: Illegal immigration is depleting California’s human capital and ravaging its economy,” the article endorses high-skilled immigration to the state while rejecting the influx of “the poorly educated, the unskilled, and the illiterate” immigrants that enter illegally from Mexico and elsewhere in Latin America.
Before swallowing the article’s thesis, consider two thoughts:
One, if low-skilled, illegal immigration is the single greatest cause of California’s woes, how does the author explain the relative success of Texas? As a survey in the July 11 issue of The Economist magazine explained, smaller-government Texas has avoided many of the problems of California while outperforming most of the rest of the country in job creation and economic growth. And Texas has managed to do this with an illegal immigrant population that rivals California’s as a share of its population.
Two, low-skilled immigrants actually enhance the human capital of native-born Americans by allowing us to move up the occupational ladder to jobs that are more productive and better paying. In a new study from the Cato Institute, titled “Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform,” this phenomenon is called the “occupational mix effect” and it translates into tens of billions of dollars of benefits to U.S. households.
Our new study, authored by economists Peter Dixon and Maureen Rimmer, found that legalization of low-skilled immigration would boost the incomes of American households by $180 billion, while further restricting such immigration would reduce the incomes of U.S. families by $80 billion.
That is a quarter of a trillion dollar difference between following the policy advice of National Review and that of the Cato Institute. Last time I checked, that is still real money, even in Washington.
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