Archive for January, 2010
The Tea Party Comes Home
Today, Politico Arena asks:
The message from Massachusetts
What now for the Democratic agenda?
My response:
Listening to Scott Brown’s long, barely scripted acceptance speech last night, you had the refreshing sense that you were listening to an ordinary American, not to some political cut-out. Here’s a guy who campaigned in a pick-up truck with over 200,000 miles on the odometer, who listened to the voters and understood that they wanted not simply to block tax hikes but to lower taxes (and the last thing they wanted was for their taxes to pay terrorists’ lawyers bills!), who understood that even worse than the health care bill now before Congress were the back-room deals that brought it about, who’s served proudly for 30 years in the National Guard — in short, here’s guy you’d be comfortable having a beer with because, as he said, “I know who I am and I know who I serve.”
Which brings to mind the famous Rose Garden beer the president and vice president shared with Prof. Gates and Sgt. Crowley — speaking of (dis)comfort. And that brings to mind Cambridge, which stayed true blue, 84-15, Walter Russell Mead informs us this morning in his delightfully tongue-in-cheek Arena post. (“First, some good news for Democrats: the base is secure.”) As goes Harvard, so goes Berkeley.
But to today’s Arena question. The Democratic left is predictably outraged that “the people” they so love in the abstract have so disappointed them in the concrete. Exhibit A is last night’s Arena post by The Nation’s Katrina vanden Heuvel. Railing against “the Tea Party’s inchoate right-wing populism” (if it’s infested Massachusetts, shudder to think of it in Idaho!), Katrina tells Obama to “get tough, get bold, kiss ‘post-partisanship’ goodbye,” and “put yourself squarely back on the side of working people” by “passing the strongest possible healthcare bill as quickly as is feasible.” And there’s the cliff, Katrina.
Lanny Davis has more sober advice for Obama in this morning’s Wall Street Journal. To those who are pointing fingers at Martha Coakley, Lanny says, “This was a defeat not of the messenger but of the message” — the unrelenting leftism that has come from this White House and this Congress. And he points, by way of instruction, to Bill Clinton’s response to the disastrous elections of 1994, though he doesn’t mention Clinton’s ringing, albeit inaccurate, description of his course-change — “The era of big government is over.” Is it in Obama’s DNA to make such a course correction? Does he have a reset button?
On health care, Obama and his party are in an almost impossible situation. If they press ahead, as Nancy Pelosi and others are urging, the cliff awaits them in November. But if they abandon their project, what will they run on in November? It’s a mess of their own making, of course, so completely did they misread the election of 2008. What better evidence of the endurance of principles of sound, limited government that some two centuries later, The Tea Party has come home to Boston.
Happy Anniversary, Mr. President
I have some thoughts on Obama after one year at npr.org:
Happy anniversary, Mr. President. Scott Brown’s victory in Massachusetts is a rude ending to a year marked by falling poll ratings and growing opposition to his signature policy initiatives….
President Obama has several models to choose from: He could reverse his tax-spend-and-regulate policies and hope for the same economic and political results that Reagan achieved. He could, like Bill Clinton, recognize the political obstacles to his sweeping ambitions and learn to work with Republicans on modest reforms. He may well end up like Lyndon Johnson, with an ambitious domestic agenda eventually bogged down by endless war. But I don’t think his wished-for FDR model — a transformative agenda that is both popular and long-lasting — is in the cards.
Read it all. And be sure to hit “Recommend” at the top and add a Comment.
FHA’s New Stringent Standards
The Federal Housing Administration will reportedly announce more stringent lending requirements and higher borrowing fees. The move comes in response to growing concerns that rising losses on mortgages it insures will require a taxpayer bailout. Although any credit tightening is welcome, the agency will not propose an increase in the minimum downpayment, currently 3.5 percent. (Borrowers with credit scores below 580 will be required to put down a minimum of 10 percent, but most FHA lenders already require a 620 minimum score.)
Yesterday, the Wall Street Journal noted that “home builders are worried” the FHA would propose raising the minimum downpayment. The CEO of a Texas builder said it would be a “game changer,” meaning that it would hinder the nascent housing recovery. However, other industry observers believe otherwise:
In markets where home values are still falling, buyers who put little money down could see their equity wiped out quickly. The FHA is “just manufacturing more upside-down homeowners by the truckload in Arizona, California, and Nevada,” says Brett Barry, a Phoenix real-estate agent who specializes in selling foreclosed homes.
FHA commissioner David Stevens counters that inhibiting lending by increasing downpayment requirements would “perpetuate” price declines. But falling prices are a painful, but necessary, correction needed to bring the housing market back into equilibrium. Government interventions in the wake of the housing bubble’s burst have created an artificial cushion. Thus, any alleged housing recovery could prove illusory when the cushion is removed. In addition, the longer the government tries to prop up the housing market, the greater the economic distortions and risk to taxpayers.
The article cites the example of a 42-year-old air-conditioning repairman who just bought a house with the FHA minimum 3.5 percent downpayment. To meet the requirement he had to borrow part of the money from his father-in-law, which he then repaid with the $8,000 first time homebuyer tax credit. He now has a $1,466 monthly mortgage payment on a $50,000 salary. Factoring in utilities and other homeownership costs, it’s not inconceivable that half of his pre-tax salary will be devoted to just his home. Is it any wonder the FHA is experiencing large default rates?
Can Scott Brown’s Election Stop the Federal Takeover…of Education?
Yesterday, I wrote about President Obama’s proposal to extend the Race to the Top program, this time letting school districts completely bypass state governments and apply directly to the feds for funding. I pointed out that the proposal was one among several troubling signs that Obama intends to put Washington fully — and, of course, unconstitutionally — in charge of American education. At the time, I didn’t realize how right I was.
When I was writing yesterday I was basing my comments on documents from the White House’s website and hadn’t yet read the details of what went on at the President’s photo-op announcing the proposed extension. I sure wish I had: At the dog-and-pony show, the President just came right out and said that he wants to push aside states — mentioned by name was famous holdout Texas — that dared to invoke the Constitution and not participate in a program that was, Constitution or no Constitution, supposed to be voluntary.
“Innovative districts like the one in Texas whose reform efforts are being stymied by state decision-makers will soon have the chance to earn funding to help them pursue those reforms,” intoned the President.
Fortunately, Texas Governor Rick Perry wasn’t about to be cowed: “I will say this very slow so they will understand it in Washington, D.C.: Texas will fight any attempt by the federal government to take over our school system.”
So it’s pretty certain now, more so even than just 24 hours ago: President Obama wants to federalize American education.
Thankfully, a lot can clearly happen in 24 hours. Yesterday’s election of Scott Brown in Massachusetts could very well send shockwaves of fear through the ranks of Democratic (and maybe even Republican) legislators in DC, who might finally get the message that Americans just don’t like federal takovers. Heck, perhaps even the President will get the message. If so, then maybe even something as relatively small as a $1.35-billion scalpel designed to cut through states and get right at districts could be seen as too dangerous to handle.
That’s speculation, of course, but we should know a lot more in just, oh, the next 24 hours.
The Brown Revolution
Around the world over the past decade, longstanding and stultifying power elites have been toppled by what came to be known as the “color revolutions” — notably the Rose Revolution in Georgia, the Orange Revolution in Ukraine, and hopefully the Green Revolution in Iran. Now the political elites in Boston and Washington have been rocked by the Brown Revolution.
Pundits have been describing a possible Brown victory in terms like “canary in the mine,” “depth charge,” “shock waves,” “nuclear explosion,” “full freak-out,” and “angels will weep and the Charles River will run red with blood.” Political scientist Raymond La Raja said a Democratic loss would be the first shot in what could be a revolutionary war – ”like the Battle of Lexington and Concord.” That’s what worries the Democratic ruling establishment.
This “revolutionary” video got more than 400,000 views in the week before the election.
Scott Brown takes over a seat in the United States Senate that has been held by one family (including its seat-fillers) for just over 57 years, since John F. Kennedy was elected to it in 1952, before Brown was born. Massachusetts hadn’t elected a Republican senator since 1972. In the closest U.S. Senate race of the past decade, Democrat John Kerry won by 35 points. All 10 of its House members are Democrats, and about 90 percent of both legislative chambers. That’s a well-entrenched political establishment. And as so often happens with long-ruling parties, it has seen its share of corruption: Three consecutive House speakers have resigned under clouds. It’s no surprise that Massachusetts Democrats have finally encountered the kind of voter reaction that national Democrats did in 1994, and national Republicans in 2006 and 2008.
Given President Obama’s falling job approval, growing opposition to the Obama health care plan, the recent elections in Virginia and New Jersey, the fury in Nebraska over Ben Nelson’s wheeling and dealing, the growing recognition that libertarians are a major part of the decentralized “Tea Party” movement, and rising poll support for “smaller government,” the Brown victory is a flashing red light with a siren warning Democrats not to proceed with a health care bill that voters don’t like and a big-government agenda that Americans weren’t voting for in 2008.
Brown is no libertarian. But he campaigned against the Obama-Reid-Pelosi health care plan and against tax increases, so he will be part of the opposition to the current governing agenda. And he stood up to challenge the Democratic machine when no one else did. And certainly events in Georgia, Ukraine, and elsewhere are sufficient reminder that the failings of individuals don’t invalidate the popular movement.
How does an entrenched political party respond to a successful rebellion? Well, one way is for both the local and national officials to refuse to certify the results of the election and try to ram unpopular programs with the votes of rejected legislators. Would Democrats try to do that with more elections looming in just 10 months? Harry Reid and Barney Frank say absolutely not. Expect a lot of scrambling this week.
Tuesday Links
- Gene Healy on today’s election in Massachusetts: “If Republican Scott Brown wins the Massachusetts special election Tuesday, the Bay State will have its first GOP senator since the era when disco was king. And Brown will have the much-derided Tea Party legions to thank.”
- Why opportunistic politicians need to stop using times of crisis for their own ends and let the next one go to waste.
- George W. Obama? “Bush’s successor—who actually taught constitutional law at the University of Chicago—is continuing much of the Bush-Cheney parallel government and, in some cases, is going much further in disregarding our laws and the international treaties we’ve signed.”
- Can Google beat China? Cato’s Timothy B. Lee tackles the question in The New York Times Online.
- Podcast: “Our America Initiative” featuring former New Mexico Governor Gary Johnson. Johnson discusses out of control government spending, immigration, the Bush years, the drug war, defense policy and more.
Race to Domination
Today’s the day that states must submit their applications to the U.S. Department of Education to compete for round-one “Race to the Top” grants. But no worries if your state’s a little behind: Not only will there be another application round for the $4.35-billion dash-for-cash, but as President Obama announced today, he wants a $1.35-billion sequel to what was supposed to be a one-time, stimulus-funded contest.
The important question, of course, is whether sponsoring this race is worthwhile for federal taxpayers. The clear answer is no.
Sure, in response to RttT states have been raising charter-school caps, allowing teachers to be evaluated using student performance, and instituting other changes, but they’ve done little of real substance. Just raising caps won’t make it much easier to get good, competitive charter schools since most of the charter-supply problem revolves around over-regulation and painful authorization processes. And while states have eliminated prohibitions on using student test results to evaluate teachers, they haven’t done much to actually base teacher evaluations on student performance or other meaningful metrics.
What has RttT done that is of substance? Unfortunately, push yet more power into federal hands, forcing states and districts to jump through all manner of hoops for a chance to get back some of their citizens’ money. Indeed, it is becoming painfully clear that President Obama intends to put Washington firmly above the states in the hierarchy of education power.
For his $1.35 billion RttT expansion, President Obama plans to allow districts to directly compete for federal funding, bypassing states completely. And then there’s his crusade for national curricular standards. His administration has been talking up “common” standards since almost day one, and in the ”fact sheet“ accompanying the RttT expansion announcement the first bullet states that RttT emphasizes “designing and implementing rigorous standards and high-quality assessments, by encouraging states to work jointly toward a system of common academic standards.”
Don’t be fooled, by the way, by the “states” working “jointly” thing, or utterly unbelievable administration denials. If the feds are paying states to adopt common standards then those standards will be de facto federal. Either that, or the feds will let states adopt any old joint standards and still get paid. Six of one bad thing, half dozen of the other…
Thankfully, there is resistance to Obama’s bribe-to-the-top scheme. Texas, most notably, has refused to participate in RttT, with Gov. Rick Perry declaring that ”we would be foolish and irresponsible to place our children’s future in the hands of unelected bureaucrats and special interest groups thousands of miles away in Washington.” And Texas is not alone: According to a New York Times article appearing yesterday, states and districts around the country are refusing to put on their track shoes and run for the federal funds.
Still, federal money — taxpayer money — can be a tough thing for any elected offical to turn down. Sooner or later, if we let him, Obama will almost certainly find an amount that no state or district can resist.
The Hopelessly Stupid Politics of the Iran NIE
The Washington policy establishment is now pulsing with excitement over news that the intelligence community (IC) is revising its 2007 statement that “We judge with high confidence that in fall 2003, Tehran halted its nuclear weapons program; we also assess with moderate-to-high confidence that Tehran at a minimum is keeping open the option to develop nuclear weapons” and that this halt “lasted at least several years.”
Funny story: The day the NIE came out, Ted Carpenter and I were arriving in Los Angeles to give at talk at the LA World Affairs Council on Iran. Immediately on our deplaning, the questions started coming: “What do you think about the NIE? How does this change things?” “What NIE?” I asked.
So amid our last minute preparations for the talk, I was scrambling to get hold of a copy, but being the Luddite I am, I couldn’t manage to get my computer to work, or to get the .pdf to open right on my Blackberry. But I was ultimately able to pull up the first sentence, quoted above, and to look at the first footnote.
That was all anybody needed to do. The footnote read:
For the purposes of this Estimate, by “nuclear weapons program” we mean Iran’s nuclear weapon design and weaponization work and covert uranium conversion-related and uranium enrichment-related work; we do not mean Iran’s declared civil work related to uranium conversion and enrichment.
Well, this is like saying Iraq had weapons of mass destruction because we found a few degraded mustard gas shells out in the middle of the desert. That wasn’t what anybody was referring to when “Iraq’s weapons of mass destruction” were a topic of conversation, so it proves only that if you redefine things you can change conclusions. Much of the nuclear infrastructure that is in dispute in Iran is contained in “civil work related to uranium conversion and enrichment,” so the new definition does not include much of what people speaking in the vernacular are including when they say “Iran’s nuclear program.” So at the talk that night in LA, I said this:
the headline splashed all over the newspapers with respect to the National Intelligence Estimate (NIE) is that Iran in 2003 suspended, and kept in suspense, its nuclear weapons program; however, it continues to operate facilities like that at Natanz which could at some point in the future be used as part of a nuclear weapons program. So it really becomes a definitional problem in the context of what components of Iran’s industrial infrastructure are included in this nuclear weapons program and which of them are kept outside of it. From my reading of the news reporting I think that it has been at least mildly misleading.
Predictably, American neoconservatives began rending their garments and gnashing their teeth, whipping each other into a frenzy, decrying the “politicized intelligence” at the CIA (do they ever tire of that?). But really, is it too much to ask of journalists who write about national security (and, to be fair, their headline writers) to read one footnote in a document that contains about three pages of text? I’m not the smartest guy in the world, and I managed to figure out what the deal was while in a big time crunch, without access to the full document, and without a sizeable rolodex of insiders I could call to help me figure out what was going on. Still, the American journalistic community splashed headlines like “NIE: Iran halted nuclear weapons program in 2003″ and such. So in a sense, the neocons were right: the inferences people drew from reading the reporting on the NIE were inaccurate.
But this is, more than anything, a critique of the American journalistic establishment than it is the IC. Writing in the first sentence of a three-page document a provocative claim and then footnoting a definition that dramatically alters the implications of the claim is not really all that tricky. The people who assemble news stories, who did not exactly cover themselves in glory in scrutinizing government claims before the war in Iraq, were either lazy or stupid in this case as well. Given the benefits the neocons reaped from the media’s laziness or stupidity in the Iraq case, the spluttering outrage in this case was always a bit much to take.
In Case This Needs Saying: It’s a Tax
Last week, President Obama unveiled a plan for something he called a ”Financial Crisis Responsibility Fee,” to be fleshed out in his forthcoming budget proposal. He will seek to have some set of financial services providers pay money to the government as comeuppance for the recent financial crisis and government involvement in trying to remedy it.
The naming of the “Financial Crisis Responsibility Fee” is a fairly conspicuous attempt to avoid calling it a tax. (My colleague David Boaz points out the sheer number of taxes the Obama administration and its allies are considering.) But it’s fairly clear that this thing is, indeed, a tax.
The galaxy of government revenues has a number of different planets—taxes, fees, penalties, and a few others. If they’re well constructed, fees are generally favored because the recipients of services or benefits pay their costs. Fees avoid redistribution of wealth (either toward or away from payers). But this doesn’t mean that you can name any payment to the government a ”fee” and produce fair and appropriate results.
When I worked on Capitol Hill, I was tasked with writing a bill to deny federal agencies the power to raise taxes, requiring them to be approved by Congress. (You’d think that only Congress should set or raise taxes, right? Sorry to disappoint.) The goal was not to draw fee-setting into the ambit of the bill.
After extensive reasearch into the dividing line between fees and taxes, which is not as simple as one might imagine, I produced the following definition, as found in the Taxpayer’s Defense Act (introduced in the House during the 105th Congress, and the House and Senate in the 106th Congress):
[T]he term “tax” means a non-penal, mandatory payment of money or its equivalent to the extent such payment does not compensate the Federal Government or other payee for a specific benefit conferred directly on the payer.
Parsing it briefly: A penalty is not a tax. A voluntary payment is not a tax. Both payments of money and tranfers of value not denominated in dollars can be taxes. A payment that compensates a benefit conferred is not a tax, but the part of a payment going above the benefit conferred is. Non-tax payments are for a specific benefit conferred directly on the payer, not benefits conferred on regulated entities generally or on the country as a whole. (Though this isn’t specified in the definition, being regulated isn’t a benefit.)
With even the New York Times referring to President Obama’s “Financial Crisis Responsibility Fee” as a “tax,” there doesn’t seem to be much chance of that the administration will get the “fee” label to stick. But, just in case, here’s confirmation: It’s a tax.
Homebuyer Tax Credit Complications
Most people would agree with Chris Edwards that the federal tax code is insanely complicated. The IRS Commissioner doesn’t do his own taxes, the Treasury secretary and other Washington policy experts haven’t paid what is owed, and the already overwhelmed IRS would be given an expanded role under the Democrat’s health care legislation.
A key problem is that the social engineers on Capitol Hill have run amok. Recently, they have been enamored with home-buying tax credits, and CNN.com notes how it is further overwhelming the IRS bureaucracy:
On Thursday, CNNMoney revealed that buyers who purchased their properties after Nov. 6 were unable to claim the refund because the Internal Revenue Service had yet to release a new form and instructions. But on Friday, the IRS finally posted the new form 5405.
Claiming the credit now requires sending paperwork to the IRS — no e-filing allowed:
And these new buyers can no longer file electronically. They have to mail in paper forms, including the new 5405, whether they are amending their 2008 taxes or claiming it on the 2009 taxes that are being filed this spring. That is going to dramatically slow refunds, but taxpayers can’t blame the IRS. Instead, it’s people scamming the system who are at fault. For example, in October tax preparer James Otto Price III was the first person convicted of this crime. He falsely claimed the credit for 15 clients. So buyers must now file documentation with their taxes — including proof of residency, a signed mortgage statement and drivers license — which the e-file system is not equipped to handle.
The original homebuyer tax credit, which became available in April 2008, generated a nightmare of fraud. In one case, the credit was claimed by a four-year-old. Even IRS employees filed “illegal or inappropriate” claims for the credit. As a result, when Congress extended and expanded the credit in November, the IRS began requiring extra documentation.
Thus, micromanagement through the tax code is a bureaucratic Catch-22. If the IRS streamlines the paperwork, tax breaks get riddled with fraud and abuse. If it tries to cut down on the fraud and abuse, taxpayers and federal workers get bogged down in a pile of wasteful paperwork.
The solution to the problem is for the government to get out of the social engineering business. Federal attempts to foster homeownership are a perfect example of why such attempted engineering can ultimately cause more harm than good. The homebuyer tax credit should be allowed to expire at the end of April, and the federal tax subsidies for homeownership should be ended.
Vermont’s Education Spending
I happened to catch the January 7 State of the State speech by Gov. Jim Douglas of Vermont on C-SPAN. It was a sober and serious presentation that laid out the facts about higher taxes and excessive spending, which are problems in just about every state.
Douglas on excessive education staffing Vermont:
Since 1997, school staffing levels have increased by 23 percent, while our student population has decreased by 11.5 percent. The number of teacher’s aides has gone up 43 percent. The number of support staff has gone up 48 percent. For every four fewer students a new teacher, teacher’s aide or staff person was hired. There are 11 students for every teacher – the lowest ratio in the country – and a staggering five students for every adult in our schools. With personnel costs accounting for 80 percent of total school spending, it’s no wonder that our K-12 system is among the most expensive in the nation at $14,000 per student per year.
Current staffing and compensation levels cannot be maintained as the student count continues to decline. If we simply move from our current 11 to 1 student/teacher ratio to 13 to 1, we would still have one of the lowest ratios in the country, while saving as much as $100 million. If we want to make education costs sustainable, we must return balance to classrooms. I propose that over four years we bring our statewide student/teacher ratio to affordable levels.
Douglas on excessive education bureaucracy:
Our school governance structures are a vestige of the 19th century and, like our unsustainable personnel costs, must be reformed. We have 290 separate school districts –- one for every 312 students –- 63 different supervisory bodies and a State Board of Education. That’s a total of 354 different education governing bodies for a state with only 251 towns.
Douglas on education financing:
At the root of our education funding challenge is a system that’s substantially eroding local control. Each year the connection between your school budget vote and your property tax bill becomes more and more distant. . . our education funding regime has grown into an unmanageable maze of exemptions, deductions, prebates, rebates, cost-shifts and hidden funding sources. Overlapping rings of complexity keep all but a few experts from understanding the many moving pieces. This is not good tax policy, not good government, and, if you ask most Vermonters, not good for much of anything. It’s time to pull back the curtains and let the sun shine in on how education is funded. Transparency – Who is paying? What are we paying for? What are the results?
Douglas on excessive education regulations:
Currently, Vermont schools are prohibited by law from accessing out-of-state distance learning programs … If a school sought to provide a new Chinese program for this student, or even a group of students, they would have to hire a new teacher with the expertise – a costly step. Allowing students to access approved distance learning programs from around the country is a simple, affordable change we can make to improve quality.
Excessive staffing, complex bureaucracy, complex financing, and excessive regulation are problems in government education systems across the country. There is no better time than today, when states have large budget gaps, to tackle these chronic problems.
So kudos to Douglas. His speech was a contrast to that of Colorado’s Gov. Bill Ritter, who followed him on C-SPAN uttering the usual lofty but vacuous speech we expect of most politicians.
The Snowe Non-Option
Jonathan Chait thinks that if Scott Brown becomes the 41st vote against President Obama’s health plan, supporters could “Go back to Olympia Snowe” to secure the necessary 60th vote. After all, “Her substantive demands have been met.”
Perhaps Chait forgets that Sen. Snowe (R-ME) — along with Sen. Susan Collins (R-ME), and every other Senate Republican — voted to declare an individual mandate unconstitutional. During the floor debate, Sen. John Ensign (R-NV) took the unusual step of raising a constitutional point of order against the bill’s individual mandate. According to the presiding officer:
The question is on agreeing to the constitutional point of order made by the Senator from Nevada, Mr. ENSIGN, that the amendment violates Article I, Section 8 of the Constitution, and the Fifth Amendment.
Snowe’s “aye” vote makes it hard for her to support any bill that includes an individual mandate. If she were to vote for an individual mandate after declaring that such a law would violate the Constitution, Snowe could reasonably be accused of violating the oath she swore to the Constitution upon joining the Senate.
Yet Democrats are unlikely to support any bill that does not include an individual mandate. As President Obama told a joint session of Congress, his plan “only works” if lawmakers force everyone to purchase government-designed health insurance.
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