Archive for March, 2011
Unions and Government Worker Pay
Yesterday, USA Today examined the average pay advantage of state and local government workers over workers in the private sector. The article found, for example, that government workers in California earned an average $71,385 in compensation in 2009, or $7,977 more than the average for private sector workers in that state.
Are these government worker pay advantages related to union shares in the states? I performed a simple regression analysis to find out. The answer is “Yes”—states with more unionized government workforces tend to have a higher government compensation advantage.
The chart below shows the regression results, including the raw data (one blue dot for each state) and the regression-fitted line (pink dots). As the union share increases, the pink line indicates that the average government pay advantage increases. In particular, the pink line indicates that for every 10 percentage point increase in a state’s union share, the average government worker pay advantage increases by $765 annually.
Let’s apply these results to Wisconsin, which has a union share of about 50 percent in its state and local workforce. Suppose that Wisconsin makes legal reforms resulting in the union share falling to 10 percent. The regression indicates that the decline would save Wisconsin taxpayers about $3,060 annually for every state and local worker, or about $872 million in total annual workforce costs for the state. (The state has 285,000 state/local workers).
(The regression was statistically significant at the 95% level, with an F-statistic of 5.9 and a T-statistic on the union share variable of 2.4. The R-square was 11 percent, which indicates that union share explains only a modest portion of the overall government pay advantages between the states).
Love the Right to Free Speech, Hate the Speaker
As I predicted after oral argument last October, today the Court ruled 8-1 (Alito dissenting) in favor of free speech at the expense of giving a legal victory to a repugnant group. While the Westboro Baptist Church hates what they view as both the sinner and the sin, the Court properly rebuked the Phelpses while correctly expressing utmost devotion to their right to propagate their wayward message.
Stepping aside from the emotions and bizarre facts, this case implicates all sorts of legal issues aside from the First Amendment. A private cemetery can and should remove unwanted visitors for trespassing — but the Phelpses didn’t enter the cemetery. A town can pass ordinances restricting the time, place, and manner of protests — but the Phelpses stayed within all applicable regulations and followed police instructions. Violent or aggressive protestors can be both prosecuted and sued for assault, harassment, and the like — but the Phelpses’ protests did not involve “getting up in the grill” of people, as their lawyer put it during oral argument.
As the brevity of Chief Justice Roberts’s opinion confirms, there’s very little to this case and the Phelpses’ actions, ugly and objectionable as they are, are as constitutionally protected as a neo-Nazi parade. If people don’t like that, they can change state laws to put certain further restrictions on protests near funerals or other sensitive areas — or federal laws in the case of military cemeteries — but they shouldn’t be able to sue simply for being offended.
See also Josh Blackman’s parsing of the opinion’s highlights.
GOP Wins First Skirmish in Budget Fight, but Shutdown Battle Still Looms
A large number of Democrats voted with Republicans in the House yesterday to pass a two-week spending bill that includes $4 billion in cuts compared to what Obama requested. This is a modest victory for the GOP since they can truthfully claim that they are on target to impose the equivalent of $100 billion of cuts over a full fiscal year.
And it appears the Senate will go along with the House proposal, as reported in today’s Washington Post:
The deal, which eliminates dozens of earmarks and a handful of little-known programs that President Obama has identified as unnecessary, sailed through the House on a 335 to 91 vote. Senate Majority Leader Harry M. Reid (D-Nev.), who initially resisted including any cuts in a short-term funding extension, predicted that it will pass that chamber as early as Wednesday.
Some people correctly note that a $4 billion cut is trivial since government spending has ballooned by $2 trillion during the Bush-Obama spending binge — especially since at least some of the supposed spending cut is based on the dishonest Washington practice of measuring “cuts” on the basis of how much Obama wanted to spend rather than nominal changes from one year to the next. Nonetheless, it is a very positive development that the conversation has shifted from “how much should spending be increased?” to “how much should spending be cut?”
That being said, the battle is far from over. Indeed, the GOP began the 1995 shutdown fight in good shape. As I explained in a recent National Review article, a significant number of congressional Democrats sided with Republicans and it appeared that Clinton was on the defensive.
But GOPers ultimately did not get everything they wanted that year, in part because Clinton and the Democrats were able to regroup when the government was temporarily re-opened for a three-week period. Democrats today presumably view the current two-week agreement as a similar opportunity to make a short-term tactical retreat in hopes of winning bigger battles in the future (not just the fight over FY2011 spending levels, but also the upcoming FY2012 budget resolution debate and the debt limit conflict in June or July).
In other words, Republicans should be very careful about having their energy dissipated by a series of diversionary battles over short-run spending bills. At the very least, they need to insist that all such bills include pro-rated spending cuts to fulfill their promise of reducing Obama’s request by $100 billion.
Terror Arrest Does Not Justify REAL ID Revival
The zeitgeist on Capitol Hill in Washington, D.C. may be for limited, constitutional government, but that doesn’t mean that big-government conservatives aren’t going to use the reprieve voters gave Republicans in the fall to once again advance big-government goals. On Monday, House Judiciary Committee Chairman Lamar Smith (R-Texas), Homeland Security Committee Chairman Peter King (R-N.Y.) and Crime, Terrorism, and Homeland Security Subcommittee Chairman James Sensenbrenner (R-Wisc.) sent a letter to Department of Homeland Security Secretary Janet Napolitano encouraging her to fully implement our national ID law, the REAL ID Act of 2005.
The deadline for state implementation of the national ID law lapsed nearly three years ago. Half the states in the country have affirmatively barred themselves from implementing REAL ID or they have passed resolutions objecting to the national ID law. But the Department of Homeland Security has repeatedly extended the deadline and reduced the compliance bar to suggest progress on the flagging national ID effort. With another faux implementation deadline looming in May, the DHS is almost certain to issue a blanket extension of the compliance deadline again soon.
Smith, King, and Sensenbrenner don’t want that to happen. They cite the arrest of Khalid Aldawsari in Texas as a reason for “immediate implementation of REAL ID.”
According to the government’s affidavit, Aldawsari planned to acquire a false birth certificate and multiple false drivers licenses, assumedly to assist in his getaway after executing his formative bombing plans. But if you read the affidavit, you can see just how remote and speculative his use of any false identification is compared to the real acts that go into his plans. You can also see the web of identifiers that law enforcement use to effectively track and surveil their targets, including phone numbers, license plates, physical addresses, immigration records, email addresses, and Internet Protocol addresses. Aldawsari was nowhere near slipping through the net, and having a false driver’s license would have made no difference after a North Carolina chemical supply company reported to the FBI his suspicious attempt to purchase the chemical phenol. Nor would false identification have made a difference had he succeeded in an attack of any significance.
Having a national ID is the fantastical way of addressing the fantastical part of Aldawsari’s alleged plot. Thankfully, the real plot was disrupted using real law enforcement techniques, which include the reporting of suspicious behavior and narrowly targeted, lawful surveillance.
Schools for Misrule at Cato Tomorrow
Yesterday was the publication date for my new book, Schools for Misrule: Legal Academia and an Overlawyered America, and tomorrow afternoon (Thursday, March 3) at 4 p.m. you can catch me in person talking about it at Cato’s headquarters or watch online at the above link. Commenting will be the Hon. Douglas Ginsburg, distinguished federal judge on the U.S. Court of Appeals for the D.C. Circuit, and Cato’s Roger Pilon will be moderating. Registration is required for the in-person version and seating not guaranteed.
From Cato’s description:
The ideas that emanate from the nation’s law schools in one generation often wind up shaping law and national policy in the next. But as Cato senior fellow Walter Olson argues in this new book, for more than four decades the nation’s law schools have been a hatchery of bad ideas, from tort and contract theories to class actions, environmental law, racial reparations, the recasting of domestic policy differences as questions of international human rights, and more. Yet the common theme is to confer power and status on the schools’ own graduates and faculty, as law pervades ever wider areas of life. The pipe dream of training up philosopher-monarchs, Olson says, distracts law schools from their genuinely useful function of training competent, ethical, and suitably humble practitioners of the law.
Publisher’s Weekly calls the book “hard-hitting,” “witty,” “cutting-edge commentary,” and “astute.” Commentary magazine runs a lengthy excerpt in its new (March) issue, available here (subscribers or individual purchase). A different excerpt is online at Minding the Campus (free). You can read about some of the early reaction to the book here and here, catch Cato’s audio podcast interview with me, or see whether I’m visiting your city on my spring speaking tour.
GAO Report on Duplicative Programs
A Government Accountability Office report on duplicative federal programs is prima facie evidence that the government is a bloated mess. For example, there are 82 federal programs involved in teacher quality, 80 programs involved in economic development, and over 100 programs involved in surface transportation.
Sen. Tom Coburn (R-OK) summed it up best in his press release on the GAO report:
This report confirms what most Americans assume about their government. We are spending trillions of dollars every year and nobody knows what we are doing. The executive branch doesn’t know. The congressional branch doesn’t know. Nobody knows.
Nobody knows because no human being could possibly keep sufficient tabs on thousands of programs in a $3.8 trillion federal budget. Compounding the problem is the fact that policymakers devote much of their time to fundraising, campaigning, and other distracting activities.
The report’s takeaway, therefore, should be that the federal government’s scope needs to be drastically curtailed. Unfortunately, a typical response to the report has been to cite it as further evidence that policymakers must “eliminate waste” and “make government more efficient.” Coburn says “This report also shows we could save taxpayers hundreds of billions of dollars every year without cutting services. And, in many cases, smart consolidations will improve service.”
No, no, no.
Most of the “services” discussed in the report need to be eliminated, not consolidated. Turning 82 teacher quality programs into, say, 10 doesn’t change the fact that the federal government should not be involved in education in the first place. (Not to mention that the federal government’s involvement in education has been a failure.)
Throughout the decades, numerous efforts have been undertaken to clean up the federal bureaucracy (e.g., Hoover Commission, Grace Commission, and Al Gore’s “Reinventing Government”). None of these house cleaning endeavors curbed the federal government’s expansion, let alone tamed the bureaucratic wilds.
James Madison wrote in Federalist 45 that the powers delegated to the federal government by the Constitution “are few and defined.” However, the federal government gradually assumed powers that are now many and undefined. Excessive bureaucracy is a natural, and inevitable, result. Thus, those policymakers who are sincerely concerned with bureaucratic duplication and waste should focus their efforts on reinstituting limits on the government’s capacity to spend. Policymakers who pretend otherwise are just wasting their time — and that of taxpayers.
Congressional Republicans May Be Understating the Cost of ObamaCare
Yesterday, the Senate Finance and House Energy & Commerce committees released a joint report on the costs that ObamaCare’s Medicaid mandate will impose on states. That report, which is based on other reports, likely understates the cost of that unfunded mandate.
In a new Cato Working Paper, “Estimating ObamaCare’s Effect on State Medicaid Expenditure Growth,” senior fellow Jagadeesh Gokhale constructed cost projections for the five largest states — California, Florida, Illinois, New York, and Texas — which account for 40 percent of the nation’s population. Gokhale carefully decomposed and organized micro-data and state-specific administrative data on Medicaid eligibility, enrollments, benefit recipiency, and average benefits per recipient. Gokhale found much larger cost burdens than the committees’ projections.
For example, Gokhale projects that ObamaCare will force Florida to spend an additional $20.4 billion between 2014 and 2023. That is almost double the committees’ estimate of an additional $12.9 billion in spending by Florida between 2013 to 2023.
Why I Am Boycotting ABC News and Disney
Sensation and hyperbole have become staples of the mainstream media, as they struggle to compete for an American attention span increasingly committed to blogs, Facebook, Twitter, and other social media. Even the venerable ABC World News has decided to indulge its worst instincts by airing—every night this week—a reality-based series called “Made in America.” Caveat Emptor: ABC is selling dangerous, nationalistic propaganda.
The gist of the series is that Americans don’t buy many U.S.-made products anymore and are therefore responsible for the persistent and relatively high rate of unemployment in the country. Last night’s episode featured a family that couldn’t find a single item in their home that was manufactured in the United States. To accentuate the point, the family takes a day trip, while movers are brought in to rid the house of all foreign-made items. Of course, at the end of the day, the family returns to a cavernous echo chamber, where they are amazed and ashamed by how much they’ve contributed to the hardships of their unemployed fellow citizens. By spending a little more on U.S.-made products, the storyline goes, Americans can put their countrymen back to work.
Here’s part of the series description from the ABC World News website:
In the coming weeks, “ABC World News with Diane Sawyer” is launching a groundbreaking series, “Made in America,” focusing on American manufacturing and our economy.
The facts show that our nation is addicted to imports. In 1960, foreign goods made up just 8 percent of Americans’ purchases. Today, nearly 60 percent of everything we buy is made overseas.
On air and online, we’ll tackle the key questions: Is buying American-made more expensive? What staples are no longer manufactured in the U.S. at all? And what difference would it make if everyone promised to buy more American-made product?
There’s no question that manufacturing still has a major impact on our economy and on the nation’s workforce. The United States has fewer manufacturing jobs now than we did in 1941, the same year as the attack on Pearl Harbor, but if every American spent an extra $3.33 on U.S.-made goods, it would create almost 10,000 new jobs in this country.
Ugh. Where to begin? Back in the “golden age” of 1960, when imports were oddities to marvel over in a disdainful way, the per-capita U.S. income was $2,914. In 2009, with imports ubiquitous, per-capita income was $46,411. (Economic Report of the President, 2010, Tables B-1 and B-34). In real, inflation-adjusted terms, even with a U.S. population increase from 181 million to 307 million, per-capita incomes in 2009 were almost triple what they were in 1960 ($42,277 vs. $15,669 in 2005 dollars—ERP, 2010, Tables B-2 and B-34). Oh, if only we could replicate the relative poverty, the limited consumer choices, the inefficient production processes, the massive trade barriers that compelled Americans to buy American, and the uneconomic work rules and wages commanded by once-powerful private sector labor unions. In 1960, before real economic liberalization spawned cultural and social liberalization, Diane Sawyer would never have dreamed of being a network news anchor, if she even dared to entertain the concept of working outside of the home. How can she pine for such an era?
New Video Explains that Tax Competition Is a Powerful Mechanism to Restrain the Greed of the Political Class
Here’s a new mini-documentary from the Center for Freedom and Prosperity, narrated by Natasha Montague of Americans for Tax Reform, that explains why the process of tax competition is a critical constraint on the propensity of governments to over-tax and over-spend.
The issue is very simple. When labor and capital have the ability to escape bad policy by moving across borders, politicians are more likely to realize that it is foolish to impose high tax rates. And they oftentimes compete for jobs and investment by lowering tax rates. This virtuous form of rivalry helps explain why so many nations in recent years have lowered tax rates and adopted simple and fair flat tax systems.
Another great feature of the video is the series of quotes from winners of the Nobel Prize. These economists all recognize competition between governments is just as desirable as competition between banks, pet stores, and supermarkets.
The video also discusses how politicians are attacking tax competition. It mentions a privacy-eroding scheme concocted by governors to tax out-of-state purchases (how dare consumers buy online and avoid state sales tax!).
And it also discusses a very destructive tax harmonization effort by a Paris-based bureaucracy (the Organization for Economic Cooperation and Development, subsidized with American tax dollars!), which would undermine fiscal sovereignty by punishing jurisdictions that adopt pro-growth tax systems that attract labor and capital.
The issues discussed in this video generally don’t get a lot of attention, but they are critical for the long-run battle to restrain government. Please share widely.
P.S. This speech by Florida’s new Governor is a good example of how tax competition encourages policy makers to do the right thing.
Should America ‘Liberate’ Libya?
In 2008, the election of President Barack Obama was widely touted as a repudiation of President George W. Bush’s messianic vision that “Our common prosperity will be advanced by allowing all humanity—men and women—to reach their full potential.” In the years following America’s failed democratic experiment in Iraq, many Americans began to spurn the Bush era’s presumptuous conviction that “We have the power to make the world we seek.” Liberals in particular roundly rejected the supposed “unyielding belief” that America is called to lead the cause of “rule of law” and “the equal administration of justice” around the world. Such pious declarations are in keeping with Bush’s neo-Wilsonian foreign policy. Does it surprise you then, that all of the quotes above were made by President Obama in his June 2009 speech at Cairo University?
Americans who favor establishing a no-fly zone over Libya hope that such an effort will save lives. What Americans have not learned is exactly what transgressions warrant the use of American force. The primary constitutional function of the U.S. Government is to defend against threats to the national interest. However, because the definition of “interest” has expanded by leaps and bounds, the United States now combats an exhausting proliferation of “threats” even in the absence of discernable enemies. Hence, the proposal of a no-fly zone over Libya is merely the latest iteration of a long-standing grand strategy that implicitly endorses an interventionist foreign policy.
Despite the fact that humanitarian assistance to Libya remains, in principle, morally defensible, the primary question is whether military action is best suited to such a task. As Christopher Coyne, Assistant Professor of Economics at West Virginia University argues, its the “Nirvana Fallacy.”
The Nirvana Fallacy is the false assumption that in the face of weak, failed or illiberal governments, external occupiers can provide a better outcome than what would exist in the absence of those efforts. But what authority does President Obama have to embark upon a mission to change the very structure of societies on the other side of the earth?
As a libertarian, I believe that intangible variables such as values, traditions, and belief systems, go beyond a U.S. policymaker’s ability—and jurisdiction—to control. Yet with worldwide attention now on Libya, it seems that once again the extension of freedom abroad is being subsumed under the mantle of America’s legitimate self-defense. Don’t believe the hype.
Ditching Collective Bargaining Won’t Control Public School Costs. Here’s What Will…
Lawmakers in Wisconsin and elsewhere are seeking to eliminate collective bargaining rights for public school employees as a means of controlling runaway spending (it has tripled in real terms since 1970, despite stagnation or decline in student achievement at the end of high school–see the last chart in this post). But even if collective bargaining is forbidden to state school employees, the savings will likely be negligible.
Surprising as it may seem, that conclusion follows directly from the research on school employee unions, which I reviewed last year for the Cato Journal. Differences in spending between school districts with and without collective bargaining are modest to non-existent. Does this mean that the unions are impotent and that their members have been wasting their $600 annual dues payments? Not quite.
Though employee compensation varies little from one school district to the next, based on the presence or absence of collective bargaining, public school employees enjoy far better compensation than their private sector counterparts. The combined salary and retirement benefits of public school teachers are 42 percent larger than those of private school teachers (see link above).
Public school employees win this generous compensation premium through political action backed by monumental campaign contributions. Democrats receive the overwhelming share of these contributions (93% from the NEA; 99% from the AFT, see Cato Journal link), but many Republican lawmakers are also swayed, fearful that the unions will finance their primary opponents the next time they face voters.
To further increase their clout, union leaders have sought to grow their membership. More members mean more dues revenue with which to influence legislators. In this regard, too, they have been enormously successful: the number of public school employees has grown ten times faster than the number of students for two generations—a major factor in the system’s exploding cost and collapsing productivity (see figure below).
Public school employees clearly understand that union membership has benefitted them handsomely in both compensation and job security. Over the past forty years, union membership as a share of the public school workforce has increased from 42 percent to 70 percent. Even if collective bargaining were eliminated tomorrow, school employees would have every reason to continue funding the self-interested political action that has served them so well in the past.
So what would provide a counterbalance to unsustainable union demands?
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
