Archive for April, 2011
VICTORY! Supreme Court Upholds Education Tax Credits
Ruling in ACSTO v. Winn today, the United States Supreme upheld Arizona’s k-12 scholarship tax credit program. Under this program, individuals receive a tax cut if they donate to a non-profit scholarship fund that gives out private school tuition aid.
Today’s decision, a reversal of an earlier ruling by the 9th Circuit, found that the respondents had no right to sue to stop the AZ program because they have not been harmed by it. And the reason they have not been harmed is central to why, for nearly 20 years, I have favored education tax credit programs over both traditional public schooling and voucher programs.
Respondents alleged that cutting a person’s taxes is equivalent to spending government money — and since taxpayers are receiving credits for donations to religious organizations, that was ostensibly equivalent to the government giving to those organizations. The Court answered, quite simply: “That is incorrect.” Elaborating, the Court ruled that:
tax credits and governmental expenditures do not both implicate individual taxpayers in sectarian activities. A dissenter whose tax dollars are “extracted and spent” knows that he has in some small measure been made to contribute to an establishment in violation of conscience…. [By contrast,] awarding some citizens a tax credit allows other citizens to retain control over their own funds in accordance with their own consciences. [emphasis added]
That is precisely the argument I have been making for a very long time (last Friday, at a conference in Berkeley; last year in a blog post, here; a dozen years ago, in my book Market Education: The Unknown History).
With this ruling, the way forward for the school choice movement is clearer than it has ever been. Education tax credits — both the scholarship form operating in Arizona and the direct form operating in Illinois and Iowa — allow for universal access to the education marketplace without forcing any citizen to subsidize instruction that violates their convictions. No other school choice system offers that advantage and it is an advantage that is central to the values of our nation. As Thomas Jefferson wrote in the Virginia Act Establishing Religious Freedom:
To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves… is sinful and tyrannical
Public schooling has long been a source of social conflict because it engenders just such compulsion. Education tax credits offer a way of securing universal public education without this blight. It is time to adopt them more widely.
The Risks of ‘John Doe’ Wiretaps
The Electronic Frontier Foundation has unearthed an interesting case of an improper use of surveillance in an investigation where the FBI had obtained “roving wiretap” authority. In a bizarre turn, the Bureau ended up eavesdropping on young children rather than their adult suspects for five days. The case is generating some attention because that same “roving wiretap” authority is one of the three surveillance powers set to expire in late May. The thing is, on the basis of what I can glean from the heavily redacted document EFF obtained via a Freedom of Information Act request, it’s not a case involving misuse of the roving authority. But it is a good concrete example of why the roving authority needs to be modified.
Protests in Afghanistan: Our Excuse to Get Out
General David Petraeus, the head of American forces in Afghanistan, has emphasized the importance of winning the “hearts and minds” of Afghans by treating them and their culture with respect. Pentagon officials may want to reexamine that assumption, but not for the reason you might think.
Evangelical pastor Terry Jones, author of the book Islam Is of the Devil and head of the Dove World Outreach Center in Gainesville, Florida, two weeks ago carried through on his promise to “stand up” to Islam and burn a Quran. In response, crowds demonstrated in cities across Afghanistan, with a mob in the northern city of Mazar-e Sharif storming a United Nations compound, killing eight non-American aid workers and beheading two of them.
The message from the protests is clear: this is war. Nevertheless, moral ambiguities emerge. When backed by over 130,000 International Security Assistance Force troops and close to 300,000 Afghan National Security Forces operating under foreign command, how are civilian aid workers being perceived by local Afghans? In the minds of the protesters, what crimes were they committing if they genuinely believed that they were defending their religious traditions and customs from infidels occupying their country? None of this should imply that the Quran burning or the grisly violence meted out against innocent aid workers was justified. If anything, they epitomize the war in Afghanistan’s two major problems.
First, they illustrate the discrepancy between the war of perceptions being waged abroad and the fearsome “Islamic menace” that our elected leaders continue to exploit back at home. Second, and perhaps more important, these incidents demonstrate the danger of America trying to forcibly export its liberal values onto illiberal societies.
U.S. policymakers have long believed that people around the world both want to adopt America’s liberal values, institutions, and practices, and that they should embrace them because those values embody the most enlightened and most civilized way of thinking. This universalist belief was aptly summarized by President George W. Bush in his 2002 West Point speech: “Moral truth is the same in every culture, in every time, and in every place…When it comes to the common rights and needs of men and women, there is no clash of civilizations.”
This way of thinking is profoundly flawed. The notion that moral truths should be singularly interpreted implicitly denies the differences between cultures. As prominent political science scholar Kenneth Waltz writes: “The powerful state may, and the United States does, think of itself as acting for the sake of peace, justice, and well-being in the world. But these terms will be defined to the liking of the powerful, which may conflict with the preferences and the interests of others.”
To argue that moral truths and values are the same in every culture allows policymakers to avoid serious questions about the consequences of intervention, including the inherent constraints of operating within a foreign culture. Even simple issues like the burqa—a billowy garment that covers a woman from head to toe—are still misunderstood in America. Whatever one thinks about the burqa (a symbol of oppression, institutionalized intolerance, etc.), it is more than a mere item of clothing; it reflects the ultra-conservative societal norms in which Afghan women live, many of whom do not have the freedom to look and act however they want.
Many well-meaning Americans believe that the United States, with its commitment to individual rights, political and religious freedom, and the rule of law, has a unique role to play in advancing Afghan human rights But the freedom Americans champion also entails one’s freedom to dissent. Does the West have the moral authority to punish Afghan traditionalists who reject our imposition of social transformation? What happens when attempts to reshape Afghan customs and belief systems incite violent rebellions, as they recently did in Mazar?
Recent events in Afghanistan should be a wake-up call to how our 10-year occupation is actually being perceived. Rather than winning “hearts and minds,” America’s civilizing mission has become increasingly associated with a Western cultural invasion.
My Cato Talk on Schools for Misrule
The March 3 event, in which I was joined by Cato’s Roger Pilon and by distinguished federal judge Douglas Ginsburg of the D.C. Circuit, is now online. You can also watch it (possibly in a larger format) at the Cato multimedia site.
If that’s not enough (or if you’d like something suitable for car listening) my appearance on Milt Rosenberg’s Extension 720, one of the nation’s great radio interview programs, is available as an audio podcast here from Chicago’s WGN. (Talkers magazine has described Rosenberg as the “nation’s leading author interviewer. A Chicago institution for the literate.”) And my speaking travels continue this week with a private Manhattan Institute event Wednesday evening, a talk at lunchtime Thursday before the American University Federalist Society chapter in Washington with Prof. Steven Vladeck commenting, and Cato’s own Policy Perspectives 2011 event in New York City on Friday.
You can buy the book here. Star libertarian lawprof Randy Barnett (just profiled in the Boston Globe) gave the book one of my favorite blurbs:
While the public loves to bash lawyers, judges, and politicians, law professors have escaped all blame. Olson provides the inside story of how progressive political ideology became the reigning orthodoxy of elite legal education, providing the legal theories responsible for an overweening government committed to mandating, prohibiting, or regulating every aspect of American life in the “public interest.” I wish I could say he exaggerates but, sadly, the legal foundation of the road to serfdom was devised by law professors.
Cato Unbound – There Ain’t No Such Thing As Free Parking
This month at Cato Unbound we’re discussing a practical, everyday issue — parking!
Yes, Cato Unbound is supposed to cover big ideas, deep thoughts, and the like, but parking policy is both important in its own right and also points to what I consider a very interesting problem: Given a theoretical or abstract commitment to free markets, well, how do we get there in the real world? What would a free-market policy look like in this or that issue area?
The answer isn’t always obvious, and the map isn’t the territory. Parking is interesting in this respect and possibly helpful. Parking is all around us, most of us deal with it every day, and the unintended consequences of parking policy are I think maybe easier to see than the unintended consequences in other fields. Parking affects how we live, how we shop, and how we work. It touches our cities, our family life, our environment, and even our health. Learning to look for such unintended consequences is part of developing a political culture that values economic insights and puts them to work.
That’s why this month we’ve invited four urban economists, each of whom can fairly be said to value the free market. Still, there will be a few disagreements among them — as I said, the map isn’t the territory. Donald Shoup leads the issue with his essay “Free Parking or Free Markets?” — arguing that our expectation of abundant free parking is both bad for our communities and the product of anti-market planning.
The conversation will continue throughout the month, with contributions from Professor Sanford Ikeda, Dr. Clifford Winston of the Brookings Institution, and Cato’s own Randal O’Toole. Be sure to stop by throughout the month, or else subscribe via RSS.
Monday Links
- “One of the first rules of negotiating is never to threaten to do something unless you are prepared to do it.”
- Policymakers and pundits assume the U.S. is so dominant that we’re prepared to fight multiple fronts at once, and that it won’t affect our security.
- Candidates for office should prepare to raise money, not rely on taxpayer subsidies.
- More market liberalization could help prepare Japan for any other natural disaster.
- Are Tea Party-backed Republicans prepared to go the distance on spending cuts?
Senator Corker’s CAP Act: A Better Version of Gramm-Rudman to Reduce the Burden of Government
This Thursday, April 7, Senator Corker of Tennessee will be the opening speaker at the Cato Institute’s conference on “The Economic Impact of Government Spending” (an event that is free and open to the public, so register here if you want to attend).
The Senator will be discussing his proposal to cap and then gradually reduce the burden of government spending, measured as a share of gross domestic product. With federal outlays currently consuming about 25 percent of economic output, excessive federal spending is America’s main fiscal problem.
Corker’s proposal would put federal spending on a 10-year glide path so that it eventually shrinks to 20.6 percent of GDP. This chart, from the Senator’s upcoming presentation, shows that government will grow at a much slower pace as a result of this restraint. Indeed, total savings over the 10-year period, measured against a baseline that assumes the federal government is left on auto-pilot, would exceed $5 trillion.
There are two things to admire about Senator Corker’s CAP plan.
First, he correctly understands that the problem is the size of government. As explained in this video, spending is the problem and deficits are a symptom of that problem.
Unfortunately, many policy makers focus on the budget deficit, which often makes them susceptible to misguided policies such as higher taxes. At best, such an approach merely substitutes one bad way of financing federal spending with another bad way of financing federal spending. And it’s much more likely that higher taxes will simply lead to more spending, thus exacerbating the real problem.
Second, Corker’s legislation has a real enforcement mechanism. If Congress fails to produce a budget that meets the annual spending cap, there is a “sequester” provision that automatically takes a slice out of almost every federal program.
Modeled after a similar provision in the successful Gramm-Rudman-Hollings law of the 1980s, this sequester puts real teeth in the CAP Act and ensures that the burden of government spending actually would be reduced.
Bias at NPR and PBS?
In my Britannica Blog column today I look at some brand-new examples of what might seem to be liberal bias at NPR and PBS:
NPR’s Diane Rehm Show devoted an hour to Sen. Bernie Sanders, the independent socialist from Vermont, talking about his new book The Speech. But it looks like Diane has not interviewed Sen. Rand Paul, the constitutional conservative from Kentucky, about his new book The Tea Party Goes to Washington, even though it’s selling better than Sanders’s book. It’s pretty clear to book publicists that it’s much easier to get a liberal author on the Diane Rehm Show than a conservative or libertarian author.
Meanwhile, this week PBS is featuring the latest in its program Journey to Planet Earth, this episode featuring “environmental visionary Lester Brown,” the long-time president of the Worldwatch Institute. The episode, “Plan B: Mobilizing To Save Civilization,” “delivers a clear and unflinching message – either confront the realities of climate change or suffer the consequences of lost civilizations and failed political states.” Matt Damon hosts. But Lester Brown’s decades-long predictions about environmental disasters have been wrong more often than the 5.9 million NCAA brackets filled out on ESPN. See this review from 1999 or this one from 2000 or this one from 2009. Meanwhile, a PBS documentary featuring the ideas of Julian Simon, who challenged doomsday orthodoxy and notably got things right? Don’t bet on it.
For more examples and why it matters, read the whole thing.
A Victory for the Laffer Curve, a Defeat for England’s Economy
A new study from the Adam Smith Institute in the United Kingdom provides overwhelming evidence that class-warfare tax policy is grossly misguided and self-destructive. The authors examine the likely impact of the 10-percentage point increase in the top income tax rate, which was imposed as an election-year stunt by former prime minister Gordon Brown and then kept in place by his feckless successor, David Cameron.
They find that boosting the top tax rate to 50 percent will slow economic performance. And because of both macroeconomic and microeconomic responses, tax revenues over the next 10 years are likely to drop by the equivalent of more than $550 billion. Here’s a key paragraph from the executive summary of the new study.
The country is suffering from a 50%-plus marginal tax rate which even its architect admits was imposed without economic purpose. Now our analysis shows that the policy is set for failure: at best leading to flat growth for a decade and £350bn of lost revenue. The Chancellor should seize the occasion of the 2011 budget to reverse this disaster promptly, for the benefit of public revenues, economic growth, the government’s standing with domestic wealth-creators, and the UK’s reputation with world business.
The authors urge Prime Minister Cameron to reverse this disastrous policy, but the odds of that happening are very slight. I hope I’m wrong, but I have repeatedly noted that Cameron almost always makes the wrong choice when deciding between liberty and statism.
President Obama wants to impose similar policies in the United States and there is every reason to expect similarly poor results. I’ve already posted evidence from IRS data showing that the rich paid much more tax following the Reagan tax cuts, so it shouldn’t shock anybody when the reverse happens if Obama is successful in moving America back toward a 1970s-style tax system.
To emphasize these critical points, let’s close with two videos. This first video explains the Laffer Curve and why politicians are foolish if they assume that there is a fixed linear relationship between tax rates and tax revenue.
This second video debunks the notion of class-warfare tax policy.
Largest Spending Cut Ever?
The Washington Post said today that a plan to “cut $33 billion from the federal budget” would be “the largest one-time reduction in U.S. history.”
Really?
The $33 billion in Democratic-proposed cuts are less than 1 percent of this year’s total spending, so we are considering very small cuts here. However, it is also true that Congress has been far more interested in growing spending than in cutting in recent decades. Still, the Washington Post said “in U.S. history,” which is a long time.
This federal budget table shows total federal spending since 1901. Total spending fell in 22 years out of the last 110 years. In 19 of those 22 years, spending was cut by more than 1 percent, or more than this year’s proposed Democratic cuts of $33 billion.
Indeed, even with $33 billion in cuts, total federal spending will still rise by more than $200 billion this year due to rising “entitlement” costs. And even in raw nominal dollars, the Washington Post isn’t correct because total federal spending fell $37 billion in 1946 and $61 billion in 2010.
We can also consider the $33 billion in proposed cuts within the applicable budget category–nondefense discretionary (NDD) spending. And we can adjust for inflation in order to fairly compare cuts in different time periods.
A $33 billion cut would reduce NDD this year by about 7 percent in constant dollars. This budget table shows that President Reagan and Congress cut NDD by 13 percent in 1982 in constant dollars.
So here is what we have discovered: Congress has reduced overall spending numerous times in the past; total spending will rise substantially this year even with proposed cuts; and Reagan cut nondefense discretionary spending more than the current $33 billion proposal would.
One year of small budget cuts won’t solve our fiscal problems. The budget-cutting drives of the early 1980s and mid-1990s made a bit of progress because they were sustained over a number of years while the economy boomed. Thus, the real challenge for Republicans will be whether they can follow up this year’s small cuts with much bigger cuts next year and beyond.
This Week in Government Failure
Over at Downsizing the Federal Government, we focused on the following issues this week:
- Michael Tanner’s new paper is a sobering reminder that it’s the major entitlement programs that are pushing us toward the cliff’s edge.
- This week the House Republican leadership finally put the Pentagon on the chopping block. However, the cuts suggested by the GOP are pathetic.
- The federal government engages in a lot of activities that are difficult to defend. But when it comes to sugar, the government’s protections are clearly indefensible.
- We’re still looking for a convincing argument as to why farmers deserve taxpayer- and consumer-funded special treatment compared with other businesses.
- Record spending levels…trillion dollar plus deficits…mountainous debt…a weak economy…what, Congress worry?
- Uncle Sam sticks it to the Easter Bunny.
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The Trouble with Doctrines
Many presidential foreign policy doctrines ago, George Kennan figured out what was wrong with them. In my latest post for The Skeptics, I rely on his insight to try to stop pundits from inventing an Obama Doctrine.
The national effort to discern an Obama Doctrine from our attack on Libya is likely to be futile. If it succeeds, it will be harmful. No one can make foreign policy without some theory or strategy. But as Kennan’s lament about the Truman Doctrine points out, doctrines tend to be post-hoc rationales of actions that confuse policy later. If taken seriously, they typically encourage foolish wars.
Kennan attributed the American desire for doctrines to our love of law and rules. I see it more as a product of divided power, which heightens the need for sales. Doctrines have a pseudo-scientific air that helps legitimate policy. They endow the messy process of presidential decision-making with false order. They over-generalize.
The rest of the post briefly applies this formula to all our presidential doctrines, from Monroe to Bush. With the exception of Nixon’s, almost all arose to justify military action and thus tend to encourage war. While I can imagine doctrines, like Weinberger-Powell, that might marginally help keep us out of trouble, even that substitutes a formula for careful consideration of action based on theory.
So I propose the Kennan Doctrine, which says don’t have a doctrine.
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