Archive for August, 2011
Slate.com vs. Tea-Party/Christians/Bachmann
Slate worked itself into a lather yesterday over the insidious education policy implications of Michele Bachmann’s Iowa Straw Poll victory:
As recently as a decade ago, Republicans like George W. Bush, John McCain, and John Boehner embraced bipartisan, standards-and-accountability education reform…. Now we are seeing the GOP acquiesce to the anti-government, Christian-right view of education epitomized by Bachmann…. Against a backdrop of Tea Party calls to abolish the Department of Education and drastically cut the federal government’s role in local public schools….”
To support this narrative, Slate asked Bachmann what the federal government’s role was in education, to which she replied, “There is none; Education is a matter reserved for the states.”
Oh, whoops, sorry. Got that last quote wrong. That wasn’t Bachmann‘s answer, it was the answer of the FDR administration.
This answer rests squarely on the Tenth Amendment, which reserves to the states and the people powers not expressly enumerated and delegated to Congress by the Constitution. It was published by the federal government in 1943, under the oversight of the president, the vice president, and the speaker of the House.
Though it might come as a surprise to Slate‘s writers, our nation was not founded on state-run schooling. And, until very recently in historical terms, the idea that the federal government had a role to play in the classroom was unthinkable. It may have required some theorizing to evaluate the merits of Congress-as-schoolmarm prior to the feds getting involved in a big way in 1965, but now… now we can just look in the rear-view mirror (see chart below).
With nearly half a century of hindsight, advocating a federal withdrawal from America’s schools does not seem “anti-government.” Just anti-crazy.
Creating Galt’s Gulch from Scratch?
Advocates of limited government love to fantasize. But because we’re strange people, we don’t have ordinary fantasies about supermodels or playing pro baseball. We daydream about a libertarian nirvana, where the rights of individuals are protected, guided by a moral order based on freedom and responsibility, and the leviathan state is forever constrained.
Ayn Rand created a fictional version of this free society in Atlas Shrugged and called it Galt’s Gulch. But some advocates of liberty want to turn fiction into reality.
Here are some excerpts from a Yahoo story about the efforts of a libertarian entrepreneur.
Pay Pal founder and early Facebook investor Peter Thiel has given $1.25 million to an initiative to create floating libertarian countries in international waters, according to a profile of the billionaire in Details magazine. Thiel has been a big backer of the Seasteading Institute, which seeks to build sovereign nations on oil rig-like platforms to occupy waters beyond the reach of law-of-the-sea treaties. The idea is for these countries to start from scratch–free from the laws, regulations, and moral codes of any existing place. Details says the experiment would be “a kind of floating petri dish for implementing policies that libertarians, stymied by indifference at the voting booths, have been unable to advance: no welfare, looser building codes, no minimum wage, and few restrictions on weapons.” …The Seasteading Institute’s Patri Friedman says the group plans to launch an office park off the San Francisco coast next year, with the first full-time settlements following seven years later.
I think this is a great idea, though I have two concerns.
First and foremost, creating a Galt’s Gulch does not mean you necessarily escape oppressive laws. Places such as the Cayman Islands, Monaco, and Hong Kong are relatively free compared to the United States, but you can’t escape the IRS by moving your money to these fiscal havens.
The United States has a “worldwide” tax system, which necessitates a form of fiscal imperialism. And because America is the 800-pound gorilla of the world economy, almost all low-tax jurisdictions have been coerced into serving as deputy tax collectors for bad U.S. tax laws.
You may be thinking, “So what, Dan, we’re talking about physically redomiciling, not just moving our money.”
Unfortunately, it’s not that easy. Living outside the United States does not mean you escape the IRS. Unlike all other developed nations, America’s worldwide tax system applies even to non-residents.
So you can only get rid of the IRS by giving up American citizenship. But even that’s difficult. Politicians have adopted reprehensible anti-expatriation laws – disgustingly similar to the ones imposed by Nazi Germany and Soviet Russia – that don’t let people emigrate without first shaking them down for money.
So if you want to move to a new Galt’s Gulch floating island, you either have to do it before you achieve economic success or you have to pay a ransom to the thuggish clowns in Washington.
This certainly isn’t an argument against what the Seasteading Institute is trying to do, but it is a warning that there will be barriers imposed by uncompetitive nations with high taxes and excessive intervention.
Simply stated, governments don’t like competition. And they definitely hate anything that hinders their ability to collect tax revenue and buy votes. Indeed, this is why I spend so much of my time fighting to preserve tax competition (even if it means the possibility of getting thrown in a Mexican jail). If the crooks in Washington and other national capitals know that the geese with the golden eggs can fly away, they will be much less likely to impose bad policy.
All of this is explained in this video on the economic benefit of tax havens.
My other concern is a personal gripe. The Seasteading Institute is planning to put their prototype off the coast of San Francisco. That’s much too chilly. I vote for the Caribbean.
Stossel Thursday
I’ll be on “Stossel” Thursday night, along with Nick Gillespie, George Mason University economists Robin Hanson and Alex Tabarrok, and, um, Dog the Bounty Hunter. The topic is “Defending the Indefensible” (!), and we’ll talk about such putatively difficult issues as insider trading, private money, bounty hunting, and gay marriage.
“Stossel” is on Fox Business Network on Thursday at 10 pm ET, and again at 10 pm Pacific Time (1 a.m. ET). It is rebroadcast on Saturday and Sunday nights. But watch it Thursday night, so you won’t be embarrassed when everybody’s talking about it at the water cooler Friday morning.
If you can’t wait till Thursday night, watch me take questions on “Stossel” from the 500 students at the International Students for Liberty Conference.
Imposing National Standards
Next month, the Obama Administration will begin granting waivers to states that are not on track to meet proficiency requirements in the No Child Left Behind Act. Education Secretary Arne Duncan will be granting these waivers selectively, based mostly on states’ willingness to abide by new executive branch mandates not included in NCLB, likely including adopting national curriculum standards.
Duncan has the authority under NCLB to grant waivers, but not to compel states to jump through administration hoops in order to earn them, as Neal McCluskey has documented clearly.
As Neal notes in today’s Cato Daily Podcast, essentially imposing national standards – as well as other potential waiver demands – represents a large-scale assertion of federal executive power over local education:
We’ve broken any semblance of a Constitutional balance of power between the executive and the legislative branch. Now the President is just going to dictate to every school what they’re going to teach. And that is a giant threat to freedom and to the American education system.
A broader recognition that the Constitution grants neither Congress nor the President any role in education would go a long way toward fixing these problems. NCLB may be, to quote Arne Duncan, “a slow-motion train wreck,” but using that law to transfer power away from parents, states and Congress is easily a solution worse than the problem.
Americans Are Not Convinced of Top Down Economics
Several recent polls have shown Americans are becoming increasingly skeptical of Washington’s economic planning capabilities. According to a recent Washington Post poll, 73 percent of Americans doubt Washington’s ability to solve economic problems. In fact, these numbers have leapt from 52 percent last year and from 41 percent in 2002. It appears that the more the government has tried to fix the U.S. economy, the less confident Americans are that the government is capable of doing such things.
When the government in Washington decides to solve economic problems, how much confidence do you have that the problem actually will be solved: A lot, some, just a little, or none at all?
Source: Washington Post Poll
Another example of this skepticism toward government economic planning comes from a recent Rasmussen poll finding that 71 percent of Americans believe the private sector is better than the government at determining technological potential.
Who is better at determining the long-term benefits and potential of new technologies, private sector companies and investors or government officials?
71 percent: Private sector companies and investors
11 percent: Government officials
17 percent: Not sure
This suggests the public is not convinced that President Obama’s “investment” spending will necessarily be properly directed to its most useful ends. For example, in the president’s 2011 State of the Union address, he marshals the word “invest” or “investment” 13 times, with 8 specifically referencing government investment. It is important to remember that when government “invests” in the economy, it requires officials to make decisions about who gets funding. This presupposes that the government has the knowledge to know which technologies have the greatest potential and thus are worthy of investment. Instead of letting billions of individuals work through a marketplace to best allocate resources to the technologies with the greatest potential, this would instead rely on a small, centralized group of intellectuals deciding who gets what.
Also, according to this Rasmussen poll the public is not convinced that when the government does “pick winners” to receive government funding, that the money will not be wasted. 64 percent believe it is likely that if a private company, which cannot find investors, gets funding from the government that the money will be wasted.
Sometimes a company cannot find investors for a new technology and they seek research funding from government. Suppose a private company cannot find investors but gets funding from the government. How likely is it that government funding will be wasted?
30 percent: Very likely
34 percent: Somewhat likely
21 percent: Not very likely
4 percent: Not at all likely
11 percent: Not sure
Washington Post Asks for Budget Plans
The Washington Post’s editorial board issued a challenge to the president and his Republican opponents: “show us your plans” for deficit reduction. In fact, the Post says it would be “delighted” to receive plans from its readers. However, the Post isn’t interested in “meaningless promises” to cut “waste, fraud, and abuse”—it wants specifics:
Here’s what we’re not looking for: pablum about eliminating unnecessary spending without identifying where. Gauzy rhetoric about making hard choices without making them. Meaningless promises about eliminating waste, fraud and abuse. Broad assertions about where to find the money — “Medicare savings,” “tax reform” — without specifics. Arbitrary spending caps without accompanying details about how those limits are to be met. If you believe, for example, that federal spending should be kept to a specific share of the economy — 18 percent? 20 percent? — show the plausible path to getting there.
Amen. Chris Edwards and I have been beating the drum for Republican policymakers in particular to get specific about what they would cut. Chris recently noted that with the exception of Sen. Tom Coburn (R-OK), Sen. Rand Paul (R-KY), and perhaps a few others, Republicans aren’t putting much effort into identifying programs to terminate. And I have noted that “It’s more common to hear Republicans blubber on about ‘reducing waste, fraud, and abuse’ in government programs and ‘saving’ the pillars of the welfare state (Social Security and Medicare) for ‘future generations.’”
As for deficit reduction ideas from Washington Post readers, we have a balanced budget plan on our Downsizing the Federal Government website. In fact, not only do we have a plan, we have over three dozen essays on numerous government agencies that provide details on what programs to cut and why.
‘The Constitution Requires Judicial Engagement, Not Judicial Abdication,’ Writes the 11th Circuit, and Then Leads by Example
On Friday, when the 11th Circuit struck down the individual mandate portion of ObamaCare, a trip to the Supreme Court became all but assured. Previously, although Supreme Court review was highly probable even if a circuit split didn’t develop, there was still an outside chance that the Court would deny review if all circuit courts upheld the law. Now, the Court is essentially obliged to take the case. This is reason enough to be happy about the decision.
As I work my way through the opinion, I become even happier. The opinion is not only exhaustive, it is convincing. If Congress oversteps the outer limits of its power, the court explains, then “the Constitution requires judicial engagement, not judicial abdication.” Thus, we are given over 200 pages of “judicial engagement”: the law is thoroughly explained, the Supreme Court precedents are summarized, and every major counter-argument is addressed. Moreover, the opinion adds nuance to certain arguments that were either not discussed in the briefs or discussed in a subtly different way. I will highlight some of those nuances below.
The opinion describes “two broad limitations on congressional power under the Commerce Clause.” The first is an “accommod[ation] of the Constitution’s federalist structure” that “preserve[s] ‘a distinction between what is truly national and what is truly local.’” The second is that courts should “not interpret the Commerce Clause in a way that would grant to Congress a general police power, ‘which the Founders denied the National Government and reposed in the States.’”
Both of these limitations are indisputable aspects of the existing case law. They are also too often ignored. By enumerating these limitations, the 11th Circuit opinion makes them even more explicit, almost turning them into factors of a legal test. And this is the right way to conceive of them. Those of us who oppose the mandate have constantly reiterated that, if this is allowed, there is nothing left that Congress may not do. Those who support the mandate have either pushed back against this characterization and argued that “health care is special” (in other words, “just this once, we swear”), or they have accepted the new scope of congressional power with a shrug, arguing that existing Supreme Court cases validate the individual mandate, even if this gives Congress unlimited power.
Friday’s opinion unequivocally asserts that such a result is unacceptable. If the current tests of congressional power under the Commerce Clause—specifically the “substantial effects” test articulated in Wickard v. Filburn—are so broad that there is no limitation other than the whims of Congress, then it is time for the Supreme Court to explain whether this constitutionally perverse result is, in fact, where we now stand. Otherwise, the 11th Circuit is obliged to uphold the original principles of the Constitution—that Congress’s powers are “few and defined”—against an unprecedented law that would undermine this founding tenet.
Ron Paul Talks Sense on Trade
Presidential Candidate Ron Paul has a decidedly mixed record on trade policy. He often votes against trade agreements because he sees them as “managed trade” and an interference with true free trade. Well, ok, but that’ s like voting against income tax cuts because you think the IRS shouldn’t exist. I get the point, but c’mon…
In any event, he was the only participant in Thursday night’s debate between the Republican presidential candidates who spoke about trade with any sense at all. As Inside US Trade [subscription required] points out, trade policy was not a prominent theme of the debate, but that didn’t stop Mitt Romney from (again) spouting nonsense about balanced trade:
Former Massachusetts governor Mitt Romney late last week took a swipe at the trade policies of the Obama administration in a debate of the Republican presidential candidates by implying they are unbalanced in favor of other nations.
As part of a seven-point list of actions to turn around the economy, Romney said the U.S. should “have trade policies that work for us, not just for our opponents,” as the third point…
(I’ll just interject here to say that by “opponents” I believe Mr Romney is referring to our trade partners. You know, the folks who sell us stuff and buy stuff from us. But I digress…)
Trade was only raised one other time during the debate. Prompted by a moderator, Rep. Ron Paul (R-TX) defended his earlier criticism of Obama’s sanctions against Iran for its nuclear program.
Saying it was “natural” that Iran would pursue nuclear weapons—given that India, Pakistan, China, and Israel also possess them—Paul attacked the sanctions policy as steering the U.S. toward conflict.
“Countries that you put sanctions on, you are more likely to fight them,” he said. “I say a policy of peace is free trade. Stay out of their internal business.”
Paul also suggested it was time for the U.S. to engage in a trading relationship with Cuba and “stop fighting these wars that are about 30 or 40 years old,” an apparent reference to the Cold War. [emphasis added]
(My friend Scott Lincicome has more on the economic illiteracy flowing from the debate here)
Mr Paul is right on this one. He and I no doubt disagree on a few issues, and on trade I have more tolerance than he does for multilateral (and, albeit to a lesser extent, bilateral and regional) trade agreements as the only likely avenues for trade liberalization in the foreseeable future. But the link between trade and peace is an important one, and often overlooked.
Speaking of Ron Paul, the following clip shows Jon Stewart at his devastating best, calling out the mainstream media—and particularly Fox News—for ignoring and/or outright mocking Ron Paul’s candidacy. Watch to the very end, you won’t regret it. (HT: RadleyBalko)
| The Daily Show With Jon Stewart | Mon – Thurs 11p / 10c | |||
| Indecision 2012 – Corn Polled Edition – Ron Paul & the Top Tier | ||||
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Polls Show Voters Don’t Support Corporate Welfare
Two polls of likely voters released by Rasmussen Reports today indicate that the federal government’s corporate welfare programs should be prime targets for spending cuts.
The first poll found little support for the Small Business Administration’s lending programs:
- A majority (58 percent) of likely voters said that the federal government shouldn’t guarantee loans issued by private lenders to small businesses. 23 percent said the government should back small business loans and 19 percent were unsure.
- A majority (59 percent) of likely voters said that reducing government regulations and taxes would be more helpful to small businesses than the government providing loans to small businesses that can’t obtain financing on their own. 22 percent said the government loans were better and 18 percent were unsure.
- Entrepreneurs particularly believed that reducing government regulations and taxes is preferable to government lending programs. 76 percent of entrepreneurs felt that way and 61 percent opposed government loans to small businesses that couldn’t obtain financing.
(See this new Cato essay on why the Small Business Administration should be terminated.)
Similarly, the second poll found little support for various federal corporate welfare programs:
- Only 15 percent of likely voters said the federal government should continue to provide funding for foreign countries to buy military weapons from U.S. companies. 70 percent were opposed and the rest were undecided.
- Only 29 percent of likely voters said the government should continue to provide loans and loan guarantees to help finance export sales for large corporations. 46 percent were opposed and the rest were undecided. (See Sallie James’ new Cato paper on why the Export-Import Bank should be terminated.)
- Only 37 percent of likely voters said the federal government should continue providing farm subsidies. A plurality (46 percent) said farm subsidies should be abolished and 17 percent weren’t sure. (See this Cato essay for more on farm subsidies.)
Your Tax Dollars at Work
President Obama says that we are a ”generous and compassionate” country and that “through government, we should do together what we cannot do as well for ourselves.” And to fulfill that “progressive vision,” he’s going to work on “making government smarter, and leaner and more effective. ”
Today, under the rubric “Breakaway Wealth/Reaping Riches from Federal Spending,” the Washington Post gives us a front-page picture of where a lot of those generous and compassionate federal dollars actually go:
Millions of dollars worth of federal contracts transformed Anita Talwar from a government accounting clerk into a wealthy woman—one who can afford a $2.8 million home in the Washington suburbs with its own elevator, wine cellar and Swarovski crystal chandeliers.
Talwar, a 59-year-old immigrant from India, had no idea that she and her husband would amass a small fortune when she launched a company providing tech support to the federal government in 1987. But she shrewdly took advantage of programs for minority-owned small businesses and rode a boom in federal contracting.
By the time Talwar sold Advanced Management Technology in 2004, it had grown from a one-woman shop to a company with more than 350 employees and $100 million in annual revenue—all of it from government contracts.
Talwar’s success—and that of hundreds of other contractors like her—is a key factor driving the explosion of the region’s wealth over the last two decades. It also has exacerbated the gap between high- and low-wage workers, which is wider in the D.C. area than almost anywhere else in the United States.
Washingtonians now enjoy the highest median household income of any metropolitan area in the country…
More than $80 billion in federal contracting dollars will flow to the region this year, up from $4.2 billion in 1980.
That’s my kind of smart, lean, and effective government!
President’s Fealty to Antidumping Lobby Kills Jobs and Depresses Growth
Rhetorically, President Obama is a champion of industry—as long as it’s green. To put our money where his mouth is, the president has already devoted over $100 billion in direct subsidies and tax credits to promote investment in solar panel, wind harnessing, lithium ion battery, and other industries he deems crucial to “winning the future.” (See Economic Report of the President, 2011, P. 129, Box 6-2 “Clean Energy Investments in the Recovery Act” for a list of some of those subsidies.) Concerning those industries, the president said in his 2010 SOTU address:
Countries like China are moving even faster… I’m not going to settle for a situation where the United States comes in second place or third place or fourth place in what will be the most important economic engine of the future.
To be sure, I am opposed to industrial policy, which presumes that one person or a cabal of self-anointed soothsayers knows how the future will unfold. But the story I am about to share is, I think, instructive in describing endemic policy dissonance within this administration and speaks to what even the president’s staunchest supporters describe as half-heartedness and an incapacity or unwillingness to follow through. Some chalk it up to indifference, but it’s really an aversion to making choices that could offend potential supporters.
While the president talks up the solar panel industry and commits our resources to its development, other policies of his administration undermine its success and encourage offshoring of production and the jobs that go with it. Dow Corning is one of the world’s largest producers of silicones, which are the most crucial components of solar panel production. The foremost ingredient in these silicones is silicon metal, which costs nearly twice the world market price in the United States because of antidumping restrictions on imports of the raw material from China and Russia (two of the world’s largest suppliers). Under U.S. antidumping law, Dow Corning and all other consumers of silicon metal were forbidden from participating formally in the proceedings that lead to the imposition of the duties.
As I described in a recent Cato policy paper, this is more than just tough luck for a few companies. This is economic self-flagellation on a grand scale. The antidumping statute prohibits consideration of the impact of prospective duties on downstream industries or on the economy as a whole, yet policymakers—having been steamrolled by the pro-antidumping lobby—have given scant consideration to the idea that this is plainly stupid policy, particularly in a globally integrated economy characterized by transnational supply chains and cross-border investment. In such an environment, if one hopes the best for the country’s value-added industries, there should be no restrictions on raw material inputs ever (a policy being embraced by other governments around the world).
Here’s Where Better Schools HAVE Scaled Up…
Earlier this summer, I released a study comparing the performance of California’s charter school networks with the amount of philanthropic grant funding they have received. The purpose was to find out if this model for replicating excellence was consistently effective. The answer, regrettably, was no.
But a new study we are releasing today finds that there is at least one place where better schools HAVE consistently scaled-up: Chile. Thanks to that nation’s public and private school choice program, chains of private schools have arisen, and they not only outperform the public schools, they also outperform the independent “mom-and-pop” private schools.
For anyone interested in replicating educational excellence, this study by a team of Chilean scholars is worth a look.
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