Rick Perry, Arne Duncan, and Michael Jackson
To my astonishment, Arne Duncan went after Republican presidential candidate Rick Perry yesterday on the grounds that Perry hasn’t done enough to improve the schools under his jurisdiction. According to Bloomberg News, Duncan said public schools have “really struggled” under Perry and that “Far too few of [the state's] high school graduates are actually prepared to go on to college.”
I was never a huge Michael Jackson fan, but for some reason his “Man in the Mirror” track just popped into my head as I read this. You see, once upon a time, Arne Duncan was “CEO” of the Chicago Public Schools. During and for some time after his tenure, he was celebrated as having presided over “The Chicago Miracle,” in which local students’ test results had improved dramatically. That fact turns out to have been fake, but accurate. The state test results did improve, but not because students had learned more; they appear to have improved because the tests were dumbed-down.
When this charge was first leveled, I decided to look into it myself, and found that it was indeed justified. There was no “Chicago Miracle.” Arne Duncan ascended to the throne of U.S. secretary of education, at least in part, on a myth. The academic achievement of the children under his care stagnated at or slightly below the level of students in other large central cities during his time at the helm. Seems an opportune occasion for someone to “start with the man in the mirror, asking him to change his ways.”
Texas Court Rules For Eminent-Domain Critic
Good news from Texas, where a state appeals court has handed a major win to investigative journalist Carla Main, whose book Bulldozed: ‘Kelo,’ Eminent Domain, and the American Lust for Land took a critical look at the seizure of private land under eminent domain laws for purposes of urban redevelopment. Dallas developer H. Walker Royall didn’t like what Main wrote about his involvement in a Freeport, Texas marina project and proceeded to sue her, publisher Encounter Books (which I should note is also my own publisher on Schools for Misrule), and even liberty-minded law professor Richard Epstein over a dust jacket blurb Epstein had given for the book. (Earlier coverage of the suit here and here.)
A trial court had declined to dismiss Royall’s claims on summary judgment, but yesterday Judge Elizabeth Lang-Miers reversed in substantial part, ruling that Royall had failed to make the requisite showing that key passages in Bulldozed had in fact defamed him. The case is not yet over, but Institute for Justice senior attorney Dana Berliner, who argued for the defense, is understandably jubilant: “Walker Royall has failed in his attempt to use this frivolous defamation lawsuit as a weapon to silence his critics,” she said. Moreover, outrage at Royall’s suit contributed to Texas’s enactment this summer (joining 26 other states) of strong “anti-SLAPP” legislation aimed at curbing lawsuits intimidating speech. You can read the opinion here, and early coverage at Gideon Kanner’s blog, the Dallas Observer and D Magazine.
Trade Helps Explain Texas-Sized Job Growth
As its governor, Rick Perry, weighs a run for the White House, Texas has drawn attention for its healthy job growth. Since the recession ended in June 2009, Texas has accounted for half of the net new jobs added to the U.S. economy, according to the lead story in this morning’s USA Today. That’s quite a record for one lone state.
We’ll leave it to others for now to argue over how much credit Gov. Perry can claim. Some credit surely goes to high oil prices, fueling job growth in a sector important to the Texas economy. Another reason for its relatively strong job growth is a friendly business climate, including no state income tax and relatively light regulations. And for those who scapegoat trade for the nation’s persistently high unemployment rate, consider that Texas is the nation’s number one trading state. As the USA Today story notes:
Overseas shipments by Texas’ strong computer, electronics, petrochemical and other industries rose 21% last year, compared with 15% for the nation, according to the Dallas Federal Reserve Bank. The state also benefits from its proximity to Latin American countries that are big importers of U.S. goods … The surge creates jobs for Texas manufacturers and ports.
As I can attest from recent speaking engagements in San Antonio and Laredo, Texans have embraced their state’s position as the nation’s leading gateway for trade with NAFTA-partner Mexico and the rest of Latin America.
While politicians and union bosses from other states grumble about allegedly unfair trade, the latest trade and job numbers show that the people of Texas are making the most of the opportunities created by our more open economy.
Actually, Texans Save $600 Million a Year
A Texas tax official estimates in this story that Texas loses an estimated $600 million in Internet sales taxes every year. Its part of a long-running debate about whether state governments should be able to collect taxes from out-of-state retailers who send goods into their jurisdictions.
What happens with the $600 million depends on what you mean by “Texas.” If you mean the government of the state of Texas in Austin, why, yes, the government appears not to collect that amount, which it wants to. If by “Texas” you mean the people who live, work, and raise their families throughout the state–Texans–they actually save $600 million a year. They get to do what they want with it. After all, it’s their money.
The Texas tax collector is complaining because the last thing state taxing agents want to do is collect money in the form of use taxes, which means something like going door to door to collect money from voters based on what they bought from out of state. Revenuers intensely prefer to hide the process, collecting their residents’ money from out-of-state companies.
Amazon.com is Texas’ target–it’s the great white whale for tax-hungry jurisdictions nationwide. With no retail outlets and few offices or fulfillment centers around the country, it’s not subject to tax jurisdiction in lots of places that would like to tap it for revenue. Having a fulfillment center in Texas may make Amazon liable for $600 million of its customers’ money, so it’s doing the sensible thing: getting out.
And thank heavens it can! Amazon is a cog in the extremely virtuous process of tax competition. Its ability to move operations means that it can escape states with burdensome taxes and tax collections oblibations, like Texas. Tax competition among states puts downward pressure on taxes, which in turn puts upward pressure on the wealth and well-being of state residents.
The pro-tax folks have been working for years to eliminate tax competition. The “Streamlined Sales Tax Project” continues work it began in 2000 to pave the way for nationwide sales taxation. “Streamlining” sounds so good, doesn’t it? But the result would be uniform–and uniformly high–sales taxes that every state might impose on every retailer that sends goods across state lines.
The Web site of the pro-tax coalition sounds good, too: the “Alliance for Main Street Fairness,” at the URL standwithmainstreet.com. Who wouldn’t want to “stand with Main Street”? Lovers of limited government, for one.
“Fairness” here means uniform high sales taxes and interstate tax collection obligations. The site doesn’t say who’s behind it, but the campaign to impose taxes on Amazon and other remote sellers is almost certainly a project of big national chain retailers. Rather than fight to lower taxes nationwide, they think they should just saddle their online competitors with tax collection obligations.
As long as the Streamlined Sales Tax Project continues to fail, tax competition in this area survives, and retailers like Amazon can provide lower costs to all of us–including that $600 million in savings enjoyed by Texans each year.
Too Quiet on the Texas Front?
Over at Matt Yglesias’ blog, Ali Frick wants to know why she hasn’t detected any “conservative outrage” over the great Texas textbook tangle. Strangely, though, she only critiques Cato by name. That’s odd because (a) Cato is a libertarian organization, not conservative, and (b) there are many other libertarian — as well as truly conservative — think tanks out there.
Unfortunately, those things are just the beginning of the post’s odd twists.
Before I get into the weirdness, though, let me cop to the charge of relative silence. I’ve been meaning to hit the Texas situation harder, but have been dealing with a much greater education threat to the country — truly national curriculum standards — as well as other big issues.
Which reminds me: If Ms. Frick is very concerned about having one set of standards imposed on the entire nation, I invite her — and anyone else — to a major debate we’ll be having at Cato on the same day that proposed national standards are expected to be released to the public. Register here to attend!
So anyway, I have been relatively quiet on Texas. But not completely silent, and Ms. Frick could easily have found things that both I and others have written on the Lone Star social studies shootout just by searching for “Texas” and ”social studies” on Cato’s website. That search brings up this, and this, and this. Oh, and we sent this statement to media outlets, resulting in lots of radio interviews on the subject. How Ms. Frick missed all of these things, I do not know.
What is especially strange about Ms. Frick’s post, though, is not that she called Cato conservative (that’s all too common), or didn’t actually seem to check if we’d done anything on this. What is especially strange — or maybe just confused — is that she thinks people at Cato should be very upset about the Texas situation because the content of textbooks for Texas is often the content other states get stuck with.
For one thing, that Texas essentially dictates content for everyone else is an increasingly debatable point. More important for Frick’s piece, though, is that she asserts that somehow Texas being a big, centralized market is clearly something that creation of the U.S. Senate was supposed to mitigate, as well as the Constitution’s Supremacy Clause:
[I]t’s hard for me to think of really anything so antithetical to the Founding principles than for one state to mandate radical changes that all the other states are forced to swallow. Indeed, avoiding such an outcome was in large part the purpose of the Senate, not to mention the Supremacy Clause of the Constitution — really, the scrapping of the Articles of Confederation altogether.
What?
First off, if you read Federalist no. 62, there is just no way to interpret it as saying that the Senate will represent states so that an individual state’s policies won’t adversely affect other states. It simply discusses the need to give representation to both states and people in the national government of the new republic.
But that isn’t Frick’s biggest stretch. That is reserved for her application of the Supremacy Clause, which reads:
This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.
Once again, this says absolutely nothing about whether it is constitutional for a big state to adopt textbooks even if it affects the textbook choices of smaller states. The clause is entirely about the supremacy of federal laws — when made to exert the specific, enumerated powers given to the federal government — over state laws. It says diddly about state actions that simply have some impact on other states, especially when those actions have nothing to do with federal powers.
All that said, libertarians do have good reason to be concerned about what has transpired in Texas, as it illustrates brilliantly the conflict, politicization, and academic dangers inherent to government schooling. But that is an issue about which many of us at Cato have dealt at great length. I invite Ms. Frick to read it all.
The Good Side of Bad News in Europe
What does the Greco-Euro currency/debt crisis mean for the U.S. economy?
Nearly everyone except the uniquely wise economist John Cochrane assumes very bad “contagion” effects –on U.S. banks, exports and particularly U.S. manufacturing.
This echoes identical anxieties while the world went through a far more dramatic Asian currency crisis after July 1997, and a Russian debt crisis the following May.
The most widely ignored effect of that crisis, however, was to depress foreign demand for oil, and thus slash oil prices to U.S. buyers from $25 a barrel in early 1997 to $11 by the end of 1998.
Oil is a major input into the manufacturing process (e.g., chemicals and plastics), and a major cost of distribution (trucks, trains and airplanes). It is also a major determinant of the cost of all energy sources used in making other goods such as aluminum and paper. When marginal costs go down, it becomes profitable to expand production.
At the height of the Asian/Russian crises, the table below shows that U.S. manufacturing output rose by more than 10 percent. It’s an ill wind that doesn’t blow somebody some good.
Looking at the same phenomenon from the other side, every recession but one (1960) was preceded by a big increase in the price of oil. For oil importers like the U.S., cheaper oil is definitely better.
During the last big foreign currency/debt crisis, the real growth of U.S. Gross Domestic Purchases (the home-grown portion of GDP) jumped by 4.7% in 1997 and 5.5% in 1998. Yet the Fed cut interest rates three times in October and November of 1998 because of what was happening in other countries.
The table show what happened to the price of oil and to U.S. manufacturing from June 1997 to December 1998. The middle column is the price of a barrel of West Texas crude, and the column to the right is the U.S. industrial production index for the manufacturing sector.
1997-06 19.17 87.80
1997-07 19.63 88.12
1997-08 19.93 89.69
1997-09 19.79 90.45
1997-10 21.26 90.98
1997-11 20.17 92.05
1997-12 18.32 92.52
1998-01 16.71 93.36
1998-02 16.06 93.31
1998-03 15.02 93.13
1998-04 15.44 93.68
1998-05 14.86 94.25
1998-06 13.66 93.53
1998-07 14.08 92.96
1998-08 13.36 95.40
1998-09 14.95 95.11
1998-10 14.39 95.96
1998-11 12.85 96.08
1998-12 11.28 96.63
In recent weeks, as the debt and currency problems in Euroland hit the front page, the price of crude oil fell by about 20 percent.
Once again, as in 1997-98, everyone may be watching the wrong ball in the wrong court.
Criminalizing Politics
Steve Poizner, the California insurance commissioner who is seeking the Republican nomination for governor, created a stir this week by charging opponent Meg Whitman’s campaign with attempting to coerce him out of the race. He said he had reported her campaign to state and federal law enforcement authorities.
What did Whitman actually do? Well, Poizner said that Whitman consultant Mike Murphy had contacted a Poizner staffer by phone and email to urge him to withdraw from the race. The email, released by Poizner, said: “I hate the idea of each of us spending $20 million beating on the other in the primary, only to have a badly damaged nominee. And we can spend $40 million tearing up Steve if we must; bad for him, bad for us, and a crazy waste to tear up a guy with great future statewide potential.” In the email, Murphy went on to suggest that if Poizner dropped out of the race before the June 8 vote, Whitman and her team would immediately get behind him for a 2012 challenge to Sen. Dianne Feinstein.
Poizner says that’s not only “strong-arm tactics” but possibly an illegal inducement to get him to withdraw. But isn’t this really just politics as usual? Don’t candidates as a matter of course say “support me this time, and I’ll support you next time” or “run for a different office and I’ll endorse you”? Presidential candidates, or their campaign managers, are often said to have promised the vice presidency to more than one rival to clear the field.
The point about spending $40 million of Republican money tearing up fellow Republicans is a pretty common complaint about party primaries. In fact, National Review correspondent John J. Miller raised just that concern about the Rick Perry-Kay Bailey Hutchison showdown in Texas.
Even during the Rod Blagojevich flap over “selling” a Senate seat, the always-provocative Jack Shafer and Jim Harper both asked, Isn’t this what politicians do? They make deals — including deals like “I’ll support your campaign if you’ll make my buddy (or me) a Cabinet secretary.” No doubt the promises are often worthless, but they still get made. Blagojevich and Murphy have reminded pols all over the country that such deals are better made in person, not via email or telephone.
Politics ain’t beanbag, Mr. Poizner. Accept the deal or reject it. But “let’s clear the field and spend our money fighting the other party” is pretty standard politics. And a darn sight better than another standard political practice, using the taxpayers’ money to bribe the voters to support you.
Liberty, Even for People You Don’t Like
In a conversation about “Don’t Ask, Don’t Tell,” Peter Sprigg of the Family Research Council admitted that he wants to re-criminalize sodomy:
…which is easy for him to say, of course, because he’s unlikely to be affected by the law. As someone who is likely to be affected by the law, I’m tempted to criminalize Peter Sprigg. Liberty is never more negotiable than when it’s liberty for someone you don’t like.
What is it that I don’t like? I don’t like putting people in cages. Whenever we can reasonably avoid it, we should. Liberty means liberty even for people we think are weird, or disgusting, or immoral — provided that they do not hurt us or our own legitimate interests. Lawrence v. Texas, for which the Cato Institute filed an amicus brief, is one of the most important expressions of this idea in our time.
Once liberty applies only to the things that we like, we have abandoned the true idea of liberty entirely. From that point on, you and I, as enforcers, must cling ever more tightly to arbitrary power. If we don’t, then someone else may come along, take that power, and criminalize us. A free society leaves the misfits alone, because sooner or later, everyone is a misfit, in some way or another.
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.
Have Mexican Dishwashers Brought California to Its Knees?
An article published this week by National Review magazine blames the many problems of California on—take a guess—high taxes, over-regulation of business, runaway state spending, an expansive welfare state? Try none of the above. The article, by Alex Alexiev of the Hudson Institute, puts the blame on the backs of low-skilled, illegal immigrants from Mexico and the federal government for not keeping them out.
Titled “Catching Up to Mexico: Illegal immigration is depleting California’s human capital and ravaging its economy,” the article endorses high-skilled immigration to the state while rejecting the influx of “the poorly educated, the unskilled, and the illiterate” immigrants that enter illegally from Mexico and elsewhere in Latin America.
Before swallowing the article’s thesis, consider two thoughts:
One, if low-skilled, illegal immigration is the single greatest cause of California’s woes, how does the author explain the relative success of Texas? As a survey in the July 11 issue of The Economist magazine explained, smaller-government Texas has avoided many of the problems of California while outperforming most of the rest of the country in job creation and economic growth. And Texas has managed to do this with an illegal immigrant population that rivals California’s as a share of its population.
Two, low-skilled immigrants actually enhance the human capital of native-born Americans by allowing us to move up the occupational ladder to jobs that are more productive and better paying. In a new study from the Cato Institute, titled “Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform,” this phenomenon is called the “occupational mix effect” and it translates into tens of billions of dollars of benefits to U.S. households.
Our new study, authored by economists Peter Dixon and Maureen Rimmer, found that legalization of low-skilled immigration would boost the incomes of American households by $180 billion, while further restricting such immigration would reduce the incomes of U.S. families by $80 billion.
That is a quarter of a trillion dollar difference between following the policy advice of National Review and that of the Cato Institute. Last time I checked, that is still real money, even in Washington.
Get Back to Me When They’ve Got Something to Launch
Over the past few days, it seems like every major state newspaper ran a story on the state’s governor signing onto the Common Core State Standards Initiative, an effort to establish national standards in mathematics and reading curricula. The only holdouts are Alaska, Texas, Missouri, and South Carolina.
I should probably be more worried, because national standards are a terrible idea.
First, there is nothing inherently better about having a single standard agreed to by numerous states than having individual states set standards for themselves. Either way, politicians – people inherently most responsive to mobilized, highly motivated public school employees who want as little meaningful accountability as possible – will be setting the standards, and the standards will therefore either start low or end up there pretty fast.
Second, the notion that national standards adopted by even just a few states will remain both voluntary for all states and non-federal is pure fantasy, like unicorns, or selfless bureaucrats. Once some version of national standards exist, Washington will tie money to adopting them, which is how the feds force states to “volunteer” for all kinds of odious stuff.
“Oh, sure, feel free to turn down the money, Mr. Arizona” Uncle Sam says. “But your citizens? Well, I don’t think we’ll be taking any volunteers on paying federal taxes…”
The Obama Administration has already got this in the works, suggesting that adopting some sort of national standard could make a state eligible for a piece of the Secretary of Education’s so-called “Race to the Top Fund,” a $5 billion “stimulus” pot of gold controlled by the secretary.
Of course, the ultimate threat is that once standards go federal they never go back, and we’ll be stuck with one-size-fits-all standards for every state, district, and child in America, standards controlled by the National Education Association, Council of Chief State School Officers, and every other card-carrying member of the self-serving education establishment. And even though we’ll finally live in a utopia in which “the child in Mississippi is held to the same standards as the child in New York,” we won’t suddenly see test scores skyrocket or heretofore untapped genius spring forth across the land. We’ll just see an even worse version of the hopelessly moribund, socialist education system we have today.
So why, in light of all these dreadful threats, am I not too worried? Because what governors have agreed to so far is just to draft national standards, not to adopt them, and as I wrote last month, while the national standards crowd seems unanimously exuberant about having a single set of standards for every kid in America, they can’t even come close to agreeing on what those standards should be. And if they can’t agree on what the national standards should be, what are the odds that millions of other people will simply assent to having someone else’s standards foisted upon them?
Not very high. Indeed, when establishing national standards was attempted in the 1990s the real fireworks didn’t begin until proposed standards were published. Then, it seemed that everyone had a different reason they were outraged – outraged! – by the standards. At best, there was only one point of broad consensus: that the wannabe national standards simply had to go.
So are national standards a serious threat? They sure are: Were they to be enacted, the educationally deadly government-schooling monopoly would be complete, with even the ability to escape to better districts or states cut off. But the news of states agreeing to develop shared standards doesn’t raise the threat level to DEFCON 1. It’s only if they complete the task – if they can somehow agree on how many fins to put on their missile, what range to shoot for, what color to paint it, where to target it, whose names to put on it, what fuel to use, and so on – that we should really become concerned. And making those decisions is, of course, the really tough part.
Revenge of the Laffer Curve
Steve Moore and Art Laffer have an excellent column in today’s Wall Street Journal. They explain that high-tax states drive repel entrepreneurs and investors, leading to a pronounced Laffer Curve effect. Productive people either leave the state or choose to earn and report less taxable income. And because growth is weaker than in low-tax states, there also is a negative impact on lower-income and middle-class people:
Here’s the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states. …Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts. …Dozens of academic studies — old and new — have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses. …Examining IRS tax return data by state, E.J. McMahon, a fiscal expert at the Manhattan Institute, measured the impact of large income-tax rate increases on the rich ($200,000 income or more) in Connecticut, which raised its tax rate in 2003 to 5% from 4.5%; in New Jersey, which raised its rate in 2004 to 8.97% from 6.35%; and in New York, which raised its tax rate in 2003 to 7.7% from 6.85%. Over the period 2002-2005, in each of these states the “soak the rich” tax hike was followed by a significant reduction in the number of rich people paying taxes in these states relative to the national average.
Interestingly, the Baltimore Sun last week published an article noting that the soak-the-rich tax imposed last year is backfiring. There are fewer rich people, less taxable income, and lower tax revenue. To be sure, some of this is the result of a nationwide downturn, but the research cited by Moore and Laffer certainly suggest that the state revenue shortfall will continue even after than national economy recovers:
A year ago, Maryland became one of the first states in the nation to create a higher tax bracket for millionaires as part of a broader package of maneuvers intended to help balance the state’s finances and make the tax code more progressive. But as the state comptroller’s office sifts through this year’s returns, it is finding that the number of Marylanders with more than $1 million in taxable income who filed by the end of April has fallen by one-third, to about 2,000. Taxes collected from those returns as of last month have declined by roughly $100 million. …Karen Syrylo, a tax expert with the Maryland Chamber of Commerce, which lobbied against the millionaire bracket, said she has heard from colleagues who are attorneys and accountants that their clients moved out of state to avoid the new tax rate. She said that some Maryland jurisdictions boast some of the highest combined state and local income tax burdens in the country. “Maryland is such a small state, and it is so easy to move a few miles south to Virginia or a few miles north to Pennsylvania,” Syrylo said. “So there are millionaires who are no longer going to be filing Maryland tax returns.”
With President Obama proposing higher tax rates for the entire nation, perhaps this is a good time to remind people about the three-part video series on the Laffer Curve that I narrated. If you have not yet had a chance to watch them, the videos are embedded here for your viewing pleasure:
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
