Dear Journalists, Donations Are Not ‘State Money’
Oklahoma has just joined the ranks of a half-dozen other states by enacting a K-12 education tax credit program. Under the new program, individuals or businesses that donate to non-profit School Tuition Organizations receive a tax cut worth 50 percent of the donation. STOs then use the funds to help low income families afford private schooling.
Journalists for the Associated Press and countless other media outlets routinely refer to donations made under education tax credit programs as “state money.” According to the United States Supreme Court’s recent ACSTO v. Winn decision, “that is incorrect.” This is a matter of settled law. To call these private donations “state money” is to misrepresent the facts and mislead readers.
It would be bad enough if the journalists and wire services misrepresenting these programs were simply unaware that they were distorting the facts, but in at least some cases they continue to do so even after having been apprized of their error. Brandon Dutcher, vice president for policy at the Oklahoma Council of Public Affairs, wrote to the AP last week to correct their earlier erroneous coverage. He received no reply and the errors continue.
I never cease to be amazed by this kind of behavior from an industry that is clinging for its life. The purpose of journalism is to apprize customers of the facts. Demonstrating indifference to the facts cannot be good for business.
Chief Seattle Declares Indiana’s Voucher Program Bad for Mother Earth
Educational freedom is nothing to trifle with, all the more so because we have so little of it left. And yet there is little serious discussion about it among school choice policy researchers and activists. All that seems to matter is the expansion of “choice” at nearly any cost.
A blog response, of sorts, to my recent piece explaining why the Indiana voucher law is a defeat for educational freedom, just came to my attention (curse ye, fickle gods of googlealerts). If it weren’t written by a respected researcher, Greg Forster, posted on Jay Greene’s blog, I’d ignore the bullet-point simulacrum of an argument.
We need more serious debate. Argument makes for better thinking and better policy. There are valid points on many sides of this issue, and everyone makes errors in fact or logic. So please, I encourage someone to tear into all of the arguments against the new Indiana voucher law and explain why my concerns are misplaced. Chief Seattle, as all good schoolchildren in Indiana know, proves that wise words can change the world.
On Forster’s Point 1, he and the Indiana Non-Public Education Association are simply incorrect . . . less than 40% of known private schools are accredited, and they remain less than a majority even when you remove the Amish ones. This is not an opinion, it is a fact based on good data available on the state DOE website, and I have found a number of very friendly and helpful DOE employees (they don’t all respond like the finance folks) who can give further context and slight revisions to these published numbers. Beyond that fact, Indiana’s voucher law actually imposes some regulations not currently imposed even on accredited schools.
On Point 2, Forster doesn’t even attempt to engage the point I make in my article for why the freedom not to participate is no argument against the destructiveness of the regulatory framework. Because participating schools will have a significant financial advantage over non-participating schools, lightly regulated schools will face increasing financial pressure to participate. Over time, many of those who refuse to submit to state control will be driven out of business by competition from the highly regulated, but voucher-funded schools. Andrew Coulson has demonstrated this process of expanding state control with voucher programs outside the US, and regulatory burden and creep here at home.
In Point 3, Forster dismisses the slew of new private school regulations as unimportant without, apparently, knowing precisely what they entail. You can read through the bill that was signed here. The most concerning requirements are not a part of state accreditation, they are new to schools participating in the Indiana voucher program. For instance, voucher schools in Indiana are required to stress the importance of “respecting the rights of others to have their own views and religious beliefs.” What does this mean for religious private schools teaching that one can only be saved by belief in Jesus Christ? Would a school wherein a teacher discusses the recent federal healthcare legislation violate the provision mandating respect for authority should she criticize the law, or perhaps violate a respect for property if she speaks favorably of the individual insurance mandate in that law?
And the law expects enforcement, reading, “The department shall, at a minimum, annually visit each eligible school and charter school to verify that the eligible school or charter school complies with the provisions of [the voucher law].” Furthermore, “Each eligible school, public school, and charter school shall grant the department full access to its premises, including access to any points of ingress to and egress from the school’s grounds, buildings, and property for observing classroom instruction and reviewing any instructional materials and curriculum.”
There is more to mull over in my article and in Indiana’s new voucher law.
Forster’s Point 4 is a ridiculous non sequitur. The state can regulate curriculum in any way it wants to, therefore it doesn’t matter if it does so or not. Here is in full:
“The state already has virtually unlimited authority to regulate private school curricula, especially in the name of ‘good citizenship.’ The Supreme Court has given states more or less a blank check to control private school curricula, and the state has especially strong authority to require, and control the content of, “citizenship” education. The existence of a voucher program changes little in this regard.”
I wonder if Forster feels the same way about healthcare; “The state can require whatever it wants for health insurance, so it doesn’t matter whether or not they have a state agency review them for adequacy or impose detailed coverage requirements.” What’s the big fuss?
It would be wonderful if everyone who pays lip service to concerns regarding educational freedom and the expansion of state control would take the matter seriously enough to familiarize themselves with the basic, relevant facts. We might just have a good and productive argument.
Top NSA Mathematician: ‘I should apologize to the American people. It’s violated everyone’s rights.’
If you’re a telecommunications firm that helped the National Security Agency illegally spy on your customers without a court order, Sen. Barack Obama will happily vote for legislation he once promised to filibuster in order to secure retroactive immunity. If you’re implicated in the use of torture as an interrogation tactic, you can breathe easy knowing President Barack Obama thinks it’s in the country’s best interests to “look forward, not back.” But if you were a government official spurred by conscience to blow the whistle on government malfeasance or ineptitude in the war on terror? As Jane Mayer details in a must-read New Yorker article, you’d better watch out! This administration is shattering records for highly selective prosecutions under the espionage act—and the primary criteria seems to be, not whether national security was harmed in any discernible way by your disclosures, but by the degree of embarrassment they caused the government.
The whole thing is fascinating, but I’m especially interested in the discussion of how electronic surveillance tools that came with built-in privacy controls were tossed in favor of more indiscriminate programs that, by the way, didn’t work and generated huge cost overruns. The most striking quotations come from disillusioned Republican intelligence officials. Here’s Bill Binney, a top NSA mathematician and analyst, on the uses to which his work was put:
Binney expressed terrible remorse over the way some of his algorithms were used after 9/11. ThinThread, the “little program” that he invented to track enemies outside the U.S., “got twisted,” and was used for both foreign and domestic spying: “I should apologize to the American people. It’s violated everyone’s rights. It can be used to eavesdrop on the whole world.”
One GOP staffer on the House Intelligence Committee recounted an exchange with then-NSA head Michael Hayden:
[Diane] Roark, who had substantial influence over N.S.A. budget appropriations, was an early champion of Binney’s ThinThread project. She was dismayed, she says, to hear that it had evolved into a means of domestic surveillance, and felt personally responsible. Her oversight committee had been created after Watergate specifically to curb such abuses. “It was my duty to oppose it,” she told me. “That is why oversight existed, so that these things didn’t happen again. I’m not an attorney, but I thought that there was no way it was constitutional.” [....] She asked Hayden why the N.S.A. had chosen not to include privacy protections for Americans. She says that he “kept not answering. Finally, he mumbled, and looked down, and said, ‘We didn’t need them. We had the power.’ He didn’t even look me in the eye. I was flabbergasted.”
Remember, these aren’t hippies from The Nation,, or ACLU attorneys, or even (ahem) wild-eyed Cato libertarians. They’re registered Republicans appalled by the corruption of the intelligence mission to which they’d devoted their professional lives.
El Salvador’s Unfortunate Lesson
Two years ago in a Cato study I documented El Salvador’s remarkable liberalization process and the significant progress in economic and social indicators that resulted from those free market reforms. I also warned then about how those achievements were threatened by the likely victory of the former Marxist guerrilla group, FMLN, in the presidential election of 2009.
Even though Mauricio Funes, the then FMLN candidate now turned president, has proven to be a relatively moderate figure when compared to his radical left-wing party, El Salvador is reversing many of the gains of the past decade. Mary O’Grady’s column in the Wall Street Journal today, which describes how “the wheels came off” of the “once thriving Salvadoran economy,” is a reminder to all countries not to take progress for granted.
Ron Paul on the General Welfare Clause
Now that Rep. Ron Paul is again a presidential candidate, his constitutional views will come under increasing scrutiny, as happened yesterday when he was interviewed by Chris Wallace on Fox News Sunday. Not surprisingly, critics immediately leapt on Paul’s “crankish view” that Social Security, Medicare, and other such programs are unconstitutional. Even Wallace seemed taken aback, citing the document’s General Welfare Clause:
The Congress shall have the Power to lay and collect Taxes … to pay the Debts and provide for the common Defence and general Welfare of the United States.
“Doesn’t Social Security come under promoting the general welfare of the United States?” Wallace asked, incredulously.
One does not have to agree with everything Paul has said or stood for over the years to grant that he has a point, and a very important one. It’s a mark of how widespread our constitutional misunderstanding is that so many Americans take it for granted, at least until the Tea Party came along, that most of what the federal government does today is constitutional.
In a nutshell, the Constitution was written and ratified to both authorize and limit the government created through it. It was designed to do the latter not through the Bill of Rights — that was an afterthought, added two years later — but through the doctrine of enumerated powers. Article I, section 8, grants the Congress only 18 powers. Nothing for education, or retirement security, or health care: Those responsibilities were left to the states or to the people, as the Tenth Amendment makes clear.
So what about the General Welfare Clause, the first of Congress’s 18 powers? To be sure, the clause was inartfully drafted, like several other provisions in the Constitution. But it was understood by nearly all as granting Congress the power simply to tax (in limited ways: see the full text). The terms “common Defence” and “general Welfare” were meant merely as general headings under which the 17 other specific powers or ends were subsumed.
In fact, the question came up almost immediately, during the ratification debates, and in early Congresses as well, so we have a rich record of just what the General Welfare Clause meant. Here, for example, in Federalist #41, is James Madison, the principal author of the Constitution:
Some, who have not denied the necessity of the power of taxation, have grounded a very fierce attack against the Constitution, on the language in which it is defined. It has been urged and echoed, that the power “to lay and collect taxes, duties, imposts, and excises, to pay the debts, and provide for the common defense and general welfare of the United States,” amounts to an unlimited commission to exercise every power which may be alleged to be necessary for the common defense or general welfare. No stronger proof could be given of the distress under which these writers labor for objections, than their stooping to such a misconstruction…. Had no other enumeration or definition of the powers of the Congress been found in the Constitution, than the general expressions just cited, the authors of the objection might have had some color for it…. But what color can the objection have, when a specification of the objects alluded to by these general terms immediately follows, and is not even separated by a longer pause than a semicolon?
Indeed, as was often asked: What was the point of enumerating the 17 other powers if Congress could do anything it wanted under this single power? The Framers could have stopped right there. They didn’t because they meant for Congress to have only certain limited powers, each one enumerated in Article I, section 8. And taxing for the general welfare limited Congress even further by precluding it from providing for special parties or interests.
Nor does it change anything to note, as Wallace did yesterday, that the Supreme Court upheld the Social Security Act in 1937 — as if that settled the question. As a practical matter it settled things, of course, just as Plessy v. Ferguson settled the “separate-but-equal” issue in 1896, only to be reversed in Brown v. Board of Education in 1954, and Bowers v. Hardwick settled the issue of homosexual sodomy in 1986, only to be reversed in Lawrence v. Texas in 2003. It’s well understood that the 1937 Court, cowed by Franklin Roosevelt’s infamous Court-packing threat, simply reversed 150 years of understanding and precedent concerning the doctrine of enumerated powers. And that removed the Constitution’s main restraint on federal power — not by constitutional amendment but by judicial fiat.
But it’s not been “extreme liberals” alone, Wallace went on to say, who’ve read the Constitution as the 1937 Court did, noting that conservative Justice Antonin Scalia recently told a congressional gathering: “It’s up to Congress how you want to appropriate, basically.” To be sure, from fear over “judicial activism,” many conservative judges have bought into the New Deal’s constitutional revolution. Perhaps the most that can be said on their side is that the Court cannot alone, this late in the day, reverse these mistakes.
In fact, this unconstitutionality cannot be undone overnight even by the Congress. Here again there are practical concerns, as Paul has recognized. Vast numbers of people have come to rely on these welfare schemes, however unsustainable they are in the long run, as has become increasingly clear. If constitutional fidelity can serve to spur fiscal discipline, however, we may yet slowly work our way out of our present and long-term fiscal dilemma. But that felicitous result will not happen until we admit both our infidelity and our indiscipline — the two are intimately connected.
By reading the General Welfare Clause in isolation, therefore, Wallace and others turn the Constitution on its head. Rather than a document aimed at limiting government, it becomes a document authorizing unlimited government. And let’s be clear: The basic issue here is nothing more — nor less — than legitimacy. Do we live under the Constitution, or don’t we? If Ron Paul’s views on this fundamental question are “cranky,” so too were those of Madison, Jefferson, Washington, and the rest of the Founders we revere.
As Used-Car Prices Soar, ‘Clunkers’ Are Missed
Cato scholars have been appropriately scathing about the federal government’s 2009 “cash for clunkers” program, which paid several billion taxpayer dollars to have older cars scrapped and their engines destroyed, with owners getting vouchers toward new vehicles. When Chris Edwards nominated cash-for-clunkers as the “dumbest government program ever,” he listed among its effects: “Low-income families, who tend to buy used cars, were harmed because the clunkers program will push up used car prices.”
Guess what’s the newest trouble to hit the car business? As news outlets around the country are reporting, the price of used cars has lately soared to a modern-day record, with some cars commanding more used than they sold for when new. News accounts commonly finger the Japanese earthquake and high gas prices as reasons, but there are some problems fitting either reason to the case. While the earthquake affected the supply of new cars, it’s the previously driven kind that has scored the more impressive price jump. And while the rise in gas prices would explain a relative shift in buyer demand from SUVs and trucks toward smaller vehicles — which has indeed happened — the strength of the used-vehicle market lately has been such that even the thirstier vehicles have advanced in price, $4 gas or no.
No doubt there are multiple reasons for the price spike, including the severe general slump in new-auto sales in recent years, which has reduced the volume of newer cars coming onto the resale market. But — as Washington scrambles to take undeserved credit for whatever passes for normalization in the auto business these days — it’s worth remembering that an artificial scarcity of used cars isn’t just bad for the poor as a group: it’s bad in particular for the upwardly mobile poor, since in most of the country landing a job means needing to line up transportation to get to that job. When it suddenly costs $6,000 instead of $3,000 to get wheels, the move from unemployment to a paying job faces a new and discouraging barrier.
There’s a further irony too. Just as the federal housing stimulus lured many buyers into unwise house purchases at a time when home prices still had a good distance to fall — leaving them worse off in retrospect — so many owners who jumped for the cash-for-clunkers program would have been better off holding on to their cars a while longer. At least that’s what one might conclude from what Frederick, Maryland used-car dealer Robert Cox told his local paper, the News-Post:
People who got $3,500 for the cars they turned in would probably get $5,000 to $7,000 for the same trade today, Cox said.
Nice going, Washington.
Kentucky v. King
Awful ruling handed down by the Supreme Court this morning in a case called Kentucky v. King [pdf]. The case concerns the power to break into a person’s home without the occupant’s consent and without a warrant. Our homes are supposed to be our castles–so the general rule is that the police must get an independent judge to approve a warrant application before the door can be forced open. There are a few common sense exceptions to the general rule. For example, if someone is screaming for help, the police can enter. Also if the police are in hot pursuit, they can follow the suspect on to private property and into a home under such circumstances. Today’s ruling expands the exceptions to situations where the police suspect that the occupants of a house may be destroying contraband such as marijuana, cocaine, or other narcotics.
In this case, the police were after a drug dealer after he fled from a controlled-buy transaction. The dealer entered some apartment but the police were unsure of the unit number. As the police got closer, they could smell marijuana coming from a nearby apartment. Instead of posting an officer nearby and applying for a warrant, they decided to bang on the door, shouting “Police!” Hearing some rustling inside, the police broke down the door so evidence could not be destroyed. The occupants were arrested on drug charges and they later challenged the legality of the police entry and search. (As it happens, the dealer the police were trying to capture was found in another apartment.)
The lower courts have generally frowned on what they describe as exigencies manufactured by police conduct, but the Supreme Court has now overturned those lower court precedents by a 8-1 vote. In dissent, Justice Ginsburg asked the right question: “How ‘secure’ do our homes remain if police, armed with no warrant, can pound on doors at will and, on hearing sounds indicative of things moving, forcibly enter and search for evidence of unlawful activity?” And the unfortunate answer to the question is, a lot less secure.
A New Obstacle to Passing Trade Agreements
Despite previously supporting them, the Obama administration announced today that it would not submit the three outstanding preferential trade deals (with South Korea, Colombia and Panama) for a vote unless and until Congress reinstates an expanded version of Trade Adjustment Assistance, a program of benefits for workers who have lost their job because of competition from imports. Although the basic TAA program (with us since 1974) is still in place, a version expanded by the stimulus package in 2009 lapsed in February amid some Republicans’ concerns about its cost and its false premise: that workers who lose their jobs because of import competition are more deserving than other unemployed Americans. More on TAA here and here.
According to this article by Congressional Quarterly[$], the business community supports the enhanced TAA, seeing it as a worthwhile bribe compromise to secure votes for trade agreements. I understand that logic, even if I don’t support it. But the merits of that argument aside, and as I’ve outlined repeatedly, I’m not sure the deal holds anymore. While it is true that TAA has in the past been used to secure votes for trade agreements, that is not really necessary in this case. After all, if the Republicans all voted in favor of the agreements, then Democratic votes (those most likely to need some sort of assurance on welfare) would not be needed, unless the administration is implying a veto threat. Indeed, it is likely that making an expanded TAA a condition for the trade deals would cost some votes from conservative and tea-party minded Republicans. But the administration wants a larger TAA program in place, and this is their price. Stay tuned.
HT: Andy Roth at the Club for Growth
Newt Tries to Out-Romney Romney, Endorses ‘Public Option’ in Medicare
In 1995, shortly after becoming Speaker of the House, Newt Gingrich mulled a radical overhaul of the U.S. Food and Drug Administration. As he put it to a room full of health insurers, “Maybe we’ll take out FDA.”
What made Newt likable to advocates of freedom is sadly no longer part of his schtick. Here’s how Andrew Stiles reports on Newt’s appearance on Meet the Press yesterday:
“I don’t think right-wing social engineering is any more desirable than left-wing social engineering,” he said when asked about [House Budget Committee chairman Paul] Ryan’s [R-WI] plan to transition to a “premium support” model for Medicare. “I don’t think imposing radical change from the right or the left is a very good way for a free society to operate.”
As far as an alternative, Gingrich trotted out the same appeal employed by Obama/Reid/Pelosi — for a “national conversation” on how to “improve” Medicare, and promised to eliminate ‘waste, fraud and abuse,’ etc.
“I think what you want to have is a system where people voluntarily migrate to better outcomes, better solutions, better options,” Gingrich said. Ryan’s plan was simply “too big a jump.”
He even went so far as to compare it the Obama health-care plan. “I’m against Obamacare, which is imposing radical change, and I would be against a conservative imposing radical change.”
If you close your eyes, it’s like listening to The Princess Bride. Medicare and Medicaid are nothing if not social engineering. So by Newt’s logic, we should get rid of them. But Newt also says that radical change is bad, which means we can’t. That leaves incremental changes. But incremental changes to massive social-engineering experiments are themselves social engineering, so we clearly cannot make incremental changes, either. ObamaCare is both social engineering and radical change. Again by Newt’s logic, ObamaCare is bad, and we must get rid of it, but we can’t. Truly, he has a dizzying intellect.
Newt’s objection to Paul Ryan’s Medicare reforms is no less incoherent. It appears to be that the reforms approved by the House would eliminate the traditional Medicare program as an option for Americans who enroll after 2021. So far as I can tell, Newt’s opposition to this feature is consistent with his past positions on Medicare reform. He wants to let people stay in traditional Medicare if that’s what they prefer, and would have traditional Medicare compete against private insurance companies for Medicare enrollees.
But it is completely inconsistent with Newt’s opposition to President Obama’s call for a so-called “public option” to compete with private insurance companies. In 2009, Newt told Good Morning America:
I guarantee you the language they draft for the public plan will give it huge advantages over the private sector or it won’t work…what they will do is rig the game…I mean, anybody who’s watched this Congress who believes that this Congress is going to design a fair, neutral playing field I think would be totally out of touch with reality.
Newt may not realize this, but he was actually explaining why his preferred Medicare reforms would fail: Congress would rig the game to protect the “public option” that Congress offers to seniors — i.e., traditional Medicare. House Republicans, led by Paul Ryan, rather bravely stuck to their guns when they kept a “public option” out of their proposed Medicare reforms. Ryan is offering Republicans credibility and success. By his own admission, Newt is offering them failure.
What’s up with Mitt Romney and Newt Gingrich? Does the Republican presidential nomination race have some sort of prize for insincerity or incoherence that I don’t know about?
Finally, Newt endorsed a “variation of the individual mandate” (tell me again why he opposes ObamaCare?) and said there is “a way to do it that make most libertarians relatively happy.” He must have meant to say leftists rather than libertarians. Regardless, I invite Newt to come to the Cato Institute so he can explain to people who actually care about freedom just how happy he’s going to make us.
Fiscal and Social Conservatives
Recently I criticized Sen. Jim DeMint for saying, “It’s impossible to be a fiscal conservative unless you’re a social conservative,” and I noted that former governor Mike Huckabee had made similar points. Yesterday on “Fox News Sunday” Huckabee said, “all social conservatives I know are also fiscal conservatives. Not necessarily the other way around.”
Well, I can tell you one social conservative who isn’t a fiscal conservative — former governor Mike Huckabee. Here’s what Cato’s “Fiscal Policy Report Card on America’s Governors” reported in 2006, at the end of Huckabee’s tenure as governor of Arkansas:
Final-Term Grade, F; Final Overall Grade, D
Thanks to a final term grade of F, Huckabee earns an overall grade of D for his entire governorship. Like many Republicans, his grades dropped the longer he stayed in office. In his first few years, he fought hard for a sweeping $70 million tax cut package that was the first broad-based tax cut in the state in more than 20 years. He even signed a bill to cut the state’s 6 percent capital gains tax—a significant pro-growth accomplishment. But nine days after being reelected in 2002, he proposed a sales tax increase to cover a budget deficit caused partly by large spending increases that he proposed and approved, including an expansion in Medicare eligibility that Huckabee made a centerpiece of his 1997 agenda. He agreed to a 3 percent income tax “surcharge” and a 25-cent cigarette tax increase. In response to a court order to increase spending on education, Huckabee proposed another sales tax increase. Huckabee wants to run for the GOP presidential nomination next year. He’s already been hailed as a viable big-government conservative candidate by some. That seems about right: Huckabee’s leadership has left taxpayers in Arkansas much worse off.
Celebrating ‘World Trade Week’ by Remembering Smoot-Hawley
Carrying on an annual tradition dating back to President Franklin Roosevelt, President Obama issued a proclamation on Friday declaring this third week in May “World Trade Week.”
Of course, every week is world trade week at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, but in order to do our part as good citizens, we’ve organized a book forum this Tuesday, May 17, at 4 p.m. on a new book by Dartmouth College economist Douglas Irwin, titled, Peddling Protectionism: Smoot-Hawley and the Great Depression.
The Smoot-Hawley tariff bill is a fitting subject for any World Trade Week. As we note in the invitation:
More than 80 years after its passage, the Smoot-Hawley Tariff Act of 1930 still resonates in today’s debate over trade policy. Advocates of trade blame the law for deepening the Great Depression and warn of the economic damage from a reversion to protectionism. Skeptics of trade say its impact has been exaggerated. Economist and historian Douglas Irwin tells the messy and, at times, amusing story of how Congress dramatically raised tariffs in 1930 just as the world was plunging into depression, and analyzes the economic consequences of the most infamous trade bill ever enacted by Congress. Irwin then draws important lessons that can help today’s trade policymakers avoid the costly mistakes of the past.
Professor Irwin will talk about his book and answer questions about this turning point in U.S. trade history. There is still time to sign up here to attend the event in person at Cato’s F.A. Hayek Auditorium, or you can watch the live video feed online here.
What the Tea Party Hath Wrought?
The Internal Revenue Service is investigating campaign donations to groups incorporated under 501(c)(4) of the tax code. Some in the IRS apparently hope to apply gift taxes to the contributions.
Higher taxes on an activity would generally lead to less of that activity, especially if a good substitute exists that is not taxed. In this case, donors could give money to 527 groups. Such donations are exempt from taxation. But 527 groups are subject to disclosure of donors.
The IRS investigations involve tax provisions “that had rarely, if ever, been enforced.” Why now? We do not know. But 501(c)(4) groups played in a important part in the 2010 campaign. As you know, the party in power lost control of the House of Representatives in 2010. With the president’s re-election at stake in 2012, the administration might hope that that less money is available to fund the political speech of its opponents.
The White House has already issued a draft order requiring disclosure of political spending by government contractors. Now these investigations of donors. The IRS effort need not lead to legal complaints to be politically effective. As one expert notes, “The lack of clarity and the potential for not-insignificant taxation on these gifts will cause many of the biggest donors to think twice.”
Many people argue that mandatory disclosure of political spending has few costs and many benefits. Such laws are said to discourage few donors from funding political speech. If that is true, why is the Obama administration so interested in forcing donors out of anonymity?
Perhaps the administration believes deeply in transparency. Or perhaps the administration believes that attacking (no longer anonymous) donors will effectively discourage speech critical of the President in 2012.
The political misuse of the Internal Revenue Service should be a concern of everyone. During the Kennedy, Johnson, and Nixon administrations, presidents and their people decided, as John Dean put it at the time, to “use the available federal machinery to screw our political enemies.” Have we forgotten that history?
Gerson Gets It Wrong Again
Michael Gerson’s predictable, reflexive attack on Rep. Ron Paul in his May 10 op-ed in the WaPo for Paul’s sensible stand in favor of ending the futile crusade called the War on Drugs, makes a curious argument. He asserts that there is a “de facto decriminalization of drugs” in Washington, D.C. Curious, because there are few places in the nation where the drug war is waged more vigorously. Doesn’t seem to be working, does it?
Yet Gerson would expand the effort. Never mind that the social pathologies in the District for which Gerson’s compassionate conservative heart bleeds are mainly a result of making drugs illegal: Turf wars with innocents caught in the crossfire; children quitting school to sell drugs because of the artificially high prices prohibition creates; disrespect for the law due to a massive criminal subculture.
Gerson, one of the chief architects of the disastrous Bush II administration, should step away from his obsessive disdain for libertarianism and consider the nationwide decriminalization of drugs undertaken in Portugal in 2001. Drugs use is down, particularly among young people, and drug-related crimes have dropped precipitously. There is a reason hundreds of thousands of Mexicans have taken to the streets to call for the end to the war on drugs there that is tearing apart the fabric of Mexican society. On top of the social aspects of the drug war dystopia, Cato senior fellow and Harvard economist Jeffery Miron estimates that ending the drug war in the U.S. would save $41.3 billion annually. As usual, Ron Paul has it right.
Flynn’s ‘Recalibrating Homeland Security’
The May/June issue of Foreign Affairs focuses on “The New Arab Revolt” (also the focus of an event at Cato a month ago). Some of the articles have a touch of datedness because they refer to the continuing pursuit of Osama bin Laden. But not so Stephen Flynn’s “Recalibrating Homeland Security,” ($) a terrific discussion of how the federal government’s post-9/11 policies have failed to meet the challenge of terrorism. Flynn throws a sentence at the living icon of al Qaeda, but the insights of his article are well worth taking in.
Most insightfully, Flynn theorizes just why it is that “nearly a decade after al Qaeda struck the World Trade Center and the Pentagon, Washington still lacks a coherent strategy for harnessing the nation’s best assets for managing risks to the homeland—civil society and the private sector.”
During the Cold War, the threat of nuclear war with the Soviet Union required “a large, complex, and highly secretive national security establishment.”
To an extraordinary extent, this same self-contained Cold War-era national security apparatus is what Washington is using today to confront the far different challenge presented by terrorism. U.S. federal law enforcement agencies, the border agencies, and the Transportation Security Administration (TSA) are subsumed in a world of security clearances and classified documents. Prohibited from sharing information on threats and vulnerabilities with the general public, these departments’ officials have become increasingly isolated from the people that they serve.
This helps explain TSA’s effrontery with travelers, the “secrecy reflex,” and the ongoing risk of overreaction. Flynn stresses that focusing on resiliency will do our country much better than those brittle, fear-backed political demands for 100% protection.
“Read the whole thing” is a bloggic accolade that I use sparingly, recognizing the limits on readers’ time. At a brief 10 pages, despite the hurdle of having to log in/buy access to the article, Flynn’s “Recalibrating Homeland Security” gets my: Read the whole thing.
Monday Links
- It is false to assume that GM’s earnings report means the auto bailout was a success.
- It is false that, among other things, failing to raise the debt limit means defaulting on our obligations.
- It is false that Osama bin Laden’s death means torture is a good idea.
- It is false that international institutions can deliver what they say they can deliver.
- It is false that oil speculators are to blame for fluctuating oil prices:
What Hyman Roth Would Say about Government Waste
We often criticize a focus on government waste here at Cato. We point out that the real spending problem is the big-ticket programs, not “waste, fraud, and abuse.” But a series of recent stories in the Washington Post, several of them in Sunday’s paper, led me to write about government waste in today’s Britannica column. I followed up on my previous post about the scandal of the Alaska Native Corporation (SBA 8(a)) preference program:
Not much, even though it was hardly the first time that the problems with the Alaska Native Corporations program had been noted. There was a Senate hearing, with the reassuring title of “Promise Fulfilled: The Role of the SBA 8(a) Program in Enhancing Economic Development in Indian Country,” where “Alaska Natives and a Small Business Administration official defended federal contracting preferences for Indian and Native firms.” No critics were invited to the hearing. After all, “The purpose of the hearing is to allow the SBA, ANCS, NHOs, Indian tribes, shareholders and other stakeholders the opportunity to demonstrate the importance and legitimacy of the program to Native communities in fulfilling self-determination and self-sufficiency,” as 49-year senator Daniel Inouye (D-HI) and Alaska’s own Sen. Mark Begich wrote in a letter to whippersnapper senator Daniel Akaka (D-HI), who has served in Congress for only 34 of his 86 years and chairs the Senate Indian Affairs Committee.
And I noted:
And for those who like big government, I have to say: This is the business you have chosen. If you want the federal government to tax (and borrow) and transfer $3.6 trillion a year, if you want it to build housing for the poor and give special benefits to Alaska Natives, if you want it to supply Americans with health care and school lunches and retirement security and local bike paths, then you have to accept that such programs come with incentive problems, politicization, corruption, and waste. Maybe it’s worth the cost.
More details here.
Vouchers vs. Tax Credits in Pennsylvania
I blogged a few days ago about the school choice policy deadlock in Pennsylvania—between the House, which favors expanding the existing k-12 scholarship-donation tax credit program, and the Senate, which favors introducing a new voucher program. Today I have an op-ed in the Philadelphia Inquirer elaborating on that blog post.
One thing I didn’t mention in the op-ed is that the Protestant George Washington helped pay for the construction of the Catholic church that was burned to the ground in the Bible Riots of 1844. It is telling that the Bible Riots were not over what was preached in St. Augustine’s church, but rather over what was taught in Philly’s public schools. America has seen comparatively little religious conflict surrounding our places of worship, but an endless series of battles over the religious (and other) content of our public schools. The reason is simple: no American has to pay to build another man’s temple, shrine, church, mosque, synagogue, or coffee-shop; but we all have to pay for the public schools.
Vouchers extend to private schooling the flaw that has precipitated our endless “public school wars”: compulsion. Under a voucher program, all taxpayers must pay for every type of schooling, including varieties that might violate their deeply held convictions.
As I explain in the op-ed, and also in this commentary on the recent ACSTO v. Winn Supreme Court decision, tax credits avoid that compulsion. Participation in them is truly voluntary, and donors get to choose the scholarship organizations that receive their funds. In the case of direct education tax credits, they simply get to keep more of their own money to spend on their own children. Credits are thus a way to secure both freedom of choice for parents and freedom of conscience for taxpayers.
Could Technical Default Today Save America from Greek-Style Fiscal Disaster in the Future?
There’s a lot of buzz about a Wall Street Journal interview with Stanley Druckenmiller, in which he argues that a temporary delay in making payments on U.S. government debt (which technically would be a default) would be a small price to pay if it resulted in the long-term spending reforms that are needed to save America from becoming another Greece.
One of the world’s most successful money managers, the lanky, sandy-haired Mr. Druckenmiller is so concerned about the government’s ability to pay for its future obligations that he’s willing to accept a temporary delay in the interest payments he’s owed on his U.S. Treasury bonds—if the result is a Washington deal to restrain runaway entitlement costs. “I think technical default would be horrible,” he says from the 24th floor of his midtown Manhattan office, “but I don’t think it’s going to be the end of the world. It’s not going to be catastrophic. What’s going to be catastrophic is if we don’t solve the real problem,” meaning Washington’s spending addiction. …Mr. Druckenmiller’s view on the debt limit bumps up against virtually the entire Wall Street-Washington financial establishment. A recent note on behalf of giant banks on the Treasury Borrowing Advisory Committee warned of a “severe and long-lasting impact” if the debt limit is not raised immediately. …This week more than 60 trade associations, representing virtually all of American big business, forecast “a massive spike in borrowing costs.” On Thursday Federal Reserve Chairman Ben Bernanke raised the specter of a market crisis similar to the one that followed the 2008 bankruptcy of Lehman Brothers. As usual, the most aggressive predictor of doom in the absence of increased government spending has been Treasury Secretary Timothy Geithner. In a May 2 letter to House Speaker John Boehner, Mr. Geithner warned of “a catastrophic economic impact” and said, “Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover.”
Mr. Druckenmiller is not overly impressed by this hyperbole. The article continues with this key passage.
“Here are your two options: piece of paper number one—let’s just call it a 10-year Treasury. So I own this piece of paper. I get an income stream obviously over 10 years . . . and one of my interest payments is going to be delayed, I don’t know, six days, eight days, 15 days, but I know I’m going to get it. There’s not a doubt in my mind that it’s not going to pay, but it’s going to be delayed. But in exchange for that, let’s suppose I know I’m going to get massive cuts in entitlements and the government is going to get their house in order so my payments seven, eight, nine, 10 years out are much more assured,” he says. Then there’s “piece of paper number two,” he says, under a scenario in which the debt limit is quickly raised to avoid any possible disruption in payments. “I don’t have to wait six, eight, or 10 days for one of my many payments over 10 years. I get it on time. But we’re going to continue to pile up trillions of dollars of debt and I may have a Greek situation on my hands in six or seven years. Now as an owner, which piece of paper do I want to own? To me it’s a no-brainer. It’s piece of paper number one.” …”Russia had a real default and two or three years later they had all-time low interest rates,” says Mr. Druckenmiller. In the future, he says, “People aren’t going to wonder whether 20 years ago we delayed an interest payment for six days. They’re going to wonder whether we got our house in order.”
This is a very compelling argument, but it overlooks one major problem — the complete inability of Republicans to succeed in forcing fiscal reform using this approach.
Ayn Rand Sells Magazines
This article about donors who want to give colleges money with strings attached, published in Bloomberg Markets and splashed across a full page of the Sunday Washington Post, leads with the story of former BB&T chairman John Allison’s campaign to get the books and ideas of Ayn Rand into college classrooms and is lavishly decorated with big photographs of Rand.
Most of the story is actually about much less titillating demands — donors who variously want a say in hiring the next football coach, a change in the school’s tuition policy, a rejection of money from other donors. But apparently editors know that Ayn Rand’s name can bring in the readers. So they act in their rational self-interest and put her name on the cover and her picture at the top of the page.
At least the Post had the good sense to drop the dumb last line of the Bloomberg story: “As private donors gain more power on campuses, it’s just the kind of shift away from state control that Rand would applaud.” Actually, giving private money to state institutions is not the sort of privatization that libertarians seek. (And Ayn Rand was a libertarian, whether she liked to admit it or not.)
‘Anarchist’ Idiocy
The Washington Post splashes a story about “anarchists” in Greece across the front page today. The print headline is “Into the arms of anarchy,” and a photo-essay online is titled “In Greece, austerity kindles the flames of anarchy.” And what do these anarchists demand? Well, reporter Anthony Faiola doesn’t find out much about what they’re for, but they seem to be against, you know, what the establishment is doing, man:
The protests are an emblem of social discontent spreading across Europe in response to a new age of austerity. At a time when the United States is just beginning to consider deep spending cuts, countries such as Greece are coping with a fallout that has extended well beyond ordinary civil disobedience.
Perhaps most alarming, analysts here say, has been the resurgence of an anarchist movement, one with a long history in Europe. While militants have been disrupting life in Greece for years, authorities say that anger against the government has now given rise to dozens of new “amateur anarchist” groups.
Faiola does acknowledge that the term is used pretty loosely:
The anarchist movement in Europe has a long, storied past, embracing an anti-establishment universe influenced by a broad range of thinkers from French politician and philosopher Pierre-Joseph Proudhon to Karl Marx to Oscar Wilde.
So that’s, let’s see, a self-styled anarchist who was anti-state and anti-private property, the father of totalitarianism, and a witty playwright jailed for his homosexuality.
Defined narrowly, the movement includes groups of urban guerillas, radical youths and militant unionists. More broadly, it encompasses everything from punk rock to WikiLeaks.
And what are these various disgruntled groups opposed to?
The rolling back of social safety nets in Europe began more than a year ago, as countries from Britain to France to Greece moved to cut social benefits and slash public payrolls, to address mounting public debt. At least in the short term, the cuts have held back economic growth and job creation, exacerbating the social pain.
And Greece is not the only place in which segments of society are pushing back.
So these “anarchists” object that the state might cut back on its income transfers and payrolls. That is, they object to the state reducing its size, scope, and power. Odd anarchists, as George Will told the crowd at the 2010 Milton Friedman Prize for Advancing Liberty dinner:
It leads to the streets of Athens, where we had what the media described as “anti-government mobs.” Anti-government mobs composed almost entirely of government employees going berserk about threats to their entitlements!
Lots of talk in the Post article about anarchists:
“They are taking everything away from us,” [19-year-old law student Nikolas] Ganiaris said. “What will happen when I finish law school? Will I only find a job making copies in a shop? Will I then need to work until I’m 70 before I retire? Will I only get a few hundred euros as pension? What future have I got now?”
A radical minority is energizing the anarchist movement, a loose network of anti-establishment groups….
Since then, experts say, the economic crisis has helped the movement thrive, with anarchists positioning themselves as society’s new avengers. Long a den of anarchists, the graffiti-blanketed Exarchia neighborhood is alive anew with dissent. Nihilist youths are patrolling the local park, preventing police from entering and blocking authorities from building a parking lot on the site. On one evening at a local cafe, an anarchist group was broadcasting anti-government messages via a clandestine radio station using a laptop and a few young recruits.
The last vignette in the story is about 20-year-old Nikos Galanos, who has joined the anarchist movement in anger over his mother’s losing her government job and his father’s being the victim of a 15 percent salary cut in his own government job.
“I don’t support violence for violence’s sake, but violence is a response to the violence the government is committing against society,” Galanos said. He later added, “It is now hard for any of us to see a future here. I feel it’s my duty to fight against the system.”
In fact, the government has been committing violence against society for decades, by taxing people, overregulating business, and spending money it didn’t have. No wonder youth unemployment is 35 percent. And what is the actual “system” that Mr. Galanos wants to fight? Greek journalist Takis Michas described it at a Cato Forum:
In Greece, the fundamental principle that has been dictating economic and political development since the creation of the Greek state in the 19th century is political clientelism.
This is a system in which political support is provided in exchange for benefits.
In this situation, rent-seeking — the attempt by various groups and individuals to influence the location of political benefits — becomes paramount. The origins of political clientelism can be traced back to the origins of the Greek state in the 1830s. As a left-wing political historian puts it, “The fundamental structure of Greece has never been civil society. Ever since the middle of the 19th century, nothing could be done in Greece without its necessarily passing through the machinery of the state.”…
The largest part of public expenditure was directed, not to public works or infrastructure, but to the wages of public service workers and civil servants….
What makes the case of Greece interesting is that Greece can be said, in a certain sense, to provide the perfect realization of the left’s vision of putting people above markets.
Greek politicians have always placed people (their clients) above markets, with results we can all see today.
Real anarchists, of either the anarcho-capitalist or mutualist variety, might have something useful to say to Greeks in their current predicament. But disgruntled young people, lashing out at the end of an unsustainable welfare state, are not anarchists in any serious sense. They’re just angry children not ready to deal with reality. But reality has a way of happening whether you’re ready to deal with it or not.
