Archives: May, 2009

Taxpayers Deserve Better from the President

President Obama’s estimated $17 billion budget cuts for fiscal year 2010 amounts to a measly .5 percent of the president’s total proposed spending, and 1.5 percent of the president’s proposed deficit for the coming fiscal year. His offerings to cut the budget should be dismissed as unserious. In fact, this is reminiscent of the Bush administration’s annual list of minuscule proposed cuts in the face of profligate spending and mounting federal debt.

President Obama says his efforts “are just the next phase of a larger and longer effort needed to change how Washington does business and put our fiscal house in order.” Promising more spending and more debt while celebrating relatively insignificant cuts and ignoring the looming entitlement crunch represents businesses as usual, not change. Current and future taxpayers deserved a serious proposal to reduce the government’s burden on their wallets and the struggling economy. Instead, the president’s first budget represents an attempt to shove the government’s hand deeper into the American peoples’ pockets and lives.

The president made several questionable statements in his address earlier today. He promised “long overdue investments” in education. But federal spending on education has already increased dramatically with no positive results. He spoke of “undertaking health care reform so that we can control costs while boosting coverage and quality” and “investing in renewable sources of energy.” Yet we know any type of reform will mean higher taxes, government rationing, and slower economic growth.

Vouchers and Violence

The front page of the tabloid Washington Examiner blares

Violence mars students’ days
Weapons, assaults common at area schools

Now I know that headlines have to be short to fit the space. But a more accurate headline would read

Weapons, assaults common at government-run schools

Fights, sexual assaults, and deadly weapons, described in the article as happening “almost once a day at some area high schools,” are almost nonexistent at private schools. Which is why it’s such a shame that the small number of District of Columbia students who have been granted a voucher to escape the D.C. public schools are going to lose that lifeline if the Democratic majority in Congress gets its way. I once proposed in the Washington Post:

The D.C. school board should declare an educational emergency and offer a voucher good in any private or public school in the District to every student who is assigned to a school that has had a shooting or stabbing or more than one weapon confiscation in the past year, whether on school property or on school buses.

I called it the “voucher trigger provision,” but the Post went with the more sober title “A Right to Safer Schools.”

But the policy shouldn’t be restricted to D.C. students. The Examiner article is in fact not about the D.C. schools; it’s about the suburban schools in Maryland and Virginia. Suburban kids would also benefit from more choice, including the choice to move from dangerous to safe schools.

Obama’s Budget Cuts

The Obama administration has issued a modest list of budget cuts for programs that are “duplicative” and “ineffective.”

That’s a good start for spending reforms, but a more substantial way to end “duplication” would be to terminate all $500 billion of federal subsidies sent to state governments each year, which duplicate properly state-level activities such as highway building.

Further, cutting some “ineffective” programs ignores the broader question of whether programs represent just and legitimate uses of government power. We can make farm subsidies more “effective,” for example, but that does not make it ethical to transfer $20 billion each year from hard-working taxpayers to often high-income farm businesses.

I’d like to see the Obama administration attack Washington’s overspending problem in a more dramatic and fundamental way.

For now, here’s a great place to start:

Bank Stress Tests: Full of Sound and Fury…

Even with the stress tests completed, the Obama Administration lacks an exit strategy for its deepening involvement in supporting these banks.

What the administration needs to do is give the American people a road map for getting out of the business of owning banks. However, instead of a roadmap, the Administration keeps digging more potholes. Secretary Geithner’s recent remarks, in which he suggested imposing additional requirements before letting banks repay their TARP obligations, raise serious questions regarding the administration’s desire to actually exit the current situation. Treasury should reconsider its position and not only allow banks to repay, but encourage them to do so. The quicker we get these institutions out from under the government, the quicker our financial markets will get moving again.

As the witching hour of 5 pm on the East Coast approaches, when the Treasury will release both aggregate and individual stress test results, the overwhelming feeling in Washington and on Wall Street is one of closure: finally the circus can come to an end. In terms of the actual results, details of which have been leaking for days, the stress tests come close to telling us absolutely nothing we did not already know.

One purpose of the stress tests was to determine if the 19 bank holding companies could withstand “higher losses than generally expected.” However, what started out as extreme economic projections are beginning to look like the consensus forecast. For instance, the stress tests assume a base case level of unemployment of 8.9 percent for 2010, and an extreme “stress” level case of 10.3 percent for 2010. There’s a good chance that we’ll reach that extreme; what the new extreme is, one can only guess, but what we do know is that the banks have not been tested for it.

While the aggregate results have yet to be released, it is a good bet that they will fall somewhere within the range of exactly just how much TARP funds Treasury has left. We can expect Treasury to announce capital shortfalls of just over $100 billion, while the real shortfalls are likely to be in excess of $200 billion. Treasury is understandably reluctant to go back to Congress for additional TARP funds, so it will likely do its best to stretch its existing resources.

One way of stretching those resources is converting preferred equity holdings into common stock. How this is to be done, and what kind of voting rights Treasury will have is yet to be seen. As Treasury has repeatedly said it will not let any of these banks fail, shifting the government’s holding from preferred to common equity is little more than an accounting game that fails to address the underlying economic realities at many of these institutions.

And the Bombs Go On: Killing Afghan Civilians

We want to talk to the Afghans about corruption.  They want to talk to us about killing civilians.

Reports the London Times:

Up to 100 civilians, including women and children, are reported to have been killed in Afghanistan in potentially the single deadliest US airstrike since 2001. The news overshadowed a crucial first summit between the Afghan President and Barack Obama in Washington yesterday.

President Obama, after White House meetings with President Karzai of Afghanistan and Asif Ali Zardari, the Pakistani President, pledged “every effort to avoid civilian casualties” in the war against the extremists.

His comments followed the expression of deep regret by Hillary Clinton, the US Secretary of State, during an earlier appearance with Mr Karzai in Washington.

News of the airstrikes came as Mr Obama met Mr Karzai and Mr Zardari for a trilateral summit aimed at pressing both leaders to join forces in confronting al-Qaeda and the Taleban. Mr Karzai had travelled to Washington to meet an Obama Administration that has little faith in his ability to take on the Taleban, the massive opium trade funding it, or rampant corruption.

Despite the Afghan leader’s pre-summit vow to make the airstrikes a focus of his meeting with Mr Obama, a top aide to the US President said that Mr Karzai was given a clear message in the Oval Office that he had to do more to clamp down on the bribes and influence-peddling that is poisoning Afghan governance.

That Afghans have got a point.  (So do we, but that’s a whole ‘nother issue.)   Mistakes are inevitable in war.  But killing civilians is a potent recruiting tool for the other side.  Alas, apologies voiced by Washington don’t offer much solace to the individuals, families, and communities suffering the casualties.

Yet bombing continues upward.  Reports the Navy Times:

Air Force, Navy and other coalition warplanes dropped a record number of bombs in Afghanistan during April, Air Forces Central figures show.

In the past month, warplanes released 438 bombs, the most ever.

April also marked the fourth consecutive month that the number of bombs dropped rose, after a decline starting last July.

The munitions were released during 2,110 close-air support sorties.

The actual number of airstrikes was higher because the AFCent numbers don’t include attacks by helicopters and special operations gunships. The numbers also don’t include strafing runs or launches of small missiles.

Unfortunately, this increases the likelihood of more civilian casualties.

Squaring the circle won’t be easy.  But the conundrum highlights the need to look for political accommodations which would safeguard our basic security interests even if they meant abandoning any illusions about creating a liberal Western-oriented Afghanistan.

More Property Rights Shenanigans on the West Coast

Cato recently filed an amicus brief urging the Supreme Court to review a Ninth Circuit decision that tramples on property rights.  (See also this oped I co-authored with co-counsel.)

Well, tomorrow the Ninth Circuit hears another case involving property rights violations, and this time the plaintiffs, in exchange for a building permit, were forced to give up their right to vote. Arguing for the beleaguered property-owners will be none other than Cato adjunct scholar Tim Sandefur.  You can read more about the case in Tim’s own blogpost on PLF’s site.

Here’s the basic principle with these cases: just as the government can’t take your property (for public use) without just compensation, it can’t attach arbitrary regulations and fees.  After all, if you own an acre of land and the government tells you you can’t do anything on it – be it run around or drain puddles or build – it might as well have “taken” it by eminent domain.  And if it says you can do these things only if you give up some other entitlement you have – not necessarily money, but, say, the right to put up signs criticizing the local government – it has imposed an unconstitutional condition on your enjoyment of your property.

The Best Defense against National Standards? Hearing about National Standards

I’ll admit it: When I go to an event intended to tout an idea I think is wrong, I get a little nervous. What if I hear an argument that’s so convincing it forces me to totally reevaluate my position? All my work will have been for naught! Well, I had just such worries as I headed toward the Thomas B. Fordham Institute’s “International Evidence about National Standards” conference yesterday.

I needn’t have worried. What I heard made me even more certain that imposing national academic standards – whether through state compacts, or worse, “incentivized” with federal dollars – is doomed to failure, just as I have been saying for years.

First, there’s likely political failure. Yes, Secretary of Education Arne Duncan and other high-profile education folks have recently been talking about the need for common standards – or at least the folly of having 50 different state standards – and many people think national standards would be great. But though people may love the idea of national standards, when it comes to actually creating and implementing them, love quickly turns to anger.

The second panel of the day, featuring Dane Linn of the National Governors Association and Gene Wilhoit of the Council of Chief State School Officers – whose organizations are working together to create national standards – made this abundantly clear. While people at the conference might have agreed that national standards are peachy in theory, they couldn’t agree at all on who should write them. Indeed, they couldn’t even agree on their general shape: While Linn and Wilhoit stressed the need for higher and narrower standards, the Fordham Institute’s Michael Petrilli, who moderated the panel, said that his group, the conference convener, could very well find itself opposing narrow standards that include too little.

If you can’t get people who really believe that we need national standards to agree on even their basic shape, why would anyone think that they could get a majority of Americans to agree on a single standard?

Of course, this was a conference supposedly about the international evidence concerning national standards. Even though the domestic political outlook for national standards appears poor, surely the evidence from abroad would conclusively demonstrate the need for national standards.

Hardly. If anything, the international evidence panel was the least persuasive part of the conference.

The hub of the panel was Michigan State University professor William Schmidt, who argued energetically against the illogical, weak standards of most American states – certainly a valid point. But he offered no compelling reasoning or evidence whatsoever to suggest that national standards would be any better than state standards. Indeed, moderator Ben Wildavsky knocked out Schmidt’s entire argument with just two punches, asking if there is empirical evidence that national standards produce better outcomes, and why Canada – which doesn’t have national standards – does very well on international comparisons. Schmidt’s answers: Almost every country participating in international exams has national standards, so it’s impossible to credit those standards with either good or bad outcomes, and Canadian provinces are kind of like countries.

If that’s the best evidence one can muster for national standards – essentially, no evidence – then there is absolutely zero good reason to support national standards.

Unfortunately, that really does seem to be all the evidence. At least, it’s all that was brought out yesterday. Which is why, though the conference didn’t force me to change my views, it did make me reach some very disheartening conclusions. Primarily, that many people support national standards simply because they are easier to conceptualize than multiple standards, and because they think that they – not people they dislike – will get to write the new, inescapable, standards for all.