Archives: August, 2009

I Would Rather You Just Said “Thank You, Private Schools,” and Went on Your Way…

Some well-known bloggers are being terrible bullies, beating up on private schools.

Felix Salmon kicks things off by hoping the government tightens the definition of a “charitable” organization and begins taxing private schools who don’t “do a bit more to earn it.” Matt Yglesias agrees that private schools are mooching deadbeats and ups the ante, calling them actively harmful as well. Finally, Conor Clarke at The Atlantic agrees, but makes the other two look like panty-waists by proposing the government radically narrow what is considered a charity in the first place.

Yglesias even has the temerity to indict private schools for the failure of NYC public schools:

And as best one can tell, their main impact on the common weal is negative, drawing parents with resources and social capital out of the public school system and contributing to its neglect. You’d have to believe that New York City’s public schools would be both better funded and free of this kind of nonsense if a larger portion of the city’s elite were sending their kids to them.

Really? Would we have to believe what Yglesias says? No, it’s not “the best one can tell.” According to the evidence, Yglesias’ breezy, offhand accusation is demonstrably wrong. Increased competition from private schools actually improves public school performance.

And the more kids who leave public to go private, the more money the schools have for the kids who remain.

What ingrates. They complain about the lost tax revenue while dismissing out of hand the billions of dollars that parents and donors spend every year to educate children outside the government system. They dismiss the fact that these parents and donors are saving taxpayers in the neighborhood of $60 Billion a year based on current-dollar public school spending and the number of kids in private schools.

Finally, if this is all about rich people getting a free ride, why aren’t these guys screaming about means-testing public schools? Why shouldn’t we charge rich parents tuition to attend public schools? If a charitable deduction for private schools is so bad, why isn’t a free public education even worse?

When Governments Are Forced to Compete, the Result Is Better Policy and More Liberty

A story in USA Today is a perfect illustration of the liberalizing power of tax competition. In an effort to attract more jobs and investment, states are competing with each - even taking the aggressive step of advertising in high-tax states. This does not guarantee that states will always use the best approach since states sometimes try to lure companies with special handouts, but tax competition generally encourages states to lower tax rates and control fiscal and regulatory burdens. The same process works internationally, which is precisely why international bureaucracies controlled by high-tax nations are seeking to thwart fiscal competition between nations:

Las Vegas is running ads in California warning businesses they can “kiss their assets goodbye” if they stay in the Golden State. In New Hampshire, economic development officials pick up Massachusetts business owners at the border in a limousine and give them VIP treatment and a pitch about why they should relocate there. Indiana officials, using billboards at the borders and direct appeals to businesses in neighboring states, are inviting them to ‘Come on IN for lower taxes, business and housing costs.’ As states struggle to keep jobs in a continuing recession, they are no longer hoping businesses in other states happen to notice their lower taxes, cheaper office space and less-stringent regulations. They are taking the message directly to them and taking shots at their neighbor’s shortcomings. …No one does it more unapologetically than the Nevada Development Authority. The agency has picked on California before, but its $1 million campaign, launched this month, ratchets up the mockery of California’s budget deficits and IOU paychecks. ‘It’s all done tongue-in-cheek. But the underlying deal is, we want this business,’ Nevada Development Authority President and CEO Somer Hollingsworth said. …’They do mask the nastiness of their message with humor, but this time, their ads are over the top,’ said [California Assemblyman] Solorio, a Democrat from Santa Ana.

This I Don’t Get

While the Immigration and Customs Enforcement agency constantly raids factories and workplaces looking for peaceful and hard-working undocumented immigrants to kick out of the country, the same federal government agency brings to the U.S. dangerous Mexican drug traffickers who—while continuing their criminal activities in Mexico and the U.S.—also serve as informants to the federal authorities in their war on drugs.

Can someone explain this to me?

HUD Helps to Set the Ground for Next Round of Mortgage Fraud

Just when you were thinking it was safe to go back into the mortgage market, today’s Wall Street Journal  is highlighting the next source of mortgage fraud, the Federal Housing Administration’s (FHA) reserve mortgage program.  In a typical reverse mortgage, the bank sends the borrower a monthly check (or a lump sum payment at the beginning of the loan).

It seems that some creative individuals have figured they could deed a run-down house to an elderly individual, and then get a reserve mortgage on that property; leaving them with the cash and the government with the run-down worthless property.  Of course, this requires getting an appraiser to go along with the value of the home, but since the Clinton HUD decided to do away with FHA control of appraisers and let the lender pick the appraiser, that sadly hasn’t been much of an obstacle.

The great thing for lenders is that if the loan goes bad, or the value of the house falls below the mortgage amount, FHA - backed by the taxpayer - picks up the tab.  Of course, the borrower is required to pay an insurance premium to cover any potential shortfalls.  But just like in any other federal insurance program, when these’s a shortfall beyond funds collected via premiums, we taxpayers are left on the hook.  I could go on about what a great job Washington does running insurance programs; suffice to say, Washington does a pretty poor job.

If Washington were serious about cracking down on predatory lending and mortgage fraud, Congress should end the practice of allowing lenders to put 100% of their losses to the taxpayer.  Maybe that would provide the correct incentives for the lender to actually make sound loans.

Meghan Cox Gurdon: Doesn’t Understand Terrorism

In goading victim states to overreact, one of the things terrorists seek is confirmation of their ideological narrative. The story Islamist terrorists tell themselves and others is that the United States is a wicked power, an occupier, a Crusader, and an exploiter of Muslims. Terrorists are energized, and they have an easier time with recruiting and maintaining support, when the United States does things that make these charges look true.

Lacking this insight, Washington Examiner columnist Meghan Cox Gurdon interprets recent events wrongly in almost every respect. Her column is called “These are Good Times for Terrorists.”

Rather than scoring a terrorist “win,” the compassionate release of Lockerbie bomber Abdel Basset al-Megrahi doesn’t square with Western cruelty. Thus—to the extent it matters to terrorists—it confounds their version of events. Terrorists don’t really do a “how much time will I serve” calculation, so the release probably doesn’t matter much. In terms of individual justice, it may have been wrong, but not in terms of counterterrorism strategy.

Gurdon cites flagging U.S. will in Afghanistan as a sign of terrorist success, and it would provide short-term gains to the Taliban if the United States exited the field. But with lessened U.S. violence in the area, and with the recent election giving a stronger toehold to legitimate government, U.S. military caution stands to deal terrorism strategic setbacks.

Where Gurdon really gets it wrong—and purposefully so—is in her interpretation of Attorney General Holder’s move to investigate allegations of torture by U.S. authorities: “[M]ilitants now know that, should they be apprehended, American interrogators cannot so much as wave a loaded gun or blow cigar smoke in their faces lest they face the disciplinary wrath of their own authorities.”

These slights are not the gravamen of the torture allegations, and Gurdon undoubtedly knows that. What she may not know is that abuse of terror suspects is good for terrorism: It confirms the ideological narrative holding that the United States is an evil, abusive power. Meticulous fair treatment of terror suspects, on the other hand—as ordinary criminals—is the fate terrorists loathe. This robs them of their claim on moral authority and makes their struggle boring.

Recall that the first of the “five demands” in the 1981 IRA hunger strike was the right not to wear a prison uniform. Treating them as ordinary criminals would sap their legitimacy and the strength of their challenge to incumbent power in the eyes of key audiences.

It would have been far, far better for the United States and CIA interrogators not to have lost their cool after the 9/11 attacks. We handed terrorism many swords with our responses. But exposing error to light and punishing proven wrongdoing confirms our ideology: fealty to the rule of law.

Meghan Gurdon doesn’t understand terrorism. And she takes a real header with her flabby attempt to associate alleged CIA torture and other missteps with the constitution:

The Republic rests on the Constitution, but the reverse is also true; the Constitution and all the benign and enlightened principles it embodies rest on the continued strength and moral will of the Republic.

No, Meghan. The republic, its strength, and its moral will all rest on the constitution.

British Economic Suicide

A Bloomberg story on one cause of the ongoing British economic disaster under Prime Minister Gordon Brown:

Andrew Wesbecher moved to London from New York in 2006 to sell software to banks and hedge funds. This month he joined the exodus of American expatriates fleeing high taxes and the city’s shrinking financial industry … Americans are heading home as Britain plans a 50 percent tax rate for those who earn more than 150,000 pounds ($248,000) a year and employers cut benefits for workers living abroad, reducing the allure of London. That comes a year after the U.K. said foreigners who have lived in the country for more than seven years must pay 30,000 pounds annually or give up the special status that shields overseas income from British taxes.

Since the 1980s, London has boomed as an international city open to the world’s entrepreneurs and their wealth, and perhaps home to more billionaires than any other city. The British economy as a whole has done quite well, pulled ahead by London and driven by a new free-market spirit in the wake of Margaret Thatcher’s privatization, deregulation, and tax cuts. Thatcher rightly argued that her cuts to income tax rates “provided a huge boost to incentives, particularly for those talented, internationally mobile people so essential to economic success.”  High tax rates at the top end were a “symbol of socialism” that she wanted to scrap.

Brown is killing the free-market goose that laid the golden eggs of Britain’s success. I really don’t understand the vision of such politicians – don’t they know what they are doing? I want people to be successful. I want entrepreneurs to create wealth. I love growing, vibrant cities.  Why do some people want to destroy all that?