Archives: May, 2010

School Vouchers vs. Tax Credits

NRO editor Robert VerBruggen has weighed in a couple of times this week on the relative merits of school vouchers and education tax credits, raising interesting and important issues.

In response to my earlier post today about an education tax credit case now before the U.S. Supreme Court, VerBruggen writes:

If the Supreme Court buys this logic — which I suppose is sound on its face — it could lead to some very interesting programs. Any time it’s illegal for a government to fund something directly, it could simply make a dollar-for-dollar “tax credit” program for it, allowing sympathetic taxpayers to technically “donate” — but actually just redirect the taxes they’d otherwise have to pay — to the cause.

This is actually an argument presented by critics of the program in their brief asking the Supreme Court not to hear the appeal that it… just decided to hear. The fact that this argument is fallacious is no doubt one reason that the Supreme Court decided to reject critics’ request. Here’s where it goes wrong:

Under a constitutional tax credit program such as Arizona’s, the state has no power to pressure/encourage taxpayers to do anything that the state could not do directly. Taxpayers can choose to give no money to religious charities, or to give all their money to them. The state is unable to affect their decisions in any way.

As Ilya Shapiro and I pointed out in Cato’s amicus brief in this case, this is identical to the law pertaining to federal charitable tax deductions. Religious charities get more tax deductible donations than any other kind of entity, and the Supreme Court has repeatedly upheld their constitutionality because the decisions regarding such donations are left entirely to the unfettered choices of private citizens.

While it would be unconstitutional for a tax credit program to only allow donations to religious charities, it is perfectly consistent with the U.S. Constitution and Supreme Court precedent for a tax credit program to be religiously neutral, leaving the donating decisions to private citizens.

But there’s much more to it than this. Credits are not just constitutional, they offer an important advantage over vouchers. Under voucher programs, all taxpayers must support every kind of schooling, which can be a source of social conflict in a diverse society. [Think liberals being forced to fund religious-conservative-capitalist schooling; or conservatives being forced to fund schools supporting homosexuality as natural and without any inherent moral implications]. While this doesn’t violate the U.S. constitution (see Zelman v. Simmons Harris), it’s still a less-than-ideal outcome, as was observed in all three dissents in the Zelman case.

Tax credits, as I explained in the last section of our amicus brief (p. 21), avoid this source of social conflict. Not just families but taxpayers enjoy the benefits of free choice and voluntary association. Tax credits are thus a way to ensure universal access to a free educational marketplace without putting citizens into conflict with one another on matters of conscience. For this and many other reasons, they are the best realistic policy for advancing educational freedom yet devised.

Regulatory Spending Actually Rose under Bush

Analysts across the ideological spectrum generally agree that the government’s regulatory bodies fail far too frequently. However, analysts seem to learn different lessons from this experience.

Washington Post business columnist Steve Pearlstein cites numerous examples of failure and concludes, “It’s time for the business community to give up its jihad against regulation.”

He says:

It hardly captures the breadth and depth of these regulatory failures to say that during the Bush administration the pendulum swung a bit too far in the direction of deregulation and lax enforcement. What it misses is just how dramatically the regulatory agencies have been shrunken in size, stripped of talent and resources, demoralized by lousy leadership, captured by the industries they were meant to oversee and undermined by political interference and relentless attacks on their competence and purpose.

It’s true that regulators often do the bidding of the industries that they regulate. But “regulatory capture” is a long recognized phenomenon that undermines the contention that the government is well-suited to be a watchdog.

Regardless, is Pearlstein right that federal regulatory agencies were “dramatically” shrunk? Not according to a new study from George Washington University and Washington University in St. Louis. The figure shows that regulatory spending actually rose an inflation-adjusted 31 percent during the Bush administration (FY2002-FY2009):

Similarly, regulatory staff jumped by 42 percent under Bush’s watch:

TSA Behavioral Screening

Behavioral screening is a useful tool in deterring and preventing terrorist attacks. As I noted in this piece at Politico, a border patrol agent successfully used behavioral screening to stop the would-be Millennium Bomber. She noticed something “hinky” about a man driving south across the Canadian border. That “hinky” – fidgety and nervous behavior when asked routine customs questions – exposed a car full of explosives intended for the passenger terminal of Los Angeles International Airport.

Two items from the USA Today travel section highlight some mixed results with TSA behavioral screening. Today’s edition reports that behavioral screening, applied by Behavioral Detection Officers (BDOs) missed at least 16 people later linked to terror plots. On the other side of the equation, false positives can impose burdens on those who are nervous or upset for reasons other than terrorism aspirations.

The TSA Blog defended the program: “If you’re one of those travelers that gets frazzled easily (not hard to do at airports), you have no reason to worry. BDOs set a baseline based on the normal airport behavior and look for behaviors that go above that baseline. So if you’re stressing about missing a flight, that’s not a guaranteed visit from the BDOs.”

That would be reassuring if yesterday’s travel section hadn’t revealed that TSA screeners are keeping a list of those who get upset at intrusive screening procedures. “Airline passengers who get frustrated and kick a wall, throw a suitcase or make a pithy comment to a screener could find themselves in a little-known Homeland Security database.”

Of course, we can take comfort from the words of a TSA screener to security expert Bruce Schneier. “This isn’t the sort of job that rewards competence, you know.”

More Garbage-In-Garbage-Out from CBO

You don’t need to watch old Gunsmoke episodes if you want to travel into the past. Just read the latest Congressional Budget Office “research” claiming that Obama’s so-called stimulus “increased the number of full-time-equivalent jobs by 1.8 million to 4.1 million.” CBO’s analysis is a throwback to the widely discredited Keynesian theory that assumes you can enrich yourself by switching money from your left pocket to right pocket. For all intents and purposes, CBO wants us to believe their Keynesian model and ignore real world data. This is akin to the famous line attributed to Willie Nelson, who was caught with another woman by his wife and supposedly said, “Are you going to believe me or your lying eyes?”

Using its own Keynesian model, the White House last year said that wasting $800 billion was necessary to keep the unemployment rate from rising above 8 percent. Yet the joblessness rate quickly jumped to 10 percent and remains stubbornly high. We’ve already beaten this dead horse (here, here, here, here, and here), in part because the White House has embarrassed itself even further with silly attempts to find some way of turning a sow’s ear into a silk purse. This is why Obama Adminisration estimates have evolved from “jobs created” to “jobs saved” to “jobs financed.”

The CBO’s most recent ”calculations” are just another version of the same economic alchemy. But don’t believe me. Buried at the end of the report is this passage, where CBO basically admits that its new “research” simply plugged new spending numbers into its Keynesian formula. This sounds absurd, and it is, but don’t forget that these are the same geniuses that predicted that a giant new health care entitlement would reduce long-run budget deficits.

CBO’s current estimates of the impact of ARRA on output and employment differ slightly from those presented in its February 2010 report primarily because the agency has revised its estimates of ARRA’s impact on federal spending on the basis of new information. Outlays resulting from ARRA in the first quarter of calendar year 2010 were higher than the amount that CBO projected in February 2010 in preparing its estimate of the law’s likely impact on output and employment, primarily because a larger-than-expected amount of refundable tax credits was disbursed in the first quarter rather than later in the year. That change makes the estimated impact of ARRA on output and employment in the first quarter slightly higher than what CBO projected in February.

‘All Your Income Are Belong to the State’

An otherwise very good story in the Arizona Republic today begins badly:

The U.S. Supreme Court on Monday agreed to review the constitutionality of an Arizona program that diverts state tax revenue into private-school scholarships.

Here’s the thing: it doesn’t do that. No state tax revenue is used in Arizona’s program, which offers a tax cut (a.k.a. “credit”) to folks who donate to non-profit k-12 tuition assistance organizations. Those non-profits then subsidize private school tuition for families seeking financial help.

Back in 1999, the Arizona Supreme Court made all this clear. Those who were trying to kill the program (at the time, the “petitioners”) claimed that the donated funds were “public money.” The Court begged to differ, writing:

Petitioners argue that this tax credit channels public money to private and sectarian schools in violation of the state constitution…. As respondents note, however, no money ever enters the state’s control as a result of this tax credit. Nothing is deposited in the state treasury or other accounts under the management or possession of governmental agencies or public officials. Thus, under any common understanding of the words, we are not here dealing with “public money.” (p. 19-21)

It would be fine for the Arizona Republic to report that critics refuse to accept the Arizona Supreme Court’s interpretation, and that they are hoping the U.S. Supreme Court will see things their way (FYI: not gonna happen). But it is not okay for the Republic, on its “news” pages, to take sides in a case now before the U.S. Supreme Court by adopting the legal assumptions of the program’s critics.

P.S.  Yes, the title is a reference to this.

Good Thing There Are So Few Bad Guys

Returning from Chicago this past weekend, I noticed that they were using strip-search machines in several security lanes at the TSA checkpoint (ORD Terminal 1). Naturally, after the ID check—yes, I did show ID this time—I chose a lane that lead to a magnetometer rather than a strip-search machine.

Annnnnd, anyone wanting to smuggle a plastic weapon could do the same.

For all the money spent on strip-search machines at ORD, and for all the exposure law-abiding travelers are getting, the incremental security benefit has been just about exactly zero. Security theater. TSA has to direct people to lanes mandatorily or install strip-search machines at all lanes to get whatever small security benefit they provide.

Going through the strip-search machine is optional—you can get a pat-down instead. Signage to that effect was poorly placed for informing the public, at the entrance to the strip-search machine. Travelers might read it as they stepped into the machine, realizing from that standing spread-eagle position that they didn’t have to be there.

Sell Your Soul for What’s Behind Curtain #1?

Would you agree to sell your soul? And not just sell it, but sell it for an undisclosed prize? The states of Maryland and Kentucky would: Both have endorsed as-yet unpublished national curriculum standards for mathematics and language arts, declaring that they will relinquish their ability to set their own standards – to control their own educational souls – in those key subjects.

Alright, maybe they haven’t completely signed away their souls in exchange for what they hope will be supernaturally inspired standards. For one thing, both states could still turn away from the final standards if they end up being utterly horrific. More important, it’s not really the standards that the states are Faustian-bargaining for. As this Washington Post article makes clear, it is the federal money at stake in the Obama administration’s Race to the Top.  So Maryland isn’t about to give up control of it’s educational destiny in exchange for truly extraordinary standards, but a mere $250 million – a big chunk of change to you and me, but just 2% of the nearly $11.1 billion the state spends on K-12 education.

Unfortunately, the transparent protestations of Education Secretary Arne Duncan and other national-standards supporters notwithstanding, what is making states endorse such standards is no powerful argument that the standards will improve education, but an obvious pursuit of federal ducats. But is that how we should want education run? States taking standards just to get DC dollars? Unfortunately, being bought by Washington – with no meaningful achievement improvements to show for it – is what states have been doing for decades, though never have they given up their ability to set their own standards.

With that in mind, readers are reminded that on the day that the final, proposed national standards are due to be released, we will be having a debate at Cato that will get past all the bribery and sound bites, and for once tackle the reality of national standards. What logic concludes, political realism makes clear, and the research reveals about national standards will be front and center, and national standards will finally be given the no-holds-barred vetting that states and their citizens deserve.