Archives: August, 2010

Race to the Top ‘Winners’ Declared

So the much ballyhooed Race to the Top program – $4.35 billion out of nearly $110 billion in federal education stimulus and bailouts – is over, with today’s announcement of ten round-two winners. Who knows for sure how the winners were ultimately determined – point allocation was highly subjective – but it’s hard to be impressed by the list: the District of Columbia, Florida, Georgia, Hawaii, Maryland, Massachusetts, New York, North Carolina, Ohio and Rhode Island.

New York? Recent revelations about dumbed-down Regents exams hardly make it seem like a paragon of honest reform. Hawaii? How did last years’ school-free Fridays help them stack up so high? Maryland? Fostering charter schools was supposed to be important, but it has one of the most constricting charter laws in the nation. And Massachusetts? Well, it’s easy to see how it won – it just dropped its own, often-considered nation-leading curriculum standards to adopt national standards demanded by Race to the Top.

In the end, though, how states were chosen really doesn’t matter that much. Why? Because the race was based mainly on who could make the biggest, fastest promises of reform, not who was actually, meaningfully reforming things. So, at the very least, we should all hold our applause for both the winners and the race for several years, because promises are easy – real change is tough.

New York Times Seeks Higher Taxes on the ‘Rich’ as Prelude to Higher Taxes on the Middle Class

In a very predictable editorial this morning, the New York Times pontificated in favor of higher taxes. Compared to Paul Krugman’s rant earlier in the week, which featured the laughable assertion that letting people keep more of the money they earn is akin to sending them a check from the government, the piece seemed rational. But that is damning with faint praise. There are several points in the editorial that deserve some unfriendly commentary.

First, let’s give the editors credit for being somewhat honest about their bad intentions. Unlike other statists, they openly admit that they want higher taxes on the middle class, stating that “more Americans — and not just the rich — are going to have to pay more taxes.” This is a noteworthy admission, though it doesn’t reveal the real strategy on the left.

Most advocates of big government understand that it will be impossible to turn America into a European-style welfare state without a value-added tax, but they don’t want to publicly associate themselves with that view until the political environment is more conducive to success. Most important, they realize that it will be very difficult to impose a VAT without seducing some gullible Republicans into giving them political cover. And one way of getting GOPers to sign up for a VAT is by convincing them that they have to choose a VAT if they don’t want a return to the confiscatory 70 percent tax rates of the 1960s and 1970s. Any moves in that direction, such as raising the top tax rate from 35 percent to 39.6 percent next January, are part of this long-term strategy to pressure Republicans (as well as naive members of the business community) into a VAT trap.

Shifting to other assertions, the editorial claims that “more revenue will be needed in years to come to keep rebuilding the economy.”  That’s obviously a novel assertion, and the editors never bother to explain how and why more tax revenue will lead to a stronger economy. Are the folks at the New York Times not aware that both economic growth and living standards are lower in European nations that have imposed higher tax burdens? Heck, even the Keynesians agree (albeit for flawed reasons) that higher taxes stunt growth.

The editorial also asserts that, “Since 2002, the federal budget has been chronically short of revenue.” I suppose if revenues are compared to the spending desires of politicians, then tax collections are - and always will be - inadequate. The same is true in Greece, France, and Sweden. It doesn’t matter whether revenues are 20 percent of GDP or 50 percent of GDP. The political class always wants more.

But let’s actually use an objective measure to determine whether revenues are “chronically short.” The Democrat-controlled Congressional Budget Office stated in its newly-released update to the Economic and Budget Outlook that federal tax revenues historically have averaged 18 percent of GDP. They are below that level now because of the economic downturn, but CBO projects that revenues will climb above that level in a few years - even if all of the 2001 and 2003 tax cuts are made permanent. Moreover, OMB’s historical data shows that revenues were actually above the long-run average in 2006 and 2007, so even the “since 2002” part of the assertion in the editorial is incorrect.

On the issue of temporary tax relief for the non-rich, the editorial is right but for the wrong reason. The editors rely on the Keynesian rationale, writing that, “low-, middle- and upper-middle-income taxpayers…tend to spend most of their income and the economy needs consumer spending” whereas “Tax cuts for the rich can safely be allowed to expire because wealthy taxpayers tend to save rather than spend their tax savings.”

I’ve debunked Keynesian analysis so often that I feel that I deserve some sort of lifetime exemption from dealing with this nonsense, but I’ll give it another try. Borrowing money from some people in the economy and giving it to some other people in the economy is not a recipe for better economic performance. Economic growth means we are increasing national income. Keynesian policy simply changes who is spending national income, guided by a myopic belief that consumer spending somehow is better than investment spending. The Keynesian approach didn’t work for Hoover and Roosevelt in the 1930s, it didn’t work for Japan in the 1990s, and it hasn’t worked for Obama.

And it doesn’t matter if the Keynesian stimulus is in the form of tax rebates. Gerald Ford’s rebate in the 1970s was a flop, and George W. Bush’s 2001 rebate also failed to boost growth. Tax cuts can lead to more national income, but only if marginal tax rates on productive behavior are reduced so that people have more incentive to work, save, and invest. This is an argument for extending the lower tax rates for all income classes, but it’s important to point out that the economic benefits will be much greater if the lower tax rates are made permanent.

Last but not least, the editorial asserts that, “The revenue from letting [tax cuts for the rich] expire — nearly $40 billion next year — would be better spent on job-creating measures.” Not surprisingly, there is no effort to justify this claim. They could have cited the infamous White House study claiming that the so-called stimulus would keep unemployment under 8 percent, but even people at the New York Times presumably understand that might not be very convincing since the actual unemployment rate is two percentage points higher than what the Obama Administration claimed it would be at this point.

Uh-oh: Here Comes Edu-Goliath!

The hard-nosed, content-at-all-cost folks at the Thomas B. Fordham Foundation have been warned, and warned, and warned some more: Get the national curriculum standards you think are so incredibly important, and they will almost certainly be captured by the pedagogical progressives who have dominated education for decades – and whose notions you disdain. Well, if what’s being reported by Common Core’s Lynne Munson – and reiterated in this lamentation for Massachusetts by the Pioneer Institute’s Jim Stergios – is accurate, that is already happening. (Actually, some prominent analysts have long said that the national standards – created by the Council of Chief State School Officers and National Governors Association – are already nothing the Fordhamites should embrace.) Writes Munson:

This is strange. P21 is being subsumed into CCSSO. There’s nothing to be read about this on either CCSSO’s or P21′s websites. But according to Fritzwire the two organizations have formed a “strategic management relationship” that will commence December 1.

So what is P21 –  the group cozying up with the standards-writing CCSSO – you ask? Let the Fordham Institute tell you:

The Partnership for 21st Century Skills (P21) has some powerful supporters, including the NEA, Cisco, Intel, and Microsoft. Fourteen states have also climbed aboard its effort to refocus American K-12 education on global awareness, media literacy and the like–and to defocus it on grammar, multiplication tables and the causes of the Civil War. Its swell-sounding yet damaging notions have been plenty influential–but the unmasking and truth-telling have begun, thanks in large part to a valiant little organization named Common Core. And new research validates this and other skeptics’ criticisms. Today the contest resembles David vs. Goliath–but remember who ultimately prevailed in that one.

Uh-oh. It might be time to end the biblical references – it looks more and more like Goliath is going to win.

Colombia vs Venezuela on Crime

The New York Times highlights today the increasing plight of violence that besets Venezuela. The headline couldn’t be blunter: “More Killings in Venezuela than Iraq.” It’s a gruesome reminder of what Hugo Chávez’s “Socialism of the 21st Century” has delivered to the Venezuelan people.

Some Venezuelan officials deny that there is a rise in crime altogether claiming it is part of a media campaign to discredit the government (they have coined the expression “media pornography” to refer to crime coverage, thus setting the semantic stage for censoring it). However, among the most plausible causes behind the national spike in crime, some government advisers point to an overall increase in violence in the region. According to this theory, not only Venezuela is suffering from a wave of bloodshed, but also other Latin American nations like Mexico and the Central American countries.

Still, when Venezuela is compared to neighboring Colombia, it becomes clear that there’s no such regional increase in crime. Just the opposite. Colombia, until recently one of the most violent countries in the world, more than halved its rate of murders in the last 8 years. Former president Álvaro Uribe and his policy of “democratic security” deserve due credit for such an accomplishment. On the other hand, Hugo Chávez’s Bolivarian revolution has delivered Venezuelans a jump of almost 50% in the murder rate in the last 10 years:

Sources: Sistema de Gestión y Segumiento a las Metas del Gobierno de Colombia (www.sigob.gov.co) and Cuerpo de Investigaciones Científicas Penales y Criminalísticas de Venezuela (www.cicpc.gov.ve).

It seems that after Hugo Chávez, Venezuelans will need a president like Álvaro Uribe to clean the house.

Federal Bailout of GM Still Horribly Wrong

Our friends at The Economist magazine usually talk good sense about free trade and free markets, which makes their retrospective endorsement of the government bailout of General Motors all the more disappointing.

In a leader in the current issue, the editors write that critics of the bailout (count Cato scholars among them) owe President Obama an apology. “His takeover of GM could have gone horribly wrong, but it has not,” they opine.

The Economist argues that, in contrast to state coddling of industries in, say, France, President Obama has driven a hard bargain by requiring GM to fire top management, cut jobs, close plants, and reduce its brand names. The magazine grants that the president’s labor-union allies won special concessions that came at the expense of bondholders, but “by and large Mr. Obama has not used his stakes in GM and Chrysler for political ends.”

First, it’s a pretty low bar to say an intervention was right because it did not go horribly wrong. The editors then too quickly brush over the horrible injustice of stiffing the taxpayers of Indiana and others who bought GM bonds and should have been in line ahead of the more politically connected United Auto Workers union.

To curry favor with organized labor, President Obama put $50 billion of taxpayer resources at risk. A post-bankruptcy GM turned a profit last quarter, along with most other automakers, but it is doubtful its anticipated IPO in the next few months will raise anything like the $80 billion or more needed to return the “investment” to taxpayers.

On top of that, the bailout of GM went far beyond any valid power granted to the federal government by the U.S. Constitution, and it blatantly favored two companies over a multitude of others in the very competitive automobile market.

Remind me again who owes whom an apology?

Public Schools Are Modern Monuments to Profligacy

It’s the hot new public-sector trend; massively expensive K-12 school buildings.

Christina Hoag of the AP writes that LA takes the prize for conspicuous public consumption with the Robert F. Kennedy Community Schools:

With an eye-popping price tag of $578 million, it will mark the inauguration of the nation’s most expensive public school ever. The K-12 complex to house 4,200 students has raised eyebrows across the country as the creme de la creme of “Taj Mahal” schools, $100 million-plus campuses boasting both architectural panache and deluxe amenities.

Gone are the days when great emperors gave expression to love and grief in spires and domes of white marble. No longer do poor parishioners and wealthy kings construct cathedrals of awe and glory.

Today, we build monuments to government schooling; vast money-pit monstrosities made of matte aluminum flashing and a bureaucrat-chic modern aesthetic.

“Districts want a showpiece for the community, a really impressive environment for learning,” says Joe Agron, editor-in-chief of American School & University, a school construction journal.

Indeed, an impressively expensive environment that is completely unrelated to student achievement. Students only need good lighting, ventilation and protection from the elements to learn. Now we have massive buildings and mini Olympic villages with aquatic centers and professional-grade sports fields. It’s no wonder LA budgeted close to $30,000 per student in 2008.

All of this overbuilding has upfront and long-term costs. Big, expensive and complicated facilities cost more to run and maintain, and the bonds that fund much of this spending leave taxpayers strapped with an increasingly heavy debt burden.

These modern Taj Mahal Schools seem to be a nation-wide phenomenon. National Center for Education Statistics data show that spending on facilities and construction has been increasing at a much faster pace than it has for classroom instruction.

From 1989 to 2008 spending on facilities acquisition and construction has increased a stunning 445% while instructional spending increased 198 percent. The number of students, meanwhile, increased just 7 percent.

Not only is government education spending out of control, much of the increase is being sunk into hugely expensive and unnecessary building projects.

We need to put more money in the hands of parents and taxpayers. We need to invest more effectively and efficiently with education tax credits.