Archives: March, 2012

How Much Education Spending Is Enough?

The Washington Times reports that the Obama administration’s answer to everything really is simply to spend more:

Education Secretary Arne Duncan used Thursday’s appearance before a key House subcommittee to not only defend the Obama administration’s request for a $1.7 billion increase in school funding for fiscal 2013, but also to rip the GOP budget proposal laid out by Rep. Paul Ryan earlier this week.

It’s easy to get confused these days, what with billions of dollars of spending at the national, state, and local levels.

How much do we actually spend, and what do we get for it? For all of you who want to get the details but don’t have much time, or have family and friends who need to be introduced to reality, here’s Everything you need to know about public school spending in less than 2½ minutes:

Oh, and below is an explanation for why your friends and family probably have no idea how much we spend on K-12 public education. (Government schools aren’t very keen on transparency and accountability.)

More Evidence that Uncle Sam Is Uncle Sucker (but U.S. Voters Aren’t)

As has become an annual tradition, my colleague Charles Zakaib has sifted through the data from the latest edition of the International Institute for Strategic Studies’ The Military Balance and created several illuminating charts. They are enclosed below and show U.S. security spending as a share of the global total, U.S. per capita spending as compared with some of our leading allies, and U.S. spending vs. the rest of NATO as a share of GDP.

The data demonstrate that Americans in 2010 spent vastly more in every sense of the term. We accounted for 47.65 percent of global security spending. We each spent more than $2,200 on the Pentagon’s budget, and hundreds more when you factor in other security spending (e.g., Homeland Security, Veterans Affairs, and nuclear weapons). That represents a 72 percent increase in real, inflation-adjusted dollars since 1998, whereas the United Kingdom and Denmark increased by 5 and 6 percent, respectively. Six NATO countries saw per capita spending decline: Italy’s has fallen by 35 percent since 1998; France by 14 percent; and 12 percent in Portugal. The aggregate numbers paint a similar picture: between 1999 and 2010, U.S. spending as a share of GDP rose from 3.15 to 4.77, whereas the rest of NATO declined from 2.05 to 1.61 percent.

The reason why those trends prevail is straightforward: people aren’t inclined to pay for something if someone else is willing to buy it for them. Conservatives understand that dynamic when it applies to housing allowances or food stamps for the less fortunate here in the United States. They ignore it when it applies to buying security for the relatively well off in Europe and Asia.

That blindness is evident in Paul Ryan’s latest budget plan. As Chris Edwards and Tad DeHaven observed earlier this week, Ryan is willing to reduce spending on many domestic programs, but he could have gone much further on the grounds that the federal government does many things that are more appropriately handled by state or local governments or, even better, by the private sector.

Ryan makes an exception for the Pentagon, allowing its budget to grow on top of the massive increases from the past decade. Ryan and others contend that national defense is a core function of government, and therefore should not be treated equally with spending on other programs that are not.

I agree: The Constitution clearly stipulates that the federal government should provide for the “common defence.” It makes no mention of subsidizing mortgages, Amtrak, or sugar. But I anxiously await Rep. Ryan’s explanation for why American taxpayers should be expected to subsidize social welfare spending in other countries. By relieving other governments from their solemn obligation to provide for the common defense of their citizens, we have allowed and encouraged them to divert their resources elsewhere.

That realization is dawning on a growing number of Americans, and they aren’t happy about it. In a just-published book, The People’s Money: How Voters Will Balance the Budget and Eliminate the Federal Debt , pollster Scott Rasmussen explains the looming gap between voters and the Political Class. Rasmussen will be at Cato next week to talk about his book, and I’ll be writing more about his findings in the future. In the meantime, I’ll leave you with just three poll findings that should trouble Republicans who believe Paul Ryan’s approach to military spending is a political winner.

  • 82 percent believe economic challenges are a bigger concern than military ones.
  • Only 35 percent of voters would leave DoD spending off the table in the search for savings.
  • 79 percent of voters think we spend too much defending others. A mere 4 percent think we don’t spend enough.

Why Is ObamaCare Unpopular?

Today POLITICO Arena asks:

Was ObamaCare doomed from the start, an unpopular proposal that was unlikely to ever catch on with the public?

My response:

Let’s remember how ObamaCare was passed – without a single Republican vote, and after the “Cornhusker Kickback,” the “Louisiana Purchase,” the Florida Flim-Flam,” and countless other shenanigans, including a phony 10-year price tag of $938 billion that the CBO now tells us will be $1.76 trillion. And remember too that ObamaCare’s passage was followed by the massive repudiation of the 2010 elections. Is it any wonder that it continues to be unpopular?

But the Supreme Court next week will be looking not at ObamaCare’s unpopularity but at its unconstitutionality – or so 26 states and others have claimed, and for good reason. The Act, if upheld, would effectively end constitutionally limited government in America. A government that can order individuals to engage in commerce is limited only by politics, not law. A federal government that can compel states to expand their Medicaid roles on pain of losing the federal tax dollars the state’s citizens must continue to pay is no longer a government subject to checks by the states.

The American people aren’t stupid. They know a massive power-grab when they see it. What makes this power-grab special is that it concerns not retirement or education, or the many other areas in which the federal government has usurped constitutionally unauthorized power over the years but that most intimate of human concerns, health care. Bad as our health care system is today, due to government meddling in the past, ObamaCare will transform it into one massive bureaucracy – high costs, poor service – and the American people know it. That’s why it continues to be so unpopular.

On New Fed Nominations: Are There No Keynesians in Flyover Country?

In late January President Obama submitted to the Senate the appointments of Jeremy Stein and Jerome Powell to the Board of Governors of the Federal Reserve System.  This past Tuesday the Senate Banking Committee held a nomination hearing for Stein and Powell.  None of this really matters, as per Section 10 of the Federal Reserve Act, neither Stein or Powell can serve currently on the Fed’s Board.

Recall that Section 10 requires that in regard to members of the board ”not more than one of whom shall be selected from any one Federal Reserve district”, the President’s selections ”shall have due regard to a fair representation of…geographical divisions of the country.”  In plain English, this means you cannot have more than one Fed governor from the same Fed district.

According to his paperwork, submitted to the Senate, Professor Stein is from Massachusetts.  Unfortunately current Fed governor Dan Turullo is from Massachusetts.  Mr. Powell is from Maryland, as is current governor Raskin.  As this was an issue with the failed nomination of Peter Diamond to the Fed, you’d think the White House (or the Fed) would have bothered to read the statute with these nominations.

Don’t get me wrong, this isn’t about personal qualifications, this is about the law.  In fact, as far as Democratic academics go, I am hard pressed to think of a better nominee than Jeremy Stein.  Much of his work has been on the topics of monetary policy and financial regulation, unlike Professor Diamond.  And not only has his work been relevant, it has been thoughtful, insightful and original.  Like current governor Turullo, Stein seems to get many of the deep flaws in our current bank capital system.  As importantly he also gets the impact of down-payment requirements as they related to housing markets, something outright rejected by many housing advocates on the left.  If the Fed was not already packed with academics, he’d be a fine addition.

While I do not agree with the President’s desire to pack the Fed board with easy money advocates and friends of Wall Street (Powell), I do believe that such is his prerogative, as long as he can get the advice and consent of the Senate.  I do, however, believe the President has to do so within the bounds of the law.  He should take his search for Keynesians to flyover country (maybe on one of his trips to Ohio), which is not currently represented on the Fed Board.

Feds Spin Yarn About ‘Significant Threat’

Federal prosecutors told a federal judge that they’re prosecuting an elderly man because his actions constitute a “ significant threat” to the legal system.

Guess what he did?

(a) He smuggled stolen FBI documents to a suspected Al-qaeda prisoner in the NY jail.

(b) He attended court hearings and made belligerent outbursts.

(c) He wrote nasty letters to prosecutors and judges accusing them of corruption.

Actually, all he did was distribute pamphlets outside the courthouse.  And in the view of federal attorneys, if such pamphlets express an opinion, or quote our second president saying jurors can and should vote according to their conscience, then the distributor must be arrested and jailed—at least if he gets too close to the courthouse.

Previous coverage here.

Osama’s Feckless Plot against Obama

In three recent colums for the Washington Post, David Ignatius reveals bits of two letters found in Osama bin Laden’s compound after the raid that killed him. One is a 48 page letter from bin Laden to Ilyas Kashmiri, a senior al Qaeda operative since killed in a drone strike. In the letter, bin Laden dispenses advice and dreams up potential terrorist acts, including a suggestion that al Qaeda teams shoot down planes carrying President Obama or General Petraeus, then the commander of U.S. forces in Afghanistan.

Ignatius is doing some excellent reporting here, providing insight in bin Laden’s last days. But he inflates bin Laden’s stature, calling him a “terrorist CEO” and his feckless hope to kill Obama a “plot” that we should find “chilling.”

As I wrote in a letter published in Wednesday’s Post, Ignatius’s article reveals something closer to a fantasy than a “plot.” Ignatius notes that al Qaeda probably lacks the weapons to down standard military aircraft, let alone Air Force One. Additionally, it’s not clear that Kashmiri had the men to pull off the plan. We should not assume that he took these suggestions seriously rather than simply listening to bin Laden with strained patience, as with a cranky uncle. Perhaps the most absurd element of the letter is bin Laden’s political analysis. He argues that elevating Joe Biden to the presidency would somehow lead the U.S. into crisis rather than creating a massive rally-around-the-flag-effect.

This is a happy reminder of al Qaeda’s incompetence, not a chilling one. As John Mueller recently noted, the materials revealed about al Qaeda since bin Laden’s death are more evidence that the cunning, disciplined al Qaeda of popular imagination is a myth. Al Qaeda consists of disjointed groups of guys dodging drones and desperately trying to live up to their inflated reputation to terrorize. There is no true central command. That is clearly true today, and was likely the case even the al Qaeda’s 1990s heyday. That disorganization helps explain why most terrorism, even al Qaeda terrorism, is homegrown—mostly organized by small groups of people in the country where it occurs with little help from abroad. That gets you awful tragedies, as we saw this week in France, but hardly the apocalyptic nightmares we’ve been told to expect.

On April 13, Cato is holding a morning conference to explore homegrown terrorism, with one panel focusing on the United States and one on other western states. The panelists (including Mueller, Risa Brooks, Brian Jenkins, Glenn Carle, Michael Kenney and Mitchell Silber) will discuss, among other things, how al Qaeda’s lack of hierarchy affects its capacity to kill and terrorize. You can sign up here.

Cross-posted from the Skeptics at the National Interest.

School Choice Leadership in New Hampshire

Yesterday, the New Hampshire Senate passed a path-breaking education tax credit bill that includes home school expenses and allows the program to grow 25 percent each year if it is successful. It is income-limited, but scholarship organizations can use 20 percent of their funds for children who would otherwise not qualify, giving flexibility instead of a hard cut-off. It allows up to 30 percent of students to be currently enrolled in private school. It imposes no new regulations on private education beyond basic reporting to the Department of taxation. And it was passed with the support of more than 60 percent of the Senate.

This is a spectacular law for New Hampshire and should inspire legislators in other states to pass the best education tax credit law their tax system will allow. (Follow these links for model legislation,  tax credit legislative guidelines, and an explanation of why credit percentages are so important.)

Due to the peculiarities of New Hampshire tax law, which makes it difficult or impossible to back out deductions if a taxpayer claims a credit, the credit is set at 85 percent of the donation. But with New Hampshire’s flat 8.5 percent business tax, a donor’s tax liability is reduced by over 93 percent. Since New Hampshire has no standard individual income tax, next up should be property tax credits to ensure even greater participation in education. Other states without these restrictions should pass 100 percent credits for both businesses and individuals, and for both personal use and donations.

I provided analysis and advice on education tax credit policy structure to individuals in New Hampshire, but a policy analyst can only explain why certain structures are better or worse for accomplishing particular goals. The legislators who led on this issue are the ones who are bringing true education reform to New Hampshire, and they should be commended for looking past entrenched interests to what’s best for the state’s children and voters. Unfortunately, that is far from the case in other states.

It is wonderful to see what can be accomplished when lawmakers take principles and policy seriously.