Archives: June, 2012

Jeb Bush at the House Budget Committee

Two op-eds in the Washington Post today (here and here) continue the discussion about Jeb Bush’s recent comments to the House Budget Committee. As a co-testifier with Bush, let me give you my impressions of the hearing.

The hearing focused on the problems created by corporate welfare, and explored the contrast between business subsidies and free market entrepreneurship. In his testimony, Bush provided nonpartisan observations on those issues, and I criticized subsidy handouts by both parties.

Budget committee chairman Paul Ryan also blamed both parties: “Both parties have pursued deficit-driven spending aimed directly at favored companies, tax carve outs for the well-connected, and regulatory barriers that stack the deck against the average citizen… Both parties share in the blame.”

Then some of the Democratic members descended on Bush like a pack of jackals. They attacked him regarding some obscure program he supported as Florida governor and they attacked him on the failure of Lehman Brothers. They also peppered him with questions on non-germane topics such as the Grover Norquist tax pledge.

The Democrats got what they wanted: the slew of media stories after the hearing generally highlighted the most divisive aspects of the Democratic exchanges with Bush. The media ignored the substance of the hearings and fanned the flames of partisan bickering—partisan bickering that media elites claim to abhor.

I’m not naïve about the political process, but cutting business subsidies could be one area where bipartisan budget reform is possible. Reforms are going to be much more difficult if the media ignores serious policy discussions and instead validates the “gotcha” tactics of some members of Congress.

Obama’s Definition of Compromise

NPR reports that in an Ohio campaign speech, President Obama praised the post-World War II “era of compromise” and “broad consensus” when both parties worked together for the national interest. He gave some specific examples:

As much as we might associate the GI Bill with Franklin Roosevelt, or Medicare with Lyndon Johnson, it was a Republican—Lincoln—who launched the Transcontinental Railroad, the National Academy of Sciences, land-grant colleges. It was a Republican—Eisenhower—who launched the Interstate Highway System and a new era of scientific research. It was Nixon who created the Environmental Protection Agency; Reagan who worked with Democrats to save Social Security—and who, by the way, raised taxes to help pay down an exploding deficit.

That is, President Obama’s idea of compromise and consensus is that Republicans support expanded government and higher taxes. He offers no examples of Democrats supporting tax reduction, spending restraint, or deregulation. It seems that in his view, the national interest is entirely and exclusively the expansion of the size, scope, and power of government. Remember that when you hear the president and his allies call for compromise and consensus. Compromise is a one-way street in President Obama’s world.

NRO Op-ed: IPAB, ObamaCare’s Super-Legislature

Yesterday, Cato released “The Independent Payment Advisory Board: PPACA’s Anti-Constitutional and Authoritarian Super-Legislature,” by the Goldwater Institute’s Diane Cohen and me.

Today, National Review Online publishes our op-ed based on that study. An excerpt:

[U]nder the statute as written, if Congress fails to repeal IPAB in 2017, the secretary must implement IPAB’s edicts even if Congress votes to block them. Nancy Pelosi was right: We needed to pass ObamaCare to find out what was in it. We’re still finding out.

ObamaCare is so unconstitutional, it’s absurd. It delegates legislative powers that Congress cannot delegate. It creates a permanent super-legislature to supplement—and when conflicts arise, to supplant—Congress. It tries to amend the Constitution via statute rather than the amendment procedure of Article V.

ObamaCare proves economist Friedrich Hayek’s axiom that government direction of the economy threatens both democracy and freedom. After decades of failing to deliver high-quality, low-cost health care through Medicare, Congress struck upon the “solution” of creating a permanent super-legislature—or worse, an economic dictator—with the power to impose taxes and other laws that the people would reject.

Fortunately, one Congress cannot bind future Congresses by statute. If the Supreme Court fails to strike down ObamaCare, Congress should exercise its power to repeal IPAB—and the rest of ObamaCare with it.

Cohen is also the lead attorney for the plaintiffs in Coons v. Geithner, which challenges the constitutionality of IPAB and which a federal court has put on hold pending the Supreme Court’s ruling in the individual-mandate and Medicaid-mandate cases.

Our Greedy Colleges

Two publications addressing college costs caught my eye in the last 48 hours. Both undermine the notion that college prices have skyrocketed almost exclusively because state subsidies to schools have plummeted.

The first piece, however, is actually supposed to make the opposite point.

You might recall my previously taking exception to statements by Terry Hartle, senior vice president of the American Council on Education, in which he asserted that there is no meaningful evidence that federal student aid drives tuition inflation, and that price increases are almost entirely a result of decreasing state appropriations to public colleges. Yesterday, Hartle and ACE’s Bryan Cook published a chart in a publication titled “Myth: Increases in Federal Student Aid Drive Increases in Tuition” that supposedly illustrates that it is indeed state budget cuts, not colleges’ ability to rake in money through aid, that explains tuition inflation.

Now, I wouldn’t say that aid “drives” prices, but I would say that aid fuels inflation by enabling schools to greatly increase tuition. I am also not aware of anyone arguing that an increase in aid leads to an immediate, one-for-one spurt in prices; instead, aid enables prices to rise over time. And it is not only federal assistance that enables prices to balloon—though Washington is the biggest aid source—but also state aid, scholarships, etc. And no one says that aid is the only factor involved in price increases; undoubtedly state subsidies matter for public colleges. So to a large extent the argument that federal aid doesn’t fully and immediately drive prices in public colleges attacks a strawman.

With all that in mind, what does ACE’s graph reveal about the declaration that state subsidy cuts are the real culprit behind rapidly rising college prices? It shows that there’s much more to the story. And I’m not even talking about the near-total inability of ACE’s preferred bogeyman to explain private college tuition.

I haven’t been able to track down the source of ACE’s data, so I can’t reproduce the graph here, nor can I do better than eyeball where each point lies. But by my viewing, there are only two academic years in which colleges’ per-capita tuition increase simply made up for state-subsidy losses: 2004-05 and 2010-11. Every other year tuition rose well in excess of subsidy losses, ranging from a 1 percentage point net gain in 1992-93 to 7 points in 2007-08.

So even by ACE numbers, our supposedly beleaguered public colleges actually look pretty greedy. And what likely enables that greed? The ability of students to cover price increases with aid.

But don’t just take my word, or ACE-supplied evidence, for this. Ask a professor:

Academic economists like to make fun of businesspeople: they want competition when they enter a new market but are quick to lobby for subsidies and barriers to competitors once they get in. Yet scholars like me are no better. We work in the least competitive and most subsidized industry of all: higher education….

Just as subsidies for homeownership have increased the price of houses, so have education subsidies contributed to the soaring price of college. Between 1977 and 2009 the real average cost of university tuition more than doubled.

These subsidies also distort the credit market. Since the government guarantees student loans, lenders have no incentive to lend wisely. All the burden of making the right decision falls on the borrowers. Unfortunately, 18-year-olds aren’t particularly good at judging the profitability of an investment without expert advice, and when they do get such advice, it generally counsels taking the largest possible loan…

Last but not least, these subsidized loans keep afloat colleges that do not add much value for their students, preventing people from accumulating useful skills.

Those are the words of University of Chicago professor Luigi Zingales in a piece in yesterday’s New York Times. It’s a nice bit of truth-telling because it comes from within academia, not without. The article is also important because it goes on to discuss a way of lending that makes sense for lender, borrower, and taxpayer: “equity contracts,” or what a 2002 Cato report called “human capital contracts.” Basically, borrowers would repay lenders by giving them an agreed-upon percentage of their future income, and all government would do is enforce the contracts. That would enable borrowers to avoid the big problem of having a set amount due often before they have the ability to repay, and it would greatly increase the efficiency of college financing, with lenders likely to be quite discerning about who really would benefit from college.

Unfortunately, that sort of efficiency is something colleges—even, it seems, public ones!—almost certainly don’t want. They love making money, and do it most easily when government gives out dollars like water.

State Rep. Balks at Voucher Funding for Muslim School

Just as Louisiana’s legislative session was wrapping up earlier this month, state Rep. Kenneth Havard refused to vote for any voucher program that “will fund Islamic teaching.” According to the AP, the Islamic School of Greater New Orleans was on a list of schools approved by the state education department to accept as many as 38 voucher students. Havard declared: “I won’t go back home and explain to my people that I supported this.”

For unreported reasons, the Islamic school subsequently withdrew itself from participation in the program and the voucher funding was approved 51 to 49. With the program now enacted and funded, nothing appears to stand in the way of the Islamic school requesting that it be added back to the list, and it is hard to imagine a constitutionally sound basis for rejecting such a request.

This episode illustrates a fundamental flaw in government-funded voucher programs: they must either reject every controversial educational option from eligibility or they compel taxpayers to support types of education that violate their convictions. In either case, someone loses. Either poor Muslims in New Orleans are denied vouchers or taxpayers who don’t wish to support Muslim schools are compelled to do so.

It doesn’t have to be that way. Education tax credit programs can ensure universal access to the education marketplace without violating anyone’s freedom of conscience. That’s because tax credits extend choice not only to parents but to taxpayers as well. Taxpayers in Arizona, Pennsylvania, and a half dozen other states can choose to donate to nonprofit tuition-assistance organizations that serve the poor. If they do make a donation, they pick the organization that receives their funds, whether it be Catholic, Muslim, Jewish, secular or entirely indifferent to religiosity.

Similarly, direct education tax credits for parents who pay for their own children’s education compel no one to support those parents’ choices. Such personal education tax credits, which already exist in Illinois and Iowa, merely let parents keep more of their own money. Far from increasing the tax burden on their fellow citizens, parents who pay for their own children’s education with the help of a credit save other taxpayers from having to pay for their children’s state schooling.

The school choice movement does not need to throw taxpayers’ freedom of conscience under the bus to secure freedom of choice for parents.

Cato Study: Heretofore Unreported ObamaCare ‘Bug’ Puts IPAB Completely beyond Congress’ Reach

Today, the Cato Institute releases a new study by Diane Cohen and me titled, “The Independent Payment Advisory Board: PPACA’s Anti-Constitutional and Authoritarian Super-Legislature.” Cohen is a senior attorney at the Goldwater Institute and lead counsel in the Coons v. Geithner lawsuit challenging IPAB and other aspects of the Patient Protection and Affordable Care Act of 2010, a.k.a. ObamaCare.

From the executive summary:

When the unelected government officials on this board submit a legislative proposal to Congress, it automatically becomes law: PPACA requires the Secretary of Health and Human Services to implement it. Blocking an IPAB “proposal” requires at a minimum that the House and the Senate and the president agree on a substitute. The Board’s edicts therefore can become law without congressional action, congressional approval, meaningful congressional oversight, or being subject to a presidential veto. Citizens will have no power to challenge IPAB’s edicts in court.

Worse, PPACA forbids Congress from repealing IPAB outside of a seven-month window in the year 2017, and even then requires a three-fifths majority in both chambers…

IPAB’s unelected members will have effectively unfettered power to impose taxes and ration care for all Americans, whether the government pays their medical bills or not. In some circumstances, just one political party or even one individual would have full command of IPAB’s lawmaking powers. IPAB truly is independent, but in the worst sense of the word. It wields power independent of Congress, independent of the president, independent of the judiciary, and independent of the will of the people.

The creation of IPAB is an admission that the federal government’s efforts to plan America’s health care sector have failed. It is proof of the axiom that government control of the economy threatens democracy.

Importantly, this study reveals a heretofore unreported feature that makes this super-legislature even more authoritarian and unconstitutional:

[I]f Congress misses that repeal window, PPACA prohibits Congress from ever altering an IPAB “proposal.”

You read that right.

The Congressional Research Service and others have reported that even if Congress fails to repeal this super-legislature in 2017, Congress will still be able to use the weak tools that ObamaCare allows for restraining IPAB. Unfortunately, that interpretation rests on a misreading of a crucial part of the law. These experts thought they saw the word “or” where the statute actually says “and.”

How much difference can one little conjunction make?

Under the statute as written, if Congress fails to repeal IPAB in 2017, then as of 2020 Congress will have absolutely zero ability to block or amend the laws that IPAB writes, and zero power to affect the Secretary’s implementation of those laws. IPAB will become a permanent super-legislature, with the Secretary as its executive. And if the president fails to appoint any IPAB members, the Secretary will unilaterally wield all of IPAB’s legislative and executive powers, including the power to appropriate funds for her own department. It’s completely nutty, yet completely consistent with the desire of ObamaCare’s authors to protect IPAB from congressional interference.

It’s also completely consistent with Friedrich Hayek’s prediction that government planning of the economy paves the way for authoritarianism.

David Davis Is Right

British Conservative Party member and former shadow home secretary David Davis says that data retention requirements being debated in the U.K. are “incredibly intrusive” and would only “catch the innocent and incompetent.” He’s right.

The United States was formed after a Revolutionary War against Britain so that we could live under a government more protective of liberty. The Fourth Amendment’s requirement of particularity with respect to warrants prevents our government from issuing blanket requirements that information about all of our communications be retained in case it’s needed for law enforcement.

At least we must hope so. Because some in our Congress seem to have little qualm about reversing the Revolutionary War’s results.