Archives: June, 2012

What’s Next After the Obamacare Ruling?

With the Supreme Court ruling on President Obama’s health care law, everyone is wondering what’s next for big government. Here are some ideas for federal policymakers to consider:

Federal Broccoli Act of 2013: Eat your broccoli, else pay the IRS $1,000.

Federal Recycling Act of 2014: Fill your blue box and put on the curb, else pay the IRS $2,000.

Federal Green Car Act of 2015: Make your next car battery powered, else pay the IRS $3,000.

Federal Domestic Jobs Act of 2016: Don’t exceed 25 percent foreign content on family consumer purchases, else pay the IRS $4,000.

Federal Obesity Act of 2017: Achieve listed BMI on your mandated annual physical, else pay the IRS $5,000.

Federal National Service Act of 2018: Serve two years in the military or the local soup kitchen, else pay the IRS $6,000.

Federal Housing Efficiency Act of 2019: Don’t exceed 1,000 square feet of living space per person in your household, else pay the IRS $7,000.

Federal Population Growth Act of 2020: Don’t exceed two children per couple, else pay the IRS $8,000.

It’s Only a Bump in the Road

Even though the Supreme Court action today is a setback for those of us who’ve fought for decades to revive limited constitutional government, it’s hardly the end of the road. The ideas this litigation put in play – in the court decisions below, in the oral arguments before the Supreme Court, and in the huge debate that has taken place across the country – will not go away. They’re the ideas of limited constitutional government that are as compelling today as they were when the Founders first articulated them over two centuries ago, even if this Court has found itself unable to give them force in this case.

But it’s not simply that the ideas are now “out of the bottle” as they haven’t been for a very long time. More deeply, it’s because they address the fundamental problem the nation faces today – out-of-control government, at all levels, giving us a looming economic disaster – that they’ll increasingly be in play. After today’s decision, it will fall to the people themselves, who’ve opposed this legislation from the beginning, to elect a Congress that stands for restoring limited constitutional government, such that a future Court will be better able to do what this Court should have done.

You Will Now Be Required to Pay for the New York Times

Fretting that Americans are not sufficiently well educated about the government’s perspectives on policy and the world, the President today introduced the Affordable News act. This legislation will make New York Times subscriptions vastly cheaper than they are today, by taxing everyone who does not already subscribe to the paper.

Just kidding…. For now, anyway.

Topics:

‘I Miss the Power’

Talking to Marketplace Radio, former Senate Majority Leader turned lobbyist Tom Daschle is candid about the attractions of political office:

Hobson: What do you miss about your time in the public sector, if anything at this point? You’ve been in the private sector for a while.

Daschle: Well, to be honest, I miss the power. The senators have an enormous amount of power, probably second only to the president of the United States.

He’s doing OK in what Marketplace laughingly calls “the private sector” – they mean “the rent-seeking sector” – having made some $5.3 million in his first two years for “providing strategic advice” at a lobbying/law firm. But he still misses the power.

Great Leadership + Thoughtful Policy = Huge Victory for Educational Freedom

Today, the New Hampshire House and Senate took a stand for choice and freedom in education. Both bodies mustered an overwhelming 69-percent super-majority in favor of the School Choice Scholarship Act, over-riding the Governor’s veto.

This is by far the largest margin of victory ever secured for a new private school choice program.

The law is path-breaking, supporting for the first time in the nation a family’s choice to home school their child.

The law protects independence and innovation in private education, imposing no new restrictions on private or home schools, because the lawmakers understand that direct accountability to parents and taxpayers is the most effective kind of accountability.

The program allows up to 30 percent of the credit funds in the first year (more in subsequent years) to support children who are already in private school, but need assistance in order to remain there.

And after the first two years, the program can expand by 25 percent each year.

I provided analysis and advice on education tax credit policy structure to individuals in New Hampshire over the past year, but a policy analyst can only explain why certain structures are better or worse for accomplishing particular goals.

The New Hampshire legislators and others who pushed this education tax credit with perseverance, principle and thoughtfulness deserve the highest praise …it is not often that we are fortunate enough to see a critical mass of true leadership in politics.

Legislators in other states should take note of what can be accomplished when lawmakers take principles and policy seriously.

The Defense Lobby, Americans for Tax Reform, and the Texas Chainsaw Massacre

Bloomberg’s Roxana Tiron reports that Congress is nearing a deal to postpone some of the most contentious provisions of last year’s Budget Control Act (BCA) until March 2013, or later. This is good news for the Aerospace Industries Association (AIA), which has been lobbying since late last year to undo at least that portion of the BCA that pertained to the Pentagon’s budget (i.e. that portion that threatens to cut most deeply into its members’ profits).

Although the mechanics of sequestration’s across-the-board cuts are problematic, the scale of the Pentagon build-down would be modest by historical standards. And yet, the mere suggestion that sequestration might actually occur has sent the industry into apoplexy. The AIA’s campaign has included the release of a new report claiming that the BCA cuts could result in over 1 million lost jobs, and warnings that hundreds of thousands of workers would be receiving pink slips just a few days before the November elections.

In short, sequestration is a horror show, a Texas Chainsaw Massacre, and the AIA’s public relations effort is designed to scare the wits out of the audience. “Sequestration,” explains Della Williams, the chief executive of Fort Worth-based Williams-Pyro Inc., “is surgery with a chain saw.”

But just as some people aren’t easily scared by campy slasher flicks, there are still a few people in Washington—especially Grover Norquist, President of Americans for Tax Reform (ATR)—who are cheering for the guy with the chainsaw.

The two sides squared off in separate events last Thursday. At the Bloomberg Government Defense Conference, AIA President Marian Blakey, Reps. Norm Dicks (D-WA) and Randy Forbes (R-VA) and Sens. Carl Levin (D-MI) and John McCain (R-AZ) called for bipartisan compromise on taxes in order to fund further Pentagon spending increases. Judging from the number of times that speakers invoked his name, Norquist posed a greater threat to national security than China or Iran. Levin, in particular, scorned ATR’s famed taxpayers’ pledge, and suggested that it was largely responsible for the impending catastrophe.

Norquist is characteristically unfazed by all this special interest pleading for more money. While Blakey and her congressional friends were attempting to rally the troops and rustle up more money, Norquist was reaffirming his opposition to higher taxes—including the closing of tax loopholes that generate more revenue—at a meeting on Capitol Hill. There is no Pentagon budget escape hatch in ATR’s pledge. If the defense industry wants more, it will have to get it from elsewhere in the budget.

The fight over sequestration, taxes, and the defense budget reveals text book cases of two perennial public policy realities: the politics of concentrated benefits, diffuse costs; and the economics of the seen vs. the unseen.

With respect to the first case, the defense industry, broadly defined, benefits disproportionately from Pentagon spending. And that industry can count many interested parties within its coalition. In addition to the defense companies, including the executives and the shareholders, there are also the workers’ at these firms (often represented by a union). Then there are the mayors and local officials who represent communities that are home to defense firms.

Given what is at stake, it is understandable that all of these groups have amped up their lobbying efforts to fend off sequestration. To take just one example, a single F-35 will cost, on average, nearly $125 million ($112.5 million for the aircraft, plus another $22 million for the engine). Prime contractor Lockheed Martin spent $15 million on lobbying in 2011 and is expected to spend even more this year. Such expenses can easily be justified to investors and shareholders if they are seen as protecting the company’s cash cow.

Individual taxpayers, by contrast, have little incentive to organize, and even less incentive to pool their money to fight against the AIA. The cost of the F-35, spread around to every taxpayer, amounts to about a dollar (if we just count the 122 million people who paid federal income taxes). Generally speaking, people do not scrutinize where every tax dollar goes; indeed, payroll tax withholding causes Americans to ignore what they pay in monthly taxes.

A few groups, including Norquist’s ATR, try to offset this imbalance of interests, and they have been reasonably successful. But Norquist’s pledges would be worthless if voters didn’t agree with him. But many do. In this poll (.pdf), for example, half of all respondents were opposed to having their taxes go up in order to pay for higher Pentagon spending.

The AIA’s other line of attack—the claim that substantial cuts in military spending will have a devastating impact on the economy, resulting in a million or more lost jobs—reveals the age-old broken-window fallacy. The AIA wants people to focus on that which is seen—defense workers who are laid off—and to ignore any consideration of how the economy as a whole will be better off if the resources that had previously gone to building planes and rockets are allocated elsewhere in the economy. These transitions are certainly difficult and painful for the individuals and firms involved, but they can be expected, all other factors being equal, to have salutary aggregate effects, especially over the long term. I’ll have more to say on that point later this week, drawing on my previous study of San Diego in the late 1950s, the early 1990s and the early 2000s.

In the meantime, I encourage you to read a succinct explanation of the broken-window fallacy from Henry Hazlitt’s Economics in One Lesson. And, if you’re really motivated, consider reading a less succinct, but more colorful, discussion of the phenomenon by Hazlitt’s intellectual forefather, the French philosopher Frédéric Bastiat.

Cross-posted from the Skeptics at the National Interest.

‘Essential’ Air Subsidies Survive in the House

The $200 million Essential Air Service program subsidizes airlines to provide service to rural communities. The program, which was supposed to be temporary, was created when the federal government deregulated the airlines in 1978. As is usually the case with a “temporary” government program, EAS subsidies have become a permanent handout.

Last night, an amendment to the House THUD appropriations bill introduced by Rep. Tom McClintock (R-CA) that would have finally terminated the EAS was defeated. In the 164 to 238 vote, all but 10 Democrats joined 77 Republicans to keep the program alive. Once again, bipartisanship wins and taxpayers lose.

Rep. McClintock’s speech on the floor of the House was excellent. In lieu of me expounding on why the Orwellian-named EAS program should have finally been put out of its misery, I’m going to turn the “floor” over to the congressman: 

If the House is to live up to the promises the Republican majority made to the American people to bring spending under control, some tough choices are going to have to be made. But this amendment isn’t one of them. This is about the easiest choice the House could possibly make: to put an end to the so-called “Essential Air Service” that lavishly subsidizes some of the least essential air services in the country.

This program shells out nearly $200 million a year – including $114 million of direct taxpayer subsidies – to support empty and near-empty flights from selected airports in tiny communities – most of which are just a few hours’ drive from major airports.

A reporter recently investigating this waste took one of these flights from Ely, Nevada and was the only passenger on the flight. Our constituents paid $1.8 million for this air service that carried just 227 passengers during the entire year! Ely is a three and a half hour drive from Salt Lake City International Airport.

Thief River Falls, Minnesota is considered an Essential Air Service airport, despite the fact it is just an hour and nine minutes drive to Grand Forks International Airport in North Dakota. Hagerstown is just 75 miles from Baltimore, but subsidizing their flights is considered an “Essential Air Service.”

It is true there are a few tiny communities in Alaska – like Kake’s 700 hearty souls – that have no highway connections to hub airports, but they have plenty of alternatives.  In the case of Kake, they enjoy year-round ferry service to Juneau.  In addition, Alaska is well served by a thriving general aviation market and the ubiquitous bush pilot.  Rural life has both great advantages and great disadvantages, and it is not the job of hardworking taxpayers who chose to live elsewhere to level out the differences.

Apologists for this wasteful spending tell us it is an important economic driver for these small towns – and I’m sure that’s so – whenever you give away money, the folks you’re giving it to are always better off. But the folks you’re taking it from are always worse off to exactly the same extent. Indeed, it is economic drivers like this that have driven Greece’s economy right off a cliff.

An airline so reckless with its funds as to manage its affairs in such a ludicrous way would quickly bankrupt itself. As we can plainly see, the same principal holds true for governments.

This was a temporary program set up when we deregulated commercial aviation. It was supposed to last a few years to give rural communities a chance to adjust.  That was 34 years ago.

In 2010, in one of the most decisive Congressional elections in American history, voters entrusted the House to Republicans with a crystal clear mandate: STOP WASTING MONEY.

Last year, the House responded to this mandate by voting to eliminate EAS subsidies in the FAA re-authorization bill. What is the response of the House appropriators? They do not eliminate funding. They do not reduce funding. No, they increased funding by 11 percent in a single year, to a new historic high.

Our nation is borrowing 40-cents of every dollar it is spending; it has lost its triple-A credit rating; its taxpayers are exhausted; its treasury is empty; its children are staggering under a mountain of debt that will impoverish them for years to come – and yet the House Appropriations Committee, in defiance of last year’s decision by the House to eliminate this program, has just voted a double-digit percentage increase for a program that flies near-empty planes around the country!

I think we can do better than that. I offer instead this amendment to stop fleecing taxpayers for this expensive folly.

I believe that House Republicans will prove themselves worthy of the trust the American people have given them in this perilous hour in our nation’s history. I believe that House Republicans can summon the fortitude to save our country from financial wreck and ruin.  And I offer this amendment to put that faith to a most modest test.

The House failed the test, but kudos to Rep. McClintock for his continuing efforts to terminate federal programs. As I’ve discussed before, roll call votes on bills or amendments to terminate specific federal agencies and programs help the taxpaying public separate the frauds from the friends.