Archives: August, 2012

Not Quite Blowing Up the Death Star, but…

For two years the national curriculum blitz has been rolling through states unabated, with “Common Core” standards now fully adopted in all but five states and development of national tests continuing. Of course all of this has been done with heavy federal air support, including making adoption of Common Core crucial for states wanting to access Race to the Top funds, and Washington selecting and funding the national test developers.

Last week, however, national curriculum forces suffered a small but notable setback, with the Utah State Board of Education withdrawing the Beehive State from the Smarter Balanced Assessment Consortium, one of the two consortia developing tests to accompany the Common Core. In terms of its on-the-ground impact, it’s not huge —Utah will still have the Common Core standards—but symbolically it could be big, showing that states can undo decisions they may have made in haste, or in pursuit of federal money or favors. And to be honest, it is more official push back than I expected.

That said, the crucial point will still be when the Elementary and Secondary Education Act—AKA, No Child Left Behind—comes before Congress for reauthorization. That is when it will be decided whether adopting the Common Core will be necessary for states to get huge amounts of annual federal funding, and whether scores on the national tests will determine whether districts, schools, or children get rewarded or punished. If those measures are included—especially the high-stakes testing—then it is game over: we will have an indisputably federal curriculum, and no state will dare resist it. They simply won’t be willing to jeopardize billions of annual dollars.

Until then, national standards opponents can take heart in Utah’s small act of defiance.

The Truth about Sequestration

Cato has just released a new video, titled “The Truth about Sequestration,” that tells the real story about sequestration, the automatic budget cuts required by the Budget Control Act. Many in Congress claim to abhor their creation, including many of those who voted for it, yet the members and the president haven’t done much to prevent it. Perhaps they shouldn’t do anything and let the cuts happen. In our video, my colleagues Ben Friedman and Dan Mitchell join me in explaining that, whatever its shortcomings as legislation (and there are many, as discussed below) sequestration may be the only viable way to reduce the Pentagon’s budget.

However, there’s little likelihood that sequestration will significantly reduce the defense budget long term. That’s because sequestration cuts the defense budget only in the first year. Every year after that, defense spending will increase. Spending levels will indeed be lower than the Pentagon last year expected them to be. But only in Washington is that considered a cut. So, under sequestration, instead of spending $5.7 trillion on defense over the next decade, as the FY2013 budget suggests, the government will spend about $5.2 trillion.

That $500 billion difference may not actually materialize. Congress has a few options to mitigate the effects of the initial $55 billion slice off the budget. They could reprogram funds after the sequester, change the definition of “programs, projects and activities” (the budget level at which the cuts are implemented), or take advantage of the flexibility within operations and maintenance (O&M) funds. In fact, because the Office of Management and Budget has declared that war spending is eligible to be sequestered, the total cuts to O&M can be spread out across a bigger pot of money. Beyond all that, sequestration does not affect outlays or funds already obligated, which means it will not affect existing contracts. So, the real story is that should sequestration actually happen, Congress and the Pentagon will have much more flexibility than they’re willing to admit.

Our video also highlights the fact that we spend far more on the military than is necessary. Since the end of the Cold War, policymakers and pundits have coalesced around the idea that the United States is the “indispensable nation” responsible for protecting everyone from everything. Under the misapprehension that threats anywhere in the world are necessarily threatening to the United States, we have taken on the responsibility of policing the entire planet. This increases the chances that the United States will become involved in conflicts that do not engage vital U.S. interests, or that we do not fully understand, or can easily remedy. This strategic hypochondria (H/T Ted Galen Carpenter) also burden American taxpayers with additional costs that could and should be borne by others. The video includes a nifty graphic showing the expansion of NATO. We have added a host of weak or fragile countries in the Middle East and Southwest Asia (including, still, Iraq and Afghanistan), and now we are doubling down with assurances to Asian nations that we will constrain China (and implying that they need not do so).

In short, a bloated defense budget has enabled these misguided policies, encourages free-riding by our “allies” and make us less safe abroad and less free at home. Though I would have much preferred a serious strategic debate before the current fiscal crisis, and indeed called for such a thing, sequestration should help us to refocus our national security priorities. In fact, the real story is that sequestration doesn’t restrict our choices, it enables us to make better ones.

Americans shouldn’t worry that sequestration will make our defense budget too small. We account for approximately 48 percent of the world’s military spending. We will retain a margin of superiority over any conceivable combination of rivals, including China, even if our share of military spending fell to 44 or 45 percent of the world’s total.

Sequestration was no one’s first choice, but keeping our reckless spending and strategic myopia on auto pilot is worse.

Free Trade Is Not the Same Thing as Protectionism

That sounds obvious, right? I would have thought so. But this Washington Post article on U.S.-China trade issues seems to conflate the two. There’s a lot to criticize in the article, but I want to focus on these two sentences:

WTO challenges are not the only tool the United States has to try to open China’s market. The Commerce Department has imposed dozens of tariffs on Chinese products considered unfairly priced or subsidized.

Now, World Trade Organization complaints are certainly a way to open foreign markets. But imposing tariffs on foreign products through anti-dumping and countervailing duties is not, repeat not, a way to open foreign markets. Rather, it is a way to close our markets. Not the same thing at all.

Chesapeake Prosperity Sunk by Boat Tax

The reigning politicians in my home state of Maryland are somewhat boxed in by geography. Clearly they are smitten with high-tax policies: the Tax Foundation rates the state’s overall tax structure among the country’s most onerous, 42nd out of 50, and the trend lately has not been favorable, with lawmakers having raised taxes and fees 24 times in just the past couple of years, as the Maryland Public Policy Institute points out.

On the other hand, Maryland’s smallish size and attenuated shape poses a tricky problem: most of the state’s population lives just a short drive from other states, and choosing to shop or do business in one of those other states—maybe even switch one’s residence there—is far less disruptive than it is for most Californians. Virginia has lower gas and sales taxes, for example, while Delaware levies no sales tax at all. Politicos still hotly dispute how many high earners were driven away by a 2007-2010 special “millionaire’s tax,” but no one argues with a straight face that the number was zero. Business taxes in Maryland, as the Tax Foundation explains, are set up so as to fall relatively lightly on mature incumbent businesses and much more heavily on new startups; that probably does dissuade some established businesses from fleeing, but at the alarming cost of stifling the new kind.

Over the weekend the Capital Gazette of Annapolis ran a news story about how marinas and other shoreline businesses have been badly hit by Maryland’s decision to retain a stiff excise tax on boat ownership (five percent of value if kept in the state more than 90 days a year). Other big maritime Atlantic states such as Virginia, Delaware, and Florida all offer better deals. The results? Boat owners keep their vessels elsewhere, registrations have drooped, and docking, repair, supply, and restaurant businesses suffer, the Capital Gazette reports:

It’s hard to fathom Maryland, home to Annapolis, known as the “Sailing Capital of the World,” would be in the bottom half of the country in total sales for boats, engines, trailers and accessories.

Yet Maryland’s sales fell from $183 million in 2010 to $162 million in 2011, placing the state No. 26 in the nation. In 2008, that number was $248.5 million.

Even the revenue from the excise tax itself is way down, “from about $29.9 million to $15 million” since 2006, the newspaper adds.

It’s as if the lawmakers in Annapolis didn’t realize that boats are mobile. I wish someone could have explained that to them.

Replacing Obamacare: Cato Offers a Positive Solution

Now that the Supreme Court has ruled on Obamacare—the first of many challenges to reach it because, to paraphrase Nancy Pelosi, the more we learn about it, the more constitutional defects we find—the focus of public debate has returned to the policy arena. I’ve stepped to the side here because, as I said all along, I’m a simple constitutional lawyer, not a health care expert.

My colleagues Michael Cannon and Michael Tanner, however, have been doing yeoman’s work in describing what states should and shouldn’t do until we get federal officials willing to excise the Obamacare tumor from the body politic—and what Congress should then do to actually reform our health care system. They’ve collected their (and a few others’) work into a really cool e-book, Replacing Obamacare: The Cato Institute on Health Care Reform.

I’ll let the Mikes expound on their various policy analyses and prescriptions elsewhere, but just wanted to highlight the legal parts:

Chapter 25 - Bill ‘Reforms’ Constitution - Robert A. Levy and Michael F. Cannon

Chapter 26 - The Case against President Obama’s Health Care Reform: A Primer for Nonlawyers - Robert A. Levy

Chapter 27 - Elena’s Nanny State - Michael D. Tanner

Chapter 28 - Obamacare Is Unconstitutional - Roger Vinson

Chapter 29 - HHS v. Florida - Cato’s individual mandate brief before the Supreme Court

Chapter 30 -  Baking Some Humble Pie for Congress - Trevor Burrus

Chapter 31 - The Supreme Obamacare Question - Michael D. Tanner

Chapter 32 - That’s Not a Limiting Principle, Noah Feldman Edition - Michael F. Cannon

Chapter 33 - In Opposing Obamacare, We Were Serious the Whole Time - Ilya Shapiro

Chapter 76 - It Now Falls to Congress - Roger Pilon

Chapter 77 - We Won Everything but the Case - Ilya Shapiro

Chapter 78 - John Roberts, Judicial Pacifist - Ilya Shapiro

Chapter 79 - Health Law a Loser despite Court Victory - Michael F. Cannon

Chapter 80 - Chief Justice Roberts Sold Out the Constitution for Less Than Wales - Ilya Shapiro

Chapter 81 - ObamaCare’s Now a Bigger Mess - Michael D. Tanner

Chapter 82 - If ObamaCare Survives, Legal Battle Has Just Begun - Jonathan H. Adler and Michael F. Cannon

These are white papers, essays, op-eds, blog posts, and even a brief that you may have come across already (and can Google separately), but now you can get them all—along with all the great policy stuff —in one convenient e-book (whose table of contents you can see here).

No More Solyndras? Not Quite

Last week, the House Energy and Commerce Committee passed the “No More Solyndras Act.” As Taxpayers for Common Sense notes, however, the bill should probably be called the “More Solyndras Act” because it would still allow the Department of Energy to approve loan guarantee applications that were submitted by Dec. 31, 2011.

Today the House Energy and Commerce Committee passed the so-called “No More Solyndras Act.” While the bill includes some taxpayer protections, it does not go far enough to ensure the Department of Energy (DOE) Loan Guarantee Program does not lose more on defaulted loans that carry much higher price tags than defaulted solar panel manufacturer, Solyndra. As currently drafted, the bill leaves $34 billion in loan guarantees on the table for projects ranging from coal and nuclear to biofuels and solar. Because these projects were vetted through the same flawed process as Solyndra, this bill could easily lead to billions in defaulted projects.

Sensing an opportunity to embarrass Republicans, Rep. Ed Markey (D-MA) offered an amendment that would have completely ended the Title 17 loan guarantee program. Most of the committee’s Republicans promptly embarrassed themselves by joining all Democrats in voting down the amendment 3-39. Republicans Mike Pompeo (Kansas), Michael Burgess (Texas), and Steve Scalise (Louisiana) were the only members to vote to abolish the program.

This isn’t the first time that Republicans have joined Democrats to save the program. Back in June, an amendment that would have shut down the Title 17 loan guarantee program failed 136-282 with 127 Republicans joining 155 Democrats to defeat it. Only 54 percent of freshmen Republicans from the so-called “Tea Party Class” supported the amendment.

An Incumbent Fantasy

The Daily Beast has a story on “The Hunted Democrat,” incumbent Senator Sherrod Brown of Ohio who is facing the voters in November. Short version: Brown once had a big lead in the polls, then groups starting spending money attacking him, now his lead is cut in half. Brown laments: “I’m disturbed. If it weren’t for all the outside money, this wouldn’t even be a race.”

It’s understandable that Brown would complain about money spent criticizing him. After all, he would prefer that the 2012 Ohio Senate contest not be a race at all. The story suggests something is wrong with the money spent criticizing Brown.

The story largely ignores Brown’s real problem. The Americans for Democratic Action give Brown a 95 out of 100 voting score (100 is as liberal as possible). Ohio has been trending Democratic in recent presidential elections, but the state is nonetheless evenly divided, a leading battleground state. Brown is voting like he represents Vermont and then complaining when groups point out the distance between his votes and the views of most people in Ohio.

The Daily Beast story and Senator Brown are really saying: wouldn’t it be better if all those “outside” groups could not tell voters that their senator was well to the left of the state he represented? It would certainly be good for Brown and other Senate incumbents. It would not be good for the voters of Ohio.