Archives: 01/2013

The Real Problem with Highly Regulated “School Choice”

A Fordham Institute paper released today seeks to answer the question: do private schools really refuse to participate in heavily regulated school choice programs? Its authors tell us that “many proponents of private school choice… take [this] for granted,” citing two examples—one of them being the Cato Institute, whose Center for Educational Freedom I direct. The authors even cite a relevant commentary by former Cato policy analyst Adam Schaeffer.

The only problem is that the cited commentary says precisely the opposite. Describing Indiana’s voucher program, Schaeffer writes: “Because participating schools will have a significant financial advantage over non-participating schools, lightly regulated [non-participating] schools will face increasing financial pressure to participate.” This captures Schaeffer’s concern as well as my own (which I expressed over a decade ago in the political economy journal Independent Review): We do not fear that private schools will refuse to participate in heavily regulated school choice programs. We know that they ultimately will participate, or be driven out of business by their subsidized counterparts.

We know this because there is extensive evidence to that effect from all over the world and across history. Everywhere that private elementary and secondary schools are eligible for government subsidies, the share of unsubsidized school enrollment falls. The higher the subsidy and the longer it has been in place, the more the unsubsidized sector is generally diminished. The Dutch enacted a heavily regulated nationwide voucher program nearly a century ago. Unsubsidized private schooling remains legal, but has been reduced to a statistical asterisk—now making up less than one percent of enrollment, compared to roughly 70 percent for subsidized private schools.

Our reason for concern over this pattern is also grounded in empirical evidence: it is the least regulated, most market-like private schools that do the best job of serving families. That is the consensus of the worldwide within-country research, which I reviewed and tabulated for a 2009 paper in the Journal of School Choice. The Fordham paper does not discuss this evidence.

Despite imputing to Cato scholars the exact opposite of the view we hold, the paper does include some interesting data. In particular, it offers a new corroboration that voucher programs are more heavily regulated than tax credit programs (a difference whose magnitude and statistical significance was previously established here). This will make it even harder for objective observers to cling to the notion that vouchers and credits are functionally equivalent.

Federal Withholding: One Budget or Two?

“Federal withholding” may take on new meaning if the Senate passes H.R. 325, the “No Budget, No Pay Act.”

Along with increasing the debt ceiling to whatever level it reaches by May 18th, the bill would withhold the pay of members of Congress and senators if their respective bodies don’t pass a budget by the April 15th deadline found in the Congressional Budget Act of 1974.

But does “pass a budget” mean that each house of Congress can pass its own budget? Or does it mean that the two have to agree on a budget? In a WashingtonWatch.com blog post running down the prospects for a normal budget year, I said “both houses of Congress are supposed to agree to a final budget plan by April 15th.” But most people believe that No Budget, No Pay simply requires each house of Congress to pass its own budget in order to stave off “federal withholding” of their paychecks.

I’m a simple country lawyer, and I looked at the language of No Budget, No Pay, which says:

If by April 15, 2013, a House of Congress has not agreed to a concurrent resolution on the budget for fiscal year 2014 pursuant to section 301 of the Congressional Budget Act of 1974, … the payroll administrator of that House of Congress shall deposit in an escrow account all payments… [blah blah blah].

And I looked at section 301 of the Congressional Budget Act of 1974, which says:

On or before April 15 of each year, the Congress shall complete action on a concurrent resolution on the budget for the fiscal year beginning on October 1 of such year. The concurrent resolution shall set forth [various things]…

And I thought to myself, “A concurrent resolution on the budget agreed to pursuant to section 301 of the Congressional Budget Act is one that is passed by Congress.”

Existing law calls for one budget resolution to be passed by Congress—i.e., both houses—by April 15th, so a budget resolution passed pursuant to the Congressional Budget Act is one that has been passed by both houses. What does “pursuant to” mean if not “in conformance to or agreement with”? A budget resolution not agreed to by both houses of Congress is not agreed to pursuant to the law.

Much of section 301 of the Congressional Budget Act refers to the budget resolution using the definite article, “the,” as opposed to indefinite articles, such as “a” or “any.” This, too, suggests that the law contemplates a single budget resolution passing both houses.

The bulk of conventional opinion is that the No Budget, No Pay Act would only require each of the two houses of Congress to pass their own budgets in order to prevent federal withholding of their paychecks. Perhaps the phrase “pursuant to” only modifies “concurrent resolution,” not “agreed to.” But that is an odd use of language to say that a “concurrent resolution” matching the one described in the Congressional Budget Act is “pursuant to” it. Why not say “as described in”? No, I think “pursuant to” modifies “agreed to,” meaning that a budget resolution has to be agreed to by both houses.

The Act does use the indefinite article—”a concurrent resolution.” One could argue that the current Congress is superceding the Congressional Budget Act’s call for a budget resolution passed by both houses. But that doesn’t jibe with the use of “pursuant to,” which I think binds the phrase “concurrent resolution” to its meaning in section 301 of the Congressional Budget Act.

The upshot is that I don’t think either house of Congress should be paid until they come to agreement on a budget. I like the use of federal withholding when Congress doesn’t do its job. It’s odd that they have to institute an incentive system like this to get them to follow the law. So, the more federal withholding the better, and I think I have the better reading of the law, too. My hope is that we don’t have to find out because Congress passes a budget on time, starts in with appropriations on time, and has set federal spending for 2014 before the beginning of the 2014 fiscal year on October 1st.

Modern Voting Rights Act Takes Another Constitutional Stumble

In 2009, Irving, Texas, was forced to redraw its city council districts after a federal court held that its multi-member-district system discriminated against Hispanic voters in violation of Section 2 of the Voting Rights Act, which protects the rights of racial and linguistic minorities to elect their preferred candidates (whatever that means). Following complex Section 2 precedent, the court employed the requisite “citizen of voting age population” (CVAP) standard and found that, in the absence of at-large elections, Irving’s Hispanic voters could have constituted their own majority district.

When Irving finished redrawing its map, the total population count of residents inhabiting each district was roughly equal and one was indeed majority-Hispanic. Because the redistricting process used total population instead of CVAP, however, that particular district had a significant concentration of non-citizen residents. A relatively small constituency of eligible voters in that district thus had their votes so “over-weighted” that their voting power was effectively double that of voters in the other districts (which, again, were similarly populated but had twice the number of eligible voters).

Irving citizens sued the city, alleging violations of their voting rights as guaranteed by the one-person, one-vote (OPOV) principle under the Fourteenth Amendment’s Equal Protection Clause. The U.S. Court of Appeals for the Fifth Circuit affirmed a dismissal of these claims, following circuit precedent holding that the decision to use either total population or CVAP when applying OPOV should be left to elected officials’ discretion. Astonishingly, even though courts are required to use CVAP when examining Section 2 racial-discrimination claims—see above—the Fifth Circuit completely ignored the CVAP disparities in the redrawn districting plan.

Cato has now filed an amicus brief supporting the Irving citizens’ request that the Supreme Court take the case. We have frequently argued that courts confront a “bloody crossroads” when trying to reconcile the modern Voting Rights Act with the Constitution. Here, not only has the Fifth Circuit illustrated the tension between Section 2 and the Fourteenth Amendment, but similar rulings in the Fourth and Ninth Circuits—either deferring to the political branches or precluding the use of CVAP altogether—have heightened the conflict.

The Fourteenth Amendment and OPOV are emphatically within the province of the judiciary to enforce. We thus urge the Court to review the intolerable contradiction that arises when Section 2, intended to enforce the guarantees of the Fourteenth Amendment, is used to violate OPOV.

While once a functional proxy for equalizing the voting strength of eligible voters, the total population metric has become imprecise and outmoded. In areas with high concentrations of non-citizen, non-voter residents, it can conceal substantive demographic differences that undermine the principle of voter equality. CVAP, by contrast, is the most precise measure of the substantive electoral equality and the proper means for reconciling the conflict between Section 2 and the Fourteenth Amendment.

The name of the case is Lepak v. City of Irving. The city and certain activist groups that have intervened in the case will now file their opposition to the petition for review, and then the Supreme Court will decide this spring whether to take the case and set it for argument in the fall.

The Good and Bad of the Immigration Reform Blueprint

Today, the so-called Gang of Eight senators revealed a blueprint for an immigration reform bill. Details in the actual legislation will matter a great deal but these are initial impressions based on the blueprint. The good and the bad.

Good:

  • Earned legalization for non-criminal unauthorized immigrants. After paying fines, back taxes, undergoing a criminal background check, and other firm penalties, unauthorized immigrants will be able to stay in the United States and eventually earn a green card. This will increase their wages over several years much faster than if they remained unauthorized. 
  • DREAMers will not face the same penalties as unauthorized immigrants who intentionally broke U.S. immigration laws, which is a positive step.
  • Legalization for unauthorized immigrant workers in the agricultural industry will be fast-tracked. This is especially important because the majority of farm workers in most states are unauthorized immigrants.
  • Removing some regulatory barriers and increasing quotas for highly skilled immigrants. This will likely include an increase in the number of employment based green cards and removing the per-country quotas that produce wait times for Indian, Chinese, Mexican, and Filipino workers. Currently, numerous firms and immigrants are dissuaded from even trying to obtain employment based green cards because of the enormous wait times.

Bad:

  • Increases the amount of resources spent on border security. The size of the border patrol is double of what it was in 2004. The number of border patrol agents is seven times greater than what it was in the 1980s with about nine times as many on the southern border. More technology and aerial drones on the border will be wasteful and not produce results.
  • Strong employment verification system like E-Verify. As I wrote here, here, and here, E-Verify is an intrusive big government workplace identification system that does not even root out unauthorized immigrants. In Arizona, which has had mandatory E-Verify since 2008, many unauthorized immigrants have moved deeper into the black market, some industries fire numerous unauthorized workers but don’t hire natives to fill the spots, and the business formation rate dropped because the penalties for intentionally or knowingly hiring unauthorized workers are so draconian.
  • Increases regulations for guest worker visas. Current guest worker visas for agricultural workers are so overregulated that they are barely used. Adding more regulations will only make the visas more unusable and incentivize American farmers and employers to hire unauthorized workers.

A viable guest worker program will increase economic growth in the United States. Guest worker visas are not as good as green cards for lower-skilled workers, but they are the only viable option at this moment. The devil is in the details but this blueprint does not provide for enough future low-skilled immigration.     

Milton Friedman on Business’s ‘Suicidal Impulse’

In a Wall Street Journal column titled “Silicon Valley’s ‘Suicide Impulse’” (Google the title if you can’t access it), Gordon Crovitz cites Milton Friedman’s speech to a Cato Institute conference in Silicon Valley in 1999:

In 1999, economist Milton Friedman issued a warning to technology executives at a Cato Institute conference: “Is it really in the self-interest of Silicon Valley to set the government on Microsoft? Your industry, the computer industry, moves so much more rapidly than the legal process that by the time this suit is over, who knows what the shape of the industry will be? Never mind the fact that the human energy and the money that will be spent in hiring my fellow economists, as well as in other ways, would be much more productively employed in improving your products. It’s a waste!”

He predicted: “You will rue the day when you called in the government. From now on, the computer industry, which has been very fortunate in that it has been relatively free of government intrusion, will experience a continuous increase in government regulation. Antitrust very quickly becomes regulation. Here again is a case that seems to me to illustrate the suicide impulse of the business community.”

You can find the full text of Friedman’s talk here.

For more on business’s suicidal impulses, see “Why Silicon Valley Should Not Normalize Relations With Washington, D.C.” by entrepreneur T. J. Rodgers; “The Sad State of Cyber-Politics” by Adam Thierer; and my own “Apple: Too Big Not to Nail.”

Changing the Electoral College Game

Article II of the United States Constitution states: “Each State shall appoint, in such Manner as the Legislature thereof may direct, a Number of Electors, equal to the whole Number of Senators and Representatives to which the State may be entitled in the Congress” to elect the president. The phrase “in such Manner” does not obviously restrict the way electors may be rewarded.

Even before the last election, some people had proposed changing the way states award electoral votes. The National Popular Vote effort, for example, proposed a compact in which states with a majority of the electoral votes agree to award their votes to the winner of the popular vote for president. Now other people, mostly Republicans, propose that states award each of their electoral votes to the winner of each congressional district in a state.

This proposal is highly partisan, but it is not outlandish. Two states, Nebraska and Maine, now award almost all of their electoral votes by congressional district. In each state, two of their electoral votes (the two they get because of equal state representation in the Senate) go the state-wide winner of the popular vote.

However, proponents of the “district proposal” have not suddenly been convinced of the merits of presidential elections in Maine and Nebraska. Rather, they are beguiled by the thought that Mitt Romney would have won in 2012 had electoral votes been awarded by congressional district.

Here we find the first problem with the proposal: it concerns the past not the future. Much like those liberal Democrats who wished to change the filibuster rule because Sen. McConnell (R-KY) frustrated the president’s desires on health care, some Republicans now wish to change electoral rules in response to the 2012 disaster.

It is unlikely that states governed by Democratic majorities in the legislature would adopt this proposal. Let’s assume they would, however, to think about what might happen.

The “district proposal” would increase the value of partisan redistricting since the presidency as well as the House would now depend on the composition of congressional districts.

The “district proposal” might change nothing. If the partisan majority in every state legislature has already maximized its share of congressional seats, nothing changes. I think that would be the case for most states controlled by the GOP.

The Sequester May Not Be ‘Fair,’ but It’s Real and It Would Slow the Growth of Government

Much to the horror of various interest groups, it appears that there will be a “sequester” on March 1.

This means an automatic reduction in spending authority for selected programs (interest payments are exempt, as are most entitlement outlays).

Just about everybody in Washington is frantic about the sequester, which supposedly will mean “savage” and “draconian” budget cuts.

http://danieljmitchell.wordpress.com/2011/11/01/sequestration-is-a-small-step-in-right-direction-not-something-to-be-feared/If only. That would be like porn for libertarians.

In reality, the sequester merely means a reduction in the growth of federal spending. Even if we have the sequester, the burden of government spending will still be about $2 trillion higher in 10 years.

The other common argument against the sequester is that it represents an unthinking “meat-ax” approach to the federal budget.

But a former congressional staffer and White House appointee says this is much better than doing nothing.

Here’s some of what Professor Jeff Bergner wrote for today’s Wall Street Journal:

You know the cliché: America’s fiscal condition might be grim, but lawmakers should avoid the “meat ax” of across-the-board spending cuts and instead use the “scalpel” of targeted reductions. …Targeted reductions would be welcome, but the current federal budget didn’t drop from the sky. Every program in the budget—from defense to food stamps, agriculture, Medicare and beyond—is in place for a reason: It has advocates in Congress and a constituency in the country. These advocates won’t sit idly by while their programs are targeted, whether by a scalpel or any other instrument. That is why targeted spending cuts have historically been both rare and small.

Bergner explains that small across-the-board cuts are very reasonable:

The most likely way to achieve significant reductions in spending is by across-the-board cuts. Each reduction of 1% in the $3.6 trillion federal budget would yield roughly $36 billion the first year and would reduce the budget baseline in future years. Even with modest reductions, this is real money. …let’s give up the politically pointless effort to pick and choose among programs, accept the political reality of current allocations, and reduce everything proportionately. No one program would be very much disadvantaged. In many cases, a 1% or 3% reduction would scarcely be noticed. Are we really to believe that a government that spent $2.7 trillion five years ago couldn’t survive a 3% cut that would bring spending to “only” $3.5 trillion today? Every household, company and nonprofit organization across America can do this, as can state and local governments. So could Washington.

And he turns the fairness argument back on critics, explaining that it is a virtue to treat all programs similarly:

Across-the-board federal cuts would have to include all programs—no last-minute reprieves for alternative-energy programs, filmmakers or any other cause. All parties would know that they are being treated equally. Defense programs, food-stamp recipients, retired federal employees, the judiciary, Social-Security recipients, veterans and members of Congress—each would join to make a minor sacrifice. It would be a narrative of civic virtue.

It’s worth noting, however, that the sequester would not treat all programs equally. Defense spending is only about 20 percent of the budget, for instance, yet the Pentagon will absorb 50 percent of the savings (though defense spending still increases over the next 10 years).

http://danieljmitchell.wordpress.com/2011/10/10/will-republicans-choose-sequester-savings-or-a-supercommittee-surrenderAt the risk of oversimplifying, the sequester basically applies to so-called discretionary spending. So-called mandatory spending accounts for a majority of federal spending, but it is largely exempt, so entitlement reform will still be necessary if we want to address the nation’s long-run fiscal challenges.