Archives: March, 2013

William Letwin, R.I.P.

Economic historian William Letwin passed away, age 90, a few days ago. Professor Letwin belonged to a prominent family: his wife, Shirley Robin Letwin, was a philosopher and social critic, author of, among other things, of “The Pursuit of Certainty”  and of the very perceptive “The Anatomy of Thatcherism.” His son, Oliver, is a British politician and currently Minister of State for Policy. The Letwins were fond of social life and held a salon in their house—the most prominent guest being Michael Oakeshott, the dean of conservative philosophy, a mentor to Shirley and a colleague to William (who moved from Chicago to the London School of Economics).

Letwin was no libertarian, and is mostly overlooked by libertarian scholars. However, his work is well worth remembering—not least for his mastery of the English language. Letwin’s works are both insightful and a pleasure to read.

Libertarians should be better acquainted with at least two of his contributions: his book Law and Economic Policy in America, and his introduction to a 1975 edition of The Wealth of Nations. His little book, The Origins of Scientific Economics: English Economic Thought 1660-1776, is another jewel.

Law and Economic Policy in America is a learned work on the origins of the Sherman Act, sharply narrated with all their political economy implications. Letwin examined both the (rather stretched) common-law rationale for competition policy, and the politics of competition policy, in its genetic moment. As the saying goes, if you like laws and sausages, you should never watch either one being made. But perhaps watching how competition policy was (and is) made will be an eye-opener for some.

Letwin’s book is still a masterpiece in explaining how antimonopoly sentiment built up in American public opinion. 

Letwin distinguished between the attitude towards contract “in restraint of trade” as emerged through the complex working of common law jurisprudence, and the way in which a widespread skepticism towards ever-larger corporations grabbing the advantages of economies of scale at the detriment of smaller businesses smoothed the way for a very different kind of legislative measure. 

The Continuing Debate Over Scholarship Tax Credits

Though there are currently more students participating in scholarship tax credit (STC) programs than voucher programs nationwide (about 151,000 to 104,000), the former have not received nearly as much attention as the latter. That has begun to change in recent years as growth in the number of STC programs has outpaced growth in voucher programs.

Over the past week, I have enjoyed engaging in a spirited debate over STC programs with Professor Kevin Welner of the University of Colorado at Boulder. The debate was sparked by Valerie Strauss’ blog post at the Washington Post, which contained several significant errors that I addressed here. Welner then responded at Strauss’ blog and we continued to spar here and here. It is my sincere hope that readers who have followed the debate have found it illuminating.

Though I suspect that Welner might not share my aspiration for universal educational choice, we have a least found common ground in the belief that, given limited resources, such programs should first aid those most in need. I also agree that our three primary areas of contention are: 1) the differences between STC programs and vouchers and their significance; 2) the fiscal impact of STC programs; and 3) who receives tax-credit scholarships. I will address Welner’s latest arguments on these matters below.

First, however, I must make two important corrections to Welner’s last post. In explaining why he did not provide context for some of his remarks, Welner wrote: “Much of this change happened in the aftermath of the 2010 midterm elections, when Republicans swept into state offices in very large numbers.” Actually, only five out of the fourteen STC programs (in Louisiana, New Hampshire, Oklahoma, Virginia and one of the two in Pennsylvania) were adopted in the wake of the 2010 midterm elections. Moreover, there was strong support among Democrats in two of those states. Pennsylvania’s 2012 STC legislation passed with the support of 15 of 20 Democrats in the Senate and unanimous support in the House. In Louisiana, the legislation passed with the support of 11 of 15 Senate Democrats (32-7 total) and 32 of 45 House Democrats (66-37 total).

Scholarship Tax Credits vs. Vouchers

Welner wonders why I did not use the term he invented to describe scholarship tax credit programs. “Neovouchers” is a confusing term that appears nowhere in any of the fourteen STC laws. It also blurs the distinctions between STCs and vouchers, which I have described previously. I have likewise avoided the term “opportunity scholarships” because it is essentially meaningless as well. The terms “scholarship tax credits” or “education tax credits” accurately describe a program in which individuals or corporations receive tax credits for donating to scholarship organizations that fund low- and middle-income students attending nonpublic schools. I don’t begrudge Welner for using the term that shares a name with his book, but I also don’t see why he should expect that others should adopt it.

In my previous posts, I argued that these two policies have similar ends but very different means and therefore should be called by different names. I then explained how the means are different, particularly their funding (public vs. private money) and administration (government-run/centralized/uniform vs. privately-run/decentralized/diverse). Welner then responds, essentially, “Yes, but their ends are nearly identical!” I would suggest that he misses the point.

Welner also takes issue with the examples I gave of courts that decided the question of whether tax credits constitute public or private money. Welner noted correctly that some of those cases did not pertain directly to scholarship tax credit programs. What he misses is that this fact strengthens my point. State courts have ruled that tax credits do not constitute “public funds” both with regard to STC programs and other forms of tax credits. This consistency shows that STC programs are not merely a legal loophole or “money laundering”, as Welner called it. The freedom of citizens to direct their own money makes such tax credit programs qualitatively different in policy terms and this difference is reflected in the law, not arbitrarily invented by it.

Credible Evidence of Savings

Welner points out that I overinterpreted his statement that he would not be surprised if Florida’s STC program generates savings. Instead, he holds that the available evidence does not support that conclusion. He argues that we do not have all the data necessary for a conclusive determination so he throws up his hands. In fact, there is credible evidence of savings.

The best available estimate of any STC program’s fiscal impact is from Florida’s Office of Program Policy Analysis and Government Accountability (OPPAGA). This is important since Florida’s STC program is the least likely candidate for realizing savings (with the possible exception of Georgia’s). Florida offers the maximum possible tax credit (100%) whereas programs in seven of the other ten states offer only partial credits, as low as 50% in Indiana and Oklahoma. Florida has the largest average scholarship size and the highest ratio of scholarship size to average public school operating per pupil expenditures, as shown in the table below. (Note that the National Center for Education Statistics’ calculation of total per pupil expenditures excludes unfunded pension liabilities. Moreover, low-income students generally cost the state more money than average to educate.)

 

State

Average scholarship size

Public school average per pupil expenditures

Scholarship size compared to PPE

Arizona (corporate)

$1,861

$9,641

19.3%

Arizona (individual)

$2,077

$9,641

21.5%

Florida

$3,664

$11,626

31.5%

Georgia

$3,494

$11,498

30.4%

Indiana

$880

$10,040

8.9%

Iowa

$1,031

$11,126

9.3%

Pennsylvania (individual)

$990

$13,712

7.2%

Rhode Island

$2,727

$14,897

18.3%

[This chart excludes Arizona’s STC program for special needs students and the STC programs in Louisiana, New Hampshire, Oklahoma, Virginia and Pennsylvania’s corporate program, which were only recently launched or have yet to launch. Table includes the most recent data available in each category.]

Now Welner is certainly correct that savings depend on the ratio of switchers to stayers, but the data I’ve provided thus far indicates that the percentage of switchers does not have to be very high to realize savings in most states. Welner was rightly skeptical of OPPAGA’s 2008 report, which made an educated guess that 90% of scholarship recipients were switchers. However, OPPAGA’s 2010 report and 2012 revenue estimating conference relied on U.S. Census data and found that their previous estimate of switchers had been too low, since 94.6% of scholarship-eligible low-income students were attending public schools in the year before the STC program took effect. As Jon East explained in RedefinED, “The estimating conference went even further, combining American Community Survey data from 2005-09 with private school enrollment data to make projections about the actual number of low-income students enrolled in each grade level in private schools in 2012.” The more recent report projected savings of $57.9 million for Florida in 2012-13.

Welner is also correct that the analysis of the total fiscal impact of STC programs should not stop there. States that offer less than Florida’s 100% tax credit should also account for the impact of the deduction of non-credit eligible portion of the donation, as well as the caps on deductions. A complete fiscal analysis would also have to include other government programs or tax credits that are available in a given state. I agree with Welner that in most states, we need more data. However, the evidence of savings in Florida is strong, even accounting for Welner’s caveats. And if there are savings in the least likeliest of states, then there are likely savings elsewhere.

Clear Benefit to Low-Income Families

In my previous posts, I criticized Strauss for claiming that low-income families do not benefit from tax-credit scholarships. Welner admits that STC programs “provide financial assistance to many lower-income families” but says that he “didn’t read [Strauss’] statement to be saying that zero low-income families receive neovouchers. ” Once again, Strauss correctly noted that tax-credit scholarships do not cover the full cost of tuition, then incorrectly concluded: “Poor families can’t make up the difference. Guess who can.” That’s a fairly unambiguous statement. Strauss didn’t even qualify her claim by referring to “most” or “some” low-income families, let alone provide any evidence to support her claim. If she wants to be taken seriously as a responsible commentator, she should correct the record.

Likewise, Strauss has not yet rescinded her fallacious charge that STC programs are “welfare for the rich” because the donors somehow benefit from the tax credits. As I have demonstrated, the donors break even at most. Even Welner abandoned that line of argument in his latest post. Again, Strauss has a duty to correct the record.

In his latest post, Welner conceded that all of the STC programs are means-tested but for Georgia’s and one of Arizona’s two programs. However, Welner expressed skepticism about the organization that issued the study showing that two-thirds of scholarship recipients in Arizona fall under 185% of the federal poverty line. He also noted correctly that the income thresholds in some states allow some middle-income families to qualify as well. That said, it is unclear why he ignored the evidence I provided from state governments showing that the average income of scholarship recipients is far below the means-testing thresholds. For example, the average income of recipient families in Pennsylvania was only $29,000, just under half of the state’s income threshold at the time. Welner has not explained why we should assume that recipients in other states look significantly different, especially when there is evidence of similar patterns.

Welner calls for more a more comprehensive state-level reporting system. I am sympathetic to this suggestion, though I believe that states should proceed with caution. Scholarship organizations are already more regulated than ordinary nonprofits, like the Salvation Army or Red Cross. While regulations vary by state, STC programs generally have more stringent accounting standards, reporting requirements, and some states even require background checks for employees. Every STC program requires that scholarship organizations spend no more than 10% on administrative costs, the exceptions being Florida’s 3% maximum and Pennsylvania’s unnecessarily high 20% maximum. (It’s important to note that a government study found that 62% of Pennsylvania scholarship organizations disbursed 100% of their collected funds while only 5% used the maximum administrative expenses.)

Our education system should empower families to choose the education that best meets their kids’ individual needs. Scholarship tax credit programs move our education system toward that goal. As with all government programs, we should constantly reassess whether STC programs are achieving their desired ends and make any necessary changes. I would like to thank Professor Welner for taking the time to discuss this important matter.

 

[Update: An earlier version of this post incorrectly labeled total per pupil expenditures as operating per pupil expenditures.]

Rand Paul and Jim Webb on Congress’s Abdication of Foreign Policy Power

John Brennan’s confirmation as CIA director displayed Congress’s disinterest in checking the president’s runaway security powers. Two months ago, when I wrote an article with the unwieldy title, “Will Obama’s Brennan Pick Shed Some Much Needed Light on Drones?” I wouldn’t have guessed that the answer would be yes; it will bestir Congress to finally force the administration to say clearly that it does not reserve the right to kill Americans at home with drone strikes, insofar as they are not engaged in combat. That statement came only thanks to whomever leaked the Justice Department’s summary memo on the topic, Brennan and Attorney General Eric Holder’s impolitic reluctance to articulate limits on the president’s power to kill Americans by calling them terrorists, and, of course, Sen. Rand Paul’s (R-Ky.) resulting filibuster. The Senate predictably left Brennan’s other sins against civil liberties mostly unexamined. 

Paul’s hard-won “toehold of constitutionality” isn’t much to cheer about, even if we add to the spoils the administration’s vague agreement to be more open about its legal rationale for placing people on kill lists. This minimal defense of civil liberties and congressional privilege is what got Republican senators like Marco Rubio of Florida and Ted Cruz, Jr. of Texas, who seem to support unfettered executive discretion to kill in the name of counterterrorism outside the United States, to support the filibuster. 

Even that was too much restraint for the neoconservative right. Sen. John McCain (R-Ariz.) read on the Senate floor a Wall Street Journal editorial calling Paul’s effort a stunt meant to “fire up impressionable libertarian kids” and assuring us that those targeted by drones here or abroad will be “enemy combatants.” McCain and the Journal spectacularly miss Paul’s point: the issue is whether the president should make that designation, chucking due process rights, without being checked by another branch of government. 

As McCain amigo Sen. Lindsay Graham (R-S.C.) noted, the Republican caucus’ flirtation with civil libertarianism seems a situational consequence of partisanship. The same goes for Democrats. Were it President McCain doing what Obama is, far more than two Democratic senators (Jeff Merkley of Oregon and Pat Leahy of Vermont) would have voted against Brennan. During his filibuster, Paul asked what happened to the Senator Obama of 2007, who opposed torture and war by executive fiat. Paul suggests that those views were products of Obama’s then circumstance: not being president. Even that may be too generous. As I wrote in a recent book review concerning Obama’s counterterrorism record, “even when he took office, there was ample evidence that his dovish positions would not outlast their political convenience.” 

We can hope, I suppose, that Paul’s stance will increase Congress’s willingness to assert its constitutional war powers. Although he did not, as far as I know, propose specific restrictions on the use of military force outside of the United States, Paul did complain that the 2001 Authorization of Military Force against the perpetrators of the September 11 attacks and those that harbored them has become a permanent warrant for almost limitless executive war powers, a kind of escape hatch from the Constitution opened by presidential utterance of the word “terrorist.”

Did Global Warming Prevent a Record-Breaking D.C. Snowstorm?

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

We haven’t seen any media stories relating global warming to the Wednesday’s weather in D.C.

We are certain that this would not have been the case had more than 11.5 inches of snow accumulated at Reagan National Airport, as it would have set the District’s all-time daily March snowfall record. Exceeding 8.5 inches would have set the record daily March snowfall observed at DCA (an accumulation well within the forecast range) and would probably have generated some global warming comments (after all, they were already waiting in the wings).

Is it only us, or does it seem that postmortem analyses of weather events only include the “consistent with human-caused global warming” meme when the event caused harm and suffering?

If our pernicious industrial activity impacts “extreme” weather, doesn’t it impact the non-extreme as well?

Despite what the global warming alarmists would like you to believe, there are a lot more of the latter than the former!

So was Wednesday’s non-record-breaking non-extreme non-snowstorm in D.C. “consistent with global warming?”

The simple answer: sure!

The temperature was just a wee bit too high for the snow to stick. And human emissions of greenhouse gases have caused a wee bit of temperature rise. Voila! Consistency.

Parsing AG Holder on Domestic Targeted Killing

As I wrote on Thursday, I’m not really losing sleep over the prospect of domestic targeted killing, mostly because it seems as though it would be so manifestly politically radioactive even within the intelligence community that I doubt it could be done secretly, and would almost certainly provoke a constitutional crisis if it became public. That said, as Marcy Wheeler notes, if we look closely at the precise wording of Attorney General Eric Holder’s response to Sen. Rand Paul disavowing any such presidential prerogative, it’s actually phrased in a way that seems calculated to preserve a fair amount of wiggle room:

It has come to my attention that you have now asked an additional question. “Does the President have the authority to use a weaponized drone to kill an American not engaged in combat on American soil?” The answer to that question is no.

Now, it’s true that Senator Paul often recurred to the example of a drone “dropping a Hellfire missile on your cafe experience” during his Wednesday filibuster, but it seems weirdly specific to give an answer that is, read strictly, confined to weaponized drones, as opposed to snipers or poison or what have you. More importantly, it’s not entirely clear what Holder considers to be the parameters of “engaged in combat.” During Paul’s filibuster, the senator often agreed that it would clearly be permissible to use defensive lethal force against someone “actively engaged in combat”—shooting down a plane on a heading to crash into a target, or killing a terrorist in the middle of a shooting spree. There’s nothing particularly controversial about those cases: in the latter instance, we’d expect police to do as much without any presidential orders.

But since Holder conspicuously omitted the word “actively,” it isn’t clear that this is what he means. The public hasn’t seen the detailed legal memoranda underlying the CIA’s overseas drone program, and so we can’t really know what to make of Holder’s statement without knowing what the government thinks it means to be “engaged in combat” in this non-traditional conflict. Though the Obama administration has (symbolically) abandoned the use of the phrase “enemy combatant,” the Bush Justice Department argued in 2004 that a “little old lady in Switzerland” who “gave money to a charity for an Afghan orphanage, and the money was passed to al Qaeda” might meet their definition of an “enemy combatant.” Could a citizen suspected of being involved in the planning stages of some future attack, then, be considered to be “engaged in combat” (perhaps even “actively”)?  Against the backdrop of the sort of examples Senator Paul was discussing, it’s presumably not what we’d intuitively think of, but then neither have the targets of our overseas drone attacks necessarily been “combatants” in the colloquial sense of one directly personally engaged in bearing arms. Again, until we see the memos and have a fuller understanding of the administration’s broader reasoning, isolated statements like Holder’s are difficult to interpret with much confidence.

Such definitional game-playing would not exactly be a novelty for this administration, which has apparently expanded the definition of “imminent threat” to cover people believed to be senior leaders of hostile groups, whether or not there is any evidence that they are actively engaged in planning some impending attack. And recall how another recent attorney general, Alberto Gonzales, managed to mislead Congress about President Bush’s warrantless wiretap program by silently redefining “the program the president has acknowledged” to mean “only the specific components he has already acknowledged,” even though these components had never been previously regarded as a separate surveillance program. So if this kind of hyperliteral close parsing of a few sentences seems like paranoid hairsplitting, it’s only because such word games appear to be par for the course when it comes to classified counterterrorism programs.

Do I think this means there’s some domestic assassination plan in the works? Certainly not. But I would not exactly be shocked if the attorney general had used a bit of careful lawyerly language to placate Senator Paul while leaving an opening for a future administration to claim that technically his disavowal of authority had been far narrower than it seemed.

Code of the West

The legal battle between the federal government and the states over the legality of marijuana is returning to the news. Former DEA chiefs are calling on the Obama administration to crack down on the two states that recently approved referenda to legalize marijuana under state law, Colorado and Washington. Meanwhile, many other states are trying to legalize marijuana for medical purposes.

On that latter point, Cato will be screening the new film Code of the West next week. This film explores the political, legal, and cultural battles over medical marijuana in Montana. Watch local policymakers grapple with the myriad issues that arise when medical marijuana becomes legal under state law for certain patients. The film also tells the story of certain growers who try to establish businesses, only to find their establishments raided by federal law enforcement agents. Join us for this film screening and the policy discussion afterward.

Registration information can be found here.

Watch the film trailer here.  More information about Code of the West here.

Chavez: The Death of A Populist … and His Currency?

Although Hugo Chávez, the socialist presidente of Venezuela, has finally met his maker, the grim reaper is still lingering in Caracas. As it turns out, Chávez was not the only important Venezuelan whose health began to fail in recent weeks: the country’s currency, the Venezuelan bolivar fuerte (VEF) may soon need to be put on life support.

In the past month the bolivar has lost 21.72% percent of its value against the greenback on the black market (read: free market). As the accompanying chart shows, the bolivar has entered what could be a death spiral, which has only accelerated with news of Chávez’s death.

 

Shortly before his death, Chávez’s administration acknowledged that the bolivar was in trouble and devalued the currency by 32%, bringing the official VEF/USD rate to 6.29 (up from 4.29). But, at the official exchange rate, the bolivar is still “overvalued” by 74% versus the free-market exchange rate.