Archives: 04/2013

Who Killed Gun Control?

The Establishment is very concerned this morning that the representatives of the people have resisted demands for stricter gun control measures. The president calls it “shameful.” The New York Times editorial board intones, “The Senate Fails America.” Dana Milbank of the Washington Post deplores a lack of “courage” on Capitol Hill, though some might think it takes courage to defy the overwhelming drumbeat of the national media.

Whatever the merits and popularity of the specific measures that went down to defeat in the Senate on Wednesday, I think the Establishment fails to appreciate the depth of American support for the Second Amendment. NPR and other media have lately noted a growing libertarian trend in American politics. That’s not just about taxes, Obamacare, marijuana, and marriage equality. It also involves gun rights. After each high-profile shooting, support for gun control rises. But it tends to fall again in short order, as public opinion reverts to the baseline of strong support for gun rights.

I was struck by this poll graphic in the Washington Post on Wednesday. Despite the virtually unanimous support for stricter gun control in the national media, along with other opinion shapers such as Hollywood and the universities, and despite the mass shootings that have received so much attention in our modern world of 24-hour news channels, Americans are becoming more convinced that guns make your family safer. 

 Washington Post Poll on Guns

The fact is, America is a country fundamentally shaped by libertarian values and attitudes. Our libertarian values helped to create the Constitution and the Bill of Rights, and those documents in turn shape our thinking about freedom and the limited powers of government. In their book It Didn’t Happen Here: Why Socialism Failed in the United States, Seymour Martin Lipset and Gary Marx write, “The American ideology, stemming from the [American] Revolution, can be subsumed in five words: antistatism, laissez-faire, individualism, populism, and egalitarianism.” If political scientists Herbert McClosky and John Zaller are right that “[t]he principle here is that every person is free to act as he pleases, so long as his exercise of freedom does not violate the equal rights of others,” then we can expect Americans to cling to their gun rights for a long time.

The New Republic’s daily email this morning asks, “Who killed gun control?” Who? The Americans.

Don’t Bother, HEA Ostriches

If this is how reauthorization of the Higher Education Act is going to go, Congress shouldn’t even bother. If, as the tone seemed to be set in House and Senate hearings yesterday, Congress won’t seriously consider even the possibility that federal student aid helps to fuel tuition inflation – much less make policy based on the massive logic and evidence backing that concern – then they might as well just quit on the HEA. And if they will accept the swiss cheese explanation that cuts in state funding drive inflation – despite its inability to explain inflation in private institutions, and public schools raising tuition about two dollars for every dollar in lost funding – then they simply aren’t serious about dealing with the crippling unintended consequences of federal “help.”

In the face of ballooning student debt and long-skyrocketing college prices, we don’t need Congressional ostriches jamming their heads in the sand anymore, pretending that their generosity with other people’s money is the solution, not the problem. Either deal with reality, or don’t bother with the HEA.

Cross-posted at seethruedu.com

New GAO Study Mistakenly Focuses on Make-Believe Tax Expenditures

I’m very leery of corporate tax reform, largely because I don’t think there are enough genuine loopholes on the business side of the tax code to finance a meaningful reduction in the corporate tax rate.

That leads me to worry that politicians might try to “pay for” lower rates by forcing companies to overstate their income.

Based on a new study about so-called corporate tax expenditures from the Government Accountability Office, my concerns are quite warranted.

The vast majority of the $181 billion in annual “tax expenditures” listed by the GAO are not loopholes. Instead, they are provisions designed to mitigate mistakes in the tax code that force firms to exaggerate their income.

Here are the key findings.

In 2011, the Department of the Treasury estimated 80 tax expenditures resulted in the government forgoing corporate tax revenue totaling more than $181 billion. …approximately the same size as the amount of corporate income tax revenue the federal government collected that year. …According to Treasury’s 2011 estimates, 80 tax expenditures had corporate revenue losses. Of those, two expenditures accounted for 65 percent of all estimated corporate revenues losses in 2011 while another five tax expenditures—each with at least $5 billion or more in estimated revenue loss for 2011—accounted for an additional 21 percent of corporate revenue loss estimates.

Sounds innocuous, but take a look at this table from the report, which identifies the “seven largest corporate tax expenditures.”

GAO Tax Expenditure Table

To be blunt, there’s a huge problem in the GAO analysis. Neither depreciation nor deferral are loopholes.

Price Controls: A Troubling Trend in Latin America

Argentina, Venezuela, and now even Ecuador have all embraced an unfortunate, if familiar, economic craze currently sweeping the region – price controls. In a wrong-headed attempt to “suppress” inflation, the respective governments have attempted to fix prices at artificially low levels. As any economist worth his salt knows, this will ultimately lead to scarcity.

Consider Venezuela, where the government sets the price of a number of goods, including premium gasoline, which is fixed at only 5.8 U.S. cents per gallon. As the accompanying chart shows, 20.4% of goods are simply not available in stores.

While price controls ostensibly keep the prices of goods on official markets low, they ultimately lead to empty shelves, depriving many consumers access to essential goods (such as toilet paper). This, in turn, leads to “repressed” inflation – given the price controls that exist, the “true” rate of inflation is held down, or repressed through Soviet-style government intervention. As the accompanying chart shows, the implied annual inflation rate for Venezuela (using changes in the black-market VEF/USD exchange rate) puts the “repressed” inflation rate at 153%.

Likewise, Argentina is facing a similar dilemma (see the accompanying chart).

In addition to scarcity and repressed inflation, price controls can lead to unintended political consequences down the road. Once price controls are implemented it is very difficult to remove them without generating popular unrest – just consider the 1989 riots in Venezuela when President Carlos Perez attempted to remove price controls. 

Hopefully, Ecuador – which, thanks to its dollarization, is experiencing an annual inflation rate of only 3% – will see this folly and abandon its expirement with price controls.

If countries like Venezuela are really interested in keeping inflation under control, they should follow Ecuador’s lead – simply junk their domestic currencies and “dollarize”.

Questions for Secretary Sebelius

Secretary of Health and Humans Services Kathleen Sebelius has been making the rounds on Capitol Hill, testifying in favor of President Obama’s proposed budget and generally trying to assure members of Congress that all is well with ObamaCare implementation. Even supporters of the law are freaking out nervous, as I discuss here.

Since everyone else is pestering Sebelius with questions, I thought I would post some questions I would like to hear her answer.

Video of Baucus’ ‘Train Wreck’ Comments

Perhaps you have now heard that today ObamaCare’s primary author, Sen. Max Baucus (D-MT), predicted a “huge train wreck” when the law takes full effect later this year. Here’s the video

Edited for you by the folks at American Commitment. They even coined a hashtag: #trainwreck.

In the Wake of Tragedy, Policymakers Should Exercise Restraint

An article in Politico reports that some policymakers are already using the tragedy in Boston to criticize the sequestration spending cuts that went into effect in March. With the nation’s nerves frayed, policymakers should choose their words more carefully. 

At a press conference held yesterday morning, House Minority Whip Steny Hoyer (D-MD) told reporters that he doubted that sequestration had “any impact presently.” He should have left it at that. Instead, he strayed far from the issue of national security and sequestration by lumping in other issues that didn’t have anything to do with the bombing: 

“I think there are multiple reasons for ensuring that we invest in our security – both domestic and international security. That we invest in the education of our children. That we invest in growing jobs in America. And don’t pursue an irrational, across-the-board policy of cutting the highest priorities and the lowest priorities essentially the same percentage…. I think this is another proof of that – if proof is needed, which I don’t think frankly it is.”

There’s a time and a place to discuss education spending and “growing jobs in America.” At a press conference less than 24 hours after a tragedy is not the right time.