Archives: April, 2014

NHTSA’s Rearview Camera Mandate

Last week the National Highway Traffic Safety Administration (NHTSA) completed rulemaking that mandated that all cars and light trucks sold in the United States in 2018 have rearview cameras installed.

In 2008 Congress enacted legislation that mandated that the NHTSA issue a rule to enhance rear view visibility for drivers by 2011.  Normally, such a delay would be held up as an example of bureaucratic ineptitude and waste. But in this case, NHTSA was responding to its own analysis that determined (p. 143) that driver error is the major determinant of the effectiveness of backup assist technologies including cameras.

In addition, NHTSA concluded that the cost per life saved from installation of the cameras ranged from about 1.5 times, to more than 3 times the 6.1 million dollar value of a statistical life used by the Department of Transportation to evaluate the cost effectiveness of its regulations.  NHTSA waited until the possibility of intervention by the courts forced it to issue the rule.  The problem in this case is Congress overreacting to rare events rather than the agency.

For more on auto safety regulation, see Kevin McDonald’s piece in Regulation here.

Incorrect, Gov. Bush

Speaking off the cuff, it’s easy to make a mistake. But for a long time former Florida governor – and trendy presidential possibility – Jeb Bush has been criticizing Common Core opponents for, among other things, saying the Core was heavily pushed by the federal government. His still getting the basics wrong on how Core adoption went down must be called out.

Interviewed at this weekend’s celebration of the 25th anniversary of his father’s presidential election – an event where, perhaps, he actually knew which questions were coming – Bush said the only way one could think the Core was a “federal program” is that the Obama administration offered waivers from the No Child Left Behind Act if states adopted it. (Start around the 7:15 mark.) And even that, he said, basically came down to states having “to accept something [they] already did”: agree to the Core.

Frankly, I’m tired of having to make the same points over and over, and I suspect most people are sick of reading them. Yet, as Gov. Bush makes clear, they need to be repeated once more: Washington coerced Core adoption in numerous ways, and creators of the Core – including the National Governors Association and Council of Chief State School Officers – asked for it!

In 2008 – before there even was an Obama administration – the NGA and CCSSO published Benchmarking for Success, which said the feds should incentivize state use of common standards through funding carrots and regulatory relief. That was eventually repeated on the website of the Common Core State Standards Initiative.

The funding came in the form of Race to the Top, a piece of the 2009 “stimulus” that de facto required states to adopt the Core to compete for a chunk of $4.35 billion. Indeed, most states’ governors and chief school officers promised to adopt the Core before the final version was even published. The feds also selected and paid for national tests to go with the Core. Finally, waivers from the widely hated NCLB were offered after RTTT, cementing adoption in most states by giving only two options to meet “college- and career-ready standards” demands: Either adopt the Core, or have a state college system certify a state’s standards as college and career ready.

Gov. Bush, the facts are clear: The feds bought initial adoption with RTTT, then coerced further adoption through NCLB waivers. And all of that was requested by Core creators before there was a President Obama!

Let’s never have to go over this again!

50 Years of Federal Spending

Fifty years ago, one of the biggest-spending presidents in U.S. history was settling into office after coming to power the prior November. Lyndon Johnson signed into law Medicare, Medicaid, and hundreds of subsidy programs for the states and cities.

Johnson was followed in office by one of the worst presidents of the 20th century in terms of domestic policy. Richard Nixon added and expanded many programs, and he helped to cement in place the array of new federal interventions pioneered by Johnson.

The chart below shows federal spending over the five decades since Johnson. Spending is divided into four components and measured as a share of gross domestic product (GDP).

Blue Line: Entitlement spending soared from the mid-1960s to the early-1980s. Medicare and Medicaid grew rapidly after being created in 1965, and Nixon signed into law numerous large increases in Social Security for current recipients. A month before the 1972 election, Social Security recipients received a letter informing them that Nixon had just signed a law bumping up their benefits by 20 percent. The recent spike in spending stems from increases in Medicare, Medicaid, food stamps, and other programs.

Black Line: Defense spending spiked in the late 1960s due to the Vietnam War. The number of U.S. troops in Vietnam peaked in 1968, then fell steadily after that. The Ronald Reagan and George W. Bush defense build-ups are also visible on the chart.

Red Line: Defense spending fell as a share of GDP in the 1970s, while nondefense discretionary spending rose. Then in the 1980s and 1990s, nondefense spending was restrained under Reagan and Bill Clinton, but then rose under George W. Bush in the 2000s.

Green Line: Bush and Barack Obama have been lucky budgeters because federal interest costs have been low during the past decade, despite the large deficits run by these two presidents. The luck won’t last: under its baseline, CBO projects that interest costs will rise from 1.3 percent of GDP today, to 2.7 percent by 2020, and to 4.1 percent by 2030.

Update: All data from the 2015 Federal Budget, Historical Tables, Table 8.4.

The Golden Rule of Spending Restraint

My tireless (and probably annoying) campaign to promote my Golden Rule of spending restraint is bearing fruit.

The good folks at the editorial page of the Wall Street Journal allowed me to explain the fiscal and economic benefits that accrue when nations limit the growth of government.

Here are some excerpts from my column, starting with a proper definition of the problem.

What matters, as Milton Friedman taught us, is the size of government. That’s the measure of how much national income is being redistributed and reallocated by Washington. Spending often is wasteful and counterproductive whether it’s financed by taxes or borrowing.

So how do we deal with this problem?

I’m sure you’ll be totally shocked to discover that I think the answer is spending restraint.

More specifically, governments should be bound by my Golden Rule.

Ensure that government spending, over time, grows more slowly than the private economy. …Even if the federal budget grew 2% each year, about the rate of projected inflation, that would reduce the relative size of government and enable better economic performance by allowing more resources to be allocated by markets rather than government officials.

I list several reasons why Mitchell’s Golden Rule is the only sensible approach to fiscal policy.

A golden rule has several advantages over fiscal proposals based on balanced budgets, deficits or debt control. First, it correctly focuses on the underlying problem of excessive government rather than the symptom of red ink. Second, lawmakers have the power to control the growth of government spending. Deficit targets and balanced-budget requirements put lawmakers at the mercy of economic fluctuations that can cause large and unpredictable swings in tax revenue. Third, spending can still grow by 2% even during a downturn, making the proposal more politically sustainable.

The last point, by the way, is important because it may appeal to reasonable Keynesians. And, in any event, it means the Rule is more politically sustainable.

I then provide lots of examples of nations that enjoyed great success by restraining spending. But rather than regurgitate several paragraphs from the column, here’s a table I prepared that wasn’t included in the column because of space constraints.

It shows the countries that restrained spending and the years that they followed the Golden Rule. Then I include three columns of data. First, I show how fast spending grew during the period, followed by numbers showing what happened to the overall burden of government spending and the change to annual government borrowing.

Golden Rule Examples

Last but not least, I deal with the one weakness of Mitchell’s Golden Rule. How do you convince politicians to maintain fiscal discipline over time?

I suggest that Switzerland’s “debt brake” may be a good model.

Can any government maintain the spending restraint required by a fiscal golden rule? Perhaps the best model is Switzerland, where spending has climbed by less than 2% per year ever since a voter-imposed spending cap went into effect early last decade. And because economic output has increased at a faster pace, the Swiss have satisfied the golden rule and enjoyed reductions in the burden of government and consistent budget surpluses.

In other words, don’t bother with balanced budget requirements that might backfire by giving politicians an excuse to raise taxes.

If the problem is properly defined as being too much government, then the only logical answer is to shrink the burden of government spending.

Last but not least, I point out that Congressman Kevin Brady of Texas has legislation, the MAP Act, that is somewhat similar to the Swiss Debt Brake.

We know what works and we know how to get there. The real challenge is convincing politicians to bind their own hands.

Education, Standards, and Private Certification

Can there be standards in education without the government imposing them?

Too many education policy wonks, including some with a pro-market bent, take it for granted that standards emanate solely from the government. But that does not have to be the case. Indeed, the lack of a government-imposed standard leaves space for competing standards. As a result of market incentives, these standards are likely to be higher, more diverse, more comprehensive, and more responsive to change than the top-down, one-size-fits-all standards that governments tend to impose. I explain why this is so at Education Next today in What Education Reformers Can Learn from Kosher Certification.” 

Hungary’s Slide Towards Authoritarianism

Yesterday’s general election in Hungary has given Viktor Orbán’s party, Fidesz, a very comfortable majority in the Hungarian Parliament, while strengthening the openly racist Jobbik party, which earned over 21 percent of the popular vote. Neither of this is good news for Hungarians or for Central Europe as a whole.

In the 1990s, Hungary was among the most successful of transitional economies of Central and Eastern Europe. With a significant exposure to markets in the final years of the Cold War and a political establishment committed to reforms, it was often singled out as an example of how a successful, sustained transition towards market and democracy should look like.

In 2014, the situation could not be more different. Hungary’s economic policies have become increasingly populist and haphazard, as the government has confiscated the assets of private pension funds, undermined the independence of the central bank, and botched the consolidation of the country’s public finances (p. 77). Worse yet, Hungary has seen a growth of nationalist and anti-Semitic sentiments which have not been adequately countered by the country’s political elites. In a recent column, I wrote about Mr. Orbán’s personal responsibility for the disconcerting political and economic developments in Hungary:

Mr. Orbán’s catering to petty nationalism often borders on selective amnesia about certain parts of Hungarian history. Recently the Federation of Hungarian Jewish Communities, the Mazsihisz, announced it would not take part in the Orbán government’s Holocaust commemorations. According to the Mazsihisz, the framing of the ceremonies whitewashes the role that the Hungarian government played and focuses exclusively on the crimes perpetrated by the Germans—despite the fact that Hungary adopted its first anti-Jewish laws as early as 1938.

Mr. Orbán’s tone-deafness when it comes to historical symbols goes hand in hand with a concerted effort to undermine the foundations of liberal democracy and rule of law in Hungary. Since Mr. Orbán came to office four years ago, Fidesz has consolidated its political power and used it to pass controversial legislation tightening media oversight, as well as constitutional changes that curb judicial power and restrict political advertising, among other measures.

FEMA Disaster Declarations

I am writing a study on the Federal Emergency Management Agency (FEMA) and looking at the issue of presidential disaster declarations. Under the 1988 Stafford Act, a state governor may request that the president declare a “major disaster” in the state if “the disaster is of such severity and magnitude that effective response is beyond the capabilities of the state and the affected local governments.”

The main purpose of declarations is to impose on federal taxpayers the relief and rebuilding costs that would otherwise fall on state and local taxpayers and individuals in the affected area. Federalism is central to disaster planning and response in the United States, and federal aid is only supposed to be for the most severe events. Unfortunately, the relentless political forces that are centralizing power in just about every policy area are also doing so in disaster policy.

Below is a chart of FEMA data showing the number of “major disasters” declared by presidents since 1974, when the current process was put in place. The number of declared disasters has soared as presidents have sought political advantage in handing out more aid. Presidents have been ignoring the plain language of the Stafford Act, which allows for aid only in the most severe situations.

In the chart, I marked with red bars the years that presidents ran for reelection. In those years, presidents have generally declared the most major disasters. That was true of Ronald Reagan in 1984, George H.W. Bush in 1992, and Bill Clinton in 1996. George W. Bush declared the most disasters of his first term in his reelection year of 2004. The two presidents who do not fit the pattern are Jimmy Carter and Barack Obama.