Tag: California

Trade Problems May Not Always Call for Trade Answers

The federal system of government in the United States has the invaluable consequence of enabling policy experimentation.  If a state legislature is considering adopting a particular policy, it can often look at the experiences of other states that have tried that policy before.  A recent study from the Milken Institute in California tries to take advantage of such potential comparisons to offer ways that California could increase its dwindling share of U.S. exports.  It is a valiant effort, but California’s decline is not the consequence of inadequate trade policy and no amount of export promotion is going to fix it.

The study begins by comparing California’s decline in export share to the dramatic rise in cross-border trade originating from Texas, the nation’s leader in goods exports. After using Texas’s success as an example of how California is lagging behind, the study decides not to use Texas as a model for reform and instead focuses on other states that have used export promotion (subsidy) agencies as case studies for how California can improve its bureaucracy to reverse the current trend.

If the success of Texas is what California should seek, then why not look at Texas as a model for reform? The study says that Texas is “unique” because it 1) has no export promotion agency, 2) has a low cost of doing business, and 3) has benefited from increased trade with the growing economy of Mexico by virtue of NAFTA-enabled integration. These differences seem to point to clear policy choices: don’t worry about export promotion (easy), improve your state’s business environment, and be close to Mexico (done!).

If it becomes more business-friendly, your state will have more business, export-oriented business included.  Since we’re looking at Texas as a model, may I suggest improving the business environment by lowering taxes and reducing regulation.

Now, I realize that the Overton Window for politically feasible reform proposals in California may not include lowering the cost of doing business. It makes a lot of sense for the authors of the study to point out the root causes of different outcomes in Texas and California but still seek a different solution more palatable to Californian sensibilities. I think their specific proposals for enhancing the capacity and quality of the export promotion process are insightful and well-supported.

There is a larger lesson in all of this for national economic policy. Increasing exports through the National Export Initiative has been a major goal of the Obama Administration’s economic recovery plan, and subsidizing loans through the Export-Import Bank has been a primary tool in that endeavor. But the people of the United States don’t need more bureaucracy to engage in more trade. They need policies that remove artificial barriers and decrease the cost of doing business—international and otherwise.

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California Knows How to Party… $16 Billlion Too Lavishly

Californians may be forgiven for expectorating coffee over their morning newspapers today, as they learn that their state deficit is not $9 billion, as Governor Brown’s administration had predicted, but rather $16 billion. Oops.

Further increasing the breakfast table choking hazard is the Governor’s “solution”: raise taxes. Gov. Brown is pushing a fall ballot initiative that would raise both sales and income taxes. He argues that this is preferable to cutting spending on things like public schooling on the grounds that schools have already been slashed to the bone. But have they? Actually, no. California’s per pupil spending has nearly doubled over the past forty odd years, in real inflation-adjusted dollars, and remains near its all-time high.

What did California get for that massive spending increase? Not a great deal if the SAT performance of its college-bound high school students is any guide. And, as I pointed out in this op-ed, it’s a pretty reasonable guide.

But while raising taxes has consistently failed to improve educational performance, cutting them actually works—via tax-credit school choice programs that give families an easier choice between public and private schools. Florida’s education tax credit program, for instance, has been shown to improve the achievement of students who stay in public schools, to improve the achievement of students who accept scholarships and attend private schools, and to save taxpayers millions of dollars a year. If expanded on a mass scale in a large state like California, it would save billions of dollars a year.

So what’ll it be, Californians? Fiscal and education policy sobriety, or the Governor’s hair-of-the-dog continued big government partying?

Gay Marriage Still Has an Uphill Climb

The right answer to the same-sex marriage question is to remove government from the marriage business altogether.  That’s a legislative matter, however, and not something the courts should decree. Until then, because state and federal laws confer benefits based on marital status, the equal protection provisions of the Fifth and Fourteenth Amendments require that same-sex couples not be subject to discrimination in receipt of those benefits. But that issue was not addressed by the U.S. Court of Appeals in California—a state that permits gay unions and does not discriminate against such unions in conferring “marital” benefits. The specific issue the court decided was whether the label “marriage” could attach to heterosexual but not homosexual partnerships. Quite properly, the court ruled that it could not. That’s a narrow but important step in the right direction. But it does not settle the more significant question whether states may grant benefits to heterosexual couples while granting less or no benefits to homosexual couples.

In fact, there’s a negative aspect of the court’s ruling, which essentially declared Prop 8 unconstitutional because California went further than other states in allowing civil unions. The court held there’s no rational basis for allowing such unions but requiring that they carry a different label. That’s quite different from invoking the Equal Protection Clause to forbid a state from denying gays a right to the benefits of marriage. That issue didn’t arise because California grants such benefits to gays. Regrettably, other states may be dissuaded from following the California civil union model because their voters wish to limit the definition of “marriage” to exclude gays. In this instance, the better may become the enemy of the good.

Status Quo Stalwarts, Meet Reality[School Choice Week Blast from the Past, Pt. 2!]

Back in 1993, when Whitney Houston hit #1 with “I will always love you”, there was something that California-based state schooling advocates didn’t love at all: a school voucher ballot initiative. Much was written on the subject, and in 1994 a booklet was published summarizing the arguments for and against (Voices on Choice, K. L. Billingsley, ed.). In today’s School Choice Week installment, we’ll hear from those who were agin’ it.

Maxine Waters, United States Congress (D, Los Angeles):
“Contrary to claims, school choice will be devastating for urban, minority, and poor students who desperately need quality education.”

Delaine Eastin, California State Representative (D, Fremont):
“Having schools without [government] standards won’t improve learning.” Private school choice “won’t teach more kids how to read and write.”

Well, actually… U.S. private school choice programs usually do improve student achievement significantly in one or more subjects, and they have never been shown to have a negative impact on student achievement. The domestic scientific evidence to that effect was collected and summarized last March by Greg Forster, for the Foundation for Educational Choice. I do have one quibble with the report (it doesn’t count the insignificant findings in studies that have at least one significant finding, as is standard practice in literature reviews) but even after addressing it the aforementioned statements would still hold true.

Heck, even the few choice programs that don’t currently seem to be raising test scores are substantially raising students’ graduation rates–and doing it at substantially less cost to taxpayers than the state schools.

What’s more, when we cast a wider net and look at scientific studies comparing government and independent schools within countries all over the world, the results are even more dramatic.  In fact, it is the least regulated, most market-like schools that most consistently outperform state-run monopoly school systems such was we have in the U.S.

Delaine Eastin:
“[T]his initiative allows schools to fail. But it does nothing to protect taxpayers when they do. When public school systems go belly up as a result of the voucher initiative, the courts are likely to rule that taxpayers will be stuck with the tab—and it won’t be cheap.”

Modern private school choice programs have been operating around the country for as long as twenty years, and I know of no case in which they have been found to increase the total burden on taxpayers. In fact, the only systematic studies of the issue find that these programs save taxpayers money—sometimes quite a bit of it. Florida’s legislature has studied the fiscal impact of that state’s k-12 scholarship donation tax credit program, and found it to save $1.49 for every $1 it reduces revenues. That’s a nearly 50% return.

What’s more, the program has been found in two separate studies to both improve achievement of students who remain in public schools and to improve achievement of students who receive scholarships to attend private schools. It’s not hard to fathom why: on average, private schools spend thousands less per pupil than does the public school monopoly.

Warren Furutani, past president, Los Angeles City Board of Education:
“It is no coincidence that dollars are being pulled from our underfunded, overburdened school system at the same time our governor and the president of this nation are pushing vouchers and choice.”

Um… Yeah… About that claim that “dollars were being pulled” from “underfunded” public schools in California. I just happen to have the actual spending trend handy:

So, not only were these Status Quo Stalwarts unable to correctly predict the future, they had some difficulty accurately describing the present. Oh, and while thrifty school choice programs around the country have been improving student achievement and attainment, it’s hard to say the same for the California’s state education monopoly.

Will the Last Job Creator to Leave California Please Turn Off the Lights?

I’ve written before about whether California is the Greece of America, in part because of crazy policies such as overpaid bureaucrats and expensive forms of political correctness,

And we all know that California has one of the nation’s greediest governments, imposing confiscatory tax rates on a shrinking pool of productive citizens.

So it is hardly surprising that the Golden State is falling behind, losing jobs and investment to more sensible states such as Texas.

But not everybody is learning the right lessons from California’s fiscal and economic mess.

There’s a group of crazies who want to increase the top tax rate by five percentage points, an increase of about 50 percent. And they have made Kim Kardashian the poster child for their proposed ballot initiative.

I’m relatively clueless about popular culture, but even I’m aware that there is a group of people know as the Kardashian sisters. I don’t know who they are or what they do, but I gather they are famous in sort of the same way Paris Hilton was briefly famous.

And they have cashed in on their popularity, which may not reflect well on the tastes of the American people, but it’s not my job to tell other people how to spend their money.

But not everybody share this live-and-let-live attitude, which is why the pro-tax crowd in California produced this video.

I suppose I could criticize the petty dishonesty of the proponents, since they deliberately blurred of the difference between “tax rates” and “taxes paid.”

Or I could expose their economic illiteracy by pointing out that higher tax rates would accelerate the emigration of investors, entrepreneurs, small business owners, and other rich taxpayers to zero-tax states such as Nevada.

But I won’t do those things. Instead, like the Nevada Realtors Association and Arizona Business Relocation Department, I’m going to support this ballot initiative.

Not because I overdid the rum and eggnog at Christmas, but because it’s good to have negative role models, whether they are countries like Greece, cities such as Detroit, or states like California.

So here’s my challenge to the looters and moochers of the Golden State. Don’t just boost the top tax rate by five-percentage points. That’s not nearly enough. Go for a 20 percent top tax rate. Or 25 percent. After all, think of all the special interests that could use the money more than Ms. Kardashian.

And if somebody tells you that she will move to South Beach or Las Vegas, or that the other rich people will move to Texas, Wyoming, or Tennessee, just ignore them. Remember, it’s good intentions that count.

In closing, I apologize to the dwindling crowd of productive people in California. It’s rather unfortunate that you’re part of this statist experiment. But you know what they say about eggs and omelets.

By the way, here’s some humor about the Golden State, including a joke about the bloated bureaucracy and a comparison with Texas.

California Wants Amazon to Tax Californians

The Los Angeles Times has a good article on California’s move to require Amazon and other out-of-state retailers to collect taxes for it. Good because it accurately portrays what’s happening. Many such stories will say that California is seeking to tax Amazon. In fact, says the headline, “California Tells Online Retailers to Start Collecting Sales Taxes From Customers.”

You see, Californians generally don’t pay their “use taxes“—the alternative to sales taxes, for things brought into the state from outside. If the tax authorities tried to collect use taxes, going door to door to tally up the goods that haven’t yet been taxed, there would be bedlam.

So they want out-of-state companies that sell into California to collect the taxes that the state’s residents would pay. But in 1992, the Supreme Court found in a decision called Quill v. North Dakota that states can’t require out-of-state retailers to collect taxes for them. Doing so would create too great a burden on interstate commerce.

If an Internet retailer has a significant presence in a state, then the state can require the retailer to collect and remit sales taxes. (It’s no longer interstate commerce—get it?) So Amazon and other retailers are doing the sensible thing: shedding ties to California, such as with their affiliate marketers. Reports the Times:

Amazon and online retailer Overstock.com Inc. told thousands of California Internet marketing affiliates that they will stop paying commissions for referrals of so-called click-through customers. … Both Amazon in Seattle and Overstock in Salt Lake City have told affiliates that they would have to move to another state if they wanted to continue earning commissions for referring customers.

The natural result of California doing yet more to make the state uninhabitable for business comes at the end of the story. Californians who earned and spent money in California as part of the Internet remote sales ecosystem plan to move elsewhere:

One affiliate, Ken Rockwell of San Diego, the owner of a 12-year-old photography website, said he planned to move out of state. “Will it be Las Vegas or Scottsdale or Ensenada?” he said. “It’s a question of where, not if.”

In the Quill case, the Supreme Court invited Congress to change the rule that it laid down. If it saw fit, Congress could permit states to export their tax responsibilities to businesses in every other state. But this would cut off the healthy tax competition you see happening in the area of remote sales; both taxes and tax collection burdens would rise.

Profligate and tax hungry states like California are desperate to overturn Quill in the courts or through the Congress. Here’s hoping they fail.

Ranking the Charter School Networks

Much of the response to the study I released last week has focused on the relative academic performance rankings of California’s charter school networks. That wasn’t the point of the study, which focuses on whether or not philanthropy + charter schooling can replace venture capital and competitive markets as a mechanism for scaling-up the best education services. Rather than try to fight the tide, I thought I’d just share the relevant rankings in an easy-to-link form, and once the debate about them dies down we can return to the larger policy point.

With that in mind, the first table below lists the top 15 charter school networks in terms of performance on the California Standards Tests, adjusted for student factors and peer effects. For comparison, two non-charter schools are included: the academically selective elite public prep schools Gretchen Whitney and Lowell–both of which feature in most lists of the top public schools in the country. There are 68 networks with the necessary data, but the lowest grant rank is 61 because eight of the networks received no philanthropic funding at all.

Next is a list of the charter networks that philanthropists have invested-in most heavily, with a view to replicating their models. Notice the minimal overlap? I repeat this comparison in the study with Advanced Placement test performance, and find the same pattern (it’s just slightly worse).

Every one of the above networks received substantially more grant funding individually than the top three highest achieving networks… combined.