Tag: obama

Obama, Romney, Teachers, and Choice

Jay Greene has an excellent piece in the Wall Street Journal this week revealing that the teacher workforce has grown dramatically over the past forty years—and at enormous cost—without improving student achievement by the end of high school. And he rightly disparages President Obama for arguing that even more teachers would somehow do the trick. Even better, Greene notes that American education will not reverse its productivity collapse and become efficient until we allow it to benefit from the freedoms and incentives of the marketplace.

But then Jay cites Governor Romney’s goal of “voucherizing federal education funds so that parents can take those resources and use them to send their children to schools of their choice,” and he does so with apparent approbation. Even ignoring the fact that the Constitution does not empower Congress to run education programs, this is a very dangerous idea.

There has been no civilization in the history of humanity in which governments have paid for private schooling without ultimately controlling what was taught and who could teach, erecting barriers to entry and thereby crippling market forces.

For that reason, I recommended against a federal voucher program under the Bush administration. Since then, additional evidence has come to light. When I studied the regulatory impact of U.S. private school choice programs last year I found that even the small existing U.S. voucher programs do indeed impose a heavy and very statistically significant additional burden of regulation on participating private schools.

Perhaps a way will be found to enact and maintain minimally regulated voucher programs in the coming years. Until that time comes, it would be the height of folly to introduce a federal voucher program whose regulations would suffocate educational freedom from coast to coast.

In my statistical study of choice program regulation, I found that K-12 tax credit programs do not impose a statistically significant extra burden of regulation on private schools. But even a national K-12 tax credit program would be far too dangerous. By leaving education policy to the states and the people, we can see which programs flourish and which become sclerotic. We must encourage and learn from that policy diversity, not squelch it with federal programs or mandates.

Post-Debate Analysis: Debunking Obama’s Flawed Assertions on Tax Deductions and Corporate Welfare

In a violation of the 8th Amendment’s prohibition against cruel and unusual punishment, my brutal overseers at the Cato Institute required me to watch last night’s debate (you can see what Cato scholars said by clicking here).

But I will admit that it was good to see Obama finally put on the defensive, something that almost never happens since the press protects him (with one key exception, as shown in this cartoon).

This doesn’t mean I like Romney, who would probably be another Bush if he got to the White House.

On the specifics, I obviously didn’t like Obama’s predictable push for class warfare tax policy, but I’ve addressed that issue often enough that I don’t have anything new to add.

I was irked, though, by Obama’s illiteracy on the matter of business deductions for corporate jets, oil companies, and firms that “ship jobs overseas.”

Let’s start by reiterating what I wrote last year about how to define corporate income: At the risk of stating the obvious, profit is total revenues minus total costs. Unfortunately, that’s not how the corporate tax system works.

Sometimes the government allows a company to have special tax breaks that reduce tax liabilities (such as the ethanol credit) and sometimes the government makes a company overstate its profits by not allowing it to fully deduct costs.

During the debate, Obama was endorsing policies that would prevent companies from doing the latter.

The irreplaceable Tim Carney explains in today’s Washington Examiner. Let’s start with what he wrote about oil companies.

…the “oil subsidies” Obama points to are broad-based tax deductions that oil companies also happen to get. I wrote last year about Democratic rhetoric on this issue: “tax provisions that treat oil companies like other companies become a ‘giveaway,’…”

I thought Romney’s response about corrupt Solyndra-type preferences was quite strong.

Here’s what Tim wrote about corporate jets.

…there’s no big giveaway to corporate jets. Instead, some jets are depreciated over five years and others are depreciated over seven years. I explained it last year. When it comes to actual corporate welfare for corporate jets, the Obama administration wants to ramp it up — his Export-Import Bank chief has explicitly stated he wants to subsidize more corporate-jet sales.

By the way, depreciation is a penalty against companies, not a preference, since it means they can’t fully deduct costs in the year they are incurred.

On another matter, kudos to Tim for mentioning corrupt Export-Import Bank subsidies. Too bad Romney, like Obama, isn’t on the right side of that issue.

And here’s what Tim wrote about “shipping jobs overseas.”

Obama rolled out the canard about tax breaks for “companies that ship jobs overseas.” Romney was right to fire back that this tax break doesn’t exist. Instead, all ordinary business expenses are deductible — that is, you are only taxed on profits, which are revenues minus expenses.

Tim’s actually too generous in his analysis of this issue, which deals with Obama’s proposal to end “deferral.” I explain in this post how the President’s policy would undermine the ability of American companies to earn market share when competing abroad - and how this would harm American exports and reduce American jobs.

To close on a broader point, I’ve written before about the principles of tax reform and explained that it’s important to have a low tax rate.

But I’ve also noted that it’s equally important to have a non-distortionary tax code so that taxpayers aren’t lured into making economically inefficient choices solely for tax reasons.

That’s why there shouldn’t be double taxation of income that is saved and invested, and it’s also why there shouldn’t be loopholes that favor some forms of economic activity.

Too bad the folks in government have such a hard time even measuring what’s a loophole and what isn’t.

How the Media Undermined President Obama’s Debate Performance

The media elites are surprised and disappointed by President Obama’s debate performance last night. They are partly to blame. If they had spent the past four years challenging the president as aggressively as they did his predecessors, he would have been far better prepared to defend his record and respond to criticism. But instead of pitching him curves and fastballs, they’ve mostly lobbed him Nerf balls. Even the Pew Charitable Trusts, hardly a Republican operation, found after his first 100 days in office that the media coverage of President Obama was twice as favorable as that received by President Bush and 50% more favorable than that received by President Clinton. Things haven’t changed much since, and the American people know it. This summer, a Rasmussen poll found that “likely voters, by a five-to-one margin, believe that America’s media is in President Obama’s pocket and will treat his candidacy better than challenger Mitt Romney.”

After tonight’s debate, perhaps the media will realize that the old adage applies to them: you only hurt the one you love.

ObamaCare’s ‘Essential Health Benefits’: Few States Implement, HHS ‘Is in Clear Violation of the Law’

ObamaCare directs the Secretary of Health and Human Services to define the “essential health benefits” that all consumers in the individual and small-group health insurance markets must purchase. HHS Secretary Kathleen Sebelius kicked that decision to the states, giving them a deadline of this past Friday, September 30. Kaiser Health News reports that all of 16 states submitted an Essential Health Benefits (EHB) benchmark to HHS by the deadline.

But did Sebelius have the authority to kick this decision to states? In a September 26 letter to Sebelius, Pennsylvania Insurance Commissioner Michael Consedine writes:

[T]he PPACA clearly states that the Secretary of HHS is to define the EHB package for policies offered both inside and outside of health insurance exchanges. While the language in PPACA was plain that this statutory responsibility fell on HHS, in December of last year HHS issued guidance preliminarily indicating states must select a benchmark design, with HHS potentially acting as final arbiter…of that selection. (Emphasis added.)

Is September 30 even a deadline?

Some communications from your agency indicate that this is a suggested response date while others indicate that it is a deadline of some sort. We again are asking for clarity.

Letting states make that decision will increase flexibility, though. Right?

[I]n reality the guidance placed additional restrictions on the EHB selection rather than flexibility. HHS guidance appears to render the states’ ability to innovate and to make an independent choice illusory. (Emphasis added.)

Indeed, the 16 states who have complied may be in for a rude awakening.

HHS indicated that any selection by the states will be subject to additional review, but we have no definitive guidance as to what, if any, weight will be given to a state’s selection. The minimum amount of information provided to date invites concern that your agency will alter or override a state’s submission…raising serious questions as to whether states have any meaningful ability to make a definitive selection of an EHB benchmark. (Emphasis added.)

Pennsylvania thus declined to submit one, and effectively told Sebelius to do her job.

Louisiana went a step further, threatening to hold Sebelius accountable if she doesn’t. In a September 27 letter, Louisiana’s Secretary of Health and Hospitals Bruce Greenstein and Insurance Commissioner James Donelson noted that the December 2011 “bulletin” merely stated that HHS “intend[s] to propose” a deadline of  September 30 for making that decision—meaning that the bulletin “neither… has the force of law, nor commits federal regulators to any particular course of action.” Moreover:

[I]t is our State’s conclusion that while the bulletin states a decision is to be made by [September 30], this “deadline” has never been formalized through the official rulemaking process. As long as formal rules do not exist, the federal government can change its approach. Since the federal government is not bound by these bulletins, neither are the States. As such, the State of Louisiana is not legally required to submit a benchmark preference by [September 30,] 2012. The State of Louisiana will not permit the federal government to dictate to our residents a default benchmark plan, as the federal government, in its disregard of the requirements of the Administrative Procedure Act regarding essential health benefits and other provisions of the PPACA, has no authority to do so under federal or Louisiana law until regulations are published in the Federal Register, following established notice and comment procedure.

The process developed for defining the essential health benefit benchmark has been a completely new method of establishing law without proper rulemaking. Implementation of new policies without open and public comment and publication in the Federal Register is in clear violation of the law.

The administration has charged states to build what the federal government mandates, but the federal government has provided [only] informal guidance and incomplete rules and regulations…Accordingly, there will be no essential health benefits package for the State of Louisiana, and we will pursue all avenues to prevent the federal government from selecting one on behalf of our state. (Emphasis added.)

As I have written previously, “implementing these parts of the law can only lead to more regulation, fewer choices, and higher costs. And of course, state officials will take the blame when ObamaCare starts increasing costs and denying care to people. There is simply no good reason for states to assume this impossible, harmful, and thankless task.”

‘I Haven’t Raised Taxes’

Why am I only hearing about President Obama’s gob-smacking “I haven’t raised taxes” claim today, and from Reason?

On CBS News’s “60 Minutes” Sunday night, President Obama said, “Taxes are lower on families than they’ve been probably in the last 50 years. So I haven’t raised taxes.”

As of Monday morning, neither the Washington Post’s Pinocchio-awarding Fact-Checker, nor the Annenberg Public Policy Center’s FactCheck.org, nor the Tampa Bay Times’ Pulitzer-Prize-winning Politifact.com had risen to this opportunity…

Unbelievable. I just checked those websites, and they still haven’t.

Fortunately, Ira Stoll has. He leaves out a number of taxes President Obama has enacted, though, including raising the Medicare payroll tax on high-income earners, applying the Medicare payroll tax to non-payroll income for high-income earners, limiting the tax exclusion for flexible spending accounts, increasing the penalties on certain health savings account withdrawals, the “Cadillac tax” on high-cost health plans…

Should States Implement ObamaCare’s ‘Essential Health Benefits’ Mandate?

The Washington Post’s Sarah Kliff writes that the Department of Health and Human Services has decided to “punt” on the “monumental” task of dictating exactly what types of coverage those who get health insurance through the individual market or small employers must purchase. HHS has decided to let each state decide for its own residents what constitutes “essential health benefits.” It was a shrewd move: under the guise of decentralized decision-making, HHS is offering to let state officials take the blame for an inevitably controversial decision and the inevitable higher costs that will result. Yay, federalism! States have until the end of this month to decide just how much coverage they are going to help ObamaCare force their citizens to purchase.

Kliff reports that many states are now wrestling with the unanswerable question, “What health-care benefits are absolutely essential?”

Is acupuncture essential health care? Weight-loss surgery? Under Obamacare, states choose…

California legislators say acupuncture makes the cut. Michigan regulators would include chiropractic services. Oregon officials would leave both of those benefits on the cutting-room floor. Colorado has deemed pre-vacation visits to travel clinics necessary, while leaving costly fertility treatments out of its preliminary package…

A Virginia advisory board recommended that the state adopt a plan that includes speech therapy and chiropractic care. A District subcommittee has endorsed a plan pegged to an existing BlueCross BlueShield package, and public comment remains open through Friday Sept. 28…

Of course, an objective definition of “essential” coverage is impossible. Like “medical necessity,” the only way to determine whether health coverage is “essential” is if the benefits exceed the costs. That is an inherently subjective question that no legislator or regulator, state or federal, can or should try to answer for a diverse population of consumers. When they do, health care providers invariably hijack the process, demanding that consumers be required to purchase coverage of their services. Since the legislators/regulators are handing out benefits while consumers and taxpayers shoulder the costs, the result is predictable: health insurance premiums rise.

Thanks to HHS’s punt, providers now have an even greater incentive to lobby states to mandate coverage of their services. If a state creates its own list of “essential health benefits,” then any benefits the state mandates will be eligible for federal subsidies. If not, the cost of state-mandated benefits continues to fall on consumers or employers, who tend to complain. (Again, shrewd. Corrupt and irresponsible. But shrewd.)

But since ObamaCare is on the books, and HHS gave states a choice, what should states do?

The choice is identical to what states face with regard to health insurance Exchanges: states have the option to implement part of ObamaCare themselves, but no matter what they decide, Washington is ultimately running the show.

The federal government will not let states pick a menu of “essential health benefits” or establish an Exchange with fewer regulatory controls than HHS would impose itself. Since less regulation than the federal government would impose is not an option, implementing these parts of the law can only lead to more regulation, fewer choices, and higher costs. And of course, state officials will take the blame when ObamaCare starts increasing costs and denying care to people. There is simply no good reason for states to assume this impossible, harmful, and thankless task.

Instead of doing the feds’ dirty work, states should use this opportunity to show how ObamaCare rigs the game against states and consumers alike. State officials that want to rid the nation of ObamaCare should submit to HHS a “benchmark” EHB plan that they know HHS will refuse. It could be either the most affordable health plan they can find in their individual or small group markets, or a plan that state officials designed themselves. Leave out benefits that HHS considers dealbreakers. Push the deductible as high as you dare. Allow annual or lifetime limits. The less coverage you include in your EHB benchmark, the more choice consumers will have and the lower the premiums will be. Submit such a proposal to HHS and dare them to reject it. Let your voters see that under ObamaCare, choice is a mirage. Dare HHS to explain why they rejected affordable health plans and forced the Treasury to subsidize more-expensive health plans.

Alternatively, state who are not inclined to confrontation can tell the Obama administration the same thing they should say with regard to health insurance Exchanges: it’s your stupid law, you implement it.

Mitt Romney’s Contrived Trade War

The Obama administration filed a formal complaint with the World Trade Organization on Monday alleging that the Chinese government is bestowing various prohibited subsidies upon Chinese automobile and auto parts producers to the tune of $1 billion and that Beijing is, accordingly, in violation of its commitments under the WTO Agreement on Subsidies and Countervailing Measures.

There are reasons to shake one’s head at this move, including the apparent hypocrisy it reveals of an administration that spins the $85 billion of subsidies it heaped upon two U.S. car companies and the United Autoworkers union as its chief economic accomplishment. Of course that figure doesn’t even include the $12-$14 billion in unorthodox tax breaks granted to GM under the bankruptcy terms; $17 billion in funds committed from the TARP to GM’s former financial arm GMAC (which received taxpayer support to facilitate GM auto sales); GM’s portion of the $25 billion Energy Department slush fund to underwrite research and development in green auto technology; and the $7,500 tax credit granted for every new purchase of a Chevy Volt, and more. (Full story here.)

To complain about $1 billion of Chinese subsidies is – shall we say – a bit rich.

Moreover, the filing of the WTO case reveals some of the unseemly perquisites of incumbency. A large concentration of the beneficiaries of the GM bailout resides in Ohio, a state that has had the administration’s strategic attention since its reelection campaign began in November 2008. But in case that largesse wasn’t enough to secure their support in November 2012, a large concentration of the beneficiaries of a successful U.S. WTO complaint also resides in Ohio, which is where – by Jove – the president was speaking when word of the WTO complaint became public.

It is all exasperating, no doubt.

But the bigger and more disconcerting story in all of this is the apparent ascendancy of economic nationalism within the GOP. Romney’s persistence in trying to brand himself the “most protectionist” or “biggest China basher” in the presidential race sort of forced Obama to bring the WTO case – or at least expedited the timetable. Have you seen the Romney ads? Have you read the shrill RNC taunts that cite the widely-discredited, union-funded Economic Policy Institute’s figures on job losses caused by trade with China? Strange bedfellows, indeed!

It was once the case – not too long ago – that Republican candidates argued in support of trade and the freedom of Americans to partake of the opportunities afforded by the global economy. But things, apparently, have changed. The nationalistic strains within the Republican Party have strengthened since 2009. I explained why this was happening in this 2010 Cato paper, which is excerpted below:

Frictions in the U.S.-China relationship are nothing new, but they have intensified in recent months. Tensions that were managed adeptly in the past are multiplying, and the tenor of official dialogue and public discourse has become more strident. Lately, the media have spilled lots of ink over the proposition that China has thrived at U.S. expense for too long, and that China’s growing assertiveness signals an urgent need for aggressive U.S. policy changes. Once-respected demarcations between geopolitical and economic aspects of the relationship have been blurred. In fact, economic frictions are now more likely to be cast in the context of our geopolitical differences, which often serves to overstate the challenges and obscure the solutions.

A sign of the times is a recent commentary by Washington Post columnist Robert J. Samuelson, in which he declares: “China’s worldview threatens America’s geopolitical and economic interests.” That statement would seem to support a course of action very different from the course implied by the same columnist 18 months earlier, when he wrote, “Globalization means interdependence; major nations ignore that at their peril.” That change of heart appears to be contagious.

Understandably, there is angst among the U.S. public, who hear frequently that China will soon surpass the United States in one economic superlative after another. Some worry that China’s rise will impair America’s capacity to fulfill or pursue its traditional geopolitical objectives. And those concerns are magnified by a media that cannot resist tempting the impulses of U.S. nationalism. Woven into stories about China’s frantic pace of development are reminders that the Chinese have not forgotten their two-century slumber—a period of humiliation and exploitation by foreign powers.

A recent National Journal cover story describing areas of bilateral policy contention—which the article laments as “frustrating” the fact that U.S. experts see “few alternatives to continued engagement” —features three menacing photographs of Chinese military formations, one picture of North Korean leader Kim Jong Il flanked by members of the Chinese military, and one photo of the Chinese foreign minister shaking hands with Iranian President Mahmoud Ahmadinejad.

Subtly, and sometimes not, the media and politicians are brandishing the image of an adversarial China. In Chinese reluctance to oblige U.S. policy wishes, we are told that China selfishly follows a “China-First” policy. In the increasing willingness of Chinese officials to criticize U.S. policies, we are told of a new “triumphalism” in China. In the reportedly shabby treatment of President Obama by his Chinese hosts on his recent trip to Beijing, we are told that the “Chinese have an innate sense of superiority.” But indignation among media and politicians over China’s aversion to saying “How high?” when the U.S. government says “Jump!” is not a persuasive argument for a more provocative posture.

China is a sovereign nation. Its government, like the U.S. government, pursues policies that it believes to be in its own interests (although those policies—with respect to both governments—are not always in the best interests of their people). Realists understand that objectives of the U.S. and Chinese governments will not always be the same, thus U.S. and Chinese policies will not always be congruous. Accentuating and cultivating the areas of agreement, while resolving or minimizing the differences, is the essence of diplomacy and statecraft. These tactics must continue to underpin a U.S. policy of engagement with China.

In this campaign, the RNC seems to be fighting to position itself to the protectionist side of Obama, daring the president to take action – a dare the president has accepted, inflating his political credit in places like Ohio. In response to Governor Romney’s assertion that the president had been soft on China and that he, Romney, would label China a currency manipulator on his first day in office, Obama created the Interagency Trade Enforcement Center, which resonated politically with the target audience. While the challenger blathers about the president’s alleged fecklessness in dealing with China, the president responds by bringing new WTO cases against Beijing. The most recent complaint, relative to the strident tack Mitt Romney is advocating, is the more responsible, more pro-market course of action. If Romney is to be believed, his trade actions would have far worse consequences for the economy.

Instead of focusing on the real sources of economic stagnation in the United States – including the uncertain business climate inspired by the bailouts, the proliferation of costly and superfluous new environmental, health, and financial regulations, a tax code that is in constant flux, frivolous torts, an education monopoly that fails to produce enough talent backstopped by an immigration system that chases it away – Mitt Romney has chosen to blame America’s woes on China. THAT is the message the Republican presidential candidate, with the full backing of the RNC, brings to the voters in Ohio, whose fortunes are increasingly tied to America’s engagement in the global economy. As of July, Ohio’s unemployment rate was 7.2 percent, more than one full percentage point lower than the U.S. rate of 8.3%. Ohio’s economy is growing on account of trade – particularly with China, the state’s third largest market and destination of $2.7 billion worth of Ohio’s output in 2011. Just look at this bar chart that depicts the importance of China to Ohio, and conversely, the costs of a real bilateral trade war.

Governor Romney should ditch his trade warrior schtick pronto, and start explaining to the electorate how pro-trade policies – including the freedom of corporations to invest abroad (to offshore a la Bain Capital)– help enlarge the economic pie. Puffing out the chest to appear the biggest protectionist in the race is bad economics and bad politics.