Tag: politicians

More Evidence on the Turning Tide

america-store_2065_6501360I wrote recently about the anti-Obama T-shirts on display at Washington’s Dulles Airport. This week I can report that at the Baltimore/Washington International Thurgood Marshall Airport, there are big cut-outs of Barack and Michelle Obama. But they’re standing by a display of shirts reading “Don’t Blame Me, I Voted for McCain and Palin” and another reading “NOPE (with the Obama campaign logo) – keep the change.” The times they are a-changin’.

In the interest of full disclosure, I should note that out in the real America, the airports of Albuquerque and San Diego, there are no T-shirts on display for or against any politician. It’s like they don’t think Americans care about politicians.

Finally, an Education Muckraker!

I’ve often complained on this blog that there are no education muckrakers – no reporters who will actually go out and investigate the misleading claims so often fed to them by politicians and public school officials. Well, it turns out there’s at least one, and his name is Ron Matus.

After being told countless times that public schools in Florida spend just $7,000 per pupil annually, Matus decided to do what no other ed reporter in the state (so far as I know) has done: check it. In a blog post today, he explains where the $7,000 number comes from, he points out that the actual total is $12,000 per pupil, and he lets readers decide which number is more relevant to them. Way to go, Mr. Matus!

I particularly enjoyed this line: “[Department of Education] officials say it’s fair to roll federal money into a per-pupil spending figure – that money does go to operational costs - but not capital outlay and debt service.”

Apparently schools don’t need buildings anymore! Wonderful news! Now that Floridians no longer have to pay for construction and renovation costs, they’ll save $6 billion a year. That is, they’ll start saving it as soon as the Department of Education gives it back to them. What’s that? They don’t want to give it back even though they say it doesn’t count? Gee. I guess it does count then, doesn’t it?

This public school emperor isn’t just naked, he’s mincing about flamboyantly and daring on-lookers to call him sartorially challenged. Well we dare, pal, we dare. If you want buildings to house all those students, and you want the billions to pay for them, then the St. Pertersburg Times, at least, is going to start counting it.

If there are any other reporters out there who have similarly tracked down the real total per pupil spending numbers, let me know and I’ll cite your work here. Or, if you’d like to try it but don’t know where to start, acoulson [at] cato [dot] org (subject: Real Education Numbers) (drop me an e-mail.)

“It’s a Lot Easier to Promise to Change Washington Than It Is to Actually Change It”

The New York Times has an interesting story on President Obama’s continuing failure to follow through on his “Sunlight Before Signing” promise. On the campaign trail, he said he would post bills online for five days before signing them. Two dozen bills now have his signature, and only one has been posted for five days before signing.

The article (and accompanying video) fixes on a couple of reasons why the president might be excused from carrying out the promise. One is the technical difficulty of managing potentially hundreds of thousands of comments. The promise did not include a promise to publish comments, though – much less to read them (though it would be politically astute to appear to do so). In my view, the difficulty of administering a public comment system – which was not part of the promise – does not excuse the failure to post the bills Congress presents to the president for five days before he signs them.

A second excuse is that posting bills online would be ineffectual. Ellen Miller of the Sunlight Foundation is quoted saying, “There isn’t anybody in this town who doesn’t know that commenting after a bill has been passed is meaningless.”

I have done my level-best to illustrate how a five-day hold at the White House would have good effects on reducing earmarks, parochial amendments, and other shenanigans – such as congressional approval of bonuses to AIG executives.

Miller’s preferred approach – placing a similar hold on bills before they leave Congress – would have a similar effect – but nothing dramatically more open. Just as under a presidential hold, members of Congress and Senators would be more reticent to introduce potentially controversial amendments. Just as under a presidential hold, they would carefully avoid a blossoming of debate about their pet projects at the end of the legislative process. A congressional hold would change the upstream behavior of the politicians – just like a presidential hold would.

A presidential hold and a congressional hold are both good ideas, and they are not mutually exclusive. The presidential hold has a key advantage: The president has already promised it – to the cheers of American voters.

The New York Times story reports a small step toward meeting the actual terms of President Obama’s pledge:

“In order to continue providing the American people more transparency in government, once it is clear that a bill will be coming to the president’s desk, the White House will post the bill online,” said Nick Shapiro, a White House spokesman. “This will give the American people a greater ability to review the bill, often many more than five days before the president signs it into law.”

If this means posting links to bills on the Thomas legislative system from Whitehouse.gov, this is something the White House has done sporadically, and it would increase transparency by a small margin if it were regularized. The administration should establish a uniform URL where bills are posted so that every American can easily find every bill the president signs. But, in terms of fulfilling President Obama’s promise, “posting a link from WhiteHouse.gov to THOMAS of a conference report that is expected to pass doesn’t cut it.”

I think this is grudging progress toward implementation of President Obama’s “Sunlight Before Signing” promise. In the video, the author of the Times article has the best line illustrating why the White House deserves modest congratulations for taking this step: “It’s a lot easier to promise to change Washington than it is to actually change it.”

Injustice of State Subsidies

My colleague Chris Edwards made a good point yesterday in his post on the injustice of federal subsidies.  The wrangling between the states to haul in the federal largesse is wasteful, and getting worse.  But the underlying issue in the article Chris cites — a state using taxpayer money to lure a company away from another state — is another wasteful activity that is all too common.

Instead of competing with other states to attract industry by lowering taxes and reducing regulations, it seems most state governors prefer a politically opportunistic method I call “press release economics.”  Here’s how it works:

A state “economic development” agency offers an out-of-state company (or even an out-of-country company) tax breaks and/or direct subsidies to locate some or all of its business operations in that state.  Most likely, the business would have located there anyhow due to myriad factors including demographics, transportation logistics, and workforce capabilities.  Sometimes several states will engage in a “bidding war” to get a business to set up shop within their borders.  The governor of the “winning” state will then issue a press release citing the new jobs and capital his administration has just brought to the state.  The locating company usually tells the press that the winning state’s package helped seal the deal.  The company and the governor’s press staff then typically arrange a photo-op at an orchestrated ground-breaking ceremony for the new facilities.

If a state is already bleeding jobs, as is often the case in the current economy, such press releases and photo-ops can be a political coup.  Moreover, the governor will have given up, or foregone, relatively little in tax revenue in comparison to, say, cutting the state corporate income tax.  This also leaves the governor with more money to spend on various vote-buying programs. I’m picking on governors, but the legislature generally prefers the press-release economics route for similar reasons.  And if you’re a governor, why risk the headache of engaging the legislature in a fight over reducing corporate taxes, unemployment taxes, or any other tax — including personal income taxes and sales taxes — that effect industry when you can take the easy win?

Am I too cynical?  Actually, I had first-hand experience with this issue when I worked in state government.  My suggestion that the governor eliminate or reduce the state’s high corporate income tax rate, and “pay for it” — at least in part — by getting rid of the state’s corporate welfare apparatus, was routinely ignored for the reasons I cited above.  That one would be hard-pressed to find support among the economics profession for the state corporate welfare give-away game means little to the majority of policymakers and their minions who naturally favor short-term political gain over long-term economic gain.  That other companies already located within the state are stuck paying the regular tax rate, and are thus put at a competitive disadvantage, is a secondary or non-concern as well.

Another issue that I won’t delve into here is the fact that these giveaways often blow up in a state’s face when the locating company ends up not producing the jobs it promised and/or it relocates to another state or country after pocketing the free taxpayer money.  Anyhow, journalists should be on the lookout for more press-release economics schemes coming from the states as revenues remain tight and politicians become desperate to demonstrate they’re “doing something.”  Journalists should examine a state’s tax structure when a taxpayer giveaway is announced to see if perhaps the governor is masking economic-unfriendly fiscal policies.

Note: South Carolina Gov. Mark Sanford proposed late last year to do exactly what I recommended: eliminate the state’s corporate income tax, offset in part by the elimination of corporate tax incentives.  There is hope.

Greedy Politicians Intrigued by Value-Added Tax to Finance European-Style Welfare State in America

The Washington Post reports that there is growing interest among politicians for a form of national sales tax known as the value-added tax (VAT). But rather than use the VAT to replace the income tax, the politicians want a new source of revenue to expand the burden of government. The story explains:

With… President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax. Common around the world, including in Europe, such a tax – called a value-added tax, or VAT – has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need… At a White House conference earlier this year on the government’s budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama’s policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate. “There is a growing awareness of the need for fundamental tax reform,” Sen. Kent Conrad (D-N.D.) said in an interview. “I think a VAT and a high-end income tax have got to be on the table.” …”While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers,” said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag. Still, Orszag has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff Rahm Emanuel and author of the 2008 book “Health Care, Guaranteed.” Meanwhile, former Federal Reserve chairman Paul A. Volcker, chairman of a task force Obama assigned to study the tax system, has expressed at least tentative support for a VAT. “Everybody who understands our long-term budget problems understands we’re going to need a new source of revenue, and a VAT is an obvious candidate,” said Leonard Burman, co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, who testified on Capitol Hill this month about his own VAT plan.

Not surprisingly, the Washington Post did not bother to quote any free-market people who oppose giving politicians a new source of money. For what it is worth, I wrote a piece for National Review in 2005 that explains why a VAT is a terrible idea. The core arguments are just as relevant today as they were then:

A VAT might have some theoretically attractive features, but it is a perniciously effective way of raising revenues and inevitably leads to bigger government. The best evidence comes from Europe. Back in the mid-1960s, the burden of government in Europe wasn’t that much higher than it was in the United States. Tax revenues consumed about 30 percent of gross domestic product in Europe. The U.S. had a small advantage: The tax burden, including state and local governments, was about 27 percent of GDP. But then European governments started adopting the VAT. Denmark was the first to do so in 1967. France and Germany followed, with many other European nations imposing the tax within 5 years. For politicians, the VAT was great news. Besides being a new source of revenue, the VAT has been a disturbingly easy tax to increase since it’s built into the price of products and hidden from consumers. Moreover, even small increases generate a big pile of revenue because the tax base is so broad. The tax has become so easy to raise that VAT rates in Europe average more than 20 percent. For taxpayers, however, the news has been disastrous. Thanks to this levy, the burden of government in Europe today is much higher than it is in the U.S. On average, taxes consume about 41 percent of Europe’s economic output. While other taxes have also climbed, the VAT certainly has helped finance the explosion of social welfare spending that creates such a drag on European economies. In the U.S., by contrast, the total tax burden as a share of GDP is about where it was 40 years ago — 27 percent… Many European governments…claimed that more destructive taxes would be reduced or repealed once the VAT was implemented. In the short term, this was true: As late as 1975, taxes on income and profits were lower in the EU than they were in the U.S. But this was a transitory phenomenon. Income-tax rates quickly began climbing and almost immediately jumped above U.S. levels. Ironically, the VAT facilitated higher tax rates on income since politicians often argued that a higher VAT had to be accompanied by higher income-tax burdens to ensure the tax burden wasn’t being shifted to lower-income taxpayers. There is only one scenario that would make a VAT acceptable. If U.S. lawmakers were willing to repeal the 16th Amendment and abolish all taxes on income, a VAT would be an acceptable risk. But until that happens, taxpayers should vigorously resist the Europeanization of America.

No Balanced Budget, No Raise

Ben Goddard writes in The Hill about the new taxpayer revolt in California this week. The political establishment put together a package of initiatives that it thought would fix the budget process there – but the people weren’t buying it. The only thing they passed was the measure to ban salary increases for legislators if they didn’t balance the budget.

There are similar proposals floating around Capitol Hill. If bills were subject to a popular vote, it seems like such a thing would be likely to pass.

Politicians in Thrall to Terrorism

Doug Bandow aptly finds the debate about Guantanamo detainees surreal. For my part, I see it as an exhibition of politicians put “on tilt” – and unwittingly executing the terrorism strategy.

The leadership of both parties appears not to understand that terrorism is designed to elicit self-injurious overreaction. Fear-mongering is a cog in the overreaction machine.

If they did understand this, they would see it as both a civic duty and politically rewarding leadership to exhibit bravery. Messages of indomitability and calm are the appropriate strategic response to terrorism.

Instead, what we have is a bidding war about who can be the most fearful of Guantanamo detainees – a group that is well under control itself and whose transportation and housing in U.S. prisons is entirely manageable.

Both parties are playing to a “base” of caterwauling Islamophobes while the bulk of the American public looks on bewildered and disappointed. Meanwhile, people around the world see that terrorism is a great way to express opposition to U.S. power and U.S. policies. Oops.