Tag: spending

President’s Budget Lacks Seriousness, Vision

By
Andrew J. Coulson

The measure of our seriousness in helping children learn is not simply the number of dollars we spend, but rather the care and thought we invest in allocating them, and our openness to changing course when the evidence demands it. The education provisions of the President’s budget, released today, lack both seriousness and vision.

The FY 2014 budget overview emphasizes three educational initiatives: preschool for all, STEM and innovation, and school infrastructure.

As foreshadowed in his State of the Union address, President Obama proposes to federally subsidize statewide preschool programs. This approach seems designed to deal with the mounting evidence that the federal government’s own preschool programs, Head Start and Early Head Start, have essentially no lasting benefits. Though candidate Obama once said he would terminate ineffective programs, his latest budget retains them both, and actually grows Early Head Start. Additionally, the new budget would subsidize PreK programs like those in Oklahoma and Georgia that advocates have long touted as “high quality.” The evidence on those programs is, however, rather mixed. Relative to the national average, Oklahoma has seen modest declines on the 4th grade NAEP tests while Georgia has seen modest gains—and the declines are larger than the gains. A broader review of the evidence by early education expert Russ Whitehurst of Brookings finds the same lackluster results overall. 

Not only are these statewide programs failing to show a pattern of lasting and substantial benefits thus far, the addition of federal subsidies will likely impede efforts to improve them. Federal education dollars at the pre-college level always come with strings attached—strings that accumulate over time. That is likely to exert a homogenizing pressure on state pre-K offerings, eliminating variation and thereby preventing us from learning which approaches are effective and which are not.

On STEM, the President is keen to fund the hiring of 100,000 new Science, Technology, and Math teachers. But America does not have a teacher quantity problem, we have a teacher effectiveness problem. Over the past 40 years, we’ve grown the number of public school employees 11 times faster than enrollment [i.e., we’ve doubled the number of staff to serve only 8.5 percent more students]. This has added $200 billion annually to the cost of American public schooling, and two million of the three million new hires were instructional staff, so it’s not simply a problem of bureaucratic bloat. And yet, despite all those new teachers and teachers’ aides, achievement at the end of high school is largely flat as are real graduation rates.

In other words, our public schools have shown themselves incapable of harnessing the talents of these millions of additional educators. The solution is not to hire yet more teachers into that system, it is to liberalize the education sector, bringing it back within the free enterprise system. Only when schools have both the freedoms and incentives to make the most of their teaching staffs, will we see educators’ talents marshaled effectively.

Finally, President Obama’s proposed new infrastructure spending focuses only on the symptom (crumbling school facilities) and ignores its cause (mismanagement). I’ve analyzed school survey data on the condition of facilities and found that public schools are in a much worse state of repair than private schools, despite the fact that private schools spend far less per pupil, on average. The question is WHY are public schools in a worse state of repair, given that they spend more? According to a federal government report, it’s because districts repeatedly defer necessary routine maintenance. These deferrals increase the cost of maintaining school facilities and accelerate the deterioration of buildings and equipment. In other words, they postpone the ounce of prevention until the pound of cure becomes unavoidable—and they do this because they don’t have to pay for the cure. Once again, bringing schools back within the free enterprise system would provide administrators with the incentives to maintain their facilities so as to avoid the financial hit of costly repairs and replacements—a hit that they can now pass on to taxpayers at no cost to themselves or their careers.

Regrettably, seeing the root causes underlying our educational woes is beyond the vision of the present administration.

Topics: 
Education and Child Policy, Tax and Budget Policy

ObamaCare Implementation News

By
Michael F. Cannon

Here’s some ObamaCare implementation news from around the interwebs:

  • “Minnesota Facing Bigger Bill For State’s Health Insurance Exchange”: Kaiser Health News reports Minnesota has increased its spending projections for operating the state’s ObamaCare Exchange by somewhere between 35-80 percent for 2015. Spending on the Exchange will rise by another 19 percent in the following year.
  • The Wall Street Journal  defends the 25-30 states that aren’t gullible enough to create an Exchange and therefore take the blame for ObamaCare’s higher-than-projected costs.
  • Arizona Gov. Jan Brewer (R) has announced she will not implement an Exchange. That creates another potential state-plaintiff, millions of potential employer-plaintiffs, and (by my count) 430,000 potential individual plaintiffs who could join Oklahoma attorney general Scott Pruitt in challenging the IRS’s illegal ObamaCare taxes. It also means that Arizona can start luring jobs away from tax-happy California. There are four Hostess bakeries in California that might be looking to relocate.
  • I’m enjoying a friendly debate with The New Republic’s Jonathan Cohn and University of Michigan law professor Samuel Bagenstos over whether the those taxes really do violate federal law and congressional intent (spoiler alert: they do). I owe Bagenstos a response.
  • PolitiFact Georgia rated false my claim that operating an ObamaCare Exchange would violate Georgia law. I explain here why it is indeed illegal for Georgia (and 13 other states) to implement an Exchange.
  • ThinkProgress.org reports, “Romney’s Transition Chief Is Encouraging States To Implement Obamacare.” A better headline would have been, “Government Contractor Encourages More Government Contracts.”
  • The Washington Examiner editorializes, “In California…state regulators have warned…insurance premiums will rise by as much as 25 percent once the exchange comes online…That’s the best-case scenario.” And, “In 2014, seven Democratic Senate seats will be up for grabs in states Mitt Romney carried (Alaska, Arkansas, Louisiana, Montana, North Carolina, South Dakota and West Virginia). Unless Obama’s HHS bureaucrats pull off an unprecedented miracle of central planning, Obamacare could well sink Democrats again in 2014, the same way it did in 2010.”
Topics: 
General, Government and Politics, Health Care

The IRS’s Illegal ObamaCare Taxes, Bagenstos Edition

By
Michael F. Cannon

As I posted a week ago today, Jonathan Adler and I have a paper titled, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” Our central claims are:

  1. The Patient Protection and Affordable Care Act explicitly restricts its “premium-assistance tax credits” (and thus the “cost-sharing subsidies” and employer- and individual-mandate penalties those tax credits trigger) to health insurance “exchanges” established by states;
  2. The IRS has no authority to offer those entitlements or impose those taxes in states that opt not to create Exchanges; and
  3. The IRS’s ongoing attempt to impose those taxes and issue those entitlements through Exchanges established by the federal government is contrary to congressional intent and the clear language of the Act.

We hope to post an updated draft of our paper, with lots of new material, soon.

At the Disability Law blog and Balkinization, University of Michigan law professor Samuel Bagenstos writes that our claims are “deeply legally flawed.”

Like others before him, Bagenstos’s main argument in support of the IRS reduces to the absurd claim that the federal government can establish an Exchange that is established by a state. He also offers two new arguments. Each is a non sequitur, and like his main argument is contradicted by the express language of the statute.

As I have written before:

[T]he statute is crystal clear. It explicitly and laboriously restricts tax credits to those who buy health insurance in Exchanges “established by the State under section 1311.” There is no parallel language – none whatsoever – granting eligibility through Exchanges established by the federal government (section 1321).

(Bagenstos claims the statute’s tax-credit-eligibility provisions use the phrase “established by the State under section 1311” only twice. He neglects to mention: how the eligibility provisions refer to those limiting phrases an additional five times; that there is no language contradicting or creating any ambiguity about the limitation they create; and that the statute also restricts its “cost-sharing subsidies” to situations where “a credit is allowed” under those eligibility rules. At the risk of repeating myself, the eligibility rules for the credits and subsidies are so tightly worded, they seem designed to prevent precisely what the IRS is trying to do.)

Bagenstos correctly notes that Section 1321 directs the federal government to create Exchanges within states that fail to create their own. Like others before him, he takes that directive to mean that the phrase “established by the State under section 1311” in fact ”does not have the exclusionary meaning” you might think. The statute authorizes tax credits through federal Exchanges, he argues, because federal Exchanges are ”established by the State under section 1311.” The federal government, it turns out, can establish an Exchange that is established by a state.

Like others before him, Bagenstos finesses the absurdity of that claim by arguing that Section 1321 provides that a federal Exchange ”will stand in the shoes of a state-operated exchange.” So far as I can tell, the “stand in the shoes” trope was first advanced by Judy Solomon of the Center for Budget and Policy Priorities. It is based on a 180-degree misreading of Section 1321. If a state chooses not to dance, Section 1321 doesn’t instruct the federal government to step inside (read: commandeer) the state’s dancing shoes. It directs the federal government put on its own dancing shoes, and to follow all the dance steps listed in Title I. Since the language restricting tax credits to state-created Exchanges appears in—you guessed it—Title I, federal Exchanges are bound by that restriction.

Bagenstos’s second argument is that since it was not necessary for Congress to restrict tax credits to state-created Exchanges to overcome the “commandeering problem,” the statute does not do so. But that’s a non sequitur. Just because Congress didn’t have to do something doesn’t mean Congress didn’t do it. The express language of the statute says Congress did it.

Bagenstos’s third argument is that because the Senate Finance Committee didn’t have to restrict tax credits to state-created Exchanges in order to have jurisdiction to direct states to create them, the Committee-approved language—which is now law—must not do so. Again, that’s a non sequitur. And not only does the express language of the statute impose that restriction, but Senate Finance Committee chairman Max Baucus (D-MT) admitted that’s what he was doing.

Along the way, Bagenstos contradicts himself, Baucus, and Timothy Jost by categorically claiming, “Nor is there any reason to think that Congress would have intended to treat participants in state- and federally-operated exchanges differently,” while conceding the commandeering problem and the Finance Committee’s limited jurisdiction are two reasons why Congress might have intended to do so.

Bagenstos’s interpretation of the statute violates the “mere surplusage” canon of statutory interpretation. It violates the expressio unius est exclusio alterius canon of statutory interpretation. It violates common sense.

Like others before him, Bagenstos offers no rebuttal to Baucus’s admission that the  statute means exactly what it says, and nothing whatsoever from the legislative history that supports the IRS’s attempt to violate the express language of the statute by imposing taxes that Congress never authorized.

Topics: 
General, Government and Politics, Health Care, Law and Civil Liberties, Regulatory Studies

If Oklahoma Wins Lawsuit, ‘The Whole Structure’ of ObamaCare ‘Starts to Fall Apart’

By
Michael F. Cannon

Oklahoma Attorney General Scott Pruitt has filed a lawsuit challenging the Internal Revenue Service’s unlawful attempt to impose ObamaCare’s taxes on exempt employers and individuals. (Jonathan Adler and I plumb this issue in our forthcoming Health Matrix article, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.”)

An article in the current issue of Business Insurance cites a couple of experts on the potential impact of the lawsuit:

While the ramifications of the suit pending in the U.S. District Court in Muskogee, Okla., are huge, the challenge brought last month has gotten little attention…

What is clear is that the outcome of the lawsuit could be crucial for the future of the health care reform law, observers said.

If premium subsidies are not available in federally established exchanges, “No one would go to those exchanges. The whole structure created by the health care reform law starts to fall apart,” said Gretchen Young, senior vice president-health policy at the ERISA Industry Committee in Washington.

“The health care reform law would become a meaningless law,” added Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington.

For more, read here, here, here, here, here, here, here, and here.

Topics: 
General, Government and Politics, Health Care, Regulatory Studies

86ing the Arguments for California Props 30, 38

By
Andrew J. Coulson

Californians are being asked to raise their taxes by between $7 billion (Prop 30) and $10 billion (Prop 38) to prop-up public school budgets. If they don’t, backers warn, public schools will face “devastating cuts.” That’s the fear mongering. This is the reality:

Over the past four decades, real per pupil spending in California has roughly doubled. In dollar terms, Californians are spending $27 billion more today on K-12 education than they did in 1974, when Gov. Jerry Brown was first elected to office—and that is after controlling for both enrollment growth and inflation.

The last dashed spike on the spending line is the increase if Prop 30 passes, as Governor Jerry Brown has been assuming. If it doesn’t pass, per pupil spending will still be up more than 80 percent over this period, after controlling for inflation. What’s more, there is no evidence that the fantastic spending increases of the past have done anything to improve student achievement.

The only state-level achievement data we have that go back this far are the SATs, and, taking into account the renorming that occurred in the mid 1990s, they have actually declined by five percent. None of the customary excuses can explain away this dismal record. A larger share of students participated in 1972 than do so today, so if a shrinking test-taking pool is the sign of a more elite subset of students taking the test, then scores should be higher today, not lower. And while state-level breakdowns by race and ethnicity are not available that far back, the national trend is similar and it shows stagnation in the scores of majority white students—which excludes changing demographics as an explanation.

As I wrote earlier this year:

It is true that a $7 billion tax increase would at least preserve a certain number of public sector jobs, even if those jobs have not, and likely will not, improve educational outcomes. But if that $7 billion is not taxed out of the free-enterprise sector of California’s economy, it will preserve or create private-sector jobs when it is spent or invested. And, contrary to the pattern shown in the accompanying chart, jobs in the free-enterprise sector do produce things that people value: from movies and music to citrus fruits and cellphones—thus generating new revenue. Tax away that money and you take away those private-sector jobs and revenue.

The final question boils down to this: Can Californians afford to tax $7 billion out of the productive sector of the economy and get nothing in return for the damage it would do?

That’s the question California voters must ask themselves on November 6th.

Topics: 
Education and Child Policy

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