Topic: Government and Politics

Budget Bravado

In a letter to lawmakers, the president’s budget director, Rob Portman, …accused Democrats of doing little to rein in “the unsustainable growth in entitlement spending” on Social Security, Medicaid and Medicare [reports the Washington Post].

Well, they did almost all oppose the trillion-dollar expansion of Medicare in 2003 that then-Rep. Portman voted for and that President Bush bludgeoned reluctant Republicans into supporting.

Wisconsin Gas Station’s Prices Are Too Low!

At least, as Dan noted below, that’s the verdict of state regulators, who recently threatened to sue a BP station owner unless he discontinues giving a 2 cent per gallon discount to senior citizens and a 3 cent per gallon discount to boosters of local youth sports programs.

According to Wisconsin regulators, the discounts represent “unfair competition” against other gas stations, and that — get this — imperils consumers. A 1939 Badger State law requires retailers to sell motor fuels at no less than a 9.2 percent markup over the wholesale price.

Wisconsin is not the only state with such a law — a dozen others (Alabama, Colorado, Florida, Louisiana, Maryland, Massachusetts, Missouri, New Jersey, North Carolina, South Carolina, Tennessee, and Utah) have similar provisions to protect gas station owners from the horrors of price competition.

You would think that, amidst the Sturm and Drang of the past few years’ high fuel prices, the public would force lawmakers to throw out this welfare for gas station owners. Alas, no.

Hat tip: Tim Rowland

The Heckler’s Veto in France

Two days before the French presidential election, Socialist candidate Segolene Royal warned that there would be riots if her opponent, conservative Nicolas Sarkozy, was elected. She told a radio interviewer:

“Choosing Nicolas Sarkozy would be a dangerous choice,” Royal told RTL radio.

“It is my responsibility today to alert people to the risk of (his) candidature with regards to the violence and brutality that would be unleashed in the country (if he won),” she said.

Pressed on whether there would actually be violence, Royal said: “I think so, I think so,” referring specifically to France’s volatile suburbs hit by widespread rioting in 2005.

Then the Washington Post casually reported, in an article on Sarkozy’s plans, that “While he seeks the strong majority that will be crucial for pursuing the ambitious agenda he has promised, it is unlikely he will risk tackling any tough issues that could spark social unrest or street protests.”

“The question he will have to ask himself first is: What are the reforms he should implement to show politically that he sticks to what he announced?” said Dominique Reynié, a political analyst at the Institute for Political Sciences’ Political Research Center. “And the second question is: What are the reforms he can implement without creating riots?”

And indeed, according to Time, there have been riots since the election. But the rioters aren’t the disaffected immigrant youth of the suburbs. Instead, “the participants are mostly white, educated and relatively comfortable middle class adherents of extreme-left and anti-globalization ideologies.” Some 500 cars were burned each night, up from the routine 100 cars set afire in la belle France every night.

It was outrageous for Royal to suggest that the French people should choose their leader on the basis of fear and threats. We talk about a “heckler’s veto” in which the government prevents someone from speaking in order in order to avoid a violent reaction from his critics. How much worse it would be for a great nation to choose its president because of a “rioters’ veto.” How appalling for the leader of a French political party ostensibly committed to the Declaration of the Rights of Man and of the Citizen to encourage a rioters’ veto. Journalists should think twice about casually reporting that elected leaders will make their decisions out of fear of rioters.

And people on the left who are committed to democracy and peace should speak up against the use of such political violence by others on the left. Nobody warned that the French bourgeoisie would riot if Royal was elected. And they wouldn’t have, so no journalist would be reporting that President-elect Royal would have to avoid “tackling tough issues that could spark social unrest.”

The Same Old K Street

Jeff Birnbaum, who covers lobbying for the Washington Post, which is sort of like covering the Pope for the Vatican Observer, writes about “the other K Street” in a lengthy article. “K Street,” of course, is shorthand–or if you believe Wikipedia, metonym–for the lobbying industry.

According to Birnbaum, “the other K Street” is a building along K Street that has become home to a dozen or so well-funded left-Democratic lobbies–Campaign for America’s Future, Americans United for Change, Progressive Majority, Ballot Initiative Strategy Center, USAction, MoveOn.org Political Action, etc. So that’s very different from the usual corporate lobbyists, right?

Well, let’s see. What K Street is really about is using political influence and the power of government to transfer resources from those who produced them to yourself or your clients. It’s about milking the taxpayers. It’s about using your political connections to impose your own agenda on the unorganized masses.

And by that definition, “the other K Street” fits right in with the corporate K Street. Special interests give them buckets of money, and they manipulate the political process on behalf of partisan, ideological, and interest-driven agendas–just like the corporate and right-wing lobbyists.

Michael Barone reminds us that it was Franklin D. Roosevelt’s aides who originally created “K Street” when they left the White House and went into business for themselves. They happily lobbied the permanent Democratic majority in Washington for the next 60 years or so. Now the taxpayers’ pinata is available to everybody.

Time for Taxpayers to Sing the Blues

Blue corn isn’t subsidized like white and yellow corn, and that’s just not right. Or so say the blue corn growers. Cindy Skrzycki’s “Regulators” column in the Washington Post today is the sort of thing that ought to make you a libertarian. So many lawyers writing so many regulations, with clauses and sub-clauses. And it’s all nonsense.

So here’s the problem:

Under the regulatory system that determines which crops qualify for inclusion in Department of Agriculture support programs, blue corn is an orphan. According to the department rulebook, it isn’t even considered corn because it’s not yellow or white, the only versions of the food that are eligible for federal agricultural loans and crop payments.

This means that farmers who grow blue corn, which is made into the blue-corn tortilla chips that many of us love to dip into a nice salsa, aren’t growing “real” corn, so they don’t qualify for loan or other support programs, according to the government. 

Now you might think this is no big deal since blue corn sells for about twice what white and yellow corn do. But the growers feel hurt and victimized and, you know, invisibilized. They want to be an official government-recognized crop. And, you know, get the loans and subsidies. Like popcorn got in 2003.

But fear not. Rep. Dennis Cardoza (D-Calif.), chairman of the House subcommittee on horticulture and organic agriculture (seriously), is listening. He’s promised the blue-corn growers that he’ll try to address their needs in the current farm bill.

And then taxpayers can subsidize premium organic blue corn, lest this great nation ever run out of blue-corn tortilla chips in a national emergency.

The Real “Reading First” Scandal

Secretary of Education Margaret Spellings will testify before a House Education Committee hearing tomorrow, and the hottest topic for her appearance on the hot-seat will be the federal “Reading First” program. A centerpiece of the No Child Left Behind act, Reading First is a billion-dollar-a-year initiative to improve language instruction in the early grades. The idea behind the program was to encourage districts to adopt scientifically proven teaching methods, but it seems to have netted roughly a million bucks for people on the Dept. of Ed.’s payroll in the process. The Department’s inspector general, John P. Higgins Jr., has made several criminal investigation referrals to the Justice Department as a result.

As government scandals go, this is tepid stuff. A million dollars? Individual states and school districts around the country have often mismanaged or defrauded taxpayers of comparable or larger sums.

The real Reading First scandal is that anyone would imagine that a bureaucratic school system bereft of competitors and immune to market incentives could be made to adopt and consistently implement effective educational practices on a vast scale, let alone sustain them over time or improve upon them.

Anyone familiar with the research on so-called systemic reform is aware that implementation quality matters as much or more than program selection. If teachers are not committed to and well trained in the selected methods, they will not effectively implement them and will not persevere with them over time.

A case in point is the federal ”Follow Through” experiment of the late 1960s and early 1970s, which put a score of different pedagogical methods in head-to-head competition. The number one method, by far, was called Direct Instruction, or Distar. As soon as “Follow Through” officially ended, most of the schools that had been using Distar abandoned it, and their test scores eventually fell back to pre-follow-through levels.

So the real question is, how do you simultaneously achieve all of the following:

  • Encourage the consistent identification and/or development of effective methods
  • Hire, train, and maintain a staff of teachers capable of properly implementing those methods
  • Ensure that, once adopted, effective methods are not displaced by the latest pedagogical fad

The only way to do that is to create powerful incentives that pressure school administrators and teachers to do these things. The only system that consistently creates these incentives is a competitive education marketplace. Until we have a market, dreams of the pervasive use of effective pedagogical methods in American education will remain just that: dreams.

Politicians May Slow Growth - and Help America’s Competitors - with Big Tax Hike on Capital Markets

The Wall Street Journal appropriately savages a putative Senate proposal to dramatically increase the tax on private equity firms. Senators Baucus and Grassley apparently think it is wrong that fund managers get a slice of the capital gains pie if investments rise in value, and they want to tax those gains as if they were income instead of increases in net worth. In a well-designed system that eliminates double taxation of saving and investment, the capital gains tax rate would be zero, so this proposal clearly would be a big step in the wrong direction. But politicians specialize in bad policy. First, they drove a substantial share of IPO business to Hong Kong and London with Sarbanes-Oxley. Now they want to drive private equity firms out of America as well:

This week Senators Max Baucus and Charles Grassley, the chairman and ranking minority member of the Finance Committee, will hold “informal meetings” to ponder a 133% tax hike on private equity firms. There’s no good rationale for this beyond the fact that Congress wants money and private equity funds have lots of it. Private equity firms will raise and deploy a record one-half trillion dollars of investment capital this year – funds that provide start-up and expansion-phase money for firms large and small. …Senator Grassley says he suspects “subterfuge” that allows fund managers to underpay their taxes. The managing partners of equity funds generally receive compensation in two ways. They charge the fund investors a 1% or 2% management fee for finding high-return business opportunities and for orchestrating the portfolio. Those fees are taxed at the personal income tax up to 35%. But fund managers also typically lay claim to a 20% slice of the fund’s future profits. That return is called “carried interest” and is taxed at the long-term capital gain rate of 15%. Congress is considering reclassifying that income as labor compensation and taxing it at the 35% income tax rate. … Far from being a clever tax dodge, carried interest plays a central role in the performance of private equity funds: It establishes an incentive structure which aligns the financial interests of the managers and investors. …The biggest losers from a private equity tax hike may be pension funds, which have become large investors in these funds; their high performance has made millions of Americans wealthier in their retirement.