Correction: There Is No Such Thing as Mandatory Out-Year Entitlement Spending

Astute Cato@Liberty reader Mark Close challenged my assertion that there is no such thing as mandatory federal spending – and won.

Since Congress can reduce spending on Social Security, Medicare, Medicaid, etc. at will, I made the strong claim that all federal spending is discretionary. I was even willing to describe interest payments on the national debt that way. I know, I know, the consequences of reneging on the debt would be catastrophic. But the (short-term) consequences of repealing Social Security & Medicare could be catastrophic for many people, too. (Imagine thousands of unemployed bureaucrats with no marketable skills! Won’t somebody please think of the surgeons??) Yet Social Security & Medicare spending is clearly discretionary.

If the difference between mandatory and discretionary spending is determined by the amount of economic dislocation that results from shutting off the spigot, I reasoned, where to draw the line? If it’s just a matter of degree, how can there be any definition of “mandatory” that isn’t just arbitrary?

Mr. Close suggested a very defensible place to draw that line: if reneging on a spending commitment would subject the U.S. government to legal action, then such spending is effectively mandatory. Examples include current-year entitlement spending, as well as current and future contractual obligations (e.g., interest payments on the national debt). Future outlays for Social Security, Medicare, etc. are not mandatory because reneging on those commitments would not subject the U.S. government to legal action.

Of course, one could still argue that interest payments on the national debt are discretionary, because Congress could always change the law to eliminate the threat of such legal action. But that’s pretty far-fetched. Even if it weren’t, Mr. Close has provided a non-arbitrary way to distinguish between mandatory and discretionary spending.

So to recap … when government officials refer to future Social Security, Medicare, and Medicaid expenditures as “mandatory spending,” they’re still lying. The U.S. government, its officers, and its agents should describe such spending as automatic, not mandatory. And the new rallying cry for the Sub-Boomer generations shall be:

There Is No Such Thing as Mandatory Out-Year Entitlement Spending!

Not quite as punchy as the original, is it? I am consoled by the fact that such smart people read Cato@Liberty.

Goose:Gander / Illegal Immigrants:Gun Owners

I’ve spent the last few months studying and writing about electronic employment eligibility verification. This is the idea of requiring every employer in the country to check the immigration status of employees against Department of Homeland Security and Social Security Administration databases. A nationwide EEV program, building on the current Basic Pilot/”E-Verify” program, was treated as a matter of near consensus at the beginning of this past summer’s immigration debate, and the Department of Homeland Security continues to promote it.

There are a lot of weaknesses in EEV. Foremost, such a system would be subject to a lot of document fraud, just like today’s Form I-9. Requiring employers to collect these forms and check the documentation of new employees doesn’t do much to control illegal immigration.

If this process were “strengthened” with a national EEV system, continuing document fraud would drive policymakers inexorably toward “strengthening” the identity cards used in the system. Indeed, the leading immigration bill this summer would have required every new hire in America to present a REAL ID-compliant national ID card. EEV requires a national ID.

This is fine by many people who are angered by illegal immigration. But the folks who want EEV and a national ID might want to be careful what they wish for.

A group called Mayors Against Illegal Guns recently sent a letter to all the major presidential candidates asking a detailed set of questions about their positions on gun control. Among them:

… Do you support a change in federal law to require that gun purchasers show Real ID-compliant identification by 2013?

I believe that REAL ID will not be implemented. In fact, the presence of REAL ID in the immigration bill is what killed it. But if EEV goes forward, it could bring REAL ID back from the dead.

With a national ID and a national infrastructure for regulating individual behavior in place, advocates will immediately seek to expand its uses - including to gun control. So it seems that those fervent opponents of illegal immigration who want a national EEV system have a choice: Will you give up your guns to get rid of illegal immigrants?

George’s Will be Done on NCLB

With reauthorization of the No Child Left Behind Act (NCLB) a total no-go for this year and probably next (since neither party wants the headache of having to fight over this hated law during an election year), it seemed that any serious discussion of NCLB was finished for the foreseeable future. And then along came columnist George Will, writing on Sunday that:

No Child Left Behind, supposedly an antidote to the “soft bigotry of low expectations,” has instead spawned lowered standards. The law will eventually be reauthorized because doubling down on losing bets is what Washington does. But because NCLB contains incentives for perverse behavior, reauthorization should include legislation empowering states to ignore it.

Will is right, and his column has gotten some people a little nervous.

Over at the American Federation of Teachers (AFT) blog, Michele—with whom I served on a NCLB panel last week but who’s last name I can’t remember (sorry Michele)—is concerned about killing federal involvement in education because she thinks that without Title I funding “the achievement gap would probably be even greater.” Now, you can’t disprove a negative so I can’t directly refute this argument, but one look at federal spending on education versus academic performance shows pretty clearly that federal money does almost no academic good. Indeed, Andrew Coulson and I compared spending and performance in End It, Don’t Mend It: What to Do with No Child Left Behind and concluded that since the feds have been seriously involved in education “we have suffered…a catastrophic decline in educational productivity, analogous to buying 1970s cars today and paying twice their original selling price.”

Mike Petrilli at the Fordham Foundation has a different concern than Michele. He thinks leaving education up to states would be no better than leaving it to NCLB, and might be worse. He’s wrong—NCLB has encouraged states to lower standards—but it’s certainly true that state control of education hasn’t been working in a lot of places for a long time. Why? For the same reason it doesn’t work when education is controlled from Washington: politicians, bureaucrats, school administrators and other policymakers are concerned about their own self-interest first and foremost, and the best way to serve that is to have as little accountability, and as much money, in public schooling as possible.

Petrilli’s solution to the problem is “to move towards national standards and tests….It need not be a federal project–it probably shouldn’t be–but could result from state collaboration. Uncle Sam might provide some seed money (or the Gates Foundation could), and maybe offer incentives (money, regulatory relief) for states to sign up.”

Now, forget the fact that once the federal government provides “seed money” and other “incentives” to adopt national standards they will become federal standards. The really important point is this: For decades we have seen policymakers at every level of government put their own self-interest first, keeping standards low and money high. There is absolutely no reason to believe that somehow all the tigers will change their stripes with national standards. Make the standards high and they will be evaded. Make them low and they will be worthless. Either way, they will not work.

So what’s the solution to all this? Universal school choice. Give parents control over public education money instead of giving it to the educrats, and make the schools compete and provide a good education to stay in business. Only then will the catastrophic flaw in top-down control at any level—the parents and children the system is supposed to serve are completely at the mercy of their servants—be eliminated, and the power structure for real accountability be in place.

Of course, that’s not what the AFT wants because, well, teacher unions hate to compete for money. And Fordham? They pay lip-service to choice, but in the end seem incapable of concluding that parents don’t need their betters in Washington to tell them what to do. Neither of these things, though, change reality: Until parents have the real power in education that comes with school choice, nothing is going to improve.

The End of the Year (but not the Term) at the Supreme Court

Today marks the last day of official business for 2007 at the Supreme Court.  The Court released opinions in three cases that were argued this term,  which join the two last week as the only rulings on the merits so far.  (The very first case argued this term, NY School Bd. v. Tom F., was affirmed without an opinion because the court split 4-4.)

Two of the cases decided this morning definitively clarified that the Sentencing Guidelines are really not binding on the sentencing court.  In Kimbrough v. U.S., the Court, by a 7-2 majority speaking through Justice Ginsburg, reversed the Richmond-based Fourth Circuit and found that a district court may impose a sentence for a crack cocaine offense that departs downward from the Guidelines’ 100-to-1 ratio for crack versus powder cocaine sentences.

In Gall v. U.S., a 7-2 majority speaking through Justice Stevens repeated that appellate courts should review sentencing decisions that depart from the sentencing guidelines using the highly deferential abuse-of-discretion standard, and that the departure in this particular case was not unreasonable (reversing the St. Louis-based Eighth Circuit).

In both the above cases, Justices Alito and Thomas were the lone dissenters.  Justice Alito was concerned that the district courts were not deferring sufficiently to the Sentencing Guidelines (which, while non-binding, must still “be taken into account”) and worried that sentencing disparities would gradually increase.  Justice Thomas continued his disagreement with Booker (the case that made the guidelines merely advisory)  in rejecting the new “reasonableness” standard.

Also of note is that Justices Scalia and Souter filed concurring opinions in the above cases.  Not unreasonably and as he was in his dissent from Booker, Justice Scalia continues to be concerned that judges are unconstitutionally finding facts relevant to sentences.  Justice Souter, who only wrote separately in Gall but stated that his views applied to Kimbrough as well,  suggested that

[T]he best resolution of the tension between substantial consistency throughout the system and the right of jury trial would be a new Act of Congress: reestablishing a statutory system of mandatory sentencing guidelines … but providing for jury findings of all facts necessary to set the upper range of sentencing discretion.

Strangely, I agree with Justice Souter.

Finally, in Watson v. U.S., a unanimous Court through the pen of Justice Souter held that one does not “use” a gun for purposes of sentencing enhancement when that person receives a gun in trade for drugs.  Justice Ginsburg filed a concurring opinion stating that, according to today’s decision, it is better to receive than to give when the subject is guns and urging the Court to adopt Justice Scalia’s dissent from an earlier case that found that trading a gun for drugs is “use.”

I agree with Justice Ginsburg – and guarantee you that neither my agreement with her nor hers with Justice Scalia is the start of a new trend.

One interesting observation is that in all three opinions decided today, Chief Justice Roberts was in the majority and in all three he used his right to assign authorship to the three most liberal members of the Court.  (Of last week’s two opinions, one also went to Ginsburg, and the Chief wrote the other himself.)  This may mean one of three things: 1) Chief Justice Roberts is trying to curry the favor of his liberal colleagues; 2) Ginsburg, Stevens, and Souter write opinions faster than their colleagues (unlikely because the opinions so far have been simple and uncontroversial); or 3) nothing at all. 

Overall, the Court has now granted cert in 60 cases (which, believe it or not, is 5 ahead of last term) and has heard argument in 26 of them – plus one case of original jurisdiction involving a suit between two states.

The Court’s next official business day, when it may issue orders granting and denying new cases will be Jan. 7.  That day will also see the Court’s argument calendar start the New Year off with the explosive case of Baze v. Rees, which considers the constitutionality of a certain kind of lethal injection (and the granting of cert on which has effectively stayed all executions by lethal injections nationally).  The next time we may see decisions on the merits is Jan. 8.

Does Jimmy Carter Really Speak for African Farmers?

Jimmy Carter’s grasp of economics apparently hasn’t sharpened in the 27 years since he imparted a wretched U.S. economy to his successor.  Or perhaps his poor-man-advocate bona fides should be scrutinized more closely.

In a Washington Post op-ed today, the former president rightly protests the egregious U.S. farm bill for its continuation of lavish subsidies to American commodities’ producers.  Carter explains how subsidies breed overproduction, which suppresses world commodity prices, thereby reducing the incomes of poor farmers in countries where commodities dominate the economy.

Carter favors proposed amendments to the current farm legislation that would replace subsidy programs with crop insurance programs to protect farmers against excessive loss, which is an improvement, though not a solution.

But, in the last paragraph of his article, Carter contradicts everything he writes before that, revealing himself to be no friend of poor farmers abroad or simply ignorant of economic processes.  He writes:

I am still a cotton farmer, and I have been in the fields in Mali, where all the work is done by families with small land holdings.  Cotton production costs 73 cents per pound in the United States and only 21 cents per pound in West Africa, so American farmers do need protection in the international marketplace.

Now wait a second.  This is a very curious statement.  If cotton production is so much cheaper in West Africa than in the United States, then more production should happen there and less should happen here.  If Carter is really interested in the well-being of West African farmers, “whose scant livelihood depends on cotton production,” he should advocate free trade in cotton.  Why instead does he advocate that U.S. farmers be protected in the international market place?  West African incomes will continue to suffer if U.S. subsidy programs are replaced by U.S. tariffs, which is what Carter seems to be advocating.  How does it help Malian farmers lift themselves out of poverty if they can’t effectively compete on their advantages?  Higher U.S. tariffs would only drive down the world price (as subsidies do) and likely compel other importer nations to raise tariffs to protect their own producers, shrinking the market further for Malian farmers.

Meanwhile, does Carter have any empathy for America’s lower income families?Apparently, not enough.  Protection of U.S. cotton farmers artificially raises the prices of textiles, which means that clothing and shoes are more expensive than they would be otherwise.  Expenditures on necessities, like clothing and food, account for a higher proportion of the budgets of lower income families.  Thus, artificially raising the prices of those products is akin to a regressive tax – it burdens those with less income disproportionately.

Perhaps Carter is not writing as the founder of the Carter Center, an international NGO, as the byline indicates, but as a small cotton farmer from Plains, Georgia, who believes the current subsidy system unfair because the big farms get most of the largesse.

There Is No Such Thing as Mandatory Federal Spending

Sometimes, governments lie.  For example, the U.S. government describes outlays for Social Security, Medicare, and Medicaid as “mandatory” spending, in contrast to “discretionary” spending on things like national defense and bridges to nowhere.

Yet “mandatory” spending is not really mandatory.  It too is discretionary, and everyone knows it.  The only thing that makes “mandatory” spending different is that Congress creates legislative formulas that automatically determine spending levels, instead of determining spending levels each year through the regular appropriations process.  Congress can change those formulas at its discretion, which means that such spending is actually … discretionary.  Calling such spending “mandatory” is therefore a lie that serves only to conceal the choices Congress has made.

The U.S. government, its officers, and its agents should describe federal spending as either “automatic” or “appropriated.”  There is no such thing as mandatory federal spending.

Update: I stand corrected.

Three Cheers for Whoopi

It’s no fun when the IRS take a big bite out of your paycheck. But it’s even worse when the taxman makes you pay additional layers of tax on the same income. And the ultimate outrage is when the government imposes another layer of tax just because you die. Plenty of economists have complained that the death tax is a punitive form of double taxation that penalizes capital formation, but Whoopi Goldberg probably did more to advance the cause of death tax repeal when she pointed out the moral injustice of the current system during a recent episode of ABC’s The View.