State Debt Cracks $2 Trillion

New Federal Reserve data show that state and local government debt has topped $2 trillion. At the end of first quarter 2007, state and local debt was $2.050 trillion, which is up 9.6 percent from first quarter 2006.

State and local debt growth has been explosive since 2001. In Table D.1 (see link), you can see that debt growth has soared in recent years, compared to the more moderate growth rates on the 1990s.

This is disturbing because current strong tax revenue growth in the states should be allowing governments to pay down debt in a prudent fashion before the next recession hits.

In Table D.3, you can see that state and local debt increased just 21 percent for the entire decade 1990-2000. Yet between 2000 and 2006, debt soared 68 percent.

For further discussion, see   

http://www.cato.org/pubs/tbb/tbb_0706-37.pdf

CBO: Bush’s “Standard Health Insurance Deduction” Would Cover 7m Uninsured

In a letter to Senate Finance Committee Chairman Max Baucus (D-Mont.), the Congressional Budget Office estimates that President Bush’s proposed “standard health insurance deduction” would reduce the number of uninsured Americans by a net 6.8 million, including a net reduction of 0.5 million children without health insurance.  That’s a net figure, since the CBO expects some uninsured people would gain coverage while others would lose coverage because some employers would stop offering health benefits.

Not too shabby.

No doubt the Church of Universal Coverage will still condemn a standard health insurance deduction because it wouldn’t cover enough children or adults.  In their catechism, nothing matters as much as a paper guarantee of health insurance. 

My own heretical view is that government should not even be trying to achieve universal coverage.  Nevertheless, today’s CBO letter is a nice reminder that there are ancillary benefits to doing the right thing.

What Could Huge Waiting Lists Mean?

An article in Sunday’s Los Angeles Times provides some very telling statistics about educational demand in the City of Angels. To get into L.A.’s magnet schools, there is a waiting list of over 28,000 students!  For admission to charter schools run by the Inner City Education Foundation, the waiting list tops 5,000! And it’s not just magnets and Inner City Education Foundation schools that have waiting lists – most charter schools in the district, according to the article, are over-subscribed.

What does this mean? For one thing, that Angelenos would love to leave the public schools to which they are assigned. Perhaps more importantly, though, it demonstrates that quasi-public schools like charters and magnets – which require approval of government entities to exist – will never be able to meet the huge demand for good schools that’s boiling over nationwide. School districts and state education departments that approve charters and magnets are simply too dominated by special interests such as teacher unions – which love the public school monopoly – to ever permit enough real choice to satisfy monopoly-busting demand. Of course, even if an explosion of magnets and charters were allowed, the bureaucratic hoops through which school founders would have to jump would almost certainly ensure that new schools would never pop up fast enough to meet growing demand, nor would schools be able to alter their offerings quickly enough to provide for ever-changing educational needs.

What this means, then, is one thing: Without full school choice, in which public education funding is controlled by parents and schools must respond to their demands, a whole lot of people will never be able to access the schools their children need. The failed system will simply never allow it.

Bulgaria Announces 10 Percent Flat Tax

According to Bulgarian news sources, the coalition government in Bulgaria has agreed to implement a low-rate flat tax starting next January. This is good news for Bulgaria, but also good news for the rest of Europe since it means further pressure for tax-rate reductions and tax reforms. The global flat tax revolution is picking up so much steam that the time has come to propose a theme song. I realize I’m showing my age, but Another One Bites the Dust seems appropriate. Perhaps the song could be piped into the European Commission and the Organization for Economic Cooperation and Development, adding to their angst about the market-based reforms sweeping the world?

At an operative cabinet meeting Sunday attended by the top brass from the three parties it was decided to retire the current three-bracket personal income tax rate system and replace it with a flat rate of 10%. …The government also decided on a 10% pension increase from October 2007, enabled by a 20% budget revenue overperformance by end-July, and a 3% cut in the social security burden.

House Farm Bill: “A Major Achievement?”

On Friday, the Democratically controlled U.S. House of Representatives passed a massive new farm bill. In a front page story on Saturday, the Washington Post reported:

The House yesterday passed a far-reaching new farm bill that preserves the existing system of subsidies for commercial farmers and adds billions of dollars for conservation, nutrition and new agricultural sectors.

Passage of the 741-page bill by a vote of 231 to 191, after partisan battling unusual for farm legislation, was a major achievement for the new Democratic leadership.

“A major achievement?” It says a lot about the political culture in our nation’s capital that passing a bill that basically continues more than 80 years of failed farm policy with minimal reforms is considered a major achievement.

In Washington, achievement is measured by how much legislation is passed and how much money is spent, not by whether the nation’s interests are advanced. For reasons we have outlined in great detail at Cato, the policies contained in the House farm bill benefit a small number of farmers at the expense of the vast majority of Americans.

Some achievement.

The Airborne Version of the Post Office/Department of Motor Vehicles

Don Boudreaux’s Cafe Hayek Blog is always worth reading, but his recent complaint about the snail-like pace of passport control struck a raw nerve since I also travel frequently. Don makes the point that it is foolish for people to want government to take over health care when it is so incompetent at everything it does. That is a very valid point, but it understates the case. Passport control (and also security screening) should be incredibly simple. Data on flight schedules and passenger density is easily available. Yet somehow the bureaucrats are incapable of having staff on duty during peak times. So if this relatively easy task is beyond the ability of the bureaucracy, then something more complex like health care surely will turn into a disaster when placed in the hands of government:

The reason we missed our flight is that nearly 50 minutes of our time after landing was consumed by waiting in a long and slow-moving line to clear passport control.  At that terminal on Friday evening, the TSA had only three agents to service the line of U.S. citizens returning from abroad.  Three.  That’s it.  Most of the passport-control-agent booths stood empty.