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.

Comfortably Affordable

On Wednesday, Ed Muir over at the AFT’s NCLBlog took issue with some calculations I made about the ability of a notional first-year teacher in Indianapolis to pay back his student loans and still take care of his other needs. Muir made some decent points, so I thought I’d respond to them, as well as some raised by an astute Cato@Liberty reader.

For starters, Mr. Muir said that placing my recent graduate in Indianapolis “colors” my “interpretation a little bit.” His reason:

[Indianapolis] has a somewhat below average ratio of beginning teacher salary to rent.  And, yes you can get an apartment for $600, but the median rent in 2005 was a bit higher.

As I wrote in my original post, Indianapolis probably isn’t representative of every place in America, so there’s nothing wrong with pointing out in what ways this might be the case. In addition, I acknowledged that Indianapolis has somewhat low rent levels compared to other cities. I didn’t, though, calculate rent at $600 a month, but $650, which is exactly “a bit higher” than the $600 Muir suggests I used.

Muir’s better point was that I didn’t include taxes in my notional teacher’s expenses, something I acknowledged in my original post. I noted too, though, that I’d left out some important likely sources of income for my teacher, like money from a temporary job he might get during the summer. (I also didn’t mention how much my teacher would make if I calculated his salary on an hourly basis because I know what kind of tizzy that can send teachers and AFT reps into!)

Anyway, taking Mr. Muir’s taxation point as a good one, let’s see what will happen to young Mr. Chips’ wallet after taxes.

Recall that our boy was making $34,638 as a first-year teacher. We’ll assume that he pays full federal and state taxes on that, though he probably wouldn’t. (For instance, he would likely be eligible for
Indiana’s renter’s tax deduction and the federal tax deduction for student loan interest payments.) What would the damage be?

Indiana has an individual tax rate on adjusted gross income of 3.4 percent. Assuming our teacher pays that tax on his entire salary, he would owe $1,178 to the State of Indiana. And what if he paid federal taxes based on his entire salary? Those would come out to $5,217. Add the state and federal taxes together and his total tax burden would be $6,395, or $533 per month.

With that monthly burden, what will Chips, Jr.’s new monthly expenses be? We add $1,480 — his other expenses — to his monthly tax burden, and get a total monthly outlay of $2,013.

Ouch! Darn taxes. They’ll get you every time. Someone really ought to downsize government! But I digress….

So what does our teacher have left after the tax man has cometh? To find out, we subtract Mr. Chips’ total monthly expenses from his monthly earnings — $2,887 — and find that the young man will still have $874 left each month.

Unfortunately, the omitted expenses on my original post didn’t end with taxes. An astute reader informed me yesterday that I’d also failed to include utilities and some modern necessities in the young man’s expense. I’d better put those in.

We’ll assume that the teacher pays for both a landline and cell phone (though increasingly people just have the latter). Let’s also assume that he has an Internet hookup, cable television, and pays for electricity but not water. What’s the damage?

Landline: $25 (I found Vonage offering unlimited local and long distance for this price.)

Cell: $40 (This is for Verizon Wireless’s America’s Choice Basic 450 plan. It’s pretty bare-bones but, hey, our guy does also have a landline.)

Internet: $20 (AT&T Express DSL.)

Cable: $48 (This is standard full cable. He could have gotten basic cable for just $13, but he needs his Turner Classic Movies.)

Electricity: $50 (This is a bit of a guess, but I found a listing for a house in Indiana that said the average electric bill was about $100, so I estimated that an apartment might be about half of that.)

Finally, the reader thought it impossible for someone to actually eat meat and vegetables on only $200 a month. But it is possible. Using local D.C. prices, I found that a person could eat three normal meals a day on that amount, and those meals would include daily intake of such things as raisin bran, broccoli, cookies, milk, orange juice, cheese, ice cream, and even steak (though not exactly filet mignon). Moreover, after eating all those things, one would still have money left over for snacks. In order to appease concerned readers, though — and give our boy a few restaurant meals — we’ll add $100 to his monthly food budget.

Now what’s he got left? All the new expenses plus the boost in his food budget combine for $283. Adding that to his old expense total of $2,013 yields a final total of $2,296. And what does that leave our boy once we subtract the expenses from his monthly salary? $591, or slightly more than 20 percent of his monthly salary, about double the proportion of his salary that it is recommended he save! And don’t forget, with the budget we gave him, young Chips isn’t scrimping on much: He’s paying average — not low — rent for an apartment he has all to himself, paying for gas and auto insurance when he could be taking public transportation, maintaining both a landline and a cell phone, spending more on food than he has to, and enjoying a pretty wide selection of television channels — all right out of college.

So what have I gotten from all my budgeting pains? Very strong evidence that one can have average — actually, I calculated above average — student loan burdens and still live very well on a first-year teacher’s salary, contrary to popular mythology. Heck, you could actually more than double my guy’s monthly debt payment and he’d still be living comfortably.

This is not, by the way, to say whether or not my teacher should get a higher salary, or whether debt burdens should be higher or lower. Those things should be decided by a free market. However, in the absence of such a market, it is important to point out the inaccuracies in many of the myths propagated to put more taxpayer money into teacher salaries and student aid, and expand the scope of government.

Unfortunately, I can point out the difference between scary rhetoric and happy reality until I’m blue in the face but still never get people from the AFT, or student advocates at the state PIRGs, to stop crying poverty for teachers and college students. Why? Because once I do that, they change the issue, saying what’s important is not really whether or not a new teacher actually makes more than enough money to live a decent life, but whether or not they’ll be “comfortable.” Writes Muir:

Can one afford it? Strictly speaking, teachers take these jobs and they pay their debts. So yes. But … that doesn’t make it comfortable for them or good policy for us. Our goal should be to make people want to come into teaching, not to make new teachers feel bitter and even more stressed. 

You just can’t beat this with concrete evidence, because now it’s all about feelings, and you can never demonstrate conclusively how one person — much less millions of people — will feel about anything. I mean, who knows what amount of money will make different people feel comfortable, bitter or stressed? We can show pretty conclusively why they should feel comfortable, but we can’t prove it. But then, that’s why Muir and others resort to these arguments: in the face of reality, they have nothing left to stand on but things that cannot be proven.

And so, in that spirit, let me end this very long post by asserting something that can never actually be proven, but unlike student debt and teacher salary myths is almost certainly true: No matter what teachers are getting paid, we will never hear someone from the AFT say “Woah, that’s enough money and benefits! We teachers are feeling really comfortable, unstressed, and appreciated. Please, don’t pay us any more!”

Knowing that should be reason enough to stick with the facts.

Loose Language Sinks Syllogisms

Responding to my explanation yesterday that non-refundable education tax credits are not public money (as she had wrongly claimed), the Ed Sector’s Sara Mead seeks refuge, perhaps unintentionally, in equivocation. She links to an old Cato op-ed in which the ethanol blending tax credit is referred to as a subsidy. Perhaps Mead is unaware of this, but the 51 cent per gallon ethanol blending credit is refundable — it can result in government money going to ethanol blenders, not simply in the reduction of the taxes they owe.

Refundable tax credits — or at least the portion of them that involves a disbursement from government coffers — are subsidies. They are public money. I have never suggested otherwise. And this fact is entirely irrelevant to a discussion of non-refundable credits.

Mead also seeks to defend her earlier misstatement of fact by arguing that the earlier statement doesn’t actually matter. What really matters, she now says, is that non-refundable credits are, for all non-legal purposes, equivalent to government funding. She is just as mistaken for believing this as she was for believing they were government money in the first place.

The most obvious material distinction is one to which I drew attention in my previous blog post today. Under a scholarship donation tax credit, it is far easier for taxpayers to avoid being compelled to fund instruction that violates their convictions. Not only is making a donation under a tax credit program optional, but in the case where a taxpayer does decide to make a donation, the taxpayer chooses the scholarship granting organization that will receive the money. Because many different SGOs arise under well designed scholarship tax credit programs, it is easy for both low income families AND taxpayers to associate with ones that comport with their own values. This element of taxpayer/donor choice does not exist under either voucher or government monopoly school programs.

Non-refundable scholarship donation tax credit programs do not eliminate compulsion entirely — anyone who chooses not to participate is still taxed to pay for the status quo monopoly system — but it dramatically reduces the likelihood that anyone will be forced to pay for schooling he or she finds morally objectionable.

There are other substantive differences between education tax credit programs and vouchers/government monopolies. I describe them at length here.

One final note: Mead ends by wondering why Cato education policy scholars have a habit of commenting on her blog posts. The reason is prosaic: her misstatements give us a “news peg” on which to hang an empirically supported exposition of the issue in question. It is a very efficient and productive way for us to do our jobs, which is to inform the public about superior policy alternatives to the educational status quo.

So while Mead seems to think that her posts are not related to her work, they are an excellent help to us in doing ours.

Who Should Run the Veterans’ Health Administration?

Ezra Klein writes about the Veterans’ Health Administration (VA):

The VA system, like many other critical government departments, isn’t being given near the resources to deal with the coming influx [of Iraq veterans], and the consequences will be disastrous. This isn’t a structural problem in the VA, but in our government… .

Good point.  If only our government-run health care systems could be run by … well … someone else.

Dear Journalists: Please Ask Hillary This Question

Senator Clinton, it has been suggested that education tax credit programs would allow universal school choice without creating the problem you have identified with school vouchers. Do you support state-level education tax credits, and if not, why not?

Here’s why this is the $64,000 question for the senator: asked about her views on school choice and vouchers, she recently responded as follows:

My problem with vouchers … is that if you provide vouchers through tax dollars, under our Constitution, to religious and private schools that you and I would agree are appropriate — that do a good job on education — how do you say no to the schools that, frankly, I would not want my tax dollars supporting — the school of white supremacists, or the school of the jihadists’ vision? You give vouchers to Catholics or Protestants, and then somebody says, ‘Well, I want my voucher for the church school that I want my child to attend.’ But you don’t want to support those values… . How do you draw that line?

The answer is to allow taxpayers to make that decision as they see fit, by offering school choice through tax credits instead of vouchers. Vouchers are, indeed, “public money.” We’re all forced to pay taxes. So, under a government school voucher program, we might be compelled to support sorts of education we find morally objectionable. But though Senator Clinton doesn’t seem to realize it, this is even more true of the existing public school system. That’s why we have been fighting school wars over what and how to teach our children for the past century and a half.

There is a simple solution to this problem: allow universal school choice through education tax credits instead of vouchers. Under a tax credit program, no government money is spent (see my blog post to that effect yesterday). Families who owe property taxes or state sales or income taxes basically receive a tax cut if they take financial responsibility for their own children’s education (paying tuition, or home-schooling them). Families with little or no tax liability would receive private scholarships that are funded by tax creditable donations from individuals and businesses. Both kinds of programs already exist, at a very tiny scale, in several states.

Both the personal use tax credits and the scholarship donation tax credits allow taxpayers to decide who receives their money — this is categorically different from both our current monopoly public school system and from government voucher programs. If you want to support the ability of poor families to choose their children’s schools instead of being locked into a particular public school, you can give money to a particular Scholarship Granting Organization of your own choosing.

If you don’t wish to subsidize education that you consider extremist, you can pick an SGO that does not allow its scholarships to be used at such schools. Because many different SGOs arise under scholarship tax credit programs, both low income families and taxpayer/donors can find ones that comport with their own needs and preferences. This arrangement all but eliminates the compulsion about which the senator has expressed concern. And if she really cares about that compulsion, she should prefer tax credit school choice programs to the status quo, because the current monpoly public school system engenders more compulsion than any other.

So, Senator Clinton: Do you support school choice through education tax credits instead of vouchers, and if not, why not?

A Seam Opens …

An oft-repeated scene in the Washington, D.C. kabuki dance recently began with the release of former CIA director George Tenet’s memoir At the Center of the Storm: My Years at the CIA.

I don’t find it particularly interesting to watch a mighty ego defend his honor — mighty egos in the U.S. government are as common as pigeons in the park. (It has to be that way, doesn’t it? Only an inflated ego thinks it can run a government as overlarge as ours.) But I’m pleased by the healthy airing of differences the book has spawned.

This morning in the Washington Post, Richard Perle takes after Tenet about factual inaccuracies in the book. (Puffing pigeons.) The rift starts to reveal some important, but long overlooked, information.

Perle writes, “the CIA failed to make our leaders aware of the rise of Islamist extremism and the immense danger it posed to the United States.” An example I would offer is the presence of Nawaf al-Hazmi and Khalid al-Mihdhar inside the United States — terrorists linked to the USS Cole bombing. Of al-Mihdar, the 9/11 Commission reported, “No one was looking for him.” The story is recounted in brief in my Cato Policy Analysis (with Jeff Jonas) Effective Counterterrorism and the Limited Role of Predictive Data Mining.

A conclusion of that paper: “In the days and months before 9/11, new laws and technologies like predictive data mining were not necessary to connect the dots. What was needed to reveal the remaining 9/11 conspirators was better communication, collaboration, a heightened focus on the two known terrorists, and traditional investigative processes.”

As U.S. government officials turn against each other, they help reveal that their agreement to turn against us — in the USA-PATRIOT Act, domestic spying, and myriad other laws and programs — was a salve for those wounded egos. They didn’t want to admit that they outright missed the 9/11 attacks.

Structured Analysis at the WH Privacy Board

The White House’s Privacy and Civil Liberties Oversight Board recently came out with its annual report, which details its organization, operations, and recent work.

I was pleased to see that it has adopted a structured approach to analyzing privacy and related issues (see pages 24-25). Its approach is quite similar to the one adopted in the Framework document created by the Department of Homeland Security’s Data Privacy and Integrity Advisory Committee. (Well, I’ll put a finer point on it: the Privacy Board report acknowledges and thanks me and the committee. It’s very nice to be singled out, of course, but the Framework document was the product of many minds, eyes, and hands from the DHS Privacy Committee.)

This doesn’t mean the White House Privacy Board has gotten everything right, of course. I have no doubt that they could have done better. But it is very important progress to see a group like this committing to an organized, structured thought process. Doing so facilitates the discussions that lead to improved, better understood, and more widely agreeable outcomes.