Are the Bush Tax Cuts Really in Jeopardy?

Deroy Murdock has a piece on National Review Online about the threat of tax and spending hikes under a Democratic Congress.     

The threat seems to me exaggerated.  Yes, Democrats would love to raise taxes.  But just because Charlie Rangel would be House Ways and Means chairman doesn’t mean tax hikes are a foregone conclusion.  I actually think President Bush would remember where he stashed his veto pen if his tax cuts were really in jeopardy and it’s unlikely the Democrats will have a veto-proof majority in Congress. (Mark the day: I’ve finally said something complimentary about the president!)  That’s assuming a bill raising taxes even passes out of the House in the first place, of course.  After all, 15 Democrats did vote to extend the capital gains and dividend tax cuts earlier this year.    

On government spending, the same logic applies.  The Democrats are just not likely to have enough votes to get everything they want.  The 30-plus fiscally-moderate Democratic members in the Blue Dog caucus will also have more clout in a closely divided Congress.  The back-bencher GOP members who have always fought against profligate spending – Jeff Flake of Arizona, Mike Pence of Indiana, Jeb Hensarling of Texas, et al – will still be around and have more pull in this scenario, too, especially in the wake of the inevitable post-defeat purge of the current leadership ranks.  Indeed, many Republicans who were quite fond of Big Government when they were pulling the levers might suddenly become budget hawks now that the “other guys” are in charge. 

So, such a scenario would probably not result in a reversal of current tax policy.  The ensuing gridlock would probably result in a slower rate of budget growth as it has in the past (which is something I’ve pointed out before).  The world wouldn’t end.  Indeed, it might actually look a little brighter – at least in the short term – for those hoping to see restraint in the growth of government.                

Voters Yawn over Global Warming

I’ve long argued that enviros don’t have anywhere near the electoral clout most people think and that no one is going to gain much political capital donning the garb of “Mr. Green Jeans.”  Today, the trade publication Greenwire (subscription required) agrees.  And believe me, these are the last people who want to make this argument.

CAMPAIGN 2006: Voters cool to climate issue in torrid midterm races

Darren Samuelsohn, Greenwire senior reporter

Five Northeastern Republicans facing fierce re-election battles turned just before the latest congressional recess to global warming in hopes the issue would boost their chances in their suburban House districts.

But the lawmakers apparently got little traction from climate change in a campaign dominated by voter concerns about the Iraq war, President Bush’s unpopularity and overall dissatisfaction with Republican leadership.

“It’s been very difficult for any of these incumbents whose problems are bigger than themselves, or whose problems have been themselves,” said Bernadette Budde, a senior vice president for the Business and Industry Political Action Committee. “They have had a hard time changing the subject.”

The five – Reps. Curt Weldon (Pa.), Mike Fitzpatrick (Pa.), Christopher Shays (Conn.), Nancy Johnson (Conn.) and Rob Simmons (Conn.) – cosponsored in September what some consider the most aggressive bill to date aimed at limiting heat-trapping greenhouse gas emissions. The bill’s lead sponsor is Rep. Henry Waxman (D-Calif.), the presumed new chairman of the House Government Reform Committee if his party wins a majority of House seats.

“Doing it before Congress goes off to campaign is telling,” said Howard Reiter, chairman of the political science department at the University of Connecticut. He added that global warming is a nuanced subject that comes with an important caveat: It may require constituents to make sacrifices in their day-to-day lives.

“The problem with global warming is its incremental,” Reiter said. “It’s not as if there’s an immediate crisis people can see.”

Massie Ritsch, spokesman for The Center for Responsive Politics, a nonpartisan organization that tracks campaign spending, said the recent media frenzy over climate change – from Hollywood-style documentaries to mainstream press coverage – did little to stir voters this year. “For all of the attention Al Gore’s movie got, it hasn’t stayed a major election issue,” he said.

The lack of voter interest in climate change is not due to a lack of effort from environmental groups ….

Reporter Michael Burnham contributed to this report.

Get Your Laws off My Body … of Constitutional Rights

One of the underappreciated costs of Roe v. Wade is its potentially radioactive effect on other rights.  Exhibit A:  The debate over the federal Partial Birth Abortion Act, whose constitutionality the Supreme Court will consider tomorrow during oral argument in Gonzales v. Carhart

The Act, passed in 2003, attempts to do what the Supreme Court told the Nebraska legislature it couldn’t do in Stenberg v. Carhart:  ban partial birth abortion without providing any exception for the health of the mother.  Why does Congress think it can tread where Nebraska couldn’t?  Because Congress, unlike the Nebraska legislature, inserted legislative findings in its version of the act, and those findings state that partial birth abortion is never “medically necessary” to a woman’s health.  The Solicitor General, in turn, contends that those findings deserve deference.

Now, I’m no fan of Roe or partial birth abortion.  But the case is about more than abortion:  If the Supreme Court owes Congress blanket deference when it determines facts that affect the scope of a Court-declared constitutional right, then the ever-shrinking power of the Supreme Court to “say what the law is” has shrunk to a disturbingly low ebb.

The costs for other judicially protected rights, if the Court took up the SG’s suggestion, are unnerving.  Imagine, say, that Congress finds that affirmative action in schools of higher education that sponsor ROTC is necessary to promote an effective multicultural military.  Should that trigger a compelling interest exception to strict racial neutrality?  Or imagine that Congress finds that affirmative action in higher education is needed not for another 25 years, as Justice O’Connor hypothesized in Grutter v. Bollinger, but another 30 or 40?  Or that Congress finds that EPA-sanctioned eminent domain in dense urban residential areas constitutes a “public use” under the Takings Clause when exercised in favor of environmentally conscious developers who commit to redevelop the land to create more green space?

If, as many conservatives hope, the Court in Carhart declares that Congress can determine facts that affect the scope of a right, all of those arguments will be far more plausible, as a matter of precedent, than they are today, a point Cato makes in its heterodox amicus brief supporting the pro-choice side in Carhart.

This danger underscores one of the toxic costs of Roe:  When the Court is unable to overturn Roe, but nonetheless holds the case in relatively low esteem, the temptation is strong to give Congress more and more power to nibble at its edges.  Once Congress is granted the power to nibble at one set of rights, all other rights are suddenly less secure.

Here’s one way the Court might avoid this danger, while simultaneously avoiding entrenching Roe in our law:

1.  Reject deference to Congress’s legislative findings because Congress deserves no special deference in an area where states are the primary regulators of medical practice by tradition and constitutional structure. 

2.  Reaffirm that Casey requires intermediate, not strict, scrutiny of infringements on the “fundamental right” to abortion, while reserving the merits of the Roe line for a later case.

3.  Note, finally, that while Congress’s findings are insufficient to overcome women’s liberty interests under the intermediate scrutiny test, state legislation is a different matter.  Were a state to pass a version of the bill passed by Congress, containing similar findings, the Court would be willing to consider granting them the deference denied Congress.  

By underscoring that strict scrutiny doesn’t apply to abortion regulations, this argument would avoid further erosion of the principle that legislatures deserve no deference when they find facts relevant to the scope of rights protected by strict scrutiny.  By giving states, not Congress, deference when they enact partial birth abortion bans accompanied by appropriate findings, the Court would return some modicum of power over abortion regulation to the states, where this power belongs.  (Of course, the Court could go even farther:  by declaring the Act beyond Congress’s enumerated power to regulate commerce–but, given that argument hasn’t been made and Raich gave up the ghost on this set of arguments–that’s simply not on the table.)

The most likely proponent of such an argument, alas, is the ever-unpredictable Justice Kennedy, a Roe fan who dissented in Stenberg based on the proposition that states deserve leeway to manage the medical trade-offs of abortions, short of an outright ban.  Unfortunately, Kennedy is also the author of the Turner I and Turner II cases, which establish that deference is owed, at a minimum, to Congress’s predictive fact-finding in areas that implicate First Amendment rights subject to intermediate scrutiny.  And that, sports fans, makes Carhart the most hair-raising case of this Supreme Court term.

Gannett to Use Peer Production

News outlets are fascinated with the news business, so quite a few stories have been flying around the last few days about the Gannett newspaper chain’s decision to use citizen journalists.

Writes the Washington Post, for example:

Gannett is attempting to grab some of the Internet mojo of blogs, community e-mail groups and other ground-up news sources to bring back readers and fundamentally change the idea of what newspapers have been for more than a century… . 

The most intriguing aspect of Gannett’s plan is the inclusion of non-journalists in the process, drawing on specific expertise that many journalists do not have. In a test at Gannett’s newspaper in Fort Myers, Fla., the News-Press, from readers such as retired engineers, accountants and other experts was solicited to examine documents and determine why it cost so much to connect new homes to water and sewer lines. The newspaper compiled the data and wrote a number of reader-assisted articles. As a result, fees were cut and an official resigned.

It’s all quite reminiscent of Friedrich Hayek’s articulation of how the price system turns local knowledge into a useful form and thus better organizes human action than any centrally planned system.

The blogosphere (writ large) can and often does surface relevant knowledge better than any group of reporters, no matter how smart or dedicated. Gannett is wise to recognize this and incorporate superior local knowledge-gathering into its business model.

Direct Democracy

Aside from voting for “Congress critters,” Americans in many states today have a chance to directly control government fiscal policy.

They will be voting on whether to approve $80 billlion in government bonds in states and cities across the country, including a huge bond package in California endorsed by Governor Arnold Schwarzenegger. Voters usually approve about two-thirds of proposed bonds, but hopefully they will be more skeptical this year given their generally foul mood toward politicians and government. 

In addition, voters have a chance to approve new budget limits on spendthrift politicians in Maine, Nebraska, and Oregon. Most states already have detailed restrictions on their budgets such as balanced budget requirements. This year’s proposals would impose limits on annual increases in taxes and spending, similar to the successful TABOR limit in Colorado. Such limits recognize the fact that politicians love to spend, but they often lack the discipline to make the needed tough trade-offs in budgeting priorities. 

Here [.pdf] is a useful summary of ballot measures across the country, both fiscal and nonfiscal.

Legal Process Is Good Business

I’ve written here a couple of times about how government access to data threatens many new and forthcoming business models.

TechDirt, a favorite tech-business blog, writes today about some ISPs’ perceived lack of cooperation with law enforcement.  That ‘lack of cooperation’ is asking for a warrant before revealing customer data.  “But requiring a warrant is a check against abuse; without them it’s hard for ISPs to judge the legitimacy and seriousness of a request. By valuing privacy, they better serve their customers, and ensure that law enforcement is only pursuing cases within the scope of the law.”

Very nice to see a business-oriented blog showing how privacy protection nests with commercial interests and good government.

Forget the Election … Education Tax Credits Will Save the Republic and Bring World Peace!

Let’s face it : everyone is sick of election prognosticating and there’s nothing left to say in any case (until the results come in and politicians and pundits begin to spin again).  So let’s turn to wonky school reform spats that just won’t die!

Sara Mead at Edpresso just doesn’t buy that education tax credits are the best thing going in education reform, so we’ll have to get more detailed.

She cannily (given that we’re libertarians here) attacks tax credits on rational choice/econ grounds, arguing that dollar-for-dollar tax credits will reduce the “cost to the donor and his or her incentive to hold scholarship foundations accountable.”  This is certainly true compared with someone in a system without tax credits that has to make the decision to pay twice for education – their incentives to hold the school accountable are large due to the significant additional investment. 

But her analysis overlooks many important factors. Most importantly, it fails to compare incentives in a tax credit system to those of the relevant alternative – our current government-run school system. 

There are many costs and incentives beyond fiscal ones.  A business that donates money to a Scholarship Granting Organization, it is true, reallocates money from the government to a non-profit, and therefore does not incur any additional monetary cost in this very simplified scenario.  That does not mean there are no costs to the company.  They must identify SGOs to which they wish to donate and comply with the required paperwork to do so.  This cost may be offset by community good will and publicity (or added to by criticism from school choice critics).  In addition, they have a long-term interest in the performance of both the SGO and children and schools they fund because their company name is now associated with them.  Donating to SGOs that fund failing schools will provide no community goodwill and is likely to draw criticism.

Another reason why businesses participate in scholarship donation programs is because they recognize that many students are emerging from our K-12 public schools unprepared to succeed in work or higher education. In addition to its civic benefits, ensuring that children are better educated directly benefits the donor businesses themselves. Better educated students mean a stronger labor force from which businesses can recruit new employees. Those businesses would thus have an incentive to direct their money to the best-managed SGOs.   

Businesses using donation tax credits have very significant interests in holding SGOs and schools accountable for educating children, interests that would easily justify the costs of choosing and donating to SGOs. 

Individual donors face the same costs of donating, and will be invested with personal incentives to make sure that they are not wasting their money and the time they have devoted to the process on SGOs and schools that fail.

Again, the reason an individual would make a donation under an SGO program is that that individual is dissatisfied with the quality of education on offer in the public schools.  Donors with that sort of motivation are hardly likely to pick SGOs at random.  Furthermore, just as the media now cover the school beat, so too would they cover SGOs, so the cost to donors of finding out about SGO operations would be low – they’d just have to pick up the paper.

It may be true that the choices of what one can do with a tax credit are severely limited compared to the universe of unrestricted choices.  But the donor will still face a choice between many SGOs, individual children, and sending the money to the state for it to disburse for her.  The donor is still making a decision regarding how to spend her money – it is simply a restricted choice set.  But the donor will still have an incentive to hold organizations accountable for results, and will have an easier time responding to information.  A donor can easily send next year’s tax credit to another SGO. 

Sara compares these incentives to hold schools accountable with donations made without the benefit of a tax credit.  Certainly, in the latter case, the incentive is large because the cost to the donor is large.  But a cost can be too large, and in this case it is – otherwise we would be awash in private scholarships.  People must currently pay twice to help the disadvantaged – once through state taxes and then again through donations.  It’s no surprise that many do not do both, even when the state misspends their tax dollars.  Education tax credits reduce the costs but not the incentives to help the disadvantaged, thereby ensuring that more of the disadvantaged will be helped.

The appropriate comparison is not with the incentives of donors who cannot claim tax credits.  The appropriate comparison is with the incentives and ability to hold schools accountable under the current system versus other proposed systems.   Sara recognizes this, but doesn’t consider the strength of the incentives within the current or proposed government-run systems (emphasis in the original):

More significantly, Adam’s point here acknowledges that the people who fund schools have a clear interest in holding those schools accountable. Guess what–when we’re talking about education that’s supported from public coffers, then the people funding the schools are all of us taxpayers, and we all have an interest in holding schools accountable for serving the public good.

Taxpayers may have an interest, but not the ability to hold schools accountable. Just try withholding your taxes when you don’t like the local schools.  I don’t think the police will be impressed with your explanation.

One of the most difficult problems in government is accountability.  There is a reason that even farmers who don’t need it continue to get subsidies, that sugar prices here are absurdly high, that the tax code is cluttered with special breaks, and that earmarks for pet projects have exploded.  All of these things are funded by “all of us taxpayers,” and we certainly “all have an interest” in holding our Congress accountable for serving the public good and not running up a deficit.  But the costs are diffuse and small to any single taxpayer, while the benefits are large and concentrated among organized groups. 

The key differences between a true system of school choice and a government run system are that individual taxpayers fund students in a system of choice, and the government funds schools in the current system.  The ability and incentives to hold schools accountable in such a system are almost non-existent, and it shows.  The costs are diffuse, and therefore not readily apparent, and the benefits are concentrated among the education establishment, which uses the political system to its advantage.  

In order for taxpayers to hold the schools accountable, they must unite on a single issue area and work together through a difficult political system for very definite goals.  Needless to say this does not happen.  It is too difficult, and the costs and potential gain are too diffuse (and non-selective) to overcome collective action problems.  Even in a charter system, this would hold true.  And even within a student-based/attached funding or voucher system, the government would fund students, meaning that costs and responsibility would still be diffuse and therefore the incentives and ability for taxpayers to hold schools accountable would be low. 

A tax credit system creates the most powerful system of incentives to hold schools accountable because individual taxpayers fund students.  Parents have the ability and incentive to hold schools accountable by going elsewhere with ease, because the money follows their child.  And taxpayers have the ability and incentive to hold schools and SGOs accountable because they know where their money is going and can take it to other schools or SGOs with ease. 

An education tax credit system relies on the incentives, knowledge, and actions of thousands of parents and taxpayers, ensuring that the interests of individual parents, families, communities, and the diverse public at large are met.  This system makes schools accountable to the largest number of stakeholders possible, and provides the most effective means of holding schools accountable to each stakeholder: exit. 

This is true public accountability.  And this system truly serves the public good by ensuring a basic education for all citizens – an education that respects the diversity of the public to which that good is provided. 

Sara proclaims that she supports choice in education, and that she doesn’t “care if you want to send your kid to a Montessori school, a single-sex school, a military school, a religious school, or a billingual Esperanto immersion school.”  Wonderful news, I say!

 “But,” Sara says, “I do care, as a taxpayer, that schools using my tax money meet basic health and safety standards, don’t discriminate, and teach kids sufficient math and verbal/literacy skills to contribute to the economy and have a decent shot in life. That’s why we need both parent choice and public accountability. And it’s why education tax credits just don’t cut it.” 

First, any educational facility would be required to meet basic health and safety standards under existing laws.  Tax credits don’t magically eliminate all previously passed regulations.    Second, all tax credit programs and proposals with which I am familiar already prohibit discrimination on the grounds of race and national origin.  Third, I can’t imagine how tax credits could result in lower basic math and verbal skills than those our current system is producing – but, even such an unfounded concern can be resolved with ease by requiring participating students to take some kind of basic achievement test, which current programs and proposals all do, and which most private schools do currently as well (however, it’s an unnecessary measure in any case – just look at all of the information on colleges).

There must be other, legitimate issues if Sara’s concern for the “public accountability” of education tax credits is to be taken seriously.  If these are the only problems Sara has with an education tax credit system, then she should unite with us behind ETCs!