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Cato Daily Dispatch for October 13, 2003

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Report: Welfare Spending Shifts
'No Child Left Behind' May Undercut Bush in 2004
Lame-duck Davis Signs Internet Tax Bill

Report: Welfare Spending Shifts

"New government figures show a profound change in welfare spending, shifting money from cash assistance into child care, education, training and other services intended to help poor people get jobs and stay off welfare," according to The New York Times.

"Cash assistance payments now account for less than half of all spending under the nation's main welfare program, Temporary Assistance for Needy Families, federal officials say. The proportion has been declining steadily since 1996, when Congress revamped welfare and abolished the guarantee of cash assistance for the nation's poorest children. The 1996 law required most adults to work within two years of receiving aid and gave states sweeping authority to run their welfare and work programs with lump sums of federal money."

In "Welfare Reform: More Than Meets the Eye," Michael Tanner, Cato's director of health and welfare studies and author of The Poverty of Welfare: Helping Others in a Civil Society, writes that the 1996 welfare overhaul has not been as successful as Republicans claim. There has been a significant reduction in welfare rolls since the reforms were put into place, he says, but those reductions are not the best way to judge the efficacy of the reforms.

"Most of those who have left the rolls and found work still remain deeply entangled in the public safety net," he writes. "Few former recipients are earning enough to support their families on wages alone. In fact, two-thirds of former welfare families continue to turn to government for assistance in meeting their health care, food, childcare, transportation, and housing needs."

Tanner concludes: "Tinkering with the current system can make modest improvements, leading to both reduced welfare usage and improvements in both economic and psychological well-being of recipients. But welfare reform by itself will do little to end dependence or lift large numbers of people out of poverty."

'No Child Left Behind' May Undercut Bush in 2004

"President Bush's No Child Left Behind education program--acclaimed as a policy and political breakthrough by the Republicans in January 2002--is threatening to backfire on Bush and his party in the 2004 elections," The Washington Post reports.

"The signature education plan is pledged to improve the performance of students, teachers and schools with yearly tests and serious penalties for failure. Although many Republicans and Democrats are confident the system will work in the long run, Bush is being criticized in swing states such as West Virginia for not adequately funding programs to help administrators and teachers meet the new, and critics say unreasonable, standards."

In the Cato Handbook for Congress, David Salisbury, director of Cato's Center for Educational Freedom, calls No Child Left Behind "a funding initiative that gives billions of additional federal dollars to failing schools."

Salisbury writes: "During his presidential campaign, Bush emphasized that he did not want to become the 'federal superintendent of schools.' But the NCLBA (No Child Left Behind Act) gives the president and the federal government far too much power over local schools and classrooms. Instead of proposing more top-down fixes for education, the president should use his position to push for the return of control of education to states and localities and urge state-level reforms that return the control of education to parents."

Lame-duck Davis Signs Internet Tax Bill

"Gov. Gray Davis offered a gift to Gov.-elect Arnold Schwarzenegger by signing legislation that will include California in a national effort to develop a fair system for taxing sales on the Internet," reports the San Francisco Chronicle.

"SB157, authored by Sen. Debra Bowen (D-Redondo Beach), allows California to join 38 other states in the Streamlined Sales Tax Project (SSTP), an effort to come up with national standards that will make it possible to extend sales taxes to Internet purchases in an equitable way."

In "Internet Tax: The New OPEC for Politicians," Cato Fiscal Policy Analyst Veronique de Rugy writes that "state governments actually are banding together to create a tax cartel that would not only lead to higher taxes but also would be a flagrant violation of the Constitution."

She goes on to say: "Make no mistake: Under the cover of the SSTP, states and local governments are asking Congress to lift the restriction that forbids them to tax extraterritorial income earned by remote sellers. The extension to sales-and-use taxes to out-of-state sales, no matter how simplified and harmonized, represents a huge threat to taxpayers and economic prosperity. The states involved want to create a tax cartel to allow them to impose taxes on firms that do not have a physical presence in the state, which means those companies would pay taxes to that state but would not consume public services. And that equals taxation without representation."

De Rugy and Adam Thierer, Cato's director of telecommunications studies, collaborated the forthcoming study, "The Internet Tax Solution: Tax Competition, Not Tax Collusion," to be released by Cato on October 23.

Wyatt Dubois, editor, wdubois@cato.org