Archives: 02/2007

What’s the Matter with “Thoughts from Kansas”? (Part 1)

In a recent post, I argued that mandating the teaching evolution by government fiat is not only ineffective but illiberal, divisive, and counterproductive.

I always like to preface my comments on this subject with the disclaimer that I am a card-carrying evolutionist. Joshua Rosenau, a grad student in ecology and evolutionary biology who blogs at “Thoughts from Kansas,” is unconvinced. He writes that my “consistent treatment of evolution as if it were anti-religious by its nature suggests that [my] views are more… nuanced than [I’m] letting on.”

This comment is worth exploring. Let’s start with an excerpt from a recent interview with Richard Dawkins, one of the most influential evolutionary biologists of our time:

Terrence McNally: When and how did you become an atheist?

Richard Dawkins: I suppose it was discovering Darwinism. I was confirmed into the Church of England at the age of thirteen. I then got pretty skeptical about it, but retained some respect for the argument from Design – the argument that says living things look as though they’ve been designed, so they probably have been. I then learned the real scientific explanation for why they look as though they’ve been designed, and that was enough for me. I lost my religious faith pretty much then.

Evolution isn’t so much anti-religious as un-religious. While it is possible (indeed common) to simultaneously understand evolution and be religious, it is not necessary to be religious once you understand evolution. The existence of humanity can be explained by purely natural causes, so “God the Creator” becomes an extraneous assumption. And when hardcore empiricists come across an extraneous assumption, they, like Richard Dawkins, have a tendency to pull out Ockham’s razor and shave it off. (And if my own views on this subject are relevant: I liked Ockham’s razor so much, “I bought the company.”)

Learning about evolution thus leads at least some people find religion superfluous. But many believers see faith in God as crucial to individual morality and even to the survival of civilization, so naturally they are apprehensive about the teaching of human origins as a purely natural process. In fact, opposition to scientific materialism was the main motivation behind the creation of the Discovery Institute’s Center for Science and Culture – the chief advocacy organization for “Intelligent Design” and “teaching the [purported] controversy” over evolution.

So, even though natural evolution is not intrinsically incompatible with faith, it is decidedly unpopular with many of the faithful.

That’s one important clarification out of the way. Here is another. Joshua characterizes my argument as follows: “his claim is that the only way to end the wars over creationism would be to let children learn whatever they want in schools that their parents pay with other people’s tax dollars.” That last bit is mistaken.

I am highly conscious of the social conflicts that arise when people are compelled to pay for instruction that violates their convictions – as paying for creationist schools would likely violate Joshua’s. In fact, that compulsion is one of the key causes of our never-ending battles over the content of public schooling. That was a central point of the paper by Neal McCluskey that launched this conversation.

Fortunately, there is a way to ensure universal school choice without forcing anyone to pay for instruction that offends their deeply held values: cut taxes on middle income families so they can spend more of their own money on their own kids’ education, and offer tax credits for donations to private scholarship granting organizations.

The tax cuts, or personal use tax credits, already exist in Illinois, though they are very limited in size. Essentially, parents who choose to shoulder the cost of their own children’s education would receive a dollar for dollar reduction in their state and local taxes, up to some pre-determined limit. This would put government and non-government schools on a more even financial playing field, and bring the option of independent schooling within easy reach of far more families.

But personal use tax credits can’t help low-income families that have little or no tax burden. To serve those families, tax credits would be offered to businesses and individuals who donate to private scholarship granting organizations (SGOs). Those organizations would, in turn, provide tuition assistance to low-income families. Such programs already exist in Pennsylvania, Arizona, and Florida, though they, too, are currently quite limited in scope.

Combining and expanding these two kinds of tax credit programs would ensure universal access to public and private schools of parents’ choosing, without forcing anyone to pay for schooling that violated their convictions. Taxpayers, not just parents, would have choice, since they could pick the SGO to which they made their donations (or choose not donate to such an organization at all). Pennsylvania has 42 SGOs, and Arizona has more than 140. It isn’t hard to find one consistent with your values, whatever those values happen to be.

I’ll respond to Joshua’s other thoughts from Kansas in a subsequent post.

Tax-Funded Media Bias

This morning on Anti-Marketplace Radio–heard on tax-funded NPR stations–there was a fine example of the quiet, unconscious liberal bias that pervades NPR and other mainstream-liberal media. Host Scott Jagow interviewed Jody Heymann, director of the McGill Institute for Health and Social Policy, who had just published a report on paid leave around the world. The segment began, “The U.S. lags far behind the rest of the world when it comes to workplace policies such as paid maternity or sick leave.”

Then Jagow asked, “Where else is the U.S. falling short?” Noting that no federal law mandates paid vacations or sick leave, he asked, “How much are states picking up the slack and how much is the private sector picking up the slack?”

So where’s the bias? Let us count the ways. First, of all the studies in the world, only a few get this kind of extended publicity. It helps if they confirm the worldview of the producers. For instance, I don’t believe Marketplace covered this Swedish study (pdf) showing that the United States is wealthier than European countries (perhaps most provocatively, that Sweden is poorer than Alabama – perhaps because Europe has the kinds of laws the Heymann study advocates). Second, Heymann was allowed to appear without a critic. Third, the interviewer never asked a critical question. He never noted that the countries that Heymann was praising are poorer than the United States and in particular that many are suffering from high unemployment brought on by such expensive labor mandates. Fourth, look at the language of the questions: “lags behind,” “falling short,” “picking up the slack.”

The unstated, perhaps unconscious, premise is that countries should have mandatory paid leave and other such programs. If we don’t, we’re “falling short” and someone must “pick up the slack.” Language like that, which is very common in the media, posits government activism as the natural condition and then positions any lack of a government program as a failure or a problem.

Bush’s Standard Health Insurance Deduction: Tax Hike or No?

National Review’s Ramesh Ponnuru takes the Bush administration’s economist Kate Baicker and spokesman Tony Snow to task for what he suggests is a misleading representation of the President’s proposed “standard health insurance deduction.”

Briefly, under that proposal, most people who purchase health insurance would receive a substantial tax cut.  However, some workers would no longer be able to exempt from taxation the full amount of their health benefits.  Individuals who now receive more than $7,500 in health benefits, and families that receive more than $15,000 worth, would have to pay taxes on the difference. 

Ponnuru writes:

Snow and Baicker are right to say that if the proposal becomes law, compensation packages will adjust, with expensive plans being scaled back and the savings passed on in higher wages. But those higher wages will be taxed. No matter how the compensation package is rearranged, the percentage of compensation that is taxed will go up for these people.

My Cato colleague Arnold Kling concurs.  I disagree.

I think there are ways to avoid a tax increase, though I agree with Ramesh that this New York Times article didn’t do enough to explain how. 

In today’s New York Sun, I discuss the prospect of tax increases on workers with expensive health benefits:

Though that’s troubling, it is by no means certain. In fact, those workers may not face a net tax increase at all, because the President’s proposal would reduce other costs on those same workers. One such “tax” is the higher health care costs that result from the current employer-sponsored system. The President’s proposal would reduce that tax. Another is the current penalty imposed on workers who do not buy coverage through an employer. The President’s proposal would eliminate that tax.

Finally, when premiums exceed the proposed deductions, employers could reduce health benefits and shift the difference to other untaxed compensation, such as contributions to health savings accounts, life insurance, or 401(k)s. That would leave those workers with zero additional taxes. Or they could shift that difference to wages, in which case the workers would pay taxes on it, but their take-home pay would rise.

Of course, it would become more difficult to avoid a tax increase over time.  The deduction amounts would rise with overall inflation, while health insurance premiums traditionally have risen much faster.

I’ll be discussing these issues with Kate Baicker and the Urban Institute’s Len Burman at a Capitol Hill briefing tomorrow.

Hurray for Profits

Good news from the oil industry: ExxonMobil announced a record after-tax profit of $39.5 billion for 2006.

That is great news because it means the company will have more funds to reinvest in exploration, refinery expansion, drilling platforms, chemical plants, and all those other brilliant machines that American families benefit from every day.

The firm invested $20 billion in exploration, structures, and equipment in 2006 and $18 billion in 2005. See here and here.

High profits are a signal to ExxonMobil management, other energy companies, and Wall Street to feed this industry more capital and to continue increasing energy production. That’s good news for U.S. energy security and U.S. consumers.

The bad news with high corporate profits is that governments confiscate so much of them. In 2005, the firm paid current income taxes of $23 billion on pre-tax profits of $59 billion, for an effective income tax rate of 39%. (The firm also paid $31 billion in excise taxes to governments). Of course, Exxon simply collects these taxes on behalf of governments–the ultimate burden falls on individuals.

(In 2006, income taxes were $28 billion on pre-tax earnings of $67 billion, but I couldn’t find the breakdown of current vs. deferred tax)

Anyway, kudos to Exxon for their fine performance!

President Bush Answers Critics on Trade

President Bush has gone on the offensive this week, touting the generally solid performance of the U.S. economy and the danger posed to our market-driven prosperity by rising protectionist sentiments in Congress.

In a speech yesterday in the historic Federal Hall in New York City, the President sounded a clear trumpet in defense of free trade. In a rarity for politicians of any stripe, he not only extolled the virtues of exports but also of imports, and bluntly warned against “walling off America from world trade.”

Here are a few highlights from the speech:

“As we improve free trade, consumers get lower prices.” 

“Since World War II, the opening of global trade and investment has resulted in income gains of about $9,000 a year for the average American household.” 

“The Doha Round … is a great opportunity to lift millions of people out of poverty around the world.” 

“I know there’s going to be a vigorous debate on trade, and bashing trade can make for good sound bites on the evening news. But walling off America from world trade would be a disaster for our economy. Congress needs to reject protectionism, and to keep this economy open to the tremendous opportunities that the world has to offer.” 

Of course, the President will need to work with skeptical Democrats in Congress to pass pro-trade legislation and stop any anti-trade measures.

In the meantime, the President can put his pro-trade words into action unilaterally. A recent article in The Weekly Standard cites several good ideas from your favorite libertarian think tank on actions President Bush could take independently of Congress to expand the freedom of Americans to trade in the global economy.

Cavalcade of Risk #18 Is Up

Joe Paduda hosts a rather comprehensive edition of the Cavalcade of Risk over at his Managed Care Matters blog. Paduda takes issue with two of my recent blog posts. 

1. The first is a post where I argued that an individual mandate will not solve the free-rider problem. One reason is that people with health insurance account for about one-third of the free-rider problem

Paduda suggests that this portion of the free-rider problem could come from providers who claim that they were uncompensated because the insurance companies or the patients did not pay as much as the provider billed. That’s a recurring problem with many estimates of uncompensated care. (Providers charge everyone the “list price” even though they don’t expect to receive it. Then they claim that the difference between the list price and the actual price was uncompensated care. By that rationale, car dealers lose millions every year to “uncompensated automobiles.”) 

The study I cited, however, based its measure of uncompensated care on the question, “How much would providers have been paid if the uninsured had been covered by private insurance?” That takes list prices out of the equation.

2. The second is a post where I argue that insurance markets do not naturally succumb to adverse selection. Rather, adverse selection only becomes a problem when insurers do not adjust premiums according to risk. Therefore, those who would prohibit risk-based premiums are largely responsible if insurers respond by trying to avoid sick people. 

Paduda responds that “the end result of Mr. Cannon’s prescription is full self-insurance for all health care costs.” I don’t know how that conclusion follows. As I understand it, the end result of risk-based premiums is that people keep purchasing (third-party) insurance until the costs of moral hazard and loading costs exceed the benefits of risk protection.

Taking on Leviathan

I attended the Conservative Summit sponsored by National Review this past weekend.  There was a strong grassroots hankering for smaller government. Ironically, the event showcased a number of leaders and ideologies that Michael Tanner shows in Leviathan of the Right to be the source of the problem with the conservative movement.

In part as a reaction to this Summit, I came up with a Request for Ideological Comment.   It starts to articulate a strong, positive vision for limited government.

1. We weave a thread of self-reliance into a sturdy fabric of interdependence. By respecting the law, we reinforce impersonal justice. By competing intensely and fairly in an impersonal global market, we raise our standard of living through specialization and innovation. By upholding Constitutional principles for limited government, we sustain our individual freedom…

A total of ten principles are stated.  I would love to have other Cato bloggers give their comments on what I call the IATF RFC.