Archives: 05/2013

Tolerate “Any” Unwelcome Campus Sex Talk, Lose Federal Funds

My colleague Andrew Coulson has already briefly noted this story, but its constitutional and policy implications — which go well beyond the higher education context — merit a more detailed look.

For more than two years civil rights enforcers at the federal Department of Education and Department of Justice have been readying a crackdown on colleges and universities that they view as excessively lax, lenient, or observant of due process toward the accused in charges of unwelcome sexual conduct. Now, in a letter and resolution agreement sent to administrators at the University of Montana, the enforcers finally seem to have tipped their hand as to how far they’re prepared to go. And the answer is: really, really far.

  • The “unwelcome conduct of a sexual nature” that colleges and universities must discipline is to include “verbal conduct,” better known as “speech.”
  • To be subject to discipline, speech or conduct won’t have to be objectively offensive to a reasonable person, merely subjectively so to the particular complainant.
  • Disciplinable speech or conduct also won’t have to be severe or pervasive enough to do actual damage to a complainant’s environment for learning or employment or research, a departure from the standard that courts have developed for liability in areas like workplace hostile-environment law. This ensures there will be more and tougher discipline handed out for offenses such as, say, posting desk photos of beach-clad spouses or playing a “shock jock” show on a dorm radio.
  • The feds say universities are not just free, but affirmatively obliged, to take “protective” action against future harassment — kicking an accused student out of a class might be one such step — before affording a hearing at which that person might defend himself or herself.

Among those outraged: FIRE, or the Foundation for Individual Rights in Education, which calls the development a “shocking affront” to the Constitution’s First Amendment; CEI’s Hans Bader (Washington is now demanding that colleges institute speech codes much broader than many already struck down as overbroad by federal courts), and prominent education blogger Joanne Jacobs (rule could stifle education about sexuality as well as both sides of campus debates on related issues).

FIRE president Greg Lukianoff says the new speech prohibitions are “so broad that virtually every student will regularly violate them… it is time for colleges and the public to push back.”

Rothbard in the New Yorker

Here’s something you don’t see every day: A discussion of Murray Rothbard’s anarcho-capitalism in the New Yorker, in a broader review of books on “anarchism” emerging from the Occupy movement. Author Kelefa Sanneh writes:

In fact, there is one anarchist who could be considered influential in Washington, but he wasn’t among the activists who participated in the Occupy movement—he died nearly twenty years ago. His name is Murray Rothbard, and, among small-government Republicans, he is something of a cult hero. He was Ron Paul’s intellectual mentor, which makes him the godfather of the godfather of the Tea Party. Justin Amash, a young Republican congressman from Michigan and a rising star in the Party, hangs a framed portrait of him on his office wall.

Rothbard was an anarchist, but also a capitalist. “True anarchism will be capitalism, and true capitalism will be anarchism,” he once said, and he sometimes referred to himself by means of a seven-syllable honorific: “anarcho-capitalist.” Graeber thinks that governments treat their citizens “like children,” and that, when governments disappear, people will behave differently. Anarcho-capitalists, on the contrary, believe that, without government, people will behave more or less the same: we will be just as creative or greedy or competent as we are now, only freer. Instead of imagining a world without drastic inequality, anarcho-capitalists imagine a world where people and their property are secured by private defense agencies, which are paid to keep the peace. Graeber doesn’t consider anarcho-capitalists to be true anarchists; no doubt the feeling is mutual.

“Cult hero … among small-government Republicans” seems a real stretch. But maybe among Ron Paul and Justin Amash, which is more congressional fans than most economist-philosophers have. Author Sanneh no doubt learned about Rothbard when he wrote a long and fairly sympathetic profile of Ron Paul on the campaign trail.

At Aaron Powell examines the New Yorker’s examination of anarchism, both capitalist and anti-capitalist. Also at find out more about Murray Rothbard, including some exclusive videos.

Did Citizens United Critics Push the IRS to Misbehave?

Last Friday, a spokeswoman for the Internal Revenue Service (IRS) admitted the agency had targeted various Tea Party and related groups during the 2010 election cycle. Later in the week, an Inspector General’s report will offer an initial look at the facts of this matter. At least two congressional committees also plan investigations. 

Many people recall that the Nixon administration used the IRS to harass political opponents. Surely the IG’s report and subsequent investigations will show whether the IRS has gotten back into the business of protecting an incumbent administration from its critics. 

It is not too soon, however, to recall the the campaign finance reform lobby has been calling for a crackdown on political groups since the Citizens United decision. One possibility would be that the IRS gave in pressure from the reform lobby and went after the Tea Party groups. 

Was there an intention to chill speech? The timing provokes doubts: the targeting began in the spring of 2010 just as the mid-term campaign season started and ended after the election when the harassment no longer has any rationale. The long delays of approving tax status certainly slowed down the wave coming toward Congress in 2010. 66 House members lost their seats in that election. Do any sitting members owe their offices to the IRS? 

Even now, leading reform groups are calling for renewed crackdown on these groups. We are also told by more sober reformers that this whole matter shows the need for more disclosure and greater clarity in the rules. But the major argument against such disclosure has been that government officials will use the information to punish political opponents. Given what we know about this case, does it make sense to give the IRS more information about, and more power over groups that oppose the administration? 

Some will note the irony here. Most of campaign finance law was enacted in 1974 just after the end of the Watergate scandal. The campaign finance reform lobby dates its life to that scandal which, as noted, included using the IRS for political ends. Now the reformers are defending the IRS and its apparent political harassment. Things do seem to have come full circle.

Tax and Expenditure Limits: The Challenge of Turning Mitchell’s Golden Rule from Theory into Reality

The main goal of fiscal policy should be to shrink the burden of government spending as a share of economic output. Fortunately, it shouldn’t be too difficult to achieve this modest goal. All that’s required is to make sure the private sector grows faster than the government.

But it’s very easy for me to bluster about “all that’s required” to satisfy this Golden Rule. It’s much harder to convince politicians to be frugal. Yes, it happened during the Reagan and Clinton years, and there also have been multi-year periods of spending discipline in nations such as Estonia, New Zealand and Canada.

But these examples of good fiscal policy are infrequent. And even when they do happen, the progress often is reversed when a new crop of politicians take power. Federal spending has jumped to about 23 percent of GDP under Bush and Obama, for instance, after falling to 18.2 percent of economic output at the end of the Clinton years.

This is why many advocates of limited government argue that some sort of external force is needed to somehow limit the tendency of politicians to over-tax and over-spend.

I’ve argued on many occasions that tax competition is an important mechanism for restraining the greed of the political class. But even in my most optimistic moments, I realize that it’s a necessary but not sufficient condition.

Another option is budget process reform. If you can somehow convince politicians to tie their own hands (in the same way that alcoholics can sometimes be convinced to throw out all their booze), then perhaps rules can be imposed that improve fiscal policy.

But what sort of rules? Europe has “Maastricht” requirements that theoretically limit deficits and debt, and 49 states have some sort of balanced budget requirement, but these policies have been very unsuccessful - perhaps because they mistakenly focus on the symptom of red ink rather than the underlying disease of government spending.

Are there any budget process reforms that do work? Well, I’ve written about Switzerland’s “debt brake,” which has generated some good results over the past 10 years because it actually imposes an annual spending cap.

Some American states also impose expenditure limits. Have they been successful?

What Washington State Can Expect From Higher K-12 Spending

Just over a year ago, the Washington State Supreme Court ruled that the legislature was insufficiently funding K-12 education, and ordered it to boost that funding. A bi-partisan consensus now seems to have emerged that spending an extra $1 billion over the next two years is the proper first step in abiding with the Court’s ruling. Additional increases are likely to follow in later years. In a special budget session to begin today, the legislature will decide what balance of tax increases and economies in other areas will be used to raise the extra funds. 

So Washington state taxpayers are looking at the prospect of ever higher taxes to pay for ever higher education spending far into the future. Unless business blossoms unexpectedly in the next few years, that’s liable to be economically painful. Will it be worth it? As a guide, we might look at how effective previous increases in spending have been. 

Despite an increase in annual spending of $1.5 billion even after taking enrollment growth into account, academic performance has barely budged. The most hopeful signs are from the 4th (and uncharted 8th) grade NAEP scores, but there is good reason to doubt that even these very modest upticks lead to real reimprovements by the end of high school. One obvious indication of the problem is that SAT scores are essentially unchanged over the period. Another reason is that evidence from the NAEP Long Term Trends study reveals a pattern in which modest gains in the early grades evaporate by the end of high school (as can be seen on this nationwide chart of the performance of 17-year-olds). Based on the SAT scores, the same pattern likely holds in Washington state, but neither the Long Term Trends NAEP data series nor test results for older students are available at the state level.

Moreover, Washington state residents seem to drastically underestimate how much is spent per pupil in their public schools. In a 2012 survey, about half of respondents thought it was less than $8,000 / pupil. In fact, as shown in the chart above, total spending from all funds was $12,467 / pupil in that year. The survey also finds that when the public is informed about actual spending levels, support for increased K-12 spending falls dramatically (and that is true despite the fact that the survey in question misleadingly represented a lower partial spending figure as if it were total spending).

So Washington state has already tried even larger increases in spending than the one currently contemplated in Olympia with little or no academic effect. What’s the alternative? How about a proven policy for improving the achievement of students in both public and private schools that simultaneously saves millions of dollars?

IRS Lied to Congress about Targeting Tea Party

On Friday, the IRS admitted that when “social welfare” groups with the terms “tea party” or “patriot” in their names applied for 501(c)(4)/tax-exempt status, IRS agents targeted them for extra (and extra-legal) scrutiny to ensure they were not engaged in politicking. The Washington Post reports, “about 75 groups were selected for extra inquiry — including, in some cases, improper requests for the names of donors.” IRS agents did not apply similar scrutiny to groups with “progressive” in their names.

Over the weekend, more details emerged. It now appears the IRS lied to Congress about this practice for more than a year. It also appears the IRS is still targeting tea-party groups today, in part because IRS bureaucrats believe groups that “educat[e] on the Constitution and Bill of Rights” deserve greater scrutiny.

Here’s a rundown. 

Senior IRS officials have known about these abuses for nearly two years. The Associated Press reports: “Senior Internal Revenue Service officials knew agents were targeting tea party groups as early as 2011…on June 29, 2011, Lois G. Lerner, who heads the IRS division that oversees tax-exempt organizations, learned at a meeting that groups were being targeted, according to the watchdog’s report. At the meeting, she was told that groups with ‘Tea Party,’ ‘Patriot’ or ‘9/12 Project’ in their names were being flagged for additional and often burdensome scrutiny…Lerner instructed agents to change the criteria for flagging groups ‘immediately’…”. IRS agents also gave extra scrutiny to groups that “criticize how the country is being run.”

The IRS tried to get away with it again. The Washington Post reports:

the agency revised its criteria a week later.

But six months later, the IRS applied a new political test to groups that applied for tax-exempt status as “social welfare” groups, the document says. On Jan. 15, 2012 the agency decided to target “political action type organizations involved in limiting/expanding Government, educating on the Constitution and Bill of Rights, social economic reform movement”…

The agency did not appear to adopt a more neutral test for social welfare groups…until May 17, 2012…

Of course, these revised criteria are not politically neutral either. Tea-party groups are still far more likely to receive extra scrutiny than progressive groups. Lots of right-leaning political groups describe their mission as working to limit government or educate people about the Constitution. Far fewer left-leaning groups emphasize educating people about the Constitution or openly declare their mission is to expand government. And note: the U.S. government treated groups as suspect if they educate the public about the Constitution and Bill of Rights. Let that one sink in.

The IRS lied to Congress for more than a year. The Associated Press reports: “At a congressional hearing March 22, 2012, [then-IRS commissioner Douglas] Shulman was adamant in his denials. ‘There’s absolutely no targeting.’” Senior IRS staff knew that claim was false nine months before Shulman made it. Yet they let Shulman’s false statement to Congress go uncorrected, amid a congressional investigation into whether the IRS was targeting tea-party groups, for another 14 months. According to the Washington Post, “The IRS made no mention of targeting conservative groups in five separate responses to congressional inquiries between Nov. 18, 2011, and June 15, 2012, according to the [inspector general’s] timeline.” Even if we view the facts in the light most favorable to the IRS and assume Shulman did not know he was uttering a falsehood – which, by the way, would mean he is a very poor manager – the IRS’s failure to correct that falsehood pretty much makes it a lie. I don’t mean that in the phony way PolitiFact uses the term. I mean a real lie.

The IRS did not come forward of its own accord. The Associated Press: “The Treasury Department’s inspector general for tax administration is expected to release the results of a nearly yearlong investigation in the coming week.” House Oversight Committee chairman Darrell Issa (R-CA) put it, “Before the IG’s report comes to the public or to Congress as required by law, it’s leaked by the IRS to try to spin the output. This mea culpa’s not an honest one.”

IRS officials maintain the targeting of tea-party groups was the work of low-level employees and not politically motivated. Yet the agency has shown a willingness to deceive Congress and the public about its own misconduct. Congress should conduct a thorough investigation.

Even if it is true that low-level IRS bureaucrats were acting on their own, Congress’ investigation should examine the role Obama administration officials played in encouraging those bureaucrats to single out the tea party. As New York Times columnist Ross Douthat explains:

Where might an enterprising, public-spirited I.R.S. agent get the idea that a Tea Party group deserved more scrutiny from the government than the typical band of activists seeking tax-exempt status? Oh, I don’t know: why, maybe from all the prominent voices who spent the first two years of the Obama era worrying that the Tea Party wasn’t just a typically messy expression of citizen activism, but something much darker — an expression of crypto-fascist, crypto-racist rage, part Timothy McVeigh and part Bull Connor, potentially carrying a wave of terrorist violence in its wings.

It would be very bad if senior Obama administration officials ordered the IRS to intimidate the president’s political opponents. It would scarcely be better if administration officials denounced their opponents until IRS bureaucrats took the hint.

People should lose their jobs over this.

Doing Business: If It Ain’t Broke, Don’t Fix It

A few weeks ago, we published a piece that defended World Bank’s Doing Business project against its critics. At the time, we didn’t know much about the politics behind the attack on the project – namely that the initiative to review Doing Business had come from China, which ranks relatively low in the ranking.

Perhaps unwittingly, the Chinese government has been assisted in its effort to shut the project down by a spectrum of organizations skeptical of markets, including CAFOD, Christian Aid, Oxfam, or Save the Children. Most recently, Christina Chang, a lead economic analyst at CAFOD appears to react to our article on FP’s Democracy Lab:

By lamenting the “uniquely democratic” debate around Doing Business, its self-appointed supporters are doing it a disservice. An independent review and a public debate are exactly what is needed.

That is not exactly a charitable way of identifying our position. We say explicitly that the project can be improved and are perfectly willing to entertain some of the specific suggestions Ms. Chang makes in her article, including the idea that the costs of corruption to businesses should be explicitly captured by the project, that the measure of access to credit could be improved, and that infrastructure-related constraints to doing business (such as access to electricity) could improve the project’s accuracy.

What bothers us, however, is that the critics of the project are also trying to undermine the key elements of the survey – namely the measures of taxation and labor market regulation. A large body of evidence shows that corporate taxation and labor market regulation have real costs to businesses – a fact Ms. Chang downplays by saying that these do not come up frequently in enterprise surveys in the developing world. While surveys may serve as a useful complement to the analysis of objective data on institutions, it is not sensible to use them as a basis for discarding specific elements of the Doing Business report – especially if independent evidence indicates that these elements matter.

Also, the goal of measuring taxation and labor market regulation as a cost to business has little to do with advancing an agenda of radical tax cuts or deregulation - although we would argue that such agenda would yield significant welfare gains in many countries around the world - instead, it has to do with an understanding of the relevant policy trade-offs.

The most serious flaw of Ms. Chang’s article lies in a confusion between the problems afflicting crony capitalism in the West and the development of private markets in emerging economies around the world:

The 2008 financial crisis highlighted long-standing reasons why the world needs to take a fresh look at how it does business. Unemployment has reached painful levels in many countries around the world. Multinational corporations use offshore jurisdictions to avoid billions in tax. Rampant inequality has become a hot-button issue.

For all these reasons, World Bank President Jim Yong Kim is right to conclude that the bank’s flagship Doing Business report needs a fresh look.

Let’s ignore the claim that inequality is on the rise, which is not true globally, and focus on the fact that Ms. Chang argued that the economic problems of the developed West somehow justify rethinking a project that has mostly informed policymaking in low- and mid-income countries. That would make sense if the policy recommendations that can be supported by the Doing Business project were also connected with the factors that have been driving economic problems of the West, such as unemployment, or the financial crisis of 2008. Yet Ms. Chang offers us no evidence for such claim.

If anything, one can argue that the unemployment in Western countries is associated with heavy labor market regulation, that the existence of offshore jurisdictions helps curb confiscatory tax regimes in the West, and that the crisis 2008 was driven by government involvement in financial and housing markets, or perhaps by a failure of monetary policy. In other words, Ms. Chang is guilty exactly of what we identified as the main problem of the current discussions about the Doing Business project – namely that she picks up on a failure of a particular type of crony capitalism in the West and uses it – disingenuously, one is tempted to say – to attack free markets around the world.