Archives: 12/2013

New Lawsuit against School Choice Program

A North Carolina teachers union and fellow defenders of the government’s near-monopoly over education filed a lawsuit against the state’s school voucher program for low-income students, joining half a dozen other lawsuits against educational choice programs around the country. Plaintiffs made the same, tired, factually-inaccurate arguments against letting low-income parents choose where to send their children to school that we’ve come to expect. For example:

“Vouchers are bad public policy,” said Mike Ward, former state school superintendent and one of the plaintiffs. “They tear away millions of dollars that are badly needed by the public schools.”

Apparently no one told Mr. Ward that 22 of 23 studies found that public schools improved their performance in response to the competition that school choice programs generate. The last study found no statistically significant impact. NC’s government-run school system is in dire need of competition. As Parents for Educational Freedom in North Carolina point out, the latest report card from the North Carolina Department of Public Instruction reveals that “nearly 70 percent of low income students in North Carolina failed to meet proficiency standards.”

The lawsuit argues that the voucher program violates Article IX, Section 6 of the North Carolina Constitution, which requires that “all moneys, stocks, bonds, and other property belonging to the State for purposes of public education…and not otherwise appropriated by the State… shall be faithfully appropriated and used exclusively for establishing and maintaining a uniform system of free public schools.

WSJ: Dems Nuked Filibuster to Defeat Halbig v. Sebelius

Wall Street Journal editorial surmises that Senate Democrats eliminated the filibuster for non-Supreme Court judicial appointments so they could pack the U.S. Court of Appeals for the D.C. Circuit with judges that would block an important ObamaCare case called Halbig v. Sebelius:

Democrats surprised Republicans in November with how quickly they dismantled the filibuster, and we are beginning to see why. Another major challenge to ObamaCare is being heard by a D.C. Circuit district judge, this time concerning whether subsidies can be delivered by the federal exchanges. Then there’s the new IRS proposed rule curtailing the political speech of 501(c)(4) groups. This rule will also probably make its way to the D.C. Circuit, and blocking GOP-leaning groups from politicking is part of the Democratic strategy for holding the Senate in 2014.

Democrats figure they have a better chance to win if they have more nominees on the appeals court—either in a three-judge panel or en banc. The plaintiffs could appeal to the Supreme Court if they lose, but you never know if the Justices will take a case.

Case Western Reserve University law professor Jonathan H. Adler and I laid the groundwork for Halbig and three other cases challenging President Obama’s attempt to tax Americans without congressional authorization in this law-journal article.

When “Zero Tolerance” Is Deadly

In his testimony before Congress advocating for the legalization of medicinal marijuana, National Review senior editor Richard Brookhiser argued that “the law disgraces itself when it harasses the sick.” How much more so when a school’s absurd “zero tolerance” drugs policy prevents a child with asthma from reaching his life-saving inhaler in time:

Ryan Gibbons was only 12 years old when he died from a severe asthma attack during recess at school. He would have simply reached for the prescription inhaler that he always carried with him, but his school took it away and locked it in the principal’s office.

As Ryan gasped for air, his friends picked him up and carried him to the office where his inhaler was held. But they couldn’t get there in time. Ryan passed out before they reached his potentially life-saving medicine. He never recovered. The date was Oct. 9, 2012.

The tragedy took place at Elgin County School in Straffordville, Ontario, Canada. Now Ryan’s grieving mom, Sarah Gibbons, is leading a campaign to get schools to change their senseless policy of keeping essential inhalers away from asthmatic children — by law.

The bill that she wants lawmakers to pass is dubbed “Ryan’s Law,” in honor of her son’s memory. The proposed law would force schools to let kids who have a doctor’s okay carry inhalers in school, in a pocket or backpack.

It’s too often the case that would-be laws named after deceased children are hastily conceived with little thought given to unintended consequences, but here it is the policy that the law seeks to overturn that was implemented without enough forethought. Schools certainly have a legitimate interest in keeping even legal drugs like alcohol and tobacco off its premises and preventing potentially-harmful prescription drugs from falling into the wrong hands. But inhalers are different than antibiotics or other prescription drugs that are taken at regularly scheduled intervals. The risk that some non-asthmatic students might abuse the inhalers is dwarfed by the risk of blocking access to inhalers. According to the Asthma and Allergy Foundation of America, nearly 25 million Americans suffer from asthma, including over 9 percent of children, and there are about 3,300 deaths resulting from asthma each year, “many of which are avoidable with proper treatment and care.”

This isn’t the first time a school policy came between a student with asthma and his inhaler. Last year, a student with asthma experiencing breathing difficulties passed out when a school nurse and school dean refused to allow him to use his inhaler – which was “still in its original packaging, complete with his name and directions for its use” – because his mother hadn’t filled out the proper form. The school did not call 911 and insisted even after the fact that it had done the right thing by following its policy to the letter.

Ryan-Murray Budget Deal Replaces Real Spending Restraint of Sequester with Budget Gimmicks and Back-Door Tax Hikes

How disappointing, but how predictable.

Politicians approved legislation in 2011 that was supposed to impose a modest bit of spending restraint over the next 10 years.

It wasn’t much. The enforcement mechanism, known as sequestration, merely was supposed to guarantee that spending climbed by $2.3 trillion rather than $2.4 trillion over the 10-year period.

But something is better than nothing, and the sequester that took place this year was a bitter defeat for President Obama and other advocates of bigger government.

Once Again, Pope Francis

This is not the first time I’ve commented on the socioeconomic ideas of the current Pontiff of the Catholic Church. However, Time’s newly named Person of the Year Pope Francis unfortunately insists once again on statist ideas that go against an open society based on free markets.

No doubt this has a clear moral dimension given that the tradition of classical liberalism (and its modern advocacy) is based on mutual respect and the allocation of property rights as moral support of its philosophical, legal and economic proposals. Hence Adam Smith’s first book in 1759 was titled The Theory of Moral Sentiments – a concern held by the leading exponents of that noble tradition.

I do not want to repeat here arguments that I’ve already stated in my previous pieces. Rather, I will restrict my comments to the most salient socioeconomic aspects of the Pope’s new document.

Some Preliminary Thoughts on the New “Final” Volcker Rule

There was only one way that the five regulatory agencies tasked with drafting the Volcker Rule–the provision of Dodd-Frank limiting proprietary trading by banks–were ever going to meet the year-end deadline and give meat to a poorly drafted statutory provision. That was if they retained maximum ex post facto discretion to decide whether bank activity is permissible or not under the rule. Unsurprisingly, this appears to be exactly what they have done.

I have some particular concerns:

The rule will require a “maze of regulators” (via the Wall Street Journal)

You thought the debate over the extraterritorial application of cross border derivatives (i.e., the fight between the Securities and Exchange Commission and the Commodities Futures Trading Commission)was contentious? Volcker is going to be five times worse. The rule still requires ongoing monitoring and enforcement by FIVE separate agencies and, as Wayne Abernathy of the American Bankers Association noted, there is still no mechanism for coordination built into the rule.

The rule lacks “bright line distinctions” (per Janet Yellen)

Basically banks won’t know if they’re in compliance or not until their regulator determines it. Ominously, SEC chairman Mary Jo White said that the regulators would be available to add “clarification.” Needless to say, a final rule should not need clarification.

The devil is in the enforcement

Several of the regulators noted that the key to “successful” implementation of the rule is ongoing monitoring and enforcement. But how do you monitor and enforce a rule that doesn’t have a bright line? So much for the rule of law.

The rule contains an exception for sovereign debt

In other words, banks can trade in as much sovereign debt as they want for their own account, but if they were to engage in similar activity with respect to investment grade corporate debt–Exxon Mobil for example–this will be illegal proprietary trading. (I feel safer already!)

Much of the “new final” rule does not have the benefit of public input

The two SEC commissioners who voted against the rule both complained they did not have sufficient time to review the contents–one labeled the year-end deadline “wholly political”–and were concerned that many of the new provisions did not have the benefit of public comment. They are correct that, at the very least, the rule should have been re-proposed as a draft.

For a full transcript of the final rule and Volcker related materials, see here.

Progress on the Laffer Curve*

The title of this piece has an asterisk because, unfortunately, we’re not talking about progress on the Laffer Curve in the United States.

Instead, we’re discussing today how lawmakers in other nations are beginning to recognize that it’s absurdly inaccurate to predict the revenue impact of changes in tax rates without also trying to measure what happens to taxable income (if you want a short tutorial on the Laffer Curve, click here).

But I’m a firm believer that policies in other nations (for better or worse) are a very persuasive form of real-world evidence. Simply stated, if you’re trying to convince a politician that a certain policy is worth pursuing, you’ll have a much greater chance of success if you can point to tangible examples of how it has been successful.

That’s why I cite Hong Kong and Singapore as examples of why free markets and small government are the best recipe for prosperity. It’s also why I use nations such as New Zealand, Canada, and Estonia when arguing for a lower burden of government spending.

And it’s why I’m quite encouraged that even the squishy Tory-Liberal coalition government in the United Kingdom has begun to acknowledge that the Laffer Curve should be part of the analysis when making major changes in taxation.

UK Laffer CurveI don’t know whether that’s because they learned a lesson from the disastrous failure of Gordon Brown’s class-warfare tax hike, or whether they feel they should do something good to compensate for bad tax policies they’re pursuing in other areas, but I’m not going to quibble when politicians finally begin to move in the right direction.

 

The Wall Street Journal opines that this is a very worthwhile development.

Chancellor of the Exchequer George Osborne has cut Britain’s corporate tax rate to 22% from 28% since taking office in 2010, with a further cut to 20% due in 2015. On paper, these tax cuts were predicted to “cost” Her Majesty’s Treasury some £7.8 billion a year when fully phased in. But Mr. Osborne asked his department to figure out how much additional revenue would be generated by the higher investment, wages and productivity made possible by leaving that money in private hands.

By the way, I can’t resist a bit of nit-picking at this point. The increases in investment, wages, and productivity all occur because the marginal corporate tax rate is reduced, not because more money is in private hands.

I’m all in favor of leaving more money in private hands, but you get more growth when you change relative prices to make productive behavior more rewarding. And this happens when you reduce the tax code’s penalty on work compared to leisure and when you lower the tax on saving and investment compared to consumption.