Archives: 04/2018

Public Schooling Battles: March Dispatch

The country saw other kinds of identity and values-based battles in March, but the month was dominated by one thing: guns, especially how you protest against them, for them, or try your best to stay neutral.

Of the 24 conflicts recorded on the Battle Map in March, 15 involved guns in some way. The large majority were directly about the March 14 National School Walkout, primarily whether schools should allow walkouts without ramifications in support of free speech; whether concerns about order and safety required that those who walked out be punished; if allowing a walkout to protest gun violence but not other causes amounted to viewpoint discrimination; and what to say, if anything, in events held in lieu of walkouts. Gun-related conflicts were recorded in Pennsylvania, North Carolina, New Jersey, Illinois, New York, California, Arkansas, Michigan, Ohio, and South Carolina, and there were likely many we did not find.

Among the incidents that got the most press attention was the case of Rocklin, CA teacher Julianne Benzel, who was apparently suspended by the district for holding an in-class discussion in which she mused that if an anti-gun walkout were allowed, so should a protest opposing abortion, lest the district treat some views unequally. So intrigued by the idea was student Brandon Gillespie that he planned a national pro-life walkout on April 11, which may well be a prominent battle in the April Dispatch. In a reversal of the expected walkout fear—kids getting in trouble for walking out in protest—a student in Hilliard City, Ohio, was punished for staying in his classroom during outdoor activities sanctioned by the school on Walkout Day. District officials said the student was punished for failing to go to the right place for students choosing not to participate, but the boy’s father said, “He was uncomfortable…as he thought that going outside would most likely be politicizing a horrific event which he wanted no part of.” Finally, a girl in New Jersey was punished for walking out, but what grabbed headlines was that the school would not accept roughly $1000 worth of flowers sent to her by people who admired her standing up for what she believed in. Said the student, “They’re always like, ‘You can always speak your mind and stuff, you have the freedom of speech here,’ and then when we do it, we’re always getting in trouble.”

Public schools absolutely upholding freedom of expression is impossible unless schools have no rules about what you can wear or say, when, about what, and to whom. But having no rules would render effective teaching very difficult, if not impossible. Not surprisingly, this tends to come to a head with highly charged issues like the war in Vietnam, or gun violence, especially when schools and students are so immediately affected by them. It is no coincidence that of all the polls we’ve put on the Battle Map Facebook page the one that has gotten by far the most attention—as the Dispatch reported last month—was about guns in schools. And it is not surprising to see quotes like this from coverage of a battle in Lacey Township, New Jersey, where two students were suspended for a Facebook post showing pictures of a family trip to a gun range: “People like us are under attack,” said resident John Pinto.

No one should feel besieged by the schools for which they must pay. But we know that they often do, because when opposing views collide in public schools, one must lose. School choice would go a long way to ending that.

How Bad Does It Have to Be?

The transit industry loses $50 billion a year. It’s customer base is dwindling. Business in many regions has declined by 20 to 40 percent. Yet Bloomberg, one of the nation’s leading business publications, says, “The outlook for public transit isn’t all that bad.”

Sheesh. Just how bad does it have to be to be “that bad”?

According to Bloomberg columnist Noah Smith, light-rail and commuter-rail ridership “are at all-time highs.” Although his chart appears to show ridership increasing through 2017, according to the source of data in his chart, ridership reports from the American Public Transportation Association (APTA), both light rail and commuter rail declined in 2017 and light rail (which APTA equates with streetcars) was much higher before 1955 than it is today.

It is true that both light- and commuter-rail ridership in 2017 were higher than 2014, a time period during which, Smith claims, heavy rail (subways and elevateds) was “down only slightly.” The different scales on Smith’s charts disguise the fact that heavy rail lost almost nine times as many riders during that period as were gained by light and commuter rail together.

Moreover, the only reason light rail grew at all was the opening of new lines, and all of that growth was offset by declining bus ridership in the cities that opened the new lines. Between 2014 and 2017, buses nationwide lost 35 riders for every one gained by light and commuter rail.

Based on the charts, Smith concludes that “the decline in U.S. transit comes almost entirely from buses” and that “trains will still be a good bet.” It’s true that about 80 percent of the decline is from buses. But buses are the backbone of the industry, providing 100 percent of transit ridership in most regions and, until the recent decline, more than 50 percent nationwide, so a loss in bus ridership can’t be dismissed as irrelevant.

Smith’s presumption is that bus and rail ridership aren’t connected. In fact, one reason bus ridership is plummeting is that too many cities bet on trains and the resulting construction cost overruns, the high costs of rail maintenance, and debt service on rail bonds forced them to cut bus service.

Here are some hard facts. According to data just released by the Federal Transit Administration, nationwide transit ridership in the first two months of 2018 was 2.2 percent less than the same two months of 2017. In turn, 2017 ridership was 4.9 percent less than 2016 and 11.5 percent less than 2014. Nearly all forms of transit are declining.

If an 11.5 percent nationwide loss since 2014 doesn’t sound “that bad,” how about a 31 percent loss in Cleveland? Or 20 to 26 percent losses in Charlotte, Columbus, Miami-Ft. Lauderdale, St. Louis, Tampa-St. Petersburg, Virginia Beach-Norfolk, and Washington DC? Or 15 to 20 percent losses in Atlanta, Boston, Dallas-Fort Worth, Los Angeles, and Philadelphia, among many other regions? Since 2010, Memphis is down 40 percent!

These regions are all very different – some large, some small; some growing rapidly, some slowly; some with trains, some with only buses – but the trend is downward everywhere except Seattle. And Seattle’s upward trend may have more to do with the confluence of Millennials, university students, and Pacific Northwest weirdness than the kind of transit Seattle is offering, so should not be construed as an example for other cities to follow.

Trains are an especially bad bet because they represent an expensive 30- to 50-year investment, so if the bet proves wrong, cities will be stuck paying the mortgage on empty railcars and tracks for decades. Outside of Manhattan, buses can move more people than trains at a far lower cost, and in Manhattan, new rail construction is ridiculously expensive.

Bipartisan Opportunities for Criminal Justice Reform

The Brennan Center for Justice recently released a new proposal paper, Criminal Justice: An Election Agenda for Candidates, Activists, and Legislatures. The agenda covers a wide range of issues within the federal and state justice systems. Several of the paper’s suggestions overlap with what we’re doing here at Cato’s Project on Criminal Justice. Specifically, the agenda calls for the federal government to allow the states decide their own marijuana laws and policies, which aligns with our longstanding commitment to federalism and ties directly to our commitment to rolling back unconstitutional overcriminalization. The paper also supports enabling police officers to divert individuals experiencing mental health crisis or drug-related problems to social services rather than take them to jail. This is a smart solution to what we call “self-defeating policing”: the policies and practices that may inflict harmful unintended consequences on communities without making them safer or providing for more personal security. In the same vein, we applaud Brennan’s call to courts to adjust civil fines on a person’s ability to pay. Civil remedies are generally superior to jail for minor offenses, but to the poor, fines and fees can become onerous new burdens that effectively criminalize poverty.

Of course, there are some proposals in the Brennan agenda where we would take a more limited government approach, such as not replacing federal subsidies that encourage mass incarceration with new federal subsidies to go in another direction, but these should not detract from the opportunities papers like this one present to the broader criminal justice community. Criminal justice reform remains among the most promising bipartisan efforts to improve society and increase individual liberty throughout the country.

You can read the whole Brennan Center report here. For more Cato work on criminal justice and civil liberties, go here.

Hey Baby, What’s Your On-Premises Sign?

Tennessee’s Billboard Regulation and Control Act of 1972 regulates roadside signs by imposing onerous restrictions as well as location and permit requirements. The statute also provides exemptions, particularly with regard to so-called “on-premises” signs. On-premises signs are those that either advertise activities that are conducted on the property or the sale of the property on which the sign is located. If a sign fails to qualify as “on-premises,” it’s subject to the full weight of the law and is often outright prohibited.

Based on the 2015 Supreme Court case of Reed v. Town of Gilberti, the federal district court ruled this on-premises/off-premises distinction to be a content-based regulation subject to strict scrutiny, ultimately finding it to violate the First Amendment. Cato certainly agrees with this outcome, and we have now filed a brief supporting it after Tennessee appealed to the U.S. Court of Appeals for the Sixth Circuit. Our basic point is this: Regardless of whether the court applies “strict scrutiny” or some lesser form of review, the statute is unconstitutional because of an insufficient fit between the ends the state claims to pursue and the means it uses.

While strict scrutiny requires the government’s interest to be “compelling” and the means employed to be the least restrictive possible, lesser scrutiny employs a somewhat more forgiving standard; a narrowly tailored regulation must directly advance the government’s “substantial” or “significant” interests.

What the CFBP Should Do Differently

What role should the Consumer Financial Protection Bureau play in regulating its industry? Although there is debate as to whether the Bureau should exist at all, policy analyst Diego Zuluaga argues in an op-ed recently published at The Hill.

Established in the wake of the financial crisis, the CFPB courted controversy from the start. As an independent agency headed by a single director who could only be dismissed for negligence or malfeasance, the bureau enjoyed an autonomy unprecedented in U.S. regulatory history.

Judge Brett Kavanaugh from the D.C. Circuit Court of Appeals wrote that ’[the CFPB’s] Director enjoys more unilateral authority than any other officer […] of the U.S. Government, other than the President.’

The first director, Richard Cordray, set about remaking American consumer finance by slapping punitive fines on providers and broadening the CFPB’s remit to include, among others, auto dealerships.

Under his direction, the bureau introduced a rule to restrict arbitration clauses in financial contracts, an intervention that would likely have raised the cost of credit.

Cordray also championed measures to severely constrain payday lending, an expensive form of short-term borrowing that can nonetheless be a lifeline for borrowers who have run out of options.

Indeed, throughout the CFPB’s first five years of existence, Cordray made little effort to dispel the fear among financial providers that the bureau was out to get them.

This may have been Cordray’s understanding of what the CFPB ought legitimately to do. Yet, in combination with the absence of effective checks and balances, his proclivity for regulatory intervention invariably created uncertainty.

By and large, the CFBP has been a destabilizing force for the financial industry. Zuluaga shows some of the ways the bureau has harmed the sector it purports to protect.

Consumer finance is an area particularly in need of legislative certainty, because it involves critical sources of short-term funding for households and is currently undergoing substantial disruption from online lenders and greater use of data in credit allocation.

Furthermore, the most prolific users of products regulated by the CFPB, such as short-term lenders, debt collectors and mortgage servicers, are people on low and middle incomes.

Politicization is not the CFPB’s only weak point. The bureau has devoted precious little effort to ensuring that regulation does not stand in the way of innovation and choice. Yet, as a rule, firms should be allowed to offer a range of products, and consumers should have the freedom to choose.

Zuluaga advocates turning the bureau from a single-director agency into a multi-member board, akin to the SEC or the Fed, and moving the bureau away from the auspices of the Fed and over to the FTC. 

The Fed’s regulatory remit involves prudential regulation and financial stability; that is, making sure bank balance sheets can withstand losses and, if they don’t, that contagion is minimized.

The FTC’s mission, on the other hand, is to protect consumers and promote competition. The CFPB’s role better matches the FTC’s because it involves not risk minimization but protecting the financial well-being of consumers.

A greater focus on competition and consumer welfare, moreover, might help the bureau to resist the temptation to overregulate.

And although Zuluaga acknowledges that there is a case for eliminating the bureau altogether, he cautions that so long as it still exists “it must be turned from foe into enabler of consumer finance.” 

The full piece is available here.

Budget Projections Show We’re Headed to Poorhouse

In a July 1932 radio address, Franklin Roosevelt said, “Let us have the courage to stop borrowing to meet continuing deficits. Stop the deficits … Any government, like any family, can for a year spend a little more than it earns. But you and I know that a continuation of that habit means the poorhouse.”

That was a surprisingly sound bit of advice from that particular president. However, after Roosevelt was elected, he helped entrench a new culture of spending and deficits in Washington that triumphed over a traditional approach of prudence and restraint in public budgeting. FDR’s fiscal legacy continues to haunt us today.

New projections show a grim fiscal future and crushing debt burdens on young Americans. The chart shows CBO’s “alternative” projection for federal debt as a share of the economy, per CRFB. The projection may be more realistic than CBO’s baseline because it assumes current tax cuts are extended and discretionary spending caps will continue to be breached in coming years.

Without reforms, federal debt held by the public will rise from 78 percent of GDP this year to 105 percent by 2028. That will be triple the level in the early 2000s. Interest on the debt will more than double as a share of GDP from 1.6 percent today to 3.3 percent by 2028.

Budget Deficits And Debt Projections Look Much Worse Assuming “Current Policy”

Publication of the CBO’s “The Budget and Economic Outlook: 2018 to 2028” has once again brought attention to the dire outlook for the federal public finances.

The challenge is best thought of in the following way:

1) there is a structural challenge associated with projections for debt-to-GDP ballooning in the coming decades due to unchanged entitlement programs interacting with an aging population

2) politicians have sailed us into these fiscal headwinds with a large, structural budget deficit, and debt held by the public is already at its highest level since just after World War II

The policy implications are clear: substantial entitlement reforms are, and always were, necessary if the US were to have any hope at preventing ever-rising federal debt (as Brian Riedl indicates in this excellent post).

But running something much closer to an overall balanced budget sooner rather than later is needed if the aim is to get the debt-to-GDP ratio heading back down towards historic norms over the coming decades.

It’s in this context the CBO numbers are so gloomy.

Over the next 10 years, based on current laws, the CBO estimates that the deficit will instead increase from 3.5 percent of GDP in 2017 to 5.4 percent in 2022, before fluctuating between 4.6 percent and 5.2 percent from 2023 to 2028. This compares with an average annual deficit of 2.9 percent over the next 50 years. Debt held by the public as a result is projected to rise to 96.2 percent of GDP by 2028.

But note this is based on “current law,” and assumes substantial income tax increases in 2025 as individual tax cuts expire, and that there will be spending cuts too.

As the CBO notes:

If those changes did not occur and current policies were continued instead, much larger deficits and much greater debt would result: The deficit would grow to 7.1 percent of GDP by 2028 and would average 6.3 percent of GDP from 2022 to 2028…debt held by the public under that alternative fiscal scenario would reach 105 percent of GDP by the end of 2028, an amount that has been exceeded only one time in the nation’s history.

The CBO data clearly shows that revenue as a proportion of GDP was expected to have risen back to its 2017 level by 2023 even before the expiration of many tax cuts, showing that from then on its rising spending that is driving the worsening outlook in debt over this period.

If the Republicans really wanted to lock in their tax cuts, they needed spending restraint. Instead, now, the fiscal outlook is set to deteriorate, tax cuts are being blamed (even though projections show tax revenues will still increase as a proportion of GDP), and on current policies debt is heading north pretty rapidly.