March 27, 2007 9:27PM

Undermining America’s Social Capital with Redistribution

A new report from the Tax Foundation analyzes the degree of redistribution imposed by government. According to the study:

America’s lowest‐​earning one‐​fifth of households received roughly $8.21 in government spending for each dollar of taxes paid in 2004. Households with middle‐​incomes received $1.30 per tax dollar, and America’s highest‐​earning households received $0.41. Government spending targeted at the lowest‐​earning 60 percent of U.S. households is larger than what they paid in federal, state and local taxes. In 2004, between $1.03 trillion and $1.53 trillion was redistributed downward from the two highest income quintiles to the three lowest income quintiles through government taxes and spending policy.

This huge shift of resources punishes those who produce and rewards those who do not. This hurts economic performance by distorting incentives. Investor’s Business Daily identifies another problem that may be equally troublesome. Massive amounts of redistribution create an entitlement mentality. People being to think that government owes them a living. And as an editorial from IBD notes, public opinion data are trending in the wrong direction:

…the U.S. tax code is becoming more progressive, not less. No one minds helping the truly needy. But as with welfare in the pre‐​1996 reform era, reliance on government can become a habit — imposing huge costs on our national economy. Worse, a ‘what’s in it for me?’ attitude seems increasingly the norm. Once a nation of stoic, self‐​reliant individualists, America now seems full of people who think other taxpayers owe them something. They see the ‘system’ as a giant cow to be milked — and damn the cow. This is backed up by polling data. In a 1994 Pew poll, 57% agreed with the statement ‘Government should care for those who can’t care for themselves.’ Today, it’s 69%.

March 27, 2007 9:24PM

Moving (Government) Forward Faster

Washington, D.C., mayor Adrian Fenty released his proposed budget last week. Titled “Moving Forward Faster,” it’s an example of the sort of thing you’d expect from a D.C. mayor who is quite fond of the nanny state.

To avoid having to read the entire document yourself, here’s the punch‐​line: Government spending – that is, expenditures financed by locally‐​derived revenue, not federal transfers – grows by a proposed 8.8 percent. By way of comparison, the city’s budget under Mayor Anthony “Baseball” Williams grew by an annual average of 7.5 percent.

But the large increase can be explained by a growing DC population, right? Nope. The most recent Census numbers show that the city’s population fell between July 2005 and July 2006. Even if fewer people flee to Virginia or Maryland this year – or even if more people start actually moving in the opposite direction – it’s virtually impossible that the population growth figures will spike by nine percent. Average annual population growth since 2003, for instance, hasn’t even come close to breaching the one‐​percent mark.

Fenty describes his budget proposal as “fiscally conservative” in his transmittal letter to the DC Council. Yet maybe we shouldn’t ridicule him for that. Since he’s operating in a city where a Republican president who spends taxpayer money almost as fast as Lyndon Johnson also calls himself “fiscally conservative,” perhaps the mayor is just mimicking the local custom.

March 27, 2007 5:21PM

Five Years Is a Long Time, Part 2

What has the Bipartisan Campaign Reform Act accomplished over the last five years?

Not much. But don’t take my word for it. Mark Schmitt helped fund the struggle for BCRA as a program officer at the Open Society Institute. Now he has written a candid and thoughtful analysis that begins:

Judged by the most visible results on promises like getting big money out of politics or cleaning up politics, campaign finance reform has been, to put it mildly, a disappointment.

March 27, 2007 3:54PM

Five Years Is a Long Time, Part 1

Today is the fifth anniversary of the signing of the Bipartisan Campaign Reform Act.

Five years ago, surveys found that 79 percent of the public approved of the job being done by the man who signed McCain‐​Feingold, George W. Bush. Now 34 percent approve of his work. Until recently, the major sponsor of the law, Sen. John McCain, seemed the most likely candidate to win the Republican presidential nomination for 2008. Now McCain persistently trails Rudolph Guiliani in the polls, and his presidential campaign seems to be in trouble.

If September 11th explained President Bush’s high rating five years ago, the war in Iraq has caused his free fall. Signing McCain‐​Feingold did show a certain lack of concern about political principles in the current president, but it probably cost him no more than a point or two in his approval ratings. (In fact, his approval rating fell on average 3 points during the two months after he signed McCain‐​Feingold).

The case of McCain seems different. GOP primary voters saw and continue to see his campaign finance “reform” jihad as an attack on conservatism, the Republican party, and the U.S. Constitution. He is not liked. That didn’t matter much to McCain, because he believed Republican voters would prefer him, warts and all, to Hillary Clinton.

But that is not the choice Republicans have right now, and the choice they do have in surveys suggests Sen. McCain may not make it to the “me or Hillary” stage of his plan to become president. Perhaps principles do matter after all.

March 27, 2007 3:53PM

Va., Md. to Require Smoking in Restaurants

As reported in the Washington Onion:

RICHMOND — Virginia governor Tim Kaine (D) proposed yesterday to require all of the state’s restaurants to allow smoking. He stopped short of seeking a wider smoking mandate for most workplaces and public spaces, as some advocates had wanted.

The Kaine proposal comes as Maryland lawmakers are pushing ahead with legislation to mandate that smoking be allowed in all bars and restaurants in that state. Lawmakers must reconcile differences between separate bills passed by the Maryland Senate and House of Delegates, including the process by which businesses could seek hardship exemptions from the law. Maryland governor Martin O’Malley (D) has said he would sign a statewide mandate.

“This is a great day for both restaurant patrons and workers,” said Kelly Bassler, president of the Mid‐​Atlantic Smoking Coalition. “We applaud both Maryland and Virginia for taking leadership in this very important issue.”

William Lucas, president of the Virginia Chamber of Business, warned that the smoking mandate could “destroy commerce as we know it. We are still studying it with the recognition that free choice in the marketplace is always our preference.”

Can you believe that Virginia and Maryland lawmakers think they have the right to force all restaurant and bar patrons and workers to adopt the smoking preferences of one group of people? There are plenty of bar and restaurant entrepreneurs who are willing to provide nonsmoking establishments, and plenty of workers who are willing to staff those places, and plenty of nonsmokers (like me) who are willing to patronize them — so why is government prohibiting the market from separating into sub‐​sectors that cater to nonsmokers and to smokers? Why can’t we nonsmokers have our places and smokers have theirs?

It is utterly outrageous! Where’s the respect for individual choice? Where’s the respect for different preferences? How dare some people force their choice on everyone else in every bar and restaurant in the state! What rotten, dirty, no‐​good…

…what’s that? What’s that you say? I have it backwards — Virginia and Maryland are considering statewide smoking bans?

Well, same difference—

(My apologies to the Washington Post.)

March 27, 2007 3:48PM

REAL ID, the Race Card

I testified in Congress yesterday, at a hearing on the REAL ID Act in the Senate Homeland Security and Governmental Affairs Committee’s Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia. My testimony is here.

An issue that I sought to highlight comes from studying the REAL ID regulations carefully: The standard that the Department of Homeland Security selected for the 2D bar code that would go on REAL ID compliant cards includes race/​ethnicity as one of the data elements. 

DHS does not specifically require inclusion of this information, but states are likely to adopt the entire standard. Thus, starting in May 2008, many Americans may be carrying nationally uniform cards that include race or ethnicity in machine‐​readable formats – available for scanning and collection by anyone with a bar code reader. Government agencies and corporations may affiliate racial and ethnic data more closely than ever with information about our travels through the economy and society.

This was not intended by the authors of the REAL ID Act, nor was it intended by the regulation writers at the Department of Homeland Security. The Belgian colonial government in 1930s Rwanda had no intention to facilitate the 1994 genocide in that country either, but its inclusion of group identity in ID cards had that result all the same.

The woman in the image below, believed to be a genocide victim, is categorized as a Tutsi just below her photograph. Her name is not seen, as it appears on the first page of this folio‐​style ID document. The names of her four children, though, are written in on the page opposite the photo.

The lessons of history are available to us. The chance of something like this happening in the United States is blessedly small, but it is worth taking every possible step to avoid this risk, given an always‐​uncertain future. In a society that strives for a color‐​blind ideal, the federal government should have no part in creating a system that could be used to track people based on race. 


photo by Jerry Fowler, USHMM

March 27, 2007 3:01PM

Congress Looks at Stadium Subsidies

This Thursday the Domestic Policy Subcommittee of the House Committee on Oversight and Government Reform will hold a hearing titled, “‘Build It and They Will Come’: Do Taxpayer‐​financed Sports Stadiums, Convention Centers and Hotels Deliver as Promised for America’s Cities?”

Several Cato studies over the years have looked at the absurd economic claims of stadium advocates. In “Sports Pork: The Costly Relationship between Major League Sports and Government,” Raymond Keating finds:

The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the “substitution effect” (in terms of the stadium game, leisure dollars will be spent one way or another whether a stadium exists or not), the dubiousness of the Keynesian multiplier, the offsetting impact of a negative multiplier, the inefficiency of government, and the negatives of higher taxes all argue against government sports subsidies. Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports — or a possible negative effect.

In Regulation magazine, (.pdf) Dennis Coates and Brad Humphreys found that the economic literature on stadium subsidies comes to consistent conclusions:

The evidence suggests that attracting a professional sports franchise to a city and building that franchise a new stadium or arena will have no effect on the growth rate of real per capita income and may reduce the level of real per capita income in that city.

And in “Caught Stealing: Debunking the Economic Case for D.C. Baseball,” Coates and Humphreys looked specifically at the economics of the new baseball stadium in Washington, D.C., and found similar results:

Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy. The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over the entire metropolitan area.

Humphreys will testify at Thursday’s hearing.