The “Gore Tax” Finds a Friend: George W. Bush

This essay originally appeared on National Review Online. Copyright 2001 National Review.
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You would think that if there were one federal program President Bush wouldwant to kill, it would be the “Gore Tax,” named after his opponent in thelast election. Yet not only do Bush administration officials not want tokill this program -- which imposes hidden taxes on phone bills to help wireschools to the Internet -- they won’t even support proposals to limit it.

At a March 7 hearing of the House Education and Workforce Committee,Education Secretary Roderick Paige announced that the administration wasbacking away from a plan to consolidate the off-budget “E-Rate” program, asit’s officially known, into other federal education programs. That’s toobad. The E-Rate program is a classic example of an unnecessary andunconstitutional federal program that demands immediate attention before itballoons into a perpetual federal entitlement.

E-Rate is shorthand for “education rate,” or the reduced prices fortechnology and telecommunications services that schools and libraries areeligible for under the program. Championed by former Vice President Al Gore, the program was part of the 1996 Telecommunications Act.

Initially, the E-Rate program was administered by a quasi-government entity, the Schools and Libraries Corporation, formed by the Federal Communications Commission in May 1997 without the consent of Congress. After questions arose regarding the constitutionality of the FCC’s creation, the agencyshifted responsibility to a non-profit organization known as the UniversalService Administration Company (USAC).

While the FCC’s sleight of hand lessened constitutional concerns byseemingly shifting management to a non-profit group, in reality it wasbusiness as usual because the USAC takes its orders from the FCC.Consequently, the FCC has continued to demand that the E-Rate program befunded through a complex system of industry mandates and hidden taxes tohelp lower the costs of installing communications and computer technologiesin classrooms and libraries. The FCC has also continued to dictate theamount of annual funding for the program, currently $2.3 billion per year.

President Bush’s original proposal to reform E-Rate was modest. Thepresident wanted to make the program marginally more accountable by shiftingadministration to the Department of Education and requiring a formalappropriation for the E-Rate in the federal budget each year.

That got it half right. To the extent that schools and libraries receivepublic funding for their technology needs, those funds should beincorporated into a formal budget subject to open debate and a vote byelected legislators. Unfortunately, the administration was proposing thatthese reforms take place at the federal level instead of the state and locallevel, where education spending decisions should occur.

The optimal solution would be to end federal involvement altogether andallow the states to operate the E-Rate program on their own, if they sochoose. While the jury is still out regarding the sensibility of increasedreliance on technology in the classroom, those educational institutionsdesiring funds for communications and computing services should petitiontheir state or local leaders for such funding, the same way they would forany other educational tool or technology. There is nothing unique aboutcommunications or computing technologies that justifies a federalentitlement program while other tools of learning are paid for through stateand local budgets.

For example, consider textbooks. Everyone would agree that textbooks are anindispensable teaching aid. Policy makers have never suggested, however, theinclusion of a hidden tax in the cost of new novels to help lower the costof textbooks in the classroom. Such an absurd cross-subsidy would beconsidered inefficient and unfair. Yet that is how the E-Rate programoperates. Hidden taxes on the phone bills of average Americanscross-subsidize school wiring efforts.

It is inexplicable why the Bush administration has decided to surrender onE-Rate reform. Worse yet, the administration’s reluctance to pursue seriousreform now paves the way for the E-Rate program to become a full-blownnational entitlement program. And with time, the burgeoning E-Rate lobbywill pressure the FCC to expand the grab bag of high-tech goodies thatshould be subsidized. Today it’s advanced phone service, high-speed Internetaccess, routers and hard wiring. As for tomorrow, who knows?

There’s a perfect candidate to run the E-Rate program in an administrationthat has abandoned all opposition to it. His name is Al Gore.

Adam D. Thierer

Adam Thierer is the Director of Telecommunications Studies at the Cato Institute in Washington, D.C. A version of this article appeared in National Review Online on April 4, 2001.