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

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You would think that if there were one federal program PresidentBush would want to kill, it would be the "Gore Tax," named afterhis opponent in the last election. Yet not only do Bushadministration officials not want to kill this program-whichimposes hidden taxes on phone bills to help wire schools to theInternet-they won't even support proposals to limit it.

At a March 7 hearing of the House Education and WorkforceCommittee, Education Secretary Roderick Paige announced that theadministration was backing away from a plan to consolidate theoff-budget "E-Rate" program, as it's officially known, into otherfederal education programs. That's too bad. The E-Rate program is aclassic example of an unnecessary and unconstitutional federalprogram that demands immediate attention before it balloons into aperpetual federal entitlement.

E-Rate is shorthand for "education rate," or the reduced pricesfor technology and telecommunications services that schools andlibraries are eligible for under the program. Championed by formerVice President Al Gore, the program was part of the 1996Telecommunications Act.

Initially, the E-Rate program was administered by aquasi-government entity, the Schools and Libraries Corporation,formed by the Federal Communications Commission in May 1997 withoutthe consent of Congress. After questions arose regarding theconstitutionality of the FCC's creation, the agency shiftedresponsibility to a non-profit organization known as the UniversalService Administration Company (USAC).

While the FCC's sleight of hand lessened constitutional concernsby seemingly shifting management to a non-profit group, in realityit was business as usual because the USAC takes its orders from theFCC. Consequently, the FCC has continued to demand that the E-Rateprogram be funded through a complex system of industry mandates andhidden taxes to help lower the costs of installing communicationsand computer technologies in classrooms and libraries. The FCC hasalso continued to dictate the amount of annual funding for theprogram, currently $2.3 billion per year.

President Bush's original proposal to reform E-Rate was modest.The president wanted to make the program marginally moreaccountable by shifting administration to the Department ofEducation and requiring a formal appropriation for the E-Rate inthe federal budget each year.

That got it half right. To the extent that schools and librariesreceive public funding for their technology needs, those fundsshould be incorporated into a formal budget subject to open debateand a vote by elected legislators. Unfortunately, theadministration was proposing that these reforms take place at thefederal level instead of the state and local level, where educationspending decisions should occur.

The optimal solution would be to end federal involvementaltogether and allow the states to operate the E-Rate program ontheir own, if they so choose. While the jury is still out regardingthe sensibility of increased reliance on technology in theclassroom, those educational institutions desiring funds forcommunications and computing services should petition their stateor local leaders for such funding, the same way they would for anyother educational tool or technology. There is nothing unique aboutcommunications or computing technologies that justifies a federalentitlement program while other tools of learning are paid forthrough state and local budgets.

For example, consider textbooks. Everyone would agree thattextbooks are an indispensable teaching aid. Policy makers havenever suggested, however, the inclusion of a hidden tax in the costof new novels to help lower the cost of textbooks in the classroom.Such an absurd cross-subsidy would be considered inefficient andunfair. Yet that is how the E-Rate program operates. Hidden taxeson the phone bills of average Americans cross-subsidize schoolwiring efforts.

It is inexplicable why the Bush administration has decided tosurrender on E-Rate reform. Worse yet, the administration'sreluctance to pursue serious reform now paves the way for theE-Rate program to become a full-blown national entitlement program.And with time, the burgeoning E-Rate lobby will pressure the FCC toexpand the grab bag of high-tech goodies that should be subsidized.Today it's advanced phone service, high-speed Internet access,routers and hard wiring. As for tomorrow, who knows?

There's a perfect candidate to run the E-Rate program in anadministration that has abandoned all opposition to it. His name isAl 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.