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Drain the wonkery

Here’s a recent comment from someone whose work I edited: “Thanks for draining the extra wonkery out of the piece, as usual.”

If you have a message that touches on public policy and you need someone to drain the wonkery out of your document, drop me a line via LinkedIn.

Using Uber, not a bus system, to satisfy transportation needs

A city experiments with subsidizing people’s transportation needs through ride-sharing services such as Uber. It gets people from A to B, without the capital costs of new buses or (more expensive yet) rail lines.

The response from (taxpayer subsidized) public radio? Hey, this may be a bad thing because it could put more cars on the road.

Sounds like someone wants to help the poor, as long as they don’t get to use the same options as everyone else.

Once you scroll back hundreds of off-topic discussions in the comments section of the article, you find this: “Uber’s business model is what you’d expect to see in third world nations,” plus a slam at Uber drivers for being native, ignorant, and desperate. There those rascally people go again, thinking for themselves.

As for my own use of Uber, I’ve had both positive and negative experiences — as I have had with mass-transit systems. I say kudos to Alta Monte Springs, Florida, for focusing on addressing human needs and doing so in a way that is aware of changes in the economy.

School choice: A practical, pragmatic response to school failure

Fix a problem now, or hope for a resolution a decade or more away?

The Atlantic magazine has a lengthy article about families in Detroit who use Michigan’s law (“schools of choice”) that make it possible for thousands of schoolchildren to attend a school outside their district.  The article talks about parents who spend a lot of time and trouble getting their children to schools.

Tough life? Certainly. Worth it? In her mind, yes. Here’s one parent:

“I told him, ‘We’re going through these extra steps and it’s a lot to get you to school, but if this is going to help better prepare you, not only for high school and for college, but for life, then it’s what we’re going to do.’”

The sophisticated version of an anti-school choice argument is an extention of the classic work, Exit, Voice, and Loyalty: When people who care the most about changing an unsatisfactory status quo leave the system, they deprive everyone else of their power to make a difference.

Yet this argument assumes that parents who see a bad situation must wait years for improvements to come, and if they don’t, well, too bad. Michigan’s schools of choice program, as well as its charter school sector, provide parents in Detroit and elsewhere with options to improve their children’s situation now, not years down the road.

Public pension math

There’s science, and then there’s political science. Likewise, there’s math, and then there’s political math. Political math can be deadly to the fiscal health of a political unit, whether it’s a city, state, or country.

Underfunded public pensions are one of those problems that dog governments, but which most people don’t know about. It’s simple, really: Politicians buy labor peace by offering generous pension benefits to government employees. Then they please everyone else by not putting in the contributions required to make the plans meet the projected benefits.

Why does this please everyone else? Money not paid into pension funds can be used for any number of programs and purposes, including hiring more government employees.

Sheila Weinberg has a great quip in a commentary on the pension mess that Illinois has, perhaps one of the worst in the nation: “Former SEC official Peter Chan said, ‘I sometimes wonder whether people understood the math.’ The governors and legislators understood that the political math they were using allowed them to claim they were meeting the constitution’s balanced budget requirement—and get re-elected—by providing increasing services and benefits without losing votes due to the tax hikes necessary to cover these expenses.”

Hello world (really)

“Hello world” is the name, if I remember correctly, of a dummy post that appears when you first set up a blog with WordPress.

In this case, “hello world” is simply a greeting that I’m using to update this site. Obviously, it’s been a while since I wrote anything original here. That’s because my interests have taken toward writing stuff that isn’t related to public policy. And when I have been involved in policy lately, it’s been more with the proofreader’s or editor’s pen than the writer’s. In one case, yes, it was actual with a pen, though usually I use a computer keyboard.

That’s all for now. By the way, if you’re interested in “who” versus “whom” and other such questions, as well as some advice on how to improve your writing skills, may I offer a recommendation? Garner’s Modern American Usage.

Initiatives and referenda: The overlooked part of elections

Initiatives and referenda are often overlooked in the red shirt/blue shirt post-game analysis. But I find them fascinating. USA Today has a quick review of some ballot measures across the nation. I see that Mary Jane did well, winning approval in Alaska, Oregon, and Washington DC, though not in Florida. Oh well. It’s getting to the point that when our economy tanks, we can all light up to make the pain go away. Even as it becomes more difficult to purchase legal products (continue reading), we’re making it easier to take one toke over the line. Freedom!

In neighboring Wisconsin, voters approved a measure to (allegedly) “prevent the state transportation fund from being siphoned to pay for other needs.” That sounds great, though I’d like to look at the details. Voters in Milwaukee said that it’s just find and dandy to regulate political speech–and they did so by greater than a 2:1 margin. Illinois approved a question that prohibits voting-related laws that have a disparate impact on selected groups of people. That sounds like a law with a lot of unanticipated consequences. Voters in Arkansas decided to let “dry” counties remain that way, should they choose. Score one for local control, and one against personal choice. The campaign was enough to remind one of the theory of baptists and bootleggers, though in this case, established liqour distributors stood in the place of the bootleggers. Michael Bloomberg and Bill Gates scored a win in Washington state, where voters approved an initiative to impose more regulations on the purchase of guns. Finally, voters in Berkeley, California, approved a soda pop tax. Who says that liberalism is (just) about providing free stuff?

This was first published at Look True North. For more information, see the Initiative and Referenda Institute, which has a handy compilation (PDF) of the results from the 2014 election.

Minnesota in the bottom 5 for tax climate, again

How is Minnesota like the Chicago Cubs? They’re both “lovable losers.”

Another season of Major League Baseball will soon expire, and the Cubs will have failed, again to even make it to the World Series. And as another year has passed, a tax-policy organization has once again said that Minnesota is a cellar-dweller.

The Tax Foundation recently released its annual State Business Tax Climate Index, and Minnesota came in with a low score. Its position of 47 puts it just ahead of California, New York, and New Jersey.

The report attempts to compare all of the 50 states against each other, using 100 factors that are grouped into five broad groups: corporate taxes, individual income taxes, sales taxes, unemployment insurance rates, and property taxes. Taxes are not the only factor that individuals and businesses consider, but in a competitive world in which people and businesses have options, they do carry some weight. And in the case of Minnesota, the tax system has been a weight.

Minnesota shows up several times in the index, and not for good reasons. It has fourth-highest corporate income tax rate, for example, and the third-highest state sales tax. It also gets nicked for complexity. For example, it is one of a few states that has an alternative minimum income tax. It exempts clothing from the sales tax, but taxes materials that businesses use to make their products—which are then taxed again. In other words, Minnesota’s tax system is skewed towards high rates, applied to a small base, which is the opposite structure of what economists recommend. And for sheer frustration, the state’s tax laws vary from the federal tax code in several key ways, further adding to complexity come tax time.

The state is still riding its glory days of large companies that could handle high tax rates and tax complexity. Some of those, such as Cray or Lockhead, have disappeared. Others, such as 3M, have aggressively expanded elsewhere. Yet still others, such as Medtronic, have even talked of leaving the country.

While Minnesota has been raising income tax rates and imposing new taxes such as the warehousing tax, some other states have been lowering rates and simplifying their tax code. Even though New York scores even lower than Minnesota overall, its position on the corporate tax component of the index will move from 24 to 20 as a result of recently passed changes. Colorado will move from 20 to 12, and North Carolina will gain five spots.

North Carolina shows that it is possible to make dramatic changes in a state’s position relative to other states. On the overall index, the its position rose dramatically, from 44 to 16. How did this happen? It flattened its personal income tax system, made sales taxes more uniform across the state, and reduced the corporate income tax by 13 percent.

If there’s a default way that Minnesotans have of improving the tax climate, it may be to offer special incentives to select businesses. See, for example, the deals offered up to the Vikings and the Mayo Clinic. But again, North Carolina is instructive. It lavished tax incentives on Dell Computers, which announced just four years later that it was leaving the state. It’s better to create a system that works well for all rather than pin hopes on a few politically connected players.

Can Minnesota ever make it to the top ten states, which start out with Wyoming, South Dakota, and Nevada? With some work and hard work, yes. It’s true that some states in the top ten have unique qualities Minnesota cannot hope to replicate. It’s not going to be able to offload the tax burden on tourists (Florida) or people who buy its petroleum (Alaska). And the political climate won’t let it join the ranks of states with no income tax, such as South Dakota or Nevada. But Utah and Indiana are in the top ten, and they, like Minnesota, have both a state sales tax and a state income tax. What have they done? They have kept the base broad and the rates low. Again, this is the opposite of what Minnesota has done.

 

First published by Center of the American Experiment

Political speech prolongs policy difficultiles

One benefit we can expect from Tuesday’s election is that some misleading, hyperbolic, and outright fraudulent advertising will come to an end. Granted, political speech is an essential part of our form of government, so you might say it’s a cost of democracy. Unfortunately, though, campaign speech shapes the political culture, making it that much harder to fix outstanding problems. I would give some examples, but they all blur together at this point. So I say, “bring on election day!” On Wednesday morning, we will stay face misleading, hyperbolic, and outright fradulent advertising. But it will be limited to advertising put out by commercial interests, which, unlike government, we are often free to ignore.

First published on True North.

The practice of medicine

Today I received a political mailing, targeting a candidate on healthcare.

“Who should be in charge of YOUR healthcare decisions?,” it asks. “Politician [name] OR Doctors?” The flier then criticizes the politician in question for votes to create a state insurance exchange.

It’s a legitimate criticism, but nothing new. The political process has been making health-related decisions for a long time, including scope-of-practice laws, certificate-of-need requirements, and insurance regulations.

You might say, though, that insurance companies are also involved in the practice of medicine. That, in turn, goes back to politics. Not only do state governments regulate health insurance, but the federal government has encouraged a “fourth-party” system of health care financing that makes health care a much more complicated affair than simply doctor and patient.

Fourth-party? Yes. Avik Roy explains:

For most Americans, health care looks something like this: A patient purchases health insurance, or receives it from his employer. The insurer then directs the patient to use physicians in its network, with whom it has negotiated reimbursement rates. The patient is given little or no information about the comparative cost or quality of any particular doctor. The patient then visits his doctor. After an interview and an examination, the physician orders tests, procedures, or medications on the patient’s behalf. The insurance company reimburses the doctor for a large share of these costs, though it might occasionally haggle if it feels the doctor has spent too much on the patient. The patient receives a bill in the mail from the insurer for his part of the expenditure; that bill is only vaguely related to the services rendered to the patient, and is generally presented in a way that makes it impossible to decipher the relationship between services and costs.

Patient. Insurance company. Employer. Medical professional. Four parties.

Employer-sponsored insurance is in large measure a create of the federal tax code. ObamaCare, or the ACA if you will, could in theory lead us toward a system of personal, portable insurance. But there are so many poor features of it that patients are going to be mired in public and private bureaucracies for quite some time.

Pensions “could be adjusted,” says bankruptcy judge

Across the country, states and cities face difficult fiscal situations, aggravated by the fact that they have over-promised and under-funded pension plans. As cities and other units of government consider bankruptcy, judges and others must ask whether those promises have a superior standing over promises made to vendors, bondholders, or citizens as a whole.

The city of Stockton, California, is in bankruptcy court, and offered Franklin Templeton Investments one cent on the dollar, while doing nothing to reduce payments owed to pensioners. Franklin filed an action with a federal bankruptcy court, and accused the city of picking and choosing winners, pleading poverty to some while making others whole.

In an opinion released this week, federal bankruptcy judge Christopher Klein said, “I’ve concluded the pension could be adjusted.” Though this is a significant statement, it’s not a formal ruling, which will come later this month. Klein also said “California public employee retirement law … is simply invalid in the face of the supremacy clause of the United States Constitution.” He went so far, in his oral presentation, to ask, “Is CalPERS [the state pension administrator] a state unto itself?”

The question in California and elsewhere is this: Should pensions receive a superior status over all other claims on city finances? There are several factors to consider, including prudence: The city has said it cannot attract and retain workers without an iron-clad guarantee. But a city also needs functioning capital markets to work, and Franklin Templeton has financed the city’s firehouses and some of its parks, as well as financed a move of its dispatch center, things from which all citizens benefit. If lenders get burned often enough, the results will not be good for the public at large, as they will require higher interest rates, or in the extreme, choose to not lend money.

As for the legal argument, “pensions,” the LA Times reminds us, “have no specific protections under the [federal bankruptcy] code, but they do often get favorable treatment during bankruptcy negotiations, both for practical reasons — they are usually a large, sometimes the biggest, creditor — and for emotional ones.” The “emotional” reasons, of course, have to do with the problem of concentrated benefits (due to pensioners) and diffused costs (to citizens as a whole). Once again, a financial problem caused by political logic may end up being “fixed” by … yet more political logic.

This is certainly a case that concerned citizens everywhere should keep an eye on.

First published by the Center of the American Experiment