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Make the Government Compete for Citizens

Monday, May 14, 2012

A book review by John R. LaPlante

Many Republicans cheered, or at least assented, when the federal government took on more powers during the presidency of George W. Bush. (See: the Patriot Act.) Democratic Party partisans, meanwhile, have taken the same tack after their own party took control the White House. (See: ObamaCare.)

But the political stars eventually realign, and then you may not be so happy with what happens. So a better approach is to support limits on government. There are various ways to do that. One is to hope for wise and benevolent rulers who won’t overstep their boundaries. (Good luck with that!) Another is to lay out in law what government can’t do, through spending limits or a Bill of Rights. Still another is to divide the power that government has among competing institutions.

In his book, “Power Divided is Power Checked,” Jason Lewis calls for reducing the power of the federal government over the states, drawing on the concept of “competitive federalism.” In brief, it means that the federal government manages national defense and foreign affairs, while the states make the laws and rules on other topics. People vote with their feet for the approach to government that suits them best.

Lewis explains how competitive federalism started (the Federalist Papers), how it has become weakened (by presidents, congresses and the Supreme Court), and how it might be strengthened once again. Along the way he talks about how federalism (or its lack) works itself out on issues such as minimum wage laws, the Americans with Disabilities Act, environmental regulations, the definition of marriage, and gun control. The book is a mini-seminar on the history of judicial interpretation, with some trips into political history along the way.

Lewis says:

Federalism has always been the sine qua non of limited government because it offers the only real safety valve from an overreaching government: the ability to flee.

Ironically, the federal government has weakened federalism by growing itself at the expense of the states.

Federal expansion has happened in several ways, including an open-ended reading of the “general welfare” and “interstate commerce” clauses of the U.S. Constitution. (Not surprisingly, advocates of the Patient Protection and Affordable Care Act—“ObamaCare”—often cite these clauses to support the law.)

Another example is the development of the “incorporation doctrine,” by which federal courts use the Bill of Rights and the Fourteenth Amendment to strike down state laws. The Amendment, enacted in 1868 in the aftermath of the Civil War, was meant, in Lewis’ words, “to constitutionalize the end of slavery in America.” That was the good news. The bad news: It has meant a diminished role for states, a larger role for the federal government, and increasing social conflict, as the cliché, “don’t make a federal case out of it” falls onto the dust heap of history. These days, it’s hard to think of something that can’t be the subject of a federal case.

Lewis is inspired by James M. Buchanan, a professor emeritus at George Mason University. In his essay, “Federalism and Individual Sovereignty,” Buchanan says that competitive federalism has a few benefits:

  1. It minimizes the risk of an oppressive central government, since much power is diffused to the states.
  2. It minimizes the power of state governments as well, by putting them into competition with each other.
  3.  It’s easier for a citizen to be effective in a smaller community than a large one.

Lewis closes his book with a look at ways of limiting federal power, especially against the states. He considers and dismisses several options. He ends by proposing a constitutional amendment—to be brought to the national debate by state legislatures, naturally—that strips the federal government of most of its power and even allows for secession. Many if not most Americans will find it fanciful or dangerous, but when we consider the political health of “we the people” today, some bracing words may be what we need.

{First published by WeThePeopleHQ.org}

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Outrageous moments in cash giveaway to the NFL

Friday, May 11, 2012

This week, the state government of Minnesota pledged to take $1 billion (give or take) of taxpayer money and spend it on … a gift to the 1 percent. Specifically, the money is meant to buy a stadium for the Minnesota Vikings, a team owned by a multimillionaire real estate developer, and the NFL, a league with annual revenues of $9 billion per year. In the grand scheme of things, it’s a small example of bad public policy. Claims that stadiums provide a great economic boost are bogus; taxation used to build stadiums is almost always regressive; the money could be used for far more fundamental public purposes–or left in the private sector; and so forth.

I’ve written a lot about this subject, so I won’t rehash everything here. But in this space, I’m conducting an experiment for anyone whom I might reach via Looke True North, or my Twitter feed. Leave a comment about this sweetheart deal. If you’ve ever seen the feature “That’s Outrageous!” in Readers Digest (dating myself, I know), then you know the kind of comment I’m looking for. (And yes, I will practice “censorship,” or as we call it in the private sector, editorial discretion. All comments are subject to moderation, and pro-giveaway comments will be deleted.) I would prefer that you leave a citation for any quotations.

So let the games begin.

@Snienow: How abt protecting Constituents? RT @timpugmire MN Sen Ldr@davesenjem private stadium talks “respect the business privacy of the Vikings.”

@5hauser: Stadium supporter Sen. Tom Bakk says if you don’t buy a pulltab or go to a game, the new stadium “is free.”

@adamwwolf The best part is that the Vikings have said the offer is ‘unworkable’. Entertaining that a bill of law is called an ‘offer’.

All of the local corporations who are lobbying for a new Vikings stadium will buy up all the tickets to prevent a blackout. Also, there are unicorns.  – Bob Collins, Minnesota Public Radio

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More on stadium madness

Monday, May 7, 2012

Today the Minnesota House is expected to vote on whether to send taxpayer money to the NFL and its team in the state, the Vikings. While some political observers I respect have said that the vote will be no, I doubt that: Never underestimate the power of the office of the governor (who wants the project), trade unions (ditto), and emotion in politics (“the Vikings are part of our heritage!”) After that vote, comes the Senate, where prospects are not as good–though again, I expect that there will be some way for the sausage to come out the other end.

I’ve written a lot about the issue, and have tangled (on Twitter) with subsidy advocates, some thoughtful, others less so. Below is a note I left on the Facebook account of one member of the Minnesota Legislature. It is something of a summary of what I have to say on the subject.

* * *

The economic impact of sports stadiums and sporting events has been grossly overstated. See, for example, a journal article I wrote about a few years ago:http://www.policyguy.com/pubs/SPLL/SPLL-StadiumGrowth.pdf or this: http://www.forbes.com/sites/mikeozanian/2012/05/04/vikings-stadium-not-likely-to-help-minnesotas-economy/

One thing people tend to forget: Sure, you can look to business A, B, or C that benefits from the subsidy. But there are little things known as “opportunity costs.” Spend $200 on gameday? That’s $200 that your local restaurant, hardware store, whatever, won’t have. The same principle applies to taxpayer funds.

Am I also opposed to preferential treatment for Best Buy, Target, etc.? Yes.

Would increased gambling pay for a stadium? Perhaps it would generate sufficient tax money–but don’t forget, that tax money could be used for many other purposes. Arguably, schools, roads, health care, police, etc. are higher priorities than subsidizing a league that has $9 billion a year in revenues.

The most honest approach is to say “Hey, we use tax money to buy stuff that we like. I like sports. I want everyone else to pay for this.” But beware: majority rule (of the population or the legislature) does not guarantee a just or even wise outcome.

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Asserting Self-Governance in Education

Friday, May 4, 2012

A core principle of the American ideal is self-governance. The rise of technical expertise, combined with a “progressive” vision of a state-led society, has undermined that vision. Fortunately, examples of self-governance can still be found, and in some cases, growing in number. One place you find them is in education.

Today, roughly 9 out of 10 children are educated in a public school that is mired in red tape and increasingly centralized. During the 70 years between 1932 and 2002, the number of school districts declined by 90 percent, in the name of efficiency. But as districts consolidate, central administrators and teacher union officials become more powerful, more distant, and more out of touch with parents.

The single teacher in a one-room schoolhouse has been replaced by an army of administrators and support staff holding very specialized, technical positions. This development was driven both by philosophical changes in the education industry and by new laws. In the 1960s, for example, President Lyndon Johnson launched “Great Society” initiatives. They were based on the belief that a new class of intellectuals and public officials, the “experts,” could scientifically eliminate long-standing human problems.

The preschool program Head Start, for example, was created as a weapon in the “war on poverty.” Head Start was followed by several other major initiatives. Some, such as No Child Left Behind, attempt to boost student achievement. Others, such as Race to the Top, indirectly shape policies regarding teachers. The Common Core Standards Initiative seeks to reshape academic standards and, some fear, curricula in classrooms across the country. Professionalization and centralization rule the day.

As Dr. Phil might say, “How’s that working out for you?” More and more people are concluding, “not very well.” The problems of public schools are well known, but two stand out above all: Costs are rising and student achievement is, at best, improving at a glacial pace. In the face of these problems, some people are turning to self-governance as a solution.

The oldest form of institutional self-reliance is the private school. Roughly 8 percent of nation’s children attend one. Parents who opt for this route must pay for public schools (as all citizens do), and then pay tuition. As a result, they have a financial incentive to make sure that their dollars are well spent. Private schools, which have no guaranteed form of income, have a similar incentive. They are free from the most burdensome of rules governing public schools, though some chose to adhere to them.

The oldest form of “private schooling” is homeschooling. The number of homeschooling students has grown from perhaps 50,000 in 1985 to somewhere north of 1.5 million today. Advocates have fought a number of laws that once restricted homeschooling, including those that mandated state control over curriculum or required homeschooling parents to obtain a teaching certificate. More than any other option in education, homeschooling represents an affirmation by “amateurs” that one of the most important tasks in life requires self-governance rather than reliance on the state.

Charter public schools represent a more recent attempt by parents to wrest control from the education establishment. They generally offer parents a more direct say than the traditional school district. Charter schools are freed from many of the state restraints imposed on districts, though this point varies from state to state. They aren’t able to levy taxes, and they’re usually smaller. As a result, they’re often more responsive to parental demand. Far from shunning parental involvement, most charter schools welcome it and some require it. Parents have responded. The first charter school was opened in 1992. Today, 2 million children attend a charter school, and 400,000 wait for a spot in schools that are bursting at the seams.

Parent trigger laws represent the latest model of self-governance. California passed the first one in 2010. Three other states have passed similar laws, and 20 have considered doing the same. It is far too soon to say whether these laws will be effective, but the idea is pure parental power: A majority of parents at a school can force—“trigger”—a change in the school’s management. Of course, school boards have always been able to do this. But the idea of a trigger law was nurtured by parents who felt powerless in the face of a school board.

Many teacher union officials, policy experts, and politicians still think that self-governance in education is unwise, claiming that parents can’t be trusted to know or do what is right. But there are signs that even some experts believe that more self-governance is valuable, or at least inevitable. Homeschooling is politically and legally safe. Charter schools find support in both major political parties.

When it published an article on parent trigger laws, TIME quoted the powerful member of Congress, Rep. George Miller (D-Calif.), who said,

The fact of the matter is, when we look at developing a model for real change and improvement in public education, it’s pretty hard to do without parents. We’ve tried for years, and it’s not working.

Though the Great Society’s architect has long passed, the technocratic vision of governance is still powerful. (ObamaCare, anyone?) But as these examples from education demonstrate, the idea of self-governance endures.

John R. LaPlante as a senior fellow of the Free Market at the Center of the American Experiment and a contributor to TheMichiganView.com.

 

{First published by WeThePeopleHq.org}

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Wear Facepaint for Commerce, not Sports Welfare

Thursday, May 3, 2012

The sight of people donning replica jerseys to lobby their elected officials to force some taxpayers to pay for their hobby makes me a bit sad: “Don’t you have a life,” I quietly ask. But I think I’ve found the hints of a silver lining in that passion: Perhaps this is a point for us to remember that commerce–freely and successfully conducted–is a beautiful thing that meets human needs in a just and humane way.

I am a staunch opponent of taxpayer funding of stadiums for professional sports teams. (Among the reasons: As an example of the broken window fallacy, it has minimal economic impact. When it comes to NFL teams, there’s no economic reason to subsidize an enterprise that hauls in $9 billion-a-year. Finally, advocates of stadiums seldom acknowledge the opportunity costs).

An honest review of the economic literature reveals that pro sports have no net economic benefit to a state or even metropolitan area. Oh, you’ll find people pointing to examples of specific jobs in construction or in hospitality, but (see the links above) those are merely mental rationalizations for what the heart wants. For at the end of the day, the true argument for subsidizing pro sports is this: “I like it, and I want government to do it. Doesn’t every civic-minded person?”

 

There’s no doubt that sports fans can be passionate about their favorite teams. They give them the chance to marvel at exceptional athletic talent, which can be a thing of beauty. They offer fans the ego boost of some second-hand glory (“did you see how we won that game?”). They also give us the chance to express some solidarity with like-minded people. We watch in the stands and at home. We talk about it around the workplace water cooler. Even people who never attend a game in person are members of “Husker Nation” or bear “Purple Pride.” Face paint, anyone?

But sports teams aren’t the only entities that give us these emotional benefits. Houses of worship, social clubs, and bowling leagues, to think of a few, give us the chance to marvel at excellence, enjoy some second-hand glory, and express solidarity.

Actually, so do businesses that  have nothing to do with sports.  The most obvious example may be Apple, which, when measured by stock value, is the most valuable company in the world. Customers like its products so much that the company enjoys what might in other instances be called “obscene” profit margins. Some customers are so enthusiastic about the company that some people (including a few of its fans) speak of a “Cult of Apple.”

To a lesser degree, any successful business is like Apple. It must provide something that customers value, something that will entice them to voluntarily surrender their hard-earned cash. Businesses succeed when they serve families and individuals, either directly or indirectly, and do a few other things well, such as keeping costs under control.

The classic essay, “I, Pencil,” gives us a bigger picture, explaining how many businesses and individuals work for mutual benefit, even without some godlike figure or benevolent dictator. (Too busy to read more? Watch Milton Friedman give the two-minute version.) The free exchange of goods and services to satisfy human needs and wants is, like a well-executed pass play, a thing of beauty and wonder.

In closing, I must make a partial qualification: Some companies and service providers prosper for the wrong reason. They prosper not because they satisfy customers, but because they satisfy politicians, who enact tariffs, dole out subsidies, restrict market entry, and so forth. Many health insurance companies embraced the Affordable Care Act because they figured that the taxpayer-subsidized health insurance exchanges would bring them enough customers to offset the law’s new restrictions. Hospitals lobby for certificate of need laws to restrict the competition. For other examples big and small, see the Institute for Justice.

For concerned citizens and business leaders, the best path, I say, is not to seek a special political favor for your preferred enterprise, but to, as far as possible, remove the various ways that governments interfere with the judgments of the consumer. Let businesses succeed by honing their skills at satisfying customers, not in lobbying.

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Backlash from Health Care Law is a Good Sign for Freedom

Tuesday, May 1, 2012

Sometime in the future, historians may point to the passage of the Patient Protection and Affordable Care Act (ACA) as the time when the centralizing power of the federal power reached its peak. The resulting push back from citizen activists and officials in the states set off a wave of successful efforts to reduce the size and scope of government generally, and the federal government, specifically.

Consider what has already happened:

More than half of the states have taken an argument with the federal government all the way to the U.S. Supreme Court. In late March, the Court heard three days of oral argument in a lawsuit brought by Florida and 25 other states. The Court, which has never spent that much time on a single case, heard testimony on whether the law is an unconstitutional expansion of Medicaid. But the key issue was whether a government can require citizens to purchase something, in this case, health insurance, simply because they are alive. The Court should be issuing its ruling in mid- to late June.

States have also taken up political action. Legislators in 40 states have introduced “health freedom acts.” Generally, such acts would forbid a state from enacting a compulsory, single-payer healthcare system. It also provides leverage for states that have challenged the ACA in court. Seven states have enacted such an act.

Legislators in 18 states have introduced legislation to enact interstate compacts on health care, and six have enacted it. The compact would, if Congress consents, transfer responsibility for overseeing healthcare from the federal government to the states. Each state in the compact would be free to regulate health care and health insurance as its own people and Legislature saw fit.

Another key issue is the question of “health insurance exchanges.” While the ACA calls for states to create these politically driven and highly regulated “marketplace,” only 13 have done so. Most have been reluctant to do so, for various reasons. The exchanges present the states with financial risks, for starters. Even more significantly, however, the exchanges are part and parcel of the individual mandate. In a sign that the ACA continues to be controversial, gubernatorial candidates in New Hampshire have of late been sparring over the question of whether that state should enact an exchange.

The American founders called not only for checks and balances within the federal government, but also for the states to have a significant role. As James Madison wrote in Federalist #45, “The powers delegated by the proposed Constitution to the federal government, are few and defined. Those which are to remain in the State governments are numerous and indefinite,” covering “the ordinary course of affairs” that citizens would address in their daily lives.

As Madison suggested, a state government can be oppressive to freedom. But as the response to the ACA is bearing out, the existence of many states is good for the cause of freedom.

John R. LaPlante as a senior fellow of the Free Market at the Center of the American Experiment and a contributor to TheMichiganView.com.

 

{First published by wethepeoplehq.org}

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Minnesota #41 out of 50 on economic outlook

Tuesday, April 24, 2012

By current standards, Minnesota’s economy is among the best in the nation. But will it continue to be in the top tier?

Last year, the Bureau of Economic Analysis said that Minnesota ranked 13th in per capital personal income. The state’s average income of $42,843, was six percent higher than the national average. That’s pretty good, though I suspect it’s lower than most Minnesotans would have expected.

Yesterday, a new report, Rich States Poor States, 5th Edition, looked at each of the states, and gave Minnesota a very different evaluation: It put Minnesota at 41 out of 50 states, both for recent economic activity, and in expected performance going forward.

“Minnesota at 41? That’s crazy talk!” Let me explain.

The looking backward component examined growth in three variables: personal income, population, and non-farm employment. Growth is the important word here. To paraphrase Frank Sinatra, you can be riding high in April, and shot down in May. Some economies continue to grow, while others stagnate.

Between 2000 and 2009, Minnesota’s per capita income grew 33 percent. Good, but that gave the state a ranking of only 29 among 50 states. In that same time, non-farm employment fell slightly, putting the state at 28th among the 50. Minnesota also lost domestic population, putting it 39th in the country in “absolute domestic migration,” which measures, among other things, how people respond to the economic climate of a state. On three measures, Minnesota was below average. Weight these three variables equally, take an average, rank the states again, and you come up with a composite ranking: Minnesota dropped to 41 out of 50 states.

What about the future? Here, the authors take 15 different measurements that reflect state policy. These include rates for income taxes, property taxes, sales taxes, and also taxes as a percentage of personal income. Other measurements include the existence and quality of limits on taxation, the existence (or not) of a right-to-work law, and the number of public employees (both an asset and a liability) as a portion of the population. Once again, Minnesota came in with a ranking of 41 out of 50 states. So Minnesota is by absolute standards doing well. But in the department of “what have you done for me lately?,” the answer may be “not much.”

The report will bring back the classic chicken-and-egg debate: Does Minnesota enjoy a higher-than-average income due to its higher-than-average level of taxation and government spending, or does the state’s above-average income allow it to pay for a more-active-than-average public sector? While I admit that some public spending has economic benefits, I’d argue for the latter explanation. Once you get beyond a certain size and scope of spending, government ceases being a necessary good and starts being a luxury good. And I think it’s fair to say that Minnesotans have treated government as a luxury good: We can afford it, we’re smart enough to spend it wisely, and we like our extensive social safety net, bike trails, sports stadiums, arts facilities, etc. Need a little more money? Oh, just tax the rich; they like it here anyway.

But can we continue our habits? Looking at, say, the fact that spending on long-term care and health care will only go up, up, up, due to the Affordable Care Act (more subsidies!) and the aging of the baby boomers, I’d have to say no. Minnesota will have to spend less, tax more (and hope the people who pay the bills don’t leave), or do both.

* * *

On a note of disclosure, I was involved in the creation of Rich States, Poor States as an editor. Another thing to note is that it was produced by the American Legislative Exchange Council (ALEC), a group that has in recent months been accused of everything from letting large companies buy legislation to providing the intellectual justification for the shooting of Trayvon Martin. Needless to say, I think ALEC has been maligned for political purposes.  If, on the other hand, you have some helpful criticism to suggest to the authors, drop me a line, courtesy of the Center, and I’ll pass it along.

John LaPlante is a senior fellow for Minnesota Free Market at Center of the American Experiment.

First published by the Center of the American Experiment on April 12, 2012

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The State-by-State Economic Impact of Proposed EPA Regulations

Tuesday, April 24, 2012

As a nation, we’ve made great strides in combining growing the economy and cleaning up air pollution. But as the Environmental Protection Agency (EPA) is setting up to roll out nine new new rules or regulations, most of which are related to coal-powered electricity, it’s worth asking, “Is the gain worth the pain?”

The report, Economy Derailed: State-by-State Impacts of the EPA Regulatory Trainwreck, comes in four sections: what new regulations are under review; how those regulations would affect the economy, on a state by state basis; who is opposing the regulations; and what officials in the states can do to respond.

Economy Derailed is from the American Legislative Exchange Council (ALEC), the demon of the day. But take note: Much of the data in the report comes from various units of the federal government, including the EPA itself.

With that aside, let’s get to a quick overview.

SECTION ONE, “the causes of economic derailment,” explain nine broad categories of proposed regulations, which for the most part deal with coal-based electricity. You’ve probably heard of some (greenhouse gas emissions), but not others (“Utility MACT Rule”). This section describes each regulation as well as recent developments. Most importantly, it outlines some of the potential costs of each new regulation.

Here are some of the potential costs:

Job loss. As a result of new rules on the use of coal, 27,000 jobs in coal mining could disappear. But the effects go far wider than that. The “Boiler MACT rule,” for example, could result in 800,000 jobs gone, nationwide. Rules based on the quantity of ozone (a natural substance) in the air could could threaten 7.3 million jobs by 2020.

Opportunity costs.  The Utility MACT rule could cost $11 billion a year (EPA estimate); a rule on coal combustion could cost anywhere from $1.5 billion a year (EPA) to $20 billion per year (other estimates). You could tell a similar story for other regulations. These sums represent spending that could be spent on paying employs, investing in equipment, and so forth.

Your electronics, lighting, heating, and air conditioning at risk. I’m stretching a bit here, but bear with me. What do the following have in common: your smart phone, computer, TV, refrigerator, air conditioner, and furnace? Most likely, they all depend on electricity. If you’re going to use them, you need to have access to reliable (always there, almost always on) electricity that you can afford.

Enacting just one of the proposed rules–the MACT rule–could result in a moratorium on new electricity plants. The rule is so divorced from the state of the art that even recently completed plants would not meet it.  Restricting the supply of something and what happens to its price? Up, up, and away. Imagine what happens next. Brownouts, anyone?

SECTION TWO gives you estimates of the effects of the proposed regulations, broken out by each state. Here’s a snapshop of the impact on Minnesota:

  • Jobs lost: Roughly 12,000
  • Increase in electric rates: 7.8 percent
  • Electric generating capacity: Enough to power 700,000 homes.

How hard a state is hit will be determined by several factors, including (a) how much of the state’s electricity comes from coal; (b) how many people work in coal mining in the state; and (c) how important larger energy users are to the state’s economy.

SECTION THREE of the report describes the “broad and diverse coalition opposing the EPA.” Depending on your view, this is a list of heroes or a rogue’s gallery. The opponents include the coal industry (of course), including its unionized workforce. But they also include governors, legislators, trade groups, and state regulatory officials.

SECTION FOUR offers up tools that state legislators can use to respond to EPA rules. These include:

  • Hold oversight hearings
  • Write to members of the state’s congressional delegation
  • Pass resolutions of opposition
  • Weigh in with comments on proposed rules

* * *

The report, regardless of how you evaluate it, is a good reminder that we shouldn’t make policy in a vacuum. The EPA is concerned with regulating, not creating jobs. It is concerned with minimizing risks to the natural environment, but it isn’t so concerned with minimizing risks to the economic environment, which bears a great deal upon the quality of the human environment.

Consider what you do when you buy an expensive product such as a house or a car–or even a relatively inexpensive item such as a smart phone or a computer. Take the purchase of a new car. You’ve settled on the make and model, but what happens if the car has three trim lines. The cheapest line has a manual transmission, uses basic materials, and has a cheap stereo. The most expensive line has leather seats, a deluxe stereo, and a larger, more powerful engine. Which one do you pick? Your income and wealth are not unlimited, so you need to balance your desire for a nicer car with your desire to spend money on everything else. Given what you know, does this or that option actually contribute anything to your well being? Only you can make that decision.

But in environmental policy, who makes the call? Can an environment be too clean? Not for the EPA. Quite reasonably, it operates as with a one-track mind, meaning it can seek reductions in particulates or other substances to the Nth degree. So the political class must step in; regulatory items sold as environmental protection measures are but one thing that a member of Congress or (to use the state equivalent) a legislator must consider when surveying the economy. And in this case, as with many others, we have the problem of … politics. There are roughly 300 million Americans, who have a nearly infinite range of preferences and ability to pay for this or that measure sold as the latest in environmental protection. The EPA, whose employees number in the thousands, make decisions for those 300 million. What’s the chance they will get them right?

Policy making might be improved by the increase in technical knowledge, which the EPA accumulates. But it’s also too important to be left to a few narrowly focused experts. Give ALEC credit for bringing the EPA rules to our attention, and giving us all more information to chew on. Read the report and then ask: Should we “buy” these policies? If so, which ones?

You can find the report, as well as related materials, at RegulatoryTrainwreck.com.

John LaPlante is a senior fellow for Minnesota Free Market at Center of the American Experiment.

First published by the Center of the American Experiment on April 23, 2012

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Working until April 17 to pay for government

Monday, April 2, 2012

In 2012, Americans will work 8 hours a day, five days a week, from the beginning of the year until April 17 to pay for the spending incurred in their name by federal, state, and local governments. That’s one of the findings of the Tax Foundation’s latest calculation of “Tax Freedom Day.”

Tax Freedom Day (trademarked by the foundation) is one way to express the cost of government. According to this year’s version of the report, Americans spend 107 days out of 365 days in the year working for governments, to pay $6.2 trillion in taxes. The single largest category is the individual income tax (40 days worth of work), followed by payroll taxes (23 days), sales and excise taxes (15 days), property taxes (12 days), corporate income taxes (10 days), and miscellaneous taxes (7 days).

If you account for deficit spending, Tax Freedom Day comes on May 14. That is within one week of the record date of May 21, 1945–a time in World War II just after the U.S. had finished defeating Nazi Germany and was closing in on the Japanese homeland.

The report also calculates Tax Freedom Day on a state-by-state basis. As you might expect, it comes earlier in some states than in others. It comes the earliest in Tennessee (March 30) and the latest in Connecticut (May 5). Tennessee has no state income tax. Connecticut has a state income tax. More importantly, its residents have higher incomes than those of any other state, which means they get more heavily taxed by the so-called progressive structure of the federal income tax. In Minnesota, the day comes on April 22, later than all but seven other states.

Spending on goods and services is a necessary fact of life. We spend money on food, clothing, and housing, for example, though less on those combined than on taxes. Some spending on government is necessary. But the question is, “Are we getting our money’s worth?”  Governments get their money by taking money away from the non-governmental sector in ways that are obvious (hello, April 15!) and not so obvious (the opportunity costs of the taxes paid, interest on debt, inflation induced by monetizing the federal debt, etc.).

Like debt, government spending can be good or bad, wise or foolish. Incurring debt to buy something that will help you permanently increase your income by 30 percent is wise; incurring debt to buy a cache of drain cleaner, which you then pour on your breakfast cereal every day, is not.

So the concept of Tax Freedom Day doesn’t in itself tell us whether we spend too much or too little on government. To make that judgment, we need to look elsewhere. (What does it do to our incomes? Civil society?) But the fact that we spend 30 percent of the year working to pay for government should drive everyone to ask some hard questions of our public officials, and ourselves.

John LaPlante is a senior fellow for Minnesota Free Market at Center of the American Experiment.

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Is a more-educated retail sales force worth the money?

Thursday, March 29, 2012

Is the expense of going to college worth it? When you consider not only tuition and books, but also opportunity costs, the answer is sometimes “no, at least from a financial standpoint.”

The Atlanta Regional Council for Higher Education, naturally enough, is an advocate for spending on higher ed. It cites, among other things, salary premiums enjoyed by college graduates over similarly situated people without degrees.

So, for example, “marketing and sales managers” who have a degree earn on average 62 percent more than managers without a degree.

But we also read that the wage premium exists in other fields: 84 percent for cashiers, 63 percent for cooks, 38 percent for auto mechanics, 34 percent for cops, and 23 percent for postal service mail carriers.

Now, I’ve run a cash register before, and I have to ask a few questions. Is having a college degree a prerequisite to working as a cashier? Does having a college degree make a cashier 84 percent more productive? Given the low wages of cashiers and the high costs of going to college, has going to college paid off, financially, for the cashier? Has it paid off for the taxpayers, who in various forms subsidize college education? I could ask similar questions of cooks, auto mechanics, and so forth.

Now let me interject a few qualifications. First of all, many people would benefit from some sort of post-secondary education. It just doesn’t have to be what we have historically called a “four-year degree.” For example, automobiles are pretty sophisticated devices, so perhaps a would-be mechanic ought to pursue a technical (“two year”) degree or a certificate from a community or technical college. A second qualification is that often–though not always–when a college graduate works as a cashier, cook, or what have you, it’s a temporary situation. In a down economy, you take whatever you can get. (In my case, my first post-college job involved asking strangers, “would you like fries with that?”) And finally, there are certainly non-financial benefits to the college experience. Being introduced to, say, classic debates in philosophy, is good for the mind and even the spirit, if not necessarily the wallet.

But neither students and their families nor taxpayers can ignore the wallet. The inflation rate of tuition consistently and significantly outpaces that of the economy as a whole. College graduates–and even those who leave college without a degree–leave the campus with significant amounts of debt. The public fisc, meanwhile, faces ever-increasing pleas for more money from colleges and universities.

So while the “wage premium” argument has some appeal, it deserves some scrutiny. And–this is the topic for some significant reflection and analysis that goes beyond a single blog post–we ought to rethink the college experience and the role of government in it.

Filed in Center of the American Experiment, k-12 education | | Comments (0)