Detroit Public Schools: Beyond a State of Emergency

Since 1999, the state has been “taking over” Detroit Public Schools. Since 2009, Detroit’s schools have been subject to a stream of emergency managers who move in for just under 18 months, do not answer to voters, and can basically do what they want without consequence.

The Detroit Public Schools state takeover is a dismal failure, as noted in this February 2015 Metro Timesarticle:

The district’s struggles can be traced to a skein of historic factors, beginning with the city’s long-declining population, a trend that started in the 1950s and continues today.

Another major factor was the approval of 1994’s Proposal A in a statewide referendum that radically changed the way Michigan finances education, shifting from a primary reliance on local property taxes to a “per pupil” foundation grant provided by the state.

The two factors — the continued loss of students and the state funding that comes with them (currently $7,296) — combined with a host of other problems to throw the district into a long downward spiral.

In an attempt to reverse that trend, the state has tried twice in the last two decades to address the crisis — not by addressing the underlying structural issues, but by usurping the elected board’s power.

The most recent Detroit Public Schools emergency manager, Darnell Earley, is chiefly responsible for water contamination in Flint, Michigan.

Detroit’s schools are in crisis, and being state-run has only exacerbated the problem.

In October 2015, Michigan Governor Rick Snyder announced a legislative package that would involve establishing a new Detroit school district while leaving the old district in place to pay off Detroit Public Schools’ crippling debt. The new, traditional school board would initially be appointed by the governor and mayor and would become an elected board by 2021. The new system would also be open enrollment.

In a January 14, 2016, Detroit Free Press article, lawmakers express concern over Snyder’s plan for Detroit public education:

The proposed legislation, which was introduced Thursday, would start with an appointed nine-member interim school board, with five of the members appointed by Gov. Rick Snyder and four by Detroit Mayor Mike Duggan. That board would hire a superintendent for the district. A nine-member school board — seven members from districts throughout the city and two from at-large — would be elected by Detroit voters in November and take over governing the district on Jan. 1, 2017.

That school board, however, would be more symbolic than substantive, said state Rep. Brian Banks, D-Detroit, because it would have no control over the hiring of a superintendent and would be subject to the same financial review commission that oversees the City of Detroit’s finances.

“It doesn’t go far enough to address our concerns. There should not be any appointed board for any length of time,” he said. “This is just going to be another form of an emergency manager.” …

Other concerns for Detroit lawmakers is the continuation of a form of the Education Achievement Authority, which will be run by a state-appointed CEO who will have authority over the bottom 5% of low-achieving schools in the state. The fact that a source hasn’t been identified to come up with the $515 million needed to pay off Detroit’s debt also is problematic, although a $250-million transfer from the state’s general fund has been included to establish the new district. …

Duggan didn’t support or reject the legislation.

“Coalition members and I, along with community stakeholders, the AFT (American Federation of Teachers) and the State Board of Education, are working closely with our Detroit legislators to have a single, unified position to eliminate the debt that is choking our schools; return control of DPS to a locally elected school board, and to create a Detroit Education Commission to establish a single standard of performance for all public schools in Detroit — district and charter,” he said in a statement referring to the Coalition for the Future of Detroit Schoolchildren. …

Part of the concern for Republicans are sick-outs by Detroit teachers protesting conditions in the schools.  Dozens of schools have closed over the last two weeks. …

[The lead sponsor of the bills, Sen. Goeff] Hansen said he expects hearings to be held on the two bills — SB 710 and 711 — within the next two weeks, with a goal of passing the legislation by April, when it is projected that DPS may run out of money.

As it stands, Detroit Public Schools are beyond deplorable.

In an effort to heighten national awareness about the Detroit Public Schools crisis, the American Federation of Teachers (AFT) produced the following four-minute tour of Spain Elementary School featuring counselor Lakia Wilson:

And Detroit teachers, parents, and other activists have been publicizing the terrible conditions of Detroit Public Schools, as well. The following images have been taken from the Detroitteach Twitter page. Note that the images below are from facilities that continue to house children and their teachers.

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Above: Toilets leaking into preschool classrooms.

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Above: Broken bathroom stall for young children.

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Above: Pictures from a classroom.

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Competent intervention into the Detroit Public Schools crisis should have happened years ago. Let’s hope Michigan lawmakers are able to do right by Detroit in 2016.

‘Le Grand Guignol’ Comes to Town – Political Corruption

By Wallace Bruschweiler and William Palumbo

Grand_Guignol_poster

Promotional poster for a Grand Guignol performance. Courtesy of Wikipedia.com.

Over the last several years, the American people have witnessed one perplexing political shenanigan after another – a never-ending story.  Instead of standing up for principles, for democracy itself, our elected leaders routinely sell-out the same country to which they swore an oath to protect.

The most recent enormous sell-out was the passage of a budget that served only the government, not the country.  It began with the election of a new Speaker, whom many hoped would serve the country better than his predecessor.  Instead of a political savior, we got yet another total political loser.

Once in power, the Speaker raised the curtain on a most appalling political horror, a true grand guignol: a budget that funds a government which is already standing on financial quicksand, and that has an abysmal, out-proportion debt.  So much for “we won’t get fooled again.”

Indeed, many of the men and women whom we once considered true patriots have, in recent years, months, and weeks, shown that their own personal agenda and banks accounts take priority over the safeguarding and destiny of our nation.  Their treachery – their betrayal­ – of the American people is forcing a major geopolitical realignment.  Under rule of the current political establishment, the United States is a leading contender in whatever Oscar equivalent is awarded to banana republics.

How and why did all this happen?  Without access to personal records, such as bank accounts domestically and on an international level, including tax shelters, it is impossible to say with certainty.  But, if past is prologue, then bribery facilitated by a government-entrenched mafia is what greases this political machinery.

Welcome to Our Real World: Today’s Ugly Reality

It is not pleasant at all to think that a mafia-type government runs Washington, D.C.   Yet it exactly explains why, despite widespread disapproval of Barack Hussein Obama and Congress, both parties continue working shamelessly against the interests and well-being of the American electorate.

Take, for example, the so-called Iranian nuclear deal.  By legitimizing Iran, the world’s preeminent sponsor of terrorism, Obama has opened the Iranian markets (especially oil and natural gas) to the western world.  In the long run, this deal has the potential to generate trillions of dollars in international trade.  Companies represented by extremely well-financed and influential lobbyists see Iran as the mother-of-all potential markets.

Despite the overwhelming dangers that emanate from enriching a brutal regime with not-so-veiled nuclear ambitions and a proven worldwide terrorist network, the Republican-led Congress refused to try anything which would have effectively postponed and/or killed the deal.

Again, how and why could this have happened?  The answer is unfortunately obvious: money (and, in the case of the Iranian nuclear deal, close family connections between the negotiating members from both sides).

There are other examples that come to mind: a multi-trillion dollar “stimulus” package, a $700 billion dollar bank bailout, countless “green” energy loans that have ended in bankruptcy, etc.

How likely is it that some of this money has been used to line pockets for political favors on both sides of the aisle?  All of this was paid and financed by the people’s tax dollars.

“A government of the mafia, by the mafia, and for the mafia” – that seems to be today’s motto

Mafia is non-ideological: it does not embrace political ideals.  It cynically espouses ideals from time to time, but ultimately it will not uphold virtues that interfere with the strict pursuit of money and power.  So, when (not if) necessary, ideals and decency are conveniently forgotten.

The public at large calls this process “a bipartisan compromise.”  However, in reality, there is only one party.  It is a political animal which puts your God-given rights on the auction block, to be sold to the highest willing and able bidder.

It’s also indisputably true that politicians, on both sides of the aisle, are taking bribes.  Wherever power accumulates, corruption immediately follows. Widespread corruption is the defining trait of Washington’s establishment today.  There is no principled leader among them.

Politicians, like everyone else, have a price.

Florida: Legislature wants to roll property taxes into state sales tax

Florida comes in at #25 for property taxes with a rate of 1.06%. New Jersey has the highest rate at 2.38 percent.  Hawaii has the lowest rate at 0.28 percent.

There have been efforts to eliminate Florida’s property taxes and rolling it into the state sales tax. The Florida legislature will be looking into doing just that during the 2016 session, which starts in January.

CBS News Miami reports:

A House committee is looking at ways to replace property taxes with a higher state sales tax.

The House Finance & Tax Committee on Wednesday started to explore different scenarios that would shift the tax burden to shoppers by eliminating or reducing the number of Floridians paying property taxes.

Committee Chairman Matt Gaetz, R-Fort Walton Beach, said any scenarios will need “many hours to fine tune,” with economists expected to address the committee before anything is advanced for the 2016 legislative session.

Read more.

We will see who comes out in opposition of this effort.

What is the property tax rate in your state? A new map from the Tax Foundation has the answer:

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Kate Scanlon from The Daily Signal reports:

The Tax Foundation, a non-partisan research think-tank based in Washington, D.C., notes that states tax property in a variety of ways and that the rates listed are the “effective rate” paid by the taxpayer.

Jared Walczak, a policy analyst with the Center for State Tax Policy at the Tax Foundation, writes that the map “cuts through this clutter, presenting effective tax rates on owner-occupied housing.”

“This is the average amount of residential property tax actually paid, expressed as a percentage of home value,” Walczak wrote.

New Jersey has the highest rate at 2.38 percent.

Illinois has the second highest rate at 2.32 percent, followed by New Hampshire at 2.15 percent and Connecticut at 1.98 percent.

Hawaii has the lowest rate at 0.28 percent. Alabama has the second lowest rate at 0.43 percent, then Louisiana at 0.51 percent and Delaware at 0.55 percent.

Read more.

Your Tax Dollars Are Blowing In The Wind

Have you ever wondered just how much of your tax money is wasted on subsidies to industrial wind producers?

Well earlier this month, our partner organization, the Institute for Energy Research, released the most comprehensive study to date of the impacts of federal wind subsidies across all U.S. States.

As you would expect, the findings don’t paint a pretty picture.

IER analysts found that from 2005 to 2014, the cumulative subsidy allocations from the PTC, ITC, and Section 1603 to the wind industry are at least $18.58 billion!

The study also found that over the last decade, taxpayers in 30 states and the District of Columbia paid more in taxes to the federal government to support wind subsidies than wind producers who own wind facilities in those states received in subsidy allocations.

Although the report discusses states and regions in terms of net losses and net subsidies to show the geographical distribution of federal wind subsidies, subsidies to wind producers come at the expense of all U.S. taxpayers.

This really is a shame considering how inefficient and unreliable wind is as a source of energy.

The environmental left often claims that wind is the “energy of the future” and “cost competitive” with all sources of energy. But if that really is the case why do they insist on billions of dollars in taxpayer money just to survive?

Instead, we should remove these federal subsidies and let the market decide what energy sources really are the most affordable, abundant, and reliable.

Exposing the impact of subsidies to industrial wind producers is a good step in that direction.

To learn more, please check out our full wind subsidy study from our partner organization, the Institute for Energy Research.

Florida Governor: Stop Funding Syrian Muslim Resettlement in the Sunshine State

Florida Governor Rick Scott requested a halt to federal funding of the scheduled resettlement of 425 Syrian Refugees in the Sunshine State.  This follows similar actions by Republican gubernatorial colleagues in Alabama, Arkansas, Illinois, Louisiana, Massachusetts Michigan, and Texas.  He  sent a letter this afternoon to U.S. House Speaker Paul Ryan, Senate Majority Leader, Mitch McConnell and all members of the Florida U.S. Senate and Congressional delegation outlining his concerns.

states taking syrian migrants cnn

He adds his concerns regarding the ability of the Administration to vett Syrian refugees to prevent the possible infiltration of ISIS jihadis as occurred last weekend in Paris.  The Syrian passport of a suicide bomber or shahids (martyr) was found at the Paris soccer stadium a check of which revealed his entry into the EU via Greece in early October, 2015

In his letter to House Speaker Ryan and Senate Majority Leader McConnell, Governor Scott expressed his concerns:

Several organizations have requested that our state Department of Children and Families support the relocation of 425 possible Syrian refugees to Florida, as they receive federal funding to house these refugees in our state. Following the terrorist attacks by ISIS in Paris that killed over 120 people and wounded more than 350, and the news that at least one of the terror attack suspects gained access to France by posing as a Syrian refugee, our state agency will not support the requests we have received.

More importantly, however, it is our understanding that the state does not have the authority to prevent the federal government from funding the relocation of these Syrian refugees to Florida even without state  support. Therefore, we are asking the United States Congress to take immediate and aggressive action to prevent President Obama and his administration from using any federal tax dollars to fund the relocation of up to 425 Syrian refugees (the total possible number of refugees pending for state relocation support at this time) to Florida, or anywhere in the United States, without an extensive evaluation of the risk these individuals may pose to our nationalsecurity.

As the federal elected body that exercises oversight and authorizes federal spending, please take any action available through the powers of the United States Congress to prevent federal allocations toward the relocation of Syrian refugees without extensive examination into how this would affect our homeland security.

My office stands ready to provide any available information regarding this request for your immediate action.

RELATED ARTICLE: Do governors have any power when it comes to resettlement of third-worlders to their states?

EDITORS NOTE: This column originally appeared in the New English Review.

Why Should We Forgive ‘Public Servants’ Student Loans? by George C. Leef

Politicians are usually eager to be generous with the money taken from taxpayers, especially when it helps them gain favor with some interest group. A good illustration is the Public Service Loan Forgiveness (PSLF) program passed in 2007.

Under PSLF, students who find jobs that are officially regarded as doing “public service” can get their college debts erased after 10 years of such work. Similar students who don’t land public service jobs can sign up for another federal program that minimizes their monthly payments, but does not wipe out their remaining debts until they’ve been paying the government back for at least 20 years.

Does this make any sense? After all, public employment often pays better than jobs calling for the same skill levels in the private sector, as Andrew Biggs and Jason Richwine have demonstrated. The notion that it’s necessary to induce people to go into “public service” with the promise of student debt relief is badly mistaken — but it will certainly be popular with those who get to escape some of their debt.

Furthermore, how can we say that some jobs involve “public service” while others don’t? That was the question bothering New America policy analyst Alexander Holt in a recent piece he wrote for CNN.

What prompted Holt to write was a statement made by Governor John Kasich at one of the Republican candidate debates: “I think we can seriously look at an idea of where you can do legitimate public service and begin to pay off some of that debt through the public service that you do.”

But exactly what counts as “legitimate public service”? Holt argues that the current policy is flawed because it rewards many high-income individuals (such as lawyers working for the government) while it excludes other people who work at least as hard and clearly serve the public.

He points to Emily Best, whose situation was highlighted in this MarketWatch piece, as an example.

Emily works on a farm and earns only $1,600 per month, which makes it a strain to cover her student debt repayments. Holt writes, “The question is whether farmers deserve PSLF because they are uniquely serving the public.”

Naturally, an organization is already pushing for inclusion of farmers in PSLF — the National Young Farmer’s Coalition. They don’t hesitate to play the usual sympathy and fear cards that help manipulate lawmakers. In a survey NYFC conducted, 30 percent of the respondents said that they hadn’t been able to expand their farms due to their student loan payments, and “nearly 6 percent said their loans drove them to quit the field.”

That’s sad, but life is full of trade-offs.

Oh, it’s more than sad, says NYFC. It could endanger our food supply. Unless we help young farmers out of student debt, we might not be able to feed ourselves. That’s the line that the sponsors of a bill to include farming under the “public service” umbrella are using.

You may be wondering why farmers need costly college degrees. Bob Young, chief economist for the American Farm Bureau Federation says that farming today is so technical that a college degree is necessary to manage the software, chemicals and other tasks on modern farms. Emily Best racked up tens of thousands of dollars in loans while pursuing a grad school degree in environmental policy with a farming focus.

The question is whether farmers couldn’t learn all they need to know without buying the whole, costly bundle of courses and experiences that comprises a college or even graduate degree. Most of our older farmers have, after all, managed to master the software, chemicals, and other things from learning they have done outside of college classrooms.

Returning to the policy debate, no doubt PSLF is both under- and over-inclusive.

Farmers certainly do serve the public by growing food, but are excluded from the “generosity” of the law.

At the same time, a good case can be made that many of the people who have managed to land “public service jobs” actually harm the public with their work—for example, the numerous lawyers in the Department of Education who busy themselves by threatening schools unless they comply with the latest federaldiktats. (The most ridiculous one this year might well be the ruling that a school must allow a “transgendered” male student to use the girls’ locker room.)

Assuming that “public service” loan forgiveness should apply to government employees, why shouldn’t it to most of the population? Holt declares, “We either all deserve a special 10-year loan forgiveness program, or none of us do.”

Between those alternatives, I pick “none of us.”

Instead of expanding Uncle Sam’s faux generosity, we should end it entirely. If we say that farmers deserve loan forgiveness because they serve the public, why not private sector health care workers? Or clergymen? Those groups “serve” their fellow man no less than workers in “public service” jobs.

All participants in a market economy “serve” in one way or another. There is no logical stopping point.

As I have often argued, it’s extremely wasteful to lure students into high-cost degree programs with easy-to-get government loans, then saddle the taxpayers with the unpaid balance when the student later defaults or manages to qualify for loan forgiveness. That artificially inflates the demand for college credentials and helps to accelerate the constant increase in the cost of higher education.

So, rather than debating which jobs will be regarded as “public service,” we ought to dispense with the idea of forgiving federal student loans at all. And that would be a good step toward the only true solution, which is to get the federal government entirely out of the business of higher education finance.

Versions of this piece first appeared at See Thru Edu and the Pope Center.

George C. LeefGeorge C. Leef

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

Lies, Damn Lies, and Tax Cut Statistics

It’s a frustrating exercise constantly correcting liberals and far-left media types about tax rate cuts. One would think that, in a field where an exhaustive search for the facts should be the rule, not the exception, media figures would be interested in what the data on tax rate cuts says. Sadly, many are not only unconcerned with what the data says, but have created an entirely new line of reasoning based on nonexistent data.

The media, as evidenced by its pitiful performance in the last GOP presidential debate, is either ignorant of the tax rate cut data or is willfully misleading Americans, insisting that cutting taxes has caused exploding government deficits due to decreases in tax revenue. This is grossly inaccurate and it’s disappointing that the people who propagate these lies do so with little concern for the economic future and health of the country.

In response I’m going to issue this challenge to any media figure, liberal, politician, or anyone else interested. I’m going to post some FACTS-yes, facts-about the J.F.K, Reagan, and G.W. Bush tax cuts, and I’m challenging you to disprove the below data and show us what you’ve got.

Here is one caveat. By posting these tax-rate cut figures I am not making any statements about the causes of the tax revenue increases after tax rate cuts. As many of you remember from your high school and college statistics courses, there is a world of difference between correlation and causation. Causation states that “A” led to “B.” While correlation implies that A and B are related but that a third variable may have been involved.

To read more, click here.

Zombie Pension paid to Dead Man for 20 years by Andrew Walden

Millions worth of taxpayer dollars have been shelled out in the form of payments and benefits to people who aren’t even alive, and few agencies are taking advantage of a low-to-no-cost system that could stop those over-payments sooner.

From pensions to property tax exemptions, even parking placards, payments and benefits that should stop when someone passes away are often passing on to the living….

the state retirement system has been crosschecking state death records monthly since December 2014, with the help of the Department of Health’s vital statistics branch Office of Health Status Monitoring through something they call “death matching.”

We asked what the DOH found when matching up deceased records with the ERS recipient list.

“Initially we found a lot of deaths that we had (still receiving checks),” said state registrar Alvin Onaka, “but on average now we’re finding 10 deaths per month.”

That’s 10 per month that weren’t previously reported to the pension fund by the family or survivors, out of the 1,400 or so retirees who pass away in Hawaii each year. ERS pegs about 150 cases that add up to the half-million overpaid.

“It could be anywhere between a few hundred dollars to several thousand dollars,” Machida said….

Last year, the FBI and state Labor Department, using a different approach, caught and prosecuted two people who for years collected hundreds of thousands of their dead parents’ payments: Lynsie Katherine Williams for more than $400,000 of her dad’s workers’ compensation payments, and Steven Splater for more than $200,000 of his mom’s disability checks. They both did time in federal prison.

The Department of Health ran its death match of the state’s retiree health system or “EUTF” and flagged a name that had passed 20 years ago and was still getting benefits. The state attorney general’s office says they have no active criminal case for that one….

In the past couple of years, two were found guilty of theft after state prosecutions for taking thousands of dollars’ worth of dead people’s continuing pension payments: Cynthia Namaka for more than $3,000, and Harold Robertson for more than $5,000. They each had to pay restitution and do community service for punishment….

Sometimes it’s not money out, but too little money being billed to taxpayers who owe, that’s costing the government.

“We worked with real property tax. We started with City and County of Honolulu, and I think on our first run of those who were claiming 65-year-old-and-over exemptions, we found 4,000 of their enrollees had expired.”

”One of our early adopters was the people who issue the (disabled parking) placards,” Onaka added. “They submitted a list and we were able to provide them with those who should not be using those placards because they were dead (and the relatives didn’t turn them back in).”

PDF: ERS pension overpayments to the deceased

Read … State matching program that could catch payments to the dead rarely used

Government Is Why the Rent Is Too Damn High by Randal OToole

Rising home prices and apartment rents have been in the news lately, but almost no one is looking at the real causes behind these problems.

Instead, they are proposing band-aid solutions that will do little to help most people afford housing but will greatly benefit special interest groups.

According to the news, BostonLos AngelesMiamiNew YorkPortlandSan FranciscoOaklandSan JoseSeattle, and Washington, DC, among other major urban areas, are all suffering from housing crises. Economists who have studied these regions know why their housing is becoming less affordable.

First, urban-growth boundaries and other land-use regulations in most of these regions have limited the amount of land available for new housing. Urban planners say these regulations are needed to control the externalities caused by urban sprawl.

However, as New Zealand’s Deputy Prime Minister recently noted in a speech about a similar housing crisis in Auckland, urban planning itself “has become the externality” that is making housing the most expensive.

Second, in many of these regions — specifically, Los Angeles, New York, San Francisco-Oakland, San Jose, and Washington — rent control has only made housing less affordable for everyone not lucky enough to live in a rent-controlled apartment.

Even though some of these cities exempt new developments from rent-control rules, developers know that such exemptions could be eliminated at any time and are wary of investing in new housing.

Many of these and other cities have also passed “inclusionary zoning ordinances” that force developers to sell or rent 10 to 20 percent of the new housing units they build at below-market rates, which both discourages new development and increases the cost of the market-rate units that are built.

Although these problems are obvious to anyone who understands the rudiments of supply and demand, they are almost completely ignored by politicians, housing officials, and low-income housing advocates.

Instead, the almost exclusive focus is on building government-subsidized (or, in the case of inclusionary zoning, developer-subsidized) housing. Yet this does nothing to solve the problem for the vast majority of homebuyers and renters.

California has the nation’s second-least affordable housing (after Hawaii), and probably has some of the most aggressive subsidized housing programs. Yet a recent report from the state legislative analyst’s office found that these programs have produced only about 7,000 subsidized housing units per year, or about 5 percent of new housing.

In a state that has nearly 14 million homes and apartments, adding 7,000 subsidized units per year will have no measurable influence on overall prices, especially in the face of growth boundaries and other factors that make housing expensive.

So why is so much emphasis placed on a policy that won’t work while a policy of deregulating land markets is ignored? The answer is that long-standing federal subsidies to housing have created an affordable-housing-industrial complex that thrives on subsidies in unaffordable housing markets and whose reason for existence would be severely diminished if those markets were deregulated.

Take, for example, Enterprise Community Partners (ECP), whose mission (as described on its IRS Form 990) is “to create opportunities for low and moderate-income people through affordable housing.”

ECP is heavily funded by your tax dollars to promote affordable housing, getting much of its tax support through Section 4 of the HUD Demonstration Act of 1993, which specifically designates ECP as a grant recipient.

Enterprise Community Partners has certainly found the business of promoting a few units of affordable housing, as opposed to making all housing more affordable, to be quite lucrative, at least for many of its staff.

According to its tax form, only a quarter of the organization’s $58 million annual expenses went to grants aimed at making more affordable housing, while 62 percent went for salaries, benefits, and professional service contracts. (The rest went for things like conferences, travel, rent, and office expenses.)

More than two dozen of its staff members earned more than $200,000 in salaries and benefits in 2013. The United States of America gets along with just one vice president; ECP has sixteen of them, half of whom make more than the $230,700 per year taxpayers pay to Joe Biden.

The organization’s tax form also admits that it spent nearly $600,000 on lobbying in 2013. Thus, groups like ECP that focus on creating a few units of affordable housing, while they ignore the real problem, become self-perpetuating. They use taxpayer dollars lobby to continue their tinkering at the edges of affordability while they and the people who listen to them do nothing about the overall affordability problem in regions with strict land-use regulation and rent control.

This post first appeared at Cato @ Liberty.

Randal OToole
Randal OToole

Randal O’Toole is a Cato Institute Senior Fellow working on urban growth, public land, and transportation issues.

Adam Smith’s Wealth of Nations and the FairTax by Rep. Dave Brat (VA-7)

Adam Smith, the father of economics, published An Inquiry into the Nature and Causes of the Wealth of Nations nearly 240 years ago[i]. Soon after, an extraordinary flourishing of innovation and human well-being took off and transformed the globe. According to economist Deirdre McCloskey, the average American today is roughly 30 to 100 times better off than our ancestors in 1800[ii], the point when humanity began to escape crushing poverty. Notwithstanding modern prosperity, however, human nature hasn’t changed much. Smith’s insights remain relevant.

The Wealth of Nations considers taxation in Book V, Chapter 2: “Of the Sources of the General or Public Revenue of the Society.” In the prior chapter, “Of the Expenses of the Sovereign or Commonwealth,” he describes the primary functions of the national government. Some—like defense—need to be paid for by general revenue, while others—like transportation infrastructure—can be built and maintained with fees paid by users.

Revenue policy should fund the necessary expenses of the government. Not to benefit this or that industry. Not to advance social objectives. Certainly not to suppress political speech.

Smith set out four goals for evaluating tax options. First, tax contributions should be proportionate to abilities. Second, the rules should be certain and not arbitrary. Third, taxes should be levied when and how its payment is most convenient. Fourth, collection should minimize administrative overhead.

He then evaluated possible tax bases using those principles: rents of land and houses, profits, wealth, wages, head taxes, and consumption. He concluded that the ideal tax bases are residential property and consumption, particularly on luxury goods.

What does Adam Smith have to do with the FairTax? Everything. Setting aside property taxes—a state and local issue—consider how his principles relate to a consumption tax like the FairTax.

Is it proportionate to abilities? Yes. Those who earn more also consume more, thus contributing proportionately more to the general revenue. Savings—which our current tax system discourages but the FairTax would not—provide no current consumption benefits. They are deferred consumption, which in the meantime enables others to borrow to finance education, infrastructure, factories, and much more while also reducing the trade deficit.

Is the FairTax certain and not arbitrary? Yes. Everyone pays the same, known rate on consumption.

Is it convenient to pay? Yes. Merchants include the tax in the prices of final goods and services, which consumers pay all at once. Businesses simply remit the revenue to the government from time to time.

The FairTax also minimizes administrative overhead. The U.S. has around six million businesses.[iii] Not all would collect revenue under the FairTax, since many don’t sell directly to consumers. Current tax law requires the processing of six million business returns, 150 million individual and household tax returns[iv] (some overlap), and various trust, foundation, and other returns that are processed today, all under a complex, burdensome, and unFairTax code.

A broad-based consumption tax like the FairTax has other benefits. It eliminates the bureaucratic discretion that enabled the illegal and corrupt targeting of political speech, as the Richmond Tea Party experienced first-hand. Less taxation on productive activities yields greater physical and human capital investment by businesses and individuals, which makes workers more productive, boosting their compensation and standards of living while also increasing returns to saving.

It eliminates a major source of favor trading between Congress and big businesses. The concentrated interests of businesses associations create enormous pressure for Congress to provide tax preferences. The FairTax dramatically reduces the ability of political insiders to manipulate the tax system.

After nearly a decade of poor economic performance, we need comprehensive, pro-growth, simplifying tax reform like the FairTax. That’s why I’m a proud cosponsor of H.R. 25. To fully restore the American Dream, however, we must also pursue major regulatory and spending reforms.

We can have even more of the market-tested innovations that improve our lives and that would have astounded Adam Smith and our ancestors. Smart policy reforms—like the FairTax—can clear the path.

[i] http://www.econlib.org/library/Smith/smWN.html

[ii] https://www.aei.org/publication/perhaps-the-most-powerful-defense-of-market-capitalism-you-will-ever-read/

[iii] http://www.census.gov/content/dam/Census/library/publications/2015/econ/g12-susb.pdf, Appendix Table 1, pp. 7.

[iv] https://www.irs.gov/uac/SOI-Tax-Stats—Individual-Statistical-Tables-by-Size-of-Adjusted-Gross-Income, “All Returns: Selected Income and Tax Items: 2013”

ABOUT CONGRESSMAN DAVE BRAT

Congressman Dave Brat represents Virginia’s 7th congressional district, serving since 2014 when he won a special election. Brat is a member of the House Budget Committee, Education and the Workforce Committee, and Small Business Committee. He has a Ph.D. in economics, formerly was a professor of economics and chairman of the economics department at Randolph Macon College, and previously worked for the World Bank and Arthur Andersen.

EDITORS NOTE: To learn more about the FairTax please click here.

No, the GI Bill Does Not Prove “Free” College Is a Good Deal by Neal McCluskey

As I’ve written before, the case for “free” college is decrepit, and Bernie Sanders’s op-ed in the Washington Post does nothing to bolster it. It sounds wonderful to say “everyone, go get a free education!” but of course it wouldn’t be free — taxpayers would have to foot the bill — and more importantly, it would spur even more wasteful over-consumption of higher ed than we have now.

Because I’ve rehearsed the broad argument against free college quite often, I’m not going to go over it again.

But Sen. Sanders’ op-ed does furnish some “evidence” worth looking at: the notion that the post-World War II GI Bill was a huge economic catalyst. Writes Sanders:

After World War II, the GI Bill gave free education to more than 2 million veterans, many of whom would otherwise never have been able to go to college. This benefited them, and it was good for the economy and the country, too.

In fact, scholars say that this investment was a major reason for the high productivity and economic growth our nation enjoyed during the postwar years.

I’ve seen this sort of argument before, as I’ve seen for government provision of education generally, and have always found it wanting, especially since we have good evidence that people will seek out the education they need in the absence of government provision, and will get it more efficiently. Since Sanders links to two sources that presumably support his GI Bill assertion, however, I figured I’d better give them a look.

Surprisingly, not only does neither illustrate that the GI Bill spurred economic growth, neither even contends it did. They say it spurred some collegeenrollment growth, and one says veterans ended up being better students than some high-profile college presidents expected them to be, but neither makes the Sanders’ growth claim.

Indeed, in line with what we’ve seen broadly in education, one says that at least 80 percent of veterans who went to college on the Bill would likely have gone anyway, and in seemingly direct opposition to what Sanders would like to see, the other notes that the Bill disproportionately helped the well-to-do, not the working class.

As the Stanley study says right in its abstract: “The impacts of both programs [the World War II and Korean War GI Bills] on college attainment were apparently concentrated among veterans from families in the upper half of the distribution of socioeconomic status.”

If we really want to do what’s best for the nation — not just what sounds or feels best — we need to ground our policies in reality. In education, as in Sanders’ op-ed, that often doesn’t happen.

This post first appeared at Cato @ Liberty.

Rep. Vern Buchanan (R-FL) Votes for the Boehner-Obama Budget Busting Deal

Florida District 16 U.S. Representative Vern Buchanan was one of 79 Republicans to vote for the Boehner-Obama budget busting deal. It is now the Buchanan-Boehner-Obama budget.

When Vern Buchanan first ran for Congress he vowed to reduce the federal budget deficits and called for a Constitutional balanced budget amendment. In a June 2015 press release Rep. Buchanan called balancing the budget “an urgent priority”. Buchanan stated:

[T]he United States can no longer afford to ignore its out-of-control spending problemWe’re going broke, it’s not a matter of if, it’s a matter of when, unless we change what we’re doing. We need a standard and I think that standard is a Constitutional Balanced Budget Amendment– Florida balances the budget every year, we make the tough choices…

It’s immoral what we’re passing on to our kids and grandkids. I have a granddaughter and a grandson on the way and I feel horrible about what’s taking place up here. “

[Emphasis added]

Given all of his rhetoric he still voted, in his own words “immorally” and against the best interests of his children grandchildren and ours, for Obama’s budget.

Melissa Quinn from the Daily Signal reports:

Despite overwhelming opposition from the majority of Republicans, the House of Representatives voted to pass a two-year budget deal today that raises spending caps by $80 billion and suspends the debt limit through March 2017.

The deal passed, 266-167, with support from moderate Republicans and all but one of the Democrats. Just 79 Republicans supported it, and all of those opposing the fiscal agreement were Republicans.

[Emphasis added]

To find out how your Congressman voted on this budget deal click here.

Stephen Moore, in his op-ed column titled “This Is the Worst Budget Deal GOP Has Negotiated Since George H.W. Bush Violated No New Taxes Pledge
writes:

Halloween is looking especially scary this year. On Monday, Republican leaders in Congress declared an unconditional fiscal surrender to President Barack Obama and the  left, negotiating a dangerous budget deal that eliminates all of the checks on Washington’s spend-and-borrow binge by breaking the budget caps, ending the sequester and raising the debt ceiling by over $1 trillion.

It’s the worst budget deal to be negotiated by the GOP since George H.W. Bush violated his no new taxes pledge in 1990 at Andrews Air Force Base.

The result of that capitulation was to make Bush a one-term president and to split the Republican party right down the middle. This deal has the same catastrophic potential.

Read more.

Citizens Against Government Waste reports:

Forty-six cents!  That’s how much of your individual income tax dollar the government squanders on wasteful spending programs.

donate

Another 31 cents goes to pay the $433 billion in annual interest on the national debt!

That leaves just 23 cents – or not quite one quarter of your tax dollar – to pay for the services that you expect from government!

 

RELATED VIDEO: Rep. Vern Buchanan on balancing the federal budget:

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Lame Ducks, Lame Deal: The Boehner-Obama Budget Plan

Boehner-Obama Budget Deal Uses Same Accounting Gimmick as Obamacare

EDITORS NOTE: The featured image of John Boehner and President Obama is by Kevin Dietsch/UPI/Newscom.

Aiding and Abetting Illegal Students

On October 20 President Obama, through the Department of Education, took another heavy-booted step in unlawfully transforming America by announcing the release of a 63-page “resource guide” to help educators, school leaders and community organizations better support “undocumented youth,” including Deferred Action for Childhood Arrivals (DACA) recipients.  The “deferred action” does not create legal status, but DACA, which granted exemption from deportation to those who had entered the country illegally before age 16 was issued by Obama in 2012 and then in 2014 was expanded to extend, among other things, eligibility to age 31.

The announcement stated that the guide includes information for high school and college educators about “the rights of undocumented students”; tips on supporting “undocumented youth”; a list of private scholarships; “guidance for migrant students in accessing their education records for DACA”; and “information on federally-funded adult education programs and on non-citizen access to federal financial aid.”  An increasing number of documents coming in departmental mailings are in Spanish, as are the accompanying “Superintendent Dear Colleague Letter” and the “Higher Ed Dear Colleague Letter.”  There is little question about which “undocumented students” are being targeted.

The guide was presented as an “effort to ensure that all students have access to a world-class education that prepares them for college and careers.”  What it promises in reality is to create more new Democratic voters, stretch resources, and further degrade education.  And it will surely add to the level of disapproval of Obama’s immigration policies, which was at 60 percent last summer.

But most teachers, professors, and administrators are out-of-step with the American public and in-step with Obama’s policies.  They welcome the suggestions.

Peter Wood, president of the National Association of Scholars, and former provost at King’s College and former associate provost at Boston University, says, “The resource guide will help [administrators] figure out the best ways to divert state and university resources to the cause.”  The federal government is following California, which especially has been on the forefront of the effort to treat illegal aliens as a privileged and desirable group of potential college enrollees.

Wood’s observations are on target. At the 2009 annual meeting of the National Council for the Social Studies, teachers shared tips on indoctrinating young students about illegal aliens. In Georgia, administration-supported teach-ins were held on various campuses, including one in 2010, at Kennesaw State University (along with a number of more official-sounding ones).  In 2012, the College of Education at Georgia State University held a “Teach-In on Tucson,” to protest Arizona legislation (HB 2281) prohibiting the use of Raza Studies curricular materials that “promote the overthrow of the U.S. government” or “promote resentment toward a race or a class of people.”  At the “teach-in,” Dean Randy Kamphaus made opening remarks, and workshops offered tips for incorporating curriculum materials from the Zinn Education Project about Christopher Columbus’s “genocide.” Associate Professor Jennifer Esposito pledged to give “extra points” to students for letters to legislators asking them to vote against enforcement of immigration laws.

After attending this teach-in, I testified before the Judiciary Non-Civil Committee. President of the Georgia pro-enforcement group, the Dustin Inman Society, D.A. King, had warned me about the teachers and students that routinely pack hearing rooms.  One of these professors had to be reprimanded by the chairman when she shouted out, accusing me of lying.  In reply to inquiries from the committee, Dean Kamphaus stated that although Esposito had “pledged” to give the assignment, she had not in fact done so and that a memo reminding faculty of university policy had been sent out.

In 2013, the Association of Teacher Educators conference featured Bill Ayers as keynote speaker and a panel called “Immigration and Education: Critical Issues, Critical Times” with the director of a “Freedom University,” the president of the Lawyers Guild, and  two public high school teachers sharing tips on helping illegals.

For years, educators have been conspiring on ways to subvert federal immigration law.  Now the Obama Department of Education is helping them.

The pro-illegal lobby has also been getting help from Republican lawmakers.  In Georgia, a state with a larger population of illegal aliens than Arizona, the majority of citizens have been opposed to supporting illegal students. Yet, the Republican-controlled state government, which, according to King, is “run by the Georgia Chamber of Commerce and the 21st-century slavers in the Ag industry,” voted to continue to give drivers licenses to illegal aliens.

“Increased special treatment in schools is only part of the story,” he says.

The latest Education Department guidelines, says Wood, will provide “ideological encouragement and talking points to answer citizens and legislators who criticize the use of public and private resources to subvert the nation’s laws on immigration.”

But the radical pro-amnesty group La Raza is “in the White House–and making policy,” says King.  Cecilia Munoz, Assistant to the President and Director of the Domestic Policy Council, lists her prior service as “Senior Vice President for the Office of Research, Advocacy, and Legislation at the National Council of La Raza …” on her White House bio.  Ten years ago jokes were being made about putting La Raza in charge of enforcement.

The joke has become tragic fact.  Even after Kate Steinle died at the hands of an illegal alien residing in the sanctuary city of San Francisco U.S. Senate Democrats killed a bill that would punish already illegal sanctuary cities.

Obama’s directive to schools is part of a bigger plan: to mainstream illegal aliens and “set up an incremental action so that illegals are actually a special, protected class,” says King.  Illegal immigration will become a civil right, he predicts.

When breaking the law gets you special privileges, then you know that America is indeed being transformed.

EDITORS NOTE: This column originally appeared on the Selous Foundation for Public Policy Research website.

Rep. Vern Buchanan (R-FL) Joins Democrats to Clear Path for Vote Reviving Export-Import Bank

Representative Vern Buchanan (R-FL District 16) was one of 62 Republicans to vote in favor of bringing to the House floor a bill funding the Export-Import Bank.

The Daily Signal reports:

The House of Representatives moved one step closer to bringing the Export-Import Bank back from the dead Monday after 62 Republicans teamed up with 184 House Democrats to force a vote to reauthorize the embattled agency.

Despite opposition from the vast majority of Republicans, the House passed a motion to discharge a bill reauthorizing Ex-Im from the Financial Services Committee, 246-177. (See how your member of Congress voted.)

The vote clears a path for the chamber to vote on the legislation sponsored by Rep. Stephen Fincher, R-Tenn. Under Fincher’s legislation, the 81-year-old bank would be reauthorized through 2019. Lawmakers are expected to vote on his bill tomorrow.

Read more.

Can you say bust the budget yet again?

Buchanan seems to say one thing and vote for the special interests.

Buchanan has repeatedly called for a Constitution balanced budget amendment but he has also consistently voted to raise the debt ceiling and keep wasteful spending programs – such as the Import-Export Bank – fully funded.

RELATED ARTICLES:

Rep. Vern Buchanan (R-FL 16) Busts the Budget — Votes for Amnesty and Obamacare

The Boehner-Obama Budget Deal Explained in One Chart

This [Budget] Deal Is Unacceptable. Congress Should Wait Until New Speaker Chosen

Find Out How Your Congressman Voted on Reauthorizing the Export-Import Bank

Freedom Caucus Members Will Stick With Daniel Webster in Today’s Speaker Vote

The Federal Reserve’s Counterfeit Prosperity

When I was a young Secret Service agent on a local financial crimes task force between 2000 and 2002, I was inundated with an explosion of new counterfeit cases. There were a number of causes for this explosion in currency counterfeiting but the main ones were: the rapid advancement in ink-jet printing technology, the declining costs, and correspondingly increased availability of affordable home printers. Prior to these technological advancements, counterfeiting U.S. currency was the near exclusive purview of state-sponsored actors, sophisticated criminals and criminal syndicates.

With the growth in ink-jet printing, any thirteen-year-old with a printer could counterfeit money. I, along with hundreds of other Secret Service agents, were so preoccupied with tracking down this new class of counterfeiters and stemming the tidal wave of new counterfeit making its way into the money supply that I never had the time to philosophize on the deeper reasons why this crime is so dangerous to national cohesion.

We are lucky enough to live in a time where the authenticity of the physical currency in our wallets is taken for granted, but when the Secret Service was founded in 1865 to combat counterfeiting—the Secret Service’s role in Presidential Protection didn’t formally begin until 1901 after the assassination of President William McKinley—it was estimated that approximately half of the currency in circulation was counterfeit. Think about that: you had a roughly 50 percent chance, when engaged in commerce, of receiving money with ZERO value. That people had faith in their currency was so important to the U.S. government at the time that the Secret Service was established and charged with hunting down and prosecuting counterfeiters in order to re-establish public trust in the battered dollar.

Read more.

 

RELATED ARTICLES:

62 House Republicans Join Democrats to Clear Path for Vote Reviving Export-Import Bank

How Marriage, Strong Families Contribute to Economic Growth

EDITORS NOTE: This column originally appeared in the Conservative Review. The featured image of Federal Reserve Chair Janet Yellen is by Jacquelyn Martin | AP Photo.