In President Obama’s recent state of the union speech, he claimed that his administration imposed fewer new regulation in the first three years of his presidency than did his predecessor over the comparable period. Posing as a champion of regulatory reform, the President noted that : ”There’s no question that some regulations are outdated, unnecessary, or too costly. In fact, I’ve approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his.” If true, this is quite a surprise in an administration broadly characterized as on a “regulatory spree unprecedented in U.S. history.” Is the President’s boast true?
If the measure of the regulatory burden is the sheer number of new regulations, President Obama’s claim is accurate. According to the Federal Register’s online data base, the current administration adopted 10, 810 new regulations from 2009 through 2011. During the first three years of the George W. Bush presidency, federal agencies added a whopping 12,587 new regulations.
President Obama’s claim that he imposed fewer regulations is technically correct. It is also misleading, and obfuscates the vast expansion of the regulatory state under his watch. As a measure of the regulatory burden on economic activity, the sheer number of any and all regulations is highly deceptive. The better measure is the number of regulations with significant economic impact and the magnitude of that impact. (The federal government labels a regulation “major” or “economically significant,” when the issuing agencies’ (invariably low-ball) estimate of annual cost of compliance is $100 million or more.)
Now compare the tally of economically significant regulations adopted in the first three years of the Obama and G.W. Bush administrations. President Bush approved 30 economically significant regulations in his first three years as chief executive. In the same period, President Obama has approved 953 such regulations. And the Obamanauts issued 257 economically significant regulations on small business while the federal agencies under the Bush team issued only 16 during the first three years in office.
Thanks to Wayne Crews of the Competitive Enterprise Institute for highlighting these numbers in the Daily Caller and for posting the data (shown below) on his Ten Thousand Commandments site. No further comment is needed to determine which president imposed the greatest shackle on the private economy and individual liberty.
The current administration’s aggressive expansion of regulatory control can be measured in any number of ways. Not only has the volume of major regulations increased but the compliance costs have grown exponentially. Most of EPA’s new rules carry costs far exceeding the $100 million threshold for classification, and supposedly for increased procedural scrutiny, as an economically significant regulation. Federal rules promulgated over the last three years typically carry compliance costs in the billions. Of the total $26 billion cost of federal rules in 2010, new EPA regulation amounted to $23 billion.
A few examples. EPA estimates that the proposed new federal ozone standard will cost approximately $90 billion to implement. Adoption of a new national ambient air quality standard (NAAQS) is not considered a regulatory action so estimation of economic impact is not required. And the national standard must be formulated to protect public health without any consideration of the cost. Then there is the mercury finalized mercury rule. EPA acknowledges that the regulation - with a cost of $11 billion -is the most expensive in the agency’s history. The Edison Electric Institute concludes the compliance cost is more like $100 billion. Regulators devise innumerable ways to elude full accounting of the direct and indirect costs to the private sector.
EPA’s non-regulatory Endangerment Finding that greenhouse gases are subject to regulation under the existing Clean Air Act has far greater economic implications than all previous EPA regulations combined. EPA, however, devised a way to get around any economic impact analyses of the initial ghg rules! The agency classified its first regulation of greenhouse gases from private business –called the Tailoring Rule- as a “deregulatory action” and thus exempt from estimation of costs. How in the world could any exercise of this all-encompassing regulatory federal authority to control carbon dioxide- the most ubiquitous by product of all natural and human activity- be construed as deregulatory?
In EPA’s view, because the Tailoring Rule reduced the number of industries which would be subject to regulation by law, the action was deregulatory in that it could have been a lot worse. EPA did reveal the absurdly staggering costs of regulating carbon dioxide in its justification for tailoring –or re-writing – the law. EPA noted that regulation under the literal terms of the law would increase a current permitting universe of now 12,000 businesses to over six million, add purely administrative costs of over $20 billion and require 230,000 additional EPA employees. This ”Tailoring Rule,” however, is not among those new federal regulations listed as “economically significant.”
The numbers, scope and economic burden of federal regulations have been steadily growing for decades under chief executives from both parties. The first three years of the Obama administration, however, has unquestionably been a period of dramatic escalation of the regulatory drag on the private economy. Unless restrained by Congress, the courts or the national elections, the worst is yet to come.
The Dallas Fed released a report this week with promising news for the state. According to research conducted by the reserve bank, “Texas employment grew at a 2 percent rate in 2011, government employment rose in November and December following four months of sharp declines, and housing indicators suggest that the sector continues to heal.”
With the Job market expected to expand “at about a 2 percent pace in 2012,” Texas seems to be on the path to continued prosperity. The most promising news of all comes in the housing market. The Fed states that “Texas existing-home sales rose by 2.2 percent in December and were up 8.7 percent from a year ago.” Meanwhile, home prices increased by 0.8 percent in the third quarter but are still down 3.1 percent from their peak in first quarter 2009, according to the FHFA House Price Index.”
It is comforting to see renewed strength in the sector that precipitated the 2007 recession. A recovery in the housing market could be a signal of renewed confidence returning to the American economy as a whole. Whether or not these trends continue depends, in part, on the monetary and fiscal policy choices of the powers that be.
Texas Comptroller Susan Combs unveiled a new website last week billed as an “online resource for Texas economic data, news and analysis.” The website in question, www.TheTexasEconomy.org, is designed to help “Texas residents, business owners and policymakers connect with economic data in a comprehensive yet easy-to-understand format.”
The site allows users to browse through a variety of economic reports and articles pertaining to Texas’ public policies and future growth. In addition, the site reports historical and recent data on various key economic indicators such as the consumer price index, unemployment rate, and gasoline retail prices.
The hope is that this site will serve as an educational tool, while at the same time providing a more transparent medium through which users can track the economic performance of the state over time. It also provides information regarding “business and industry, education and training, people and places, natural resources, health care, and revenue and spending.” In other words, the site strives to become a one-stop-shop when it comes to Texas’ markets and prosperity.
National School Choice Week is almost over, but Texas lawmakers needs to keep this important piece of the state’s education reform agenda in mind throughout the year as we prepare for the 83rd Texas Legislature in 2013. We have a long way to go before our state’s choice laws are on par with national leaders like Indiana (statewide voucher program), Arizona (multiple education scholarship programs), and Florida (the best virtual education system in the country).
There are a number of reasons for bringing more school choice to Texas, not least of which is demand. There are 56,000 students on wait lists for charter schools, a list that has grown steadily over the last 5 years, yet we still have a hard cap of 215 open enrollment in the state. We don’t have any form of education scholarship or voucher program at the K-12 level in Texas, despite the successes of San Antonio’s Edgewood voucher program, which ran from 1998 to 2008. During that stretch, participating schools saw their academic performance improve, and the district as a whole saw home values in the area rise substantially. As for virtual education, the Texas Virtual School Network maintains a monopoly on the state’s digital learning; Texas does not allow for qualified, competitive private online providers to operate freely in the state.
However, with four school finance lawsuits currently working their way through the state’s courts, perhaps the most compelling reasons to bring more choice into the mix are fiscal ones. What Texas is constitutionally obligated to provide its students is an efficient system of public education. What school choice provides is competition for our public schools, and as former Texas Supreme Court Justice Scott Brister stated in 2005, “Today, we know that one thing above all else makes service providers efficient: competition.”
There’s still a year to go before the next Texas Legislature, but National School Choice Week is as good a time as any to start thinking about reforms our state still desperately needs to make, both for the sake of our students and the fiscal future of Texas education.
For more on school choice issues in Texas, please view our panel on the subject, entitled “Choosing Your Child’s Educational Future”, from TPPF’s 2012 Policy Orientation here.
A new report from the Tax Foundation (TF) ranks Texas among the top ten best states in the nation when it comes to business tax climates. This year, Texas ranked ninth, finishing four places higher than last year thanks, in part, to absence of a state income tax.
For those unfamiliar with TF’s annual ranking, it’s based on the State Business Tax Climate Index which “accounts for dozens of state tax provisions, creating a single easy-to-use score that measures each state against the tax climates of every other state…The Index enable business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.”
Among the other states to rank highly on the list are: Wyoming (1); South Dakota (2); Nevada (3); Alaska (4); Florida (5); New Hampshire (6); Washington (7); Montana (8); and Utah (10).
Populating this year’s list of worst business tax climates are: Iowa (41); Maryland (42); Wisconsin (43); North Carolina (44); Minnesota (45); Rhode Island (46); Vermont (47); California (48); New York (49); and New Jersey (50).
To read the Tax Foundation’s study in full, click here.
Some encouraging economic numbers from the Texas Workforce Commission: Texas’ unemployment rate continues to trend in the right direction, dropping from 8.1 percent in November 2011 to 7.8 percent in December 2011. This marks the first time since July 2009 that the state’s seasonally adjusted unemployment rate has tracked at such a reduced level.
In addition, the Commission also reported that the state’s economy added over 20,000 net new jobs for the month of December, bringing this year’s job creation grand total to over 200,000 net new jobs. This job growth occurred in 8 of the 11 major industries in Texas.
Texas’ economy has now seen positive job creation territory for the past twenty consecutive months.
* Bonus: An interesting statistic not mentioned in the Commission’s latest press release—this month’s unemployment figure means that Texas’ seasonally adjusted unemployment rate has been at or below the national average for 60 consecutive months or five years! Clearly, there is something special happening in the Lone Star State.
The Congressional Budget Office (CBO) released its January Issue Brief this week. The brief was an evaluation of Medicare demonstration projects on disease management, care coordination, and value-based payment. These projects aimed to find ways to bend the cost curve down in Medicare by realigning incentives to encourage the system and all participants to seek better outcomes rather than just more health care. Their conclusion is important in evaluating our entitlement programs,
“The evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to participating organizations were considered…Demonstrations aimed at reducing spending and increasing quality of care face significant challenges in overcoming the incentives inherent in Medicare’s fee-for-service payment system…” (emphasis added)
Texas utilizes managed care in its Medicaid program which has been successful at reducing costs, but it has not been successful in bending the health care cost curve down. The incentives in Medicaid are perverse. With no skin in the game for clients, they are incentivized to consume as much health care as they wish and often do so in inappropriate ways. With the provider rate cuts that were driven by the lack of state flexibility to reform the program, providers are incentivized to call for extra tests and procedures to offset losses from low rates.
The CBO report makes clear that trying to institute free market principles in the current Medicare/Medicaid is like trying to start a fire in a rainstorm. Medicaid, especially, is so poorly designed that the only solution is fundamental reform. This reform must re-engage the patient as a consumer in order to realign incentivizes to maximize value and quality. The future of Medicaid and health care does not lie in fee-for-service, pay-for-performance, or managed care government programs. The future of Medicaid and health care lies in patients making value based decisions on their own health care.
Continued economic growth and recovery produced another strong month of sales tax collections.
An excerpt from an e-mail sent earlier this morning from the Texas Comptroller states: “Total sales tax collections for December jumped 9.5 percent compared with December 2010, marking the 21st consecutive month of year-to-year gains. Texas Comptroller Susan Combs attributed the gains to improvement in all major economic sectors including oil and natural gas production, retail trade and restaurants.” [Emphasis mine]
Another solid indication that Texas has emerged from the Great Recession and is headed in the right direction.
With the ongoing internet protests over the Stop Online Piracy Act’s (SOPA, H.R. 2631) provisions that many in the online community feel will lead to internet censorship, it is important to look at what new criminal penalties the law will create and whether or not these penalties will add to the already-significant problem of overcriminalization. The bill creates many new criminal laws for causes of action such as tortious interference and copyright infringement that have traditionally been left to civil law.
One of these provisions is section 201 of the bill, which states that “[a]ny person who willfully infringes a copyright shall be punished as provided under section 2319 of title 18.” Section 2319 of title 18 allows for individuals to be imprisoned for up to five years for a first offense and up to ten years for a second offense. (A link to this section of the bill can be found here, and a link to section 2319 of title 18 here).
The bill also goes on to add large penalties in Section 202 for an individual who:
(i) intentionally traffics or attempts to traffic in goods or services and knowingly uses a counterfeit mark on or in connection with such goods or services,
`(ii) intentionally traffics or attempts to traffic in labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature, knowing that a counterfeit mark has been applied thereto, the use of which is likely to cause confusion, to cause mistake, or to deceive, or
`(iii) intentionally imports, exports, or traffics in counterfeit drugs or intentionally participates in or knowingly aids drug counterfeiting,
Penalties for this type of offense could include fines of up to two million dollars and ten years imprisonment.
Provisions like these are the reason many conservative groups such as The Heritage Foundation, and those on the left such as Nancy Pelosi are opposing the bill and its counterpart, the Protect Intellectual Property Act (PIPA), in the Senate. Critics fear that under the currently proposed language (especially the criminal penalties under the streaming provisions), an individual could be prosecuted for merely uploading a video of himself singing a copyrighted song on Youtube. Under a strict application of the law, Justin Bieber could land in prison.
While online piracy is indeed a serious problem and intellectual property should be reasonably safeguarded, there are free market solutions. For example, companies are developing software that will enable the private sector to better detect websites that engage in serial piracy of copyrighted content. These serial pirates can ultimately be put out of business through civil litigation or arbitration with the Internet Corporation for Assigned Names and Numbers (ICANN).
Right On Crime would also suggest that legislatures look to our checklist to analyze key factors before expanding federal criminal law that has already grown excessively to encompass more than 4,500 statutory offenses. Right On Crime encourages legislatures to use our checklist when drafting any anti-piracy statutes to: 1) ensure that new laws are truly necessary; 2) identify conduct that is better addressed in the civil law system; and 3) include an appropriate culpable mental state if a criminal penalty is truly necessary.
More fodder for those who believe that small government and smaller taxes help fuel big economic gains.
A new report authored by the investor news site 24/7 Wall Street and highlighted by the Texas Comptroller ranks Texas’ economy as one of the fastest-growing state economies in the nation over the past decade.
According to the report, Texas’ Gross Domestic Product (GDP) grew by an estimated 52.1 percent between 2000 and 2010, ranking it sixth in the nation in terms of total economic growth. Only Utah (+52.1 percent); South Dakota (+57 percent); Alaska (+66.6 percent); North Dakota (+76.1 percent); and Wyoming (+98.5 percent) ranked better in the comparison.
It’s worth noting that Texas’ appearance on the list of fastest-growing state economies is somewhat unique because the Lone Star State is the “only one of the 10 largest states to register in the top 10 for GDP growth.”
It’s getting harder and harder to deny the Texas Model works, and it works well.
As the chart at the bottom of this page shows, public higher education in our state increased its full-time-equivalent positions by nearly 25 percent between 2002 and 2011. This data, released last week by the State Auditor’s office, raises a number of questions in these budget-stressed times, foremost among which is, “What percentage of these new hires were faculty and what, administration?”
The paramountcy of this query becomes evident when we look at the national data regarding the growth in adminstration in higher education over the last few decades. In his 2011 book, published by Oxford University Press, The Fall of the Faculty: The Rise of the All-Administrative University and Why it Matters, Benjamin Ginsberg writes, “Forty years ago . . . the efforts of 446,830 professors were supported by 268,952 administrators and staffers. Over the past four decades, though, as the number of full-time professors increased slightly more than 50 percent . . . the number of administrators and administrative staffers employed by those schools increased by an astonishing 85 percent and 240 percent, respectively.”
While this transformation has occurred at both private and public institutions, the lion’s share of the growth has taken place in the former. “Between 1975 and 2000, the number of administrators and managers employed by public institutions increased by 66 percent. During the same time period, though, the number of administrators employed by private colleges and universities grew by 135 percent.”
What do these increases in staff amount to in dollars? Adjusting for inflation, from 1947 to 1995, “overall university spending increased 148 percent. Administrative spending, though, increased by a whopping 235 percent. Instructional spending, by contrast, increased only 128 percent, 20 points less than the overall rate of spending increase.”
Ginsberg finds that senior administrators have done particularly well under the new regime. From 1998 to 2003, deans and vice presidents saw their salaries increase as much as 50 percent. “By 2007, the median salary paid to a president of a doctoral degree-granting institution was $325,000. Eighty-one presidents earned more than $500,000 and twelve earned over $1 million.” Surveying these increases, a Chronicle of Higher Education piece (“Presidents Defend Their Pay as Public Colleges Slash Budgets,” April 2011) observes that university CEOs must take a careful path when arguing that their “budgets have been cut to the bone . . . while at the same time acknowledging their rarified personal financial circumstances in states where layoffs, program closures, and pay reductions have been all too common.”
Could it be that Texas public higher education has remained immune to this decades-long trend? I am currently doing the research in search of an answer, which I shall report in a later edition of “Speaking Freely.”
What if the job market in the nation’s other 49 states had kept up with that of Texas over the last 3 years? A recent piece by the Texanomics blog serves to bring clarity to that very question.
The research, originally conducted by the US Bureau of Labor Statistics, shows that “if US employment had grown at the same rate as Texas’ since January 2009,” the country, overall, would currently “have 5% unemployment.” It should be noted that over the same period of time, while the “US labor force has shrunk” Texas' “has grown nearly 5%.”
Workers have undoubtedly emigrated from states around the country and flooded the Lone Star State’s labor market with both educated and skilled prospective employees. This increase in the supply of labor has put a slight downward pressure on wages in Texas - a force offset slightly by Texas’ lower costs of living.
The overall picture here is that while Texas has seen astounding growth in employment, in comparison to other states, it has also seen a similar expansion of its labor supply. In order to see a net decrease in unemployment Texas must meet increases in labor supply with even greater increases in employment opportunities.
Unemployment numbers by themselves do not tell the whole story. Texas has obviously fared well in recent years in comparison to many other states, but until a national recovery takes hold- one that will relieve Texas of some of the pressure to remain a prime job creator in a highly flexible labor market- the state will have to continue to fight to meet those increases in the demand for jobs with a greater supply of them.
Texas is often hailed as having one of the most vibrant job markets in United States. According to a recent report, Texas is living up to these expectations.
Kurt Badenhausen of Forbes writes that, “Total employment in Texas is forecasted to expand 2.9 percent annually through 2015.” That’s a total of “1.6 million new net jobs” for the Lone Star State over the next few years. What’s the reason for this impressive growth in the labor market? Badenhausen argues that it is due to “a low tax, business friendly climate with a surging population that offers a nearly unlimited supply of young labor.”
It is those free market principles that have allowed Texas to outperform other states in the nation during this prolonged period of economic recovery. The marketing of Texas as a pro-business state has convinced many companies to relocate from what Badenhausen refers to as “union-shop states.” This movement has fueled Texas’ ongoing economic growth.
People and businesses vote with their feet. The recent taxpayer exodus from Illinois and the relocation or expansion of companies such as General Electric, eBay, Electronic Arts, and 3M make the choice clear. There is no better argument for free market principles than those choices made by citizens to live and work in a state that practices those very fundamental ideas.
The Palmetto State is known for many things—its deep Southern heritage, its exceptional hospitality and charm, and amazing natural beauty. But South Carolina has also recently earned another dubious distinction: it’s become the first state in the nation to receive at least half of its funding from the federal government.
According to a new report from the Liberty Bullhorn, “estimates for 2011 show that South Carolina got $12.8 billion from the federal government. At the same time, the General Fund spending was $5.1 billion and Other Funds amounted to $7.7 billion.”
In fairness, some of South Carolina’s dependency on federal funds can be traced back to the stimulus; however, it’s important to note that while the stimulus served as a catalyst for this particular event, the state has trended toward becoming a ward of the federal government for quite some time and, arguably, would have reached this point soon enough. Consider that in 2008, the share of federal funds in the state’s budget totaled 32 percent; by 2009, that percentage increased to 34 percent; in 2010, it jumped to 37 percent; and finally in 2011, it crossed the 50 percent mark.
South Carolina’s heavy dependence on federal funds raises serious concerns about state sovereignty and the proper role of the federal government. For instance, whose interests will come first in South Carolina: those of the federal government, who’s now bankrolling half of the state’s operations, or the state’s own taxpayers? And just how much power and control has the state legislature ceded in exchange for “free” federal money?
This is definitely an issue that all those concerned about states’ rights should be watching closely.
An article from Reuters calls attention once again to one of the many problems resulting from the current Medicaid program – fraud. The headline was “Actavis Group has reached an $84 million settlement with Texas to resolve civil claims that it defrauded the state's Medicaid program by artificially inflating prices for its generic drugs.”
The case is more than 10 years old and originated with a whistleblower lawsuit and was on appeal from a trial court. To be clear, this was a settlement, and Actavis admitted no wrongdoing. But, the price tag of the settlement for Actavis was half the original verdict. Attorney General Abbott is to be commended for his work in prosecuting Medicaid fraud that, according to his press release, has recouped $450 million in drug pricing lawsuits. But as successful as he has been, the underlying flaw in Medicaid’s structure still has millions of dollars going out for fraud that the state then spends huge sums detecting, investigating, and prosecuting.
Contrast that effort with the results of Robert Wood Johnson studies conducted by Mathematica and others of a Medicaid pilot program in Florida. The program was called Cash and Counseling and provided a fixed amount of “cash” made available to a disabled person to purchase their own services rather than the one-size-fits-all Medicaid services. Counseling was available for those who needed it. Not only was the program a cost saver for the state, but also the studies found that the clients were highly satisfied with the service and that there was zero fraud.
The by-product of a free market again proves superior to that of central planning. When people make their own value decisions and make the payment themselves, the only ones who lose are the bad guys.
Teacher compensation is one among many controversial issues in public education, both nationally and in Texas. Here in the Lone Star State, that controversy tends to center both on the amount we pay our teachers, and the manner in which we reward our teachers. The latter is executed through the state’s minimum salary schedule for teachers, and guarantees an incremental raise every year a teacher works in Texas education.
The alternative is merit pay, and it is gaining traction nationwide. This New York Times article highlights the successes that merit pay has had in quality teacher retention in several major urban areas, with a focus on Washington D.C.:
WASHINGTON — During her first six years of teaching in this city’s struggling schools, Tiffany Johnson got a series of small raises that brought her annual salary to $63,000, from about $50,000. This year, her seventh, Ms. Johnson earns $87,000.
That latest 38 percent jump, unheard of in public education, came after Ms. Johnson was rated “highly effective” two years in a row under Washington’s new teacher evaluation system. Those ratings also netted her back-to-back bonuses totaling $30,000.
“Lots of teachers leave the profession, but this has kept me invested to stay,” said Ms. Johnson, 29, who is a special-education teacher at the Ron H. Brown Middle School in Northeast Washington. “I know they value me.”
While the dollar figures may be extreme (even in regards to merit pay, school districts need to be judicious with how they spend their money, particularly state funds), the concept – that teaching excellence should be rewarded, and moreover, that teachers want to see their efforts rewarded – needs to be applied more liberally in Texas public education. The article does touch on Houston’s successful merit pay program, but the practice of rewarding teaching excellence is hardly universal in this state.
The fact of the matter is, the bedrock of a great education is great teaching. If Texas wants to draw strong young professionals into the field, it must stop simply rewarding longevity, and begin giving our best teachers the potential to earn what they deserve.
ObamaCare’s promises to the American people were to (1) lower health insurance costs, (2) increase healthcare quality, and (3) increase access to healthcare. We have already experienced dramatic increases in the cost of health insurance and now the release of an annual report by the Fraser Institute, Canada’s leading public policy think-tank, exposes the fallacy of promise number three.
To set the report in context, I will share the recent experience of a friend. Marci is the mother of four, ranging in age from 10 to 20, who started having problems serious enough for her husband to take her to the doctor on a Monday morning. She was sent for tests that day and discovered that she had a tumor deep in her brain. By Thursday, she had a surgical biopsy and a diagnosis of an inoperable, but treatable, fast-growing lymphoma. The next Tuesday, they began chemotherapy. Speech therapy and occupational therapy were also started right away. Though the treatment will continue for several weeks, Marci was home for Christmas, walking and talking.
The Fraser Institute report paints an entirely different picture had Marci been a Canadian. Canada’s socialized medicine portends the state of healthcare in the United States under ObamaCare. In 2011, the median wait time from a referral from a general practitioner to surgery increased to an all-time high of 19 weeks. The nationwide data on specialists is “…the shortest total waits (between referral from a GP and treatment) are for medical oncology (4.2 weeks), radiation oncology (4.6 weeks), and elective cardiovascular surgery (10.3 weeks). Conversely, patients waited longest between a GP referral and plastic surgery (41.6 weeks), orthopedic surgery (39.1 weeks), and neurosurgery (38.3 weeks).”
Government control and regulatory interference in the marketplace has created the problem of healthcare costs spiraling out of control in the United States. The solution is certainly not in more government control but rather lies in freeing the marketplace to control costs through competition and individual choice.
Would you want your Marci – your wife, mother, or daughter – waiting even the shortest time of 4.2 weeks for treatment? Or do you want the wait to be measured in days instead of weeks?
When given the opportunity to reverse ObamaCare, we should not only do so, but we should also demand that the other layers of healthcare regulations be repealed so that Americans can enjoy reduced health insurance costs, improved quality, and increased access to the healthcare the we ourselves choose.
If the idea of soaking up the sun in California appeals to you, you now have an extra reason to do so: it’s good for the environment. According to liberal blogger Matt Yglesias:
[C]oastal California is one of the most ecologically sustainable places on the planet for a person to live. California's sources of electricity are fairly green and California's weather is amazing so people who live there burn way less fossil fuels heating and cooling their homes, shops, and offices than do people in most of the country. . . . The average California resident emits a bit over half the national average in CO2 emissions. Under the circumstances, we should be trying to make it as easy and affordable for as large share of the American population as possible to move to California.
Yglesias’ broader point, which is perfectly correct, is that environmental restrictions can’t be evaluated in a vacuum. When the EPA clamps down mercury emissions from U.S. cement manufacturers, the result is that you get more cement imported from China, where less efficient kilns tend to emit larger amounts of mercury. Similarly, when the City of San Francisco restricts the development of new housing, the resulting high home prices can lead to something equally horrifying to the liberal mind: “When people can't afford to live in the Bay Area, they move to Houston instead.”
I was in Los Angeles a few months ago, and despite being a proud Texan I have to admit the weather is better there than in Houston. And yet, every year tens of thousands are fleeing the beautiful weather of southern California for the Texas heat. According to Census Bureau data, 68,959 people moved from California to Texas in 2010 (roughly double the 36,582 moving from Texas to California). Texas has consistently gained several hundred thousand new residents a year over the last decade, whereas California has lost 3.6 million in net migration since 1990. Businesses, in particular, have been eagerto relocate, citing California’s high taxes and burdensome regulatory environment as factors.
Stopping this outflow will require California to get its fiscal house in order. Reform pubic pensions, lower taxes, keep spending in line with revenues, and eliminate regulations that harass business and restrict development. In short, it needs to become more like Texas. If liberals find this distasteful, they can always console themselves with the thought that they aren’t just saving a state, they are helping to save the planet.
A new report from the Illinois Policy Institute (IPI) finds that people are fleeing Illinois en masse, driven out by the state’s high taxation and other “poor public policies.” The place that many Illinoisians are going—low-tax, limited government Texas.
According to the report, Texas is the leading beneficiary of Illinois’ mass exodus. In 2009, the state suffered a net population loss of 40,969. Of those exiting Illinois, 7,615 people relocated to Texas, nearly double that of the next highest state, Indiana, who netted 4,458 new residents.
Texas isn’t just benefitting from the additional people either. These new residents are, of course, bringing their money with them—to the tune of “more than $188 million” in 2009.
While this new report shouldn’t surprise many Texans, who have consistently shown their favor of limited government through the ballot box, this is a good reminder that people in general prefer smaller government, and they’re willing to pick up and move to get it.
Every year millions of children are told that if they are bad Santa will leave a lump of coal in their stockings instead of a Christmas present. If new EPA regulations threatening coal-based power plants go into effect, many parents may end up wishing their children had been a little naughty.
That’s because on January 1st the Environmental Protection Agency’s Cross-State Air Pollution Rule is scheduled to go into effect. Officially, the rule is supposed to account for the fact that emissions from one state can drift downwind into other states, imperiling the latters’ ability to meet EPA air quality standards. That sounds sensible, but the reality is that EPA’s new rules are based not on what is happening today, but on what its computer models predict may happen in the future.
The Cross-State Rule is one of four new EPA regulations targeting coal-powered generation. Together, the rules will lead to the closing of between 32 and 58 coal-fired power plants in a dozen states, according to a recent analysis by the Associated Press. This is horrible news for the communities that are often built around these plants, but it also has worrying implications for the public at large. Coal provides half of America’s baseload electrical generation, and as much as 80% in some areas. The sudden shuttering of dozens of coal plants could take as much as 8% of the country’s electrical generation offline, imperiling basic reliability. Both NERC (the federal North American Electric Reliability Corporation) and ERCOT (the Electric Reliability Council of Texas) have warned that the anti-coal rules could force rolling blackouts. EPA, however, has suggested that any problems with electrical reliability can be dealt with once they arise, at which point it may be too late.
The Texas power company Luminant filed suit in September challenging the validity of the Cross-State Rule and seeking a stay (similar challenges have also been filed by several state governments). The stay motion is currently pending before the U.S. Court of Appeals for the D.C. Circuit, and a ruling is expected imminently.
The latest round of employment statistics were released late last week revealing a resilient Texas economy. Among the report’s highlights:
Texas added 20,800 net new jobs in November 2011, bringing the year-over-year total to 226,000. This makes for 19 consecutive months of positive annual job growth.
The state’s unemployment rate dropped from 8.4 percent in October 2011 to 8.1 percent in November 2011, well-below the national average of 8.6 percent. This marks the 59th consecutive month that the state’s unemployment rate has been at or below the national average.
The state’s private sector workforce added 22,700 new jobs in November, bringing the state’s 12-month total to 289,000.
Though the state is still not out of the woods yet, it is easy to see that we’re headed in the right direction.
Texas continues to be the fastest-growing state in the nation, both numerically speaking and percentage-wise, according to newly released Census Bureau data.
Between April 1, 2010 and July 1, 2011, Texas gained an additional 529,000 people, far more than the next three states with the highest numeric increase: California (438,000), Florida (256,000), and Georgia (128,000).
In terms of percentage growth, Texas’ population grew by 2.1 percent over the period, the fastest rate of increase of any state. Only the District of Columbia saw a bigger jump (2.7 percent)—and with federal government spending nearing record-levels, it’s not hard to understand why.
And while the new data doesn’t offer an explanation as to why Texas’ population continues to soar, it’s not a stretch to think that people are flocking to the Lone Star State because of the jobs and economic opportunities that are here, both of which have been strengthened by our state’s commitment to sound public policies.
Online learning is not a specifically American phenomenon. This New York Timesarticle discusses a London based digital math tutor named Salmon Kahn, who uses Youtube to reach 3.5 million students with his math tutorials.
This is a testament some of the biggest benefits of online learning- the potential for great instructors to reach a substantial body of students, and the ability for students to learn at their own pace:
“In a traditional classroom, what’s fixed is the amount of time you spend on a subject. The variable is how well you learn it,” [Mr. Kahn] said during an interview on Skype. “But when you think about all the things you learn outside a classroom — riding a bike, sports, playing an instrument — what you want to achieve is a certain mastery.”
While his own group, the Kahn Academy, is only working in the K-12 realm, Mr. Kahn also highlights the potential of online learning for higher education:
“There are a lot of higher education institutions where the teaching just isn’t very good, where the teachers rattle on as they’ve been doing for years, and where, especially in the sciences, the teachers just don’t keep up,” he said.”
Online learning, then, is a means to modernize these teaching practices, and once again give high quality educators access to the largest number of students.
With lawsuits regarding school finance once again dominating Texas education headlines, we are certainly approaching a legislative session where fresh ideas for improving our public schools will be welcome. Going further down the virtual learning path is a move Texas needs to make.
Texas state government spends more on public education, as a percentage of general expenditures, than just about every state, according to the latest findings from the Census Bureau.
Per the Census Bureau’s 2010 Annual Survey of State Government Finances, Texas state government spending on public education topped 45 percent of general expenditures in 2010, ranking the Lone Star State third in the nation. Only Indiana and Georgia were shown to have spent a larger percentage, 46.6 percent and 46.3 percent respectively.
Nationwide, the average percentage of education expenditures to general expenditures totals just 35.8 percent.
Americans are far more concerned about the threat of big government than either the threat of big business or big labor, according to a newly released Gallup poll.
According to the results, 64 percent of the poll’s respondents agreed that “big government is the biggest threat to the nation,” one percentage point shy of the record. By comparison, just 26 percent of respondents said that big business was the biggest threat and only 8 percent said big labor.
The results seem to re-affirm the idea that Americans want less government, not more.
Note: Summary of November 5 speech by Thomas Lindsay to the Texas A & M Class of ’51. In his speech, Dr. Lindsay issued a challenge to America’s colleges and universities to (1) require all of their students—regardless of major—to study the Founding principles of our democracy, and (2) to amend their Mission Statements to reflect the importance of democratic education in liberal education generally. What follows is his view of what such a project entails.
It is far from accidental that the word “liberal,” in “liberal education,” has the same root as the word “liberty.” Liberal education is an education for and through liberty. Agreeing with Socrates that the “unexamined life is not worth living,” a university worthy of the name finds the highest liberty to consist in the freedom of the mind; that is, in freedom from unexamined assumptions, for example, swings in intellectual fashion, partisan politics, and ideology. Liberty at its peak is thus identical with the pursuit of truth.
A genuine institution of liberal education recognizes that the intellectual liberty it pursues depends on its being situated in a system of political liberty. That is, the cultivation of free minds simultaneously transcends and depends on the political freedom enshrined in the American Constitution. This dependence, along with the commitment to enhancing students’ self-knowledge, mandates that such an institution require all its students to study seriously the Founding documents—the Declaration of Independence, the U.S. Constitution, and The Federalist—as well as the other original sources that both informed the Founding and reacted to it.
Consistent with the Socratic approach, the proper study of American democracy consists first and foremost in asking fundamental questions of our founding documents:
First, what is the meaning of human equality as articulated in the Declaration’s statement that “all men are created equal”? Equal in what respects? Does the Declaration include African-Americans, as Abraham Lincoln, Frederick Douglass, and Martin Luther King, Jr., insisted?
Second, what does the Declaration mean in stating that we possess rights that are not “alienable”? Who or what, precisely, cannot alienate our rights? Are all rights deemed inalienable, or only some? Why?
Third, why does the Founding generation consider government just only when it is instituted by the consent of the governed? Is justice for the Founders simply consent-based? If not, what for them trumps consent?
Fourth, why do the Founders opt for representative democracy over the “pure” version of democracy practiced in ancient Athens? What does Madison, in The Federalist, assert was the inadequacy of ancient democracy?
Fifth, and finally, what economic conditions make American democracy possible? Why does the Constitution protect property rights? Why do its critics, such as Marx, believe private property to be the root of injustice? How would Madison and Hamilton have responded to Marx’s and his followers’ critique?
In November, the Census Bureau released a new way to calculate the number of people in the U.S. who live in poverty – the Supplemental Poverty Measure (SPM). As one might expect, the number of Americans classified as poor using the new methodology increased from 46.6 million to 49.1 million. Interestingly, however, the number of children in poverty decreased substantially, by 8.4 million, but the elderly category increased 5.1 million, primarily due to the inclusion of out-of-pocket medical expenses. Rather than a full scale cost-of-living adjustment for the various regions of the country, the new methodology included only the cost of housing. But including only that measure lowered the number in poverty in the South by 3.5 million.
But, defining the number of people in poverty, whether using the original methodology or the new SPM, does not reveal the resources made available to those families. The Texas Workforce Commission (TWC) manages all of TANF (Temporary Aid to Needy Families), commonly referred to as the welfare program, through the Local Workforce Development Boards. For several years, TWC has complied various wage and benefit scenarios for those on TANF or on TANF transitional benefits. The most monetarily significant benefit not overseen by TWC is housing aid and is, therefore, not included. The chart below, coincidentally also released in November, is nonetheless very instructive.
Robert Rector, Heritage Foundation, wrote in 2007, “For most Americans, the word "poverty" suggests destitution: an inability to provide a family with nutritious food, clothing, and reasonable shelter. But only a small number of the 37 million persons classified as "poor" by the Census Bureau fit that description.”
This chart published by the Heritage Foundation with data from Census Bureau adds additional insight.
As the standard of living goes up for the poor in our nation, government programs should be focused on providing incentives for full time work and for stable marriages, both of which have been demonstrated to be the best ways out of poverty. Expanding the definition of poverty and thereby the number of Americans classified as poor is counterproductive.
Last week, the Federal Reserve Bank of Dallas released a new report on employment trends in Texas over the last decade or so. The report affirms the broad-based strength of the Texas job market that we have touted for the last several years.
Key takeaways:
Since recession concluded, Texas employment up 3.3 percent (rest of country up only 0.6 percent).
Between 2001 and 2010, Texas gained 827,000 jobs—increases in every category except manufacturing, information, and construction. Meanwhile, the U.S. lost 2.8 million jobs.
Between 2001 and 2010, Texas added 391,000 jobs (11.9 percent increase) in occupational categories paying above the U.S. median, and 470,000 jobs (7.9 percent increase) in categories paying below the median. Positions in above-median categories made up 36.4 percent of total Texas jobs in 2010, up from 35.5 percent in 2001.
Real hourly wages increased slightly between 2001 and 2010, but remain about 93 percent of the national average. Cost of living is lower in Texas, plus Texas workers tend to be younger and less educated and more likely to be foreign born.
In her column yesterday for Slate Magazine, Emily Bazelon attacked the Supreme Court’s recent decision in Cavazos v. Smith, stating that the opinion “will easily be the most vindictive of the term.”
In 1996, when he was seven weeks old, Etzel Glass died during the night. His mother, Tomeka, had put him to sleep on a sofa in a room with Shirley Ree Smith, Etzel’s grandmother. Smith was helping Tomeka raise Etzel and two other children, who were also sleeping in the room with her. There was no indication that she’d been anything but loving toward the kids at any time. When Smith woke up and found Etzel limp, she ran with him to his mother’s room next door, saying she thought he’d fallen off the sofa. At first, the doctors who examined Etzel said he’d died of sudden infant death syndrome—no one’s fault. But the coroner found the cause of death to be shaken-baby syndrome, and prosecutors decided that Shirley Ree Smith had done the shaking.
Smith was convicted and sentenced to 15 years to life. On appeal, the California courts determined that there was a reasonable basis for the jury’s finding of guilt, and upheld her conviction. Smith then sought relief from the federal courts, despite the fact that federal law clearly bars federal courts from overturning a state court decision rejecting a sufficiency of the evidence challenge unless the state court decision is “objectively unreasonable.” Faced with a heartrending story, however, the Ninth Circuit Court of Appeals decided to ignore the law and substitute its own judgment for that of the jury and state courts.
Bazelon does not disagree with this legal assessment. As she notes:
AEDPA [the Anti-Terrorism and Effective Death Penalty Act] tells federal courts that they can’t overturn state courts except in a narrow set of circumstances: If a conviction is contrary to or unreasonably applies clearly established federal law, or if it’s based on an unreasonable determination of the facts. AEDPA is a straitjacket. The federal courts are supposed to put it on and quit worrying about whether innocent people have been put in prison.
A panel of judges for the U.S. Court of Appeals for the 9th Circuit refused to do that. They looked at the medical testimony against Shirley Ree Smith and how badly it holds up to the light of current knowledge, and they said that Smith had spent enough years in prison.
Nevertheless, Bazelon faults the Supreme Court for choosing to reverse the Ninth Circuit’s decision:
after twice sending the 9th Circuit pointed warnings about this case, the Supreme Court reversed the circuit court’s decision. The majority’s brief and unsigned opinion concedes that “doubts about whether Smith is in fact guilty are understandable.” But according to six justices, it’s not the 9th Circuit’s job to do anything about that.
There’s an old saying among judges: hard cases make bad law. It’s an old saying for a reason. If the facts of this case are as Bazelon describes them, then Smith would be an excellent candidate for a pardon (a fact Bazelon herself admits almost as an afterthought). But courts need to be concerned not only with the facts of the case in front of them, but also with the implications for future cases. There is no reason to think that federal judges are better equipped than state judges or juries to evaluate the credibility of witnesses and the merits of scientific evidence. The right of trial by jury and the dual sovereignty of our federal/state system are fundamental to America notions of law. Preventing the Ninth Circuit from undermining these notions is hardly vindictive.
Today the National Governor’s Association (NGA) and the National Association of State Budget Officers (NASBO) released their annual report on state budgets. In short, state budget problems are improving as revenues increase and spending reductions are made. To be sure, the states should continue to reduce the size of state governments to cope with deficits, but, according to the report, the problems facing state budgets have lessened since 2008. In future projections of state budgets the NGA and NASBO confirm that Medicaid will remain an issue for state budgets.
The report states that total state Medicaid spending increased by 16 percent between 2010 and 2011. It confirms that the dominant issue for state Medicaid policy is cost containment. In fact, based on a Kaiser annual survey on Medicaid cited by the report, 46 states plan to restrict provider rates in 2012. On top of these reductions states are pursuing enhance managed care and care coordination policies.
Cost containment will continue to be a focus as the report confirms the new health care law will pose significant new costs to states through Medicaid. These costs will include increased enrollment of individuals not covered by new federal funding, new administration costs for much larger enrollment numbers, the simple administrative costs associated with the aggressive timeline in the health care law, and rising health care costs.
The Foundation has written extensively on the rising costs and unsustainability of Medicaid. This report confirms that Medicaid, in its current form, cannot continue for states without significant reductions to other programs, such as public education, or significant tax increases. These will be the options for Texas in the next legislative session. It is hard to imagine that Texas taxpayers will approve of new taxes or significant cuts to education in order to finance a program that provides relatively poor quality of care.
Nobel Prize winning economist Paul Krugman recently devoted his column in the New York Times to the wonders of solar energy:
We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. That’s right, solar power.
If that surprises you, if you still think of solar power as some kind of hippie fantasy, blame our fossilized political system, in which fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives.
As if on cue, the New York Times proceeded to publish an expose of the massive subsidies given to solar power by the federal government. Entitled “A Gold Rush of Subsidies in Clean Energy Search,” the article documents how taxpayer funding has in many cases all but guaranteed a profit for many solar installations, leading large companies to open solar farms just for the tax write off:
A great deal of attention has been focused on Solyndra, a start-up that received $528 million in federal loans to develop cutting-edge solar technology before it went bankrupt, but nearly 90 percent of the $16 billion in clean-energy loans guaranteed by the federal government since 2009 went to subsidize these lower-risk power plants, which in many cases were backed by big companies with vast resources.
From 2007 to 2010, federal subsidies jumped to $14.7 billion from $5.1 billion, according to a recent study.
“It is like building a hotel, where you know in advance you are going to have 100 percent room occupancy for 25 years,” said Kevin Smith, chief executive of SolarReserve. His Nevada solar project has secured a 25-year power-purchase agreement with the state’s largest utility and a $737 million Energy Department loan guarantee and is on track to receive a $200 million Treasury grant.
Even companies whose business has little to do with energy or finance, like the Internet giant Google, benefit from the public subsidies. Google has invested in several renewable energy projects, including a giant solar plant in the California desert and a wind farm in Oregon, in part to get federal tax breaks that it can use to offset its profits from Web advertising.
The price of solar panels may have dropped over the last few years, but solar power remains more expensive than fossil fuels. That’s not likely to change any time soon. The Energy Information Administration projects that in 2016 the average levelized cost of generating power from solar PV will remain two to three times as expensive as power generated by coal or natural gas, not including subsidies. Solar power represents less than one percent of power generated in the United States, and is only able to hold onto this tiny share of the market thanks to large subsidies from the federal government. According, to the Energy Information Administration, federal subsidies to solar are approximately $.96 per kWh, eight and a half times the average price of electricity in the United States ($.11 per kWh). Federal subsidies to fossil fuels amount to $.0006 per kWh. That hardly sounds like a political system where alternative fuels are denigrated by an all-powerful fossil fuel lobby.
The Times article came out after Krugman’s column, of course, but there has been plenty of reporting in the NYT about problems with solar power before that (see here, here, and here). Even Krugman was forced on his blog to back away from some of the implications of his own column:
I’ve been getting some pushback from people I respect on today’s column…. Some of it involves questioning the cost data, but the main point, I think, is that even if solar power’s price per kwh matches coal-fired, it’s not going to take over the market right away, and maybe not ever. The sun doesn’t shine at night, and often doesn’t shine during the day. Intermittency is a big problem, and I probably should have made that clearer.
Is there a link between economic freedom and prosperity?
That’s the question that Charles Koch Institute recently set out to answer and their findings—depicted below in the first of a series—speaks volumes about the importance of limited government, a strong property rights system, and sound money.
A great video, well worth watching.
- Lauron Fischer
Research Fellow, Center for Fiscal Policy
In recent weeks, much press has been devoted to pushing the idea that the state suffers from a lack of revenue, oftentimes leading readers to believe that tax increases are needed in 2013 to shore up the state’s finances.
But what’s often missing from these articles is the fact that state revenues have grown generously over the past two decades, far outpacing the growth of other economic indicators.
Consider that from fiscal 1990 to fiscal 2010, total net revenues grew from $23.6 billion to $87.4 billion, representing an increase of 270.3 percent.
As the data shows, state revenue growth has, in every instance, either exceeded or greatly exceeded the growth of other important economic indicators over the past two decades, leading one to conclude that the state’s fiscal issues stem not from revenue deficiencies but rather spending excesses. Or as Marsha Blackburn so eloquently put it: “Government does not have a revenue problem; government has a spending problem. Government does not have a revenue problem; government has a priority problem. It is time that we begin to fine tune our focus and decide what the priority of government ought to be.”
Last week faux-conservative funnyman Stephen Colbert did a segment ribbing conservatives and libertarians for their criticism of the EPA. After a clip of Fox News’ John Stossel arguing that the EPA has done a good job in the past but has now gone too far, Colbert, in his typically satirical fashion, parodied the criticisms thus: “We protected the air and water. We cleaned it up. Now [the EPA is] just rubbing it in our faces by continuing to keep it clean.”
To bolster his case, Colbert talked to former EPA Administrator Carol Browner, who argued that “we need to regulate mercury. Mercury is a neurotoxin. It's bad for our brains. It's bad for our children's brains." Mercury, of course, is already a highly regulated substance. The EPA, however, has currently proposed several new rules targeting coal plants for emissions of trace amounts of mercury in the air. The vast majority of mercury emissions come from natural activity such as volcanoes, geysers, and subsea vents. Only about 0.5% of total mercury emissions come from American coal plants. And there is little evidence that such low levels of ambient mercury are harmful to human health. Indeed, EPA’s proposed mercury exposure standards are two to three times as those adopted by the World Health Organization, The Food and Drug Administration, and the US Agency for Toxic Substances and Disease Registry. If adopted, EPA’s new standards would be the strictest in the entire world.
Ms. Browner also sought to deflect criticism of her former agency on the jobs front, claiming that EPA was a jobs-creator because “when EPA says that that dirty smokestack needs a new scrubber, someone has to engineer that scrubber, someone has to build that scrubber, someone has to install it, maintain it, operate it.” Ms. Browner seems to have overlooked the possibility that plants might end up closing if they can’t afford complying with the new regulations, as is happening already. Even where plants do choose to comply, the money to pay the costs of doing so does not just fall from the sky, but must be taken away from other productive activities. One wonders whether ignorance of the broken window fallacy is a job requirement for being an EPA Administrator.
Colbert is a funny guy, but one shouldn’t take his show too seriously.
President Obama's avowed to commitment to "folks" paying their "fair share in taxes" is generally understood to refer only to the rich, who already pay 90% of all taxes. The Framers of our Constitution would of course have been been disturbed by the spectacle of one half the American population forming a vast coalition of rent-seekers to manipulate the machinery of government in order to capture the wealth of the other half of the population -- essentially the "progressive" taxation system (and political party system) we have today.
The idea of flattening and broadening the burden of government taxation is eminently fair -- all Americans should pay their fair share. We need to get back to the principles of self-reliance an individual responsibility on which this great nation was built. Such a tax reform would also be smart economics. A new op-ed out this morning in the Wall Street Journal by Dr. Martin Feldstein (former chairman of Reagan's Council of Economic Advisers) looks at the impact of the 1986 tax reforms on personal income and tax revenue:
Taxpayers who faced a marginal tax rate of 50% in 1985 had a marginal tax rate of just 28% after 1986, implying that their marginal net-of-tax share rose to 72% from 50%, an increase of 44%. For this group, the average taxable income rose between 1985 and 1988 by 45%, suggesting that each 1% rise in the marginal net-of-tax rate led to about a 1% rise in taxable income.
This dramatic increase in taxable income reflected three favorable effects of the lower marginal tax rates. The greater net reward for extra effort and extra risk-taking led to increases in earnings, in entrepreneurial activity, in the expansion of small businesses, etc. Lower marginal tax rates also caused individuals to shift some of their compensation from untaxed fringe benefits and other perquisites to taxable earnings. Taxpayers also reduced spending on tax-deductible forms of consumption.
Dr. Feldstein goes on to explain:
The substantial sensitivity of taxable income to the taxpayer's marginal net-of-tax share has important implications for the effect of tax-rate reductions on total tax revenue. For a 10% across-the-board reduction in all tax rates, a traditional "static" analysis implies that revenue would fall to 90% of its previous level. But reducing a current 40% marginal tax rate by 10% to 36% raises the net-of-tax share to 64% from 60%, a rise of 6.7%. If that causes the taxable income of those at that tax level to rise by 6.7%, their taxable income would fall to only 96% of what it had been. In short, the behavioral response of taxpayers in this highest bracket would offset 60% of the static revenue loss.
Feldstein then points to the Joint Select Committee on Deficit Reduction, which is required to propose $1.5 trillion in cuts for the next ten years or sequesters will go into effect. He signals that his proposal flatten, reduce, and broaden the tax base would produce enough increased economic activity and revenue to wipe out a third of the deficit reduction target:
Combining that base broadening with a 10% cut in all tax rates would be revenue neutral in a traditional static analysis. But the experience after the 1986 tax reform implies that the combination of base broadening and rate reduction would raise revenue equal to about 4% of existing tax revenue. With personal income-tax revenue in 2011 of about $1 trillion, that 4% increase in net revenue would be $40 billion at the current level of taxable income, or more than $500 billion over the next 10 years.
The Joint Select Committee should insist on counting that revenue as the starting point for a serious deficit reduction plan.
Simplifying the task base would also reduce the enormously waste Americans spend each year just to get through the irretrievable labyrinth of the Internal Revenue Code. To paraphrase Senator Phil Gramm, our current system forces one half of us to pull the wagon while the other half gets to sit in it, and leaves everyone worse off. Isn't it time we all got out off the wagon and helped to pull it?
The preliminary results, which were announced at a malaria forum hosted by the Bill and Melinda Gates Foundation in Seattle, covered 6,000 of the participating children, all aged between 5 and 17 months.
The developers, GlaxoSmithKline and the PATH Malaria Vaccine Initiative, which receives funding from the Bill and Melinda Gates Foundation, said it showed roughly a 50% reduction in malaria cases in a 12 month period following vaccination.
This is, of course, fantastic news, and the world owes a debt of gratitude to the scientists responsible for developing this vaccine. At the risk of being a bit boorish, though, I’d like to take a moment to consider the implications this has for the debate over global warming.
An increase in malaria rates was supposed to be one of the major negative consequences resulting from climate change. Some have estimated that a warmer earth would result in tens or even hundreds of millions of additional malaria cases. Like most issues in the climate change debate, this has been disputed. But it’s safe to say that those predicting an increase in malaria didn’t include this new vaccine as a variable in their models. In addition to saving untold lives, therefore, the vaccine may have the side effect of making warming a little less costly.
Now obviously, increased malaria is only one of many of the bad things that are claimed will result from climate change. Nor does the existence of the vaccine mean that malaria itself is no longer a serious problem. It does, however, raise a couple of broader points. First, the ability of human ingenuity to overcome seemingly insurmountable problems in unexpected ways is truly amazing. As David Friedman has noted, at the turn of the 20th people looking forward would have worried about whether there would be enough arable land available to grow food to feed the sheer number of horses needed to power a growing industrial society (not to mention the question of where to put all the horse manure). As it turned out, a new technology, the automobile, rendered those concerns completely moot. We have no way of knowing whether similar technological advances will also render much of the global warming debate moot.
And second, because of this, we could all stand to be a little more humble in our predictions about what climate change means for human welfare.
Last week, Secretary of Health and Human Services Kathleen Sebelius announced they were halting the implementation of the CLASS program. An amendment to ObamaCare required the department to certify the program’s solvency before moving forward with implementation, and the department could not determine a way to make the program sustainable. Thus, implementation has been halted. After repeated warnings from conservatives, HHS officials, and Medicare’s chief actuary, this announcement certainly came as vindication of the critiques that this program was unworkable. However, the policy’s drafting is an example of the progress fiscal conservatives have made on entitlement policy.
CLASS was a new entitlement program that intended to provide home health care to elderly and disabled individuals. What made CLASS different from other entitlement programs was the added policy that before the program could be administered the Department had to demonstrate that it was actuarially sound over a 75-year time period. This is a common sense policy to require that we have the money to pay for a long term entitlement program before it begins. Also, this policy is indicative of the influence fiscal conservatives have had on the entitlement debate. Prior to CLASS, 75 year projections were not required to begin entitlement programs. In fact, we would live in a very different world if they had.
Medicare was started in 1965 as an entitlement program that would provide health insurance benefits to America’s elderly paid for through contributions from their income prior to the years they need the benefits. If Congress had required HHS to demonstrate the solvency of Medicare Part A through 2040 they would likely have not begun the program. As of this year the Medicare Part A trust fund is slated to officially become insolvent in 2024, 16 years prior to the end of the 75 year window from the beginning of Medicare. Even before the current recession, the Medicare Part A trust fund was slated to become insolvent in 2029.
The delay of the CLASS Act was a victory for taxpayers and free market health care advocates. It also stands as a testament to the influence of fiscal conservatism on the drafting of bills in Washington.
Last week the US Preventative Services Task Force (USPTF) released their study and recommendations on prostate cancer screenings. Their findings argue that “Prostate-specific antigen–based screening results in small or no reduction in prostate cancer–specific mortality…” The nation’s largest urology group, among others, quickly spoke out against these findings saying, “Because of early detection efforts, the death rate from prostate cancer has decreased 38% (from almost 40 per 100,000 men in 1992 to fewer than 25 per 100,000 in 2007).”
Despite these protests by physicians patients’ access to these screenings may be limited. The New York Times has reported that, based on the USPTF recommendation, insurers were considering removing coverage for screenings. They report, “Both Aetna and Kaiser Permanente said it was unclear whether they would continue paying for the test. ‘We are currently reviewing the U.S. Preventive Services Task Force’s recent announcement on prostate cancer screening,’ Jason Allen, a spokesman for Kaiser Permanente, said in an e-mail.” By removing coverage of these screenings a patient’s ability to receive them may be constrained.
This rationing may not be as overt as one sees in socialized systems like the United Kingdom, but it still holds the potential to restrict a patient’s ability to receive the care they desire. A patient’s health care decisions should not be determined by the recommendations of any federal board, no matter how distant. A patient’s need of prostate cancer screenings, along with all other health care, ought to be a decision made by the patient with the advice of their doctor. Health care reform needs to come by a reduction of costs not care.
The Texas Legislature decided this year not to pass stringent regulatory controls over credit service organizations. While that is a big victory for most Texas consumers, Dallas residents, and now Austin residents, are not quite as fortunate.
Citing the City of Dallas’ recent plans to regulate credit service organizations by passing an ordinance restricting access to certain small, short term loans, Austin has decided to follow suit.
The City Council members conceded that they were aware of litigation pending against the City of Dallas regarding the passing of its ordinances, but decided to move forward anyway. While there are clearly questions about the legality of these types of ordinances, there are none about its ramifications.
These ordinances will restrict consumer access to short-term loans and ultimately cause prices of loans to rise, thus harming the citizens that these ordinances are designed to protect.
As we concluded in our research paper, Evaluating Consumer Access to Short-Term Lending, consumers understand that that a competitive and vibrant short-term credit market provides them choice and access to needed financial services. There is and will continue to be a market demand for small, short-term loans. Restricting access to these needed services has caused more bounced checks, Chapter 7 bankruptcies, and greater difficulty with lenders and debt collectors.
After evaluating the burdens and benefits of increased regulation, the Texas Legislature voted “no.” These burdens are the same in Austin, and will only serve to harm Austin consumers.
Recently, Jeff Benedict, the author of Little Pink House, overheard something very rarely issued in the legal world. An apology.
The apology came from Justice Richard Palmer of the Connecticut State Supreme Court, and it was issued to Suzette Kelo. Justice Palmer had voted with the 4-3 majority in one of most infamous property rights cases in the United States’ history. The decision ultimately allowed the City of New London to take the land owned by Ms. Kelo and her neighbors, and tear down their houses in order to build a shopping area and factory that never materialized. In his apology, Justice Palmer said: “Had I known of what you just told us, I would have voted differently.”
After three Legislative sessions, Texas has finally passed eminent domain reforms that will prevent any of our state justice’s from having to make a similar apology. SB 18–the omnibus property rights bill–created many safeguards for Texans, as we noted in our bill analysis of SB 18. However, even in Texas there are still a few more issues that need to be resolved to ensure private property rights remain strong in Texas. The 83rd Texas Legislature should look at strengthening the buy-back and banning takings that are not necessary for a public use.
On September 23, the U.S. House of Representatives passed a bill to forestall the approaching “ EPA train wreck” – commonly understood as the unprecedented economic damage to result from the slew of new EPA regulations. Known as the TRAIN Act (Transparency in Regulatory Analysis of Impacts to the Nation, H.R. 2401), the measure requires a comprehensive disclosure of the costs and benefits of the many EPA rules. Thankfully, the analysis is to be conducted not by EPA, but by an interagency committee composed of cabinet secretaries and agency chiefs, chaired by the Secretary of Commerce. The U.S. Senate has introduced a similar bill, called the CARE Act (Comprehensive Assessment of Regulations on the Economy Act).
The TRAIN Act would require a far broader assessment of economic impacts than EPA is now required to do. In addition to impacts on regulated entities, the analysis would include cumulative and incremental effects on: U.S. employment, the global economic competitiveness of energy-intensive and trade-sensitive industries, regional fuel and electricity supplies, the reliability and adequacy of the bulk power supply in the U.S., consumers, small business, state governments and labor markets. The committee’s preliminary report is due to Congress by January 31, 2012. Following a public comment period of 90 days, the TRAIN Act’s final report is due August 1, 2012.
The EPA rules covered by the TRAIN Act include: the Cross-State Air Pollution Rule, New National Ambient Air Quality Standards for ozone, sulfur dioxide, nitrogen dioxides and particulate matter; Maximum Available Control Technology (MACT) standards for electric utilities, industrial boilers, and cement kilns; disposal of coal combustion residuals, and greenhouse gas regulations. These regulations are those labeled as the EPA train-wreck. The TRAIN Act would delay adoption of those rules now pending and suspend the legal effectiveness of those rules already adopted, such as the Cross-State Air Pollution rule.
This EPA’s regulatory initiative, which catalyzed the TRAIN Act, constitutes “a regulatory spree unprecedented in U.S. history,” according to the Wall Street Journal. The cumulative impact of these rules, all coming into effect within the next three years, is uncharted territory in the four decades of federal environmental regulation. Voices from diverse quarters such as the Federal Electric Reliability Commission, organized labor and small business predict that these EPA rules will undermine the reliability of the U.S. electricity supply and augur national job losses in excess of one million.
Although the TRAIN Act does not provide congressional authority to quash EPA regulations it will force the leadership of the executive agencies and all of Congress to confront the magnitude of EPA’s regulatory spree. The TRAIN Act does, however, prevent EPA from adopting or implementing of the rules covered by the bill until six months after issuance of the TRAIN Act’s final report – January 2013. In effect, this is a one year “time-out” to scrutinize the impacts and alleged benefits of EPA’s regulatory spree. ”
Two health care reports were released this week. One is on the sharp increase in health insurance premiums this year, and the other is a survey of physicians regarding whether they provide more treatment to their patients than is necessary. These two reports were not coordinated, but their findings are closely related.
From 2010 to 2011 the average price of a family policy increased by 9 percent, resulting in the average cost of family coverage breaking $15,000 per year for the first time. This is a significant hike well over inflation, wage, or employment growth. Also reported was that 28 percent of physicians say they provide more care than their patients actually require. Incidentally, they cite fear of being sued as the primary factor. Texas has reduced this problem better than many other states through meaningful tort reform. However, there is a greater cause and effect at work here. Patients are receiving more care than necessary from doctors who are in turn billing the insurance companies for this unnecessary care. Insurance companies then require more money from customers, who are also the patients, to cover the cost of care. The patient/customer is now incentivized to get more unnecessary care to make the insurance premiums more valuable to them. These two reports illustrate the core problem with rising health care costs in America: third party payment.
Third party payment is the system whereby most price signals are removed from the direct interaction of the patient and the provider. This leaves the patient with the incentive to consume as much of the best health care as possible because the immediate cost to them is marginal. Insurance companies then make payments with the incentive to maximize their profit margins. However, there is no interaction between the patient and the provider on the value of the health care being provided. If a physician told a patient that they needed x-y-z test, the cash paying patient is far more likely to ask questions, such as, “Why do I need this test?” The patient would then know the price and the justification for the test and be able to make a value decision – otherwise known as a price signal. It is the lack of these value based decisions that is one of the driving forces behind rising health care costs.
Milton Friedman said there are four ways to spend money. Two of these are: “you can spend your own money on yourself” and “you can spend other people’s money on yourself”. When you spend your own money on yourself you have great incentive to find the best value for your money. However, when you spend someone else’s money on yourself you have great incentive to get the highest quality and quantity with less regard to the cost. The American health care system is based on the latter of these, and it will not be sustainable until it is based on the former.
There was a long, hard fought battle over public school spending in Texas during the 82nd Legislative Session, specifically over whether Texas needed to continue to grow its education budget. Proponents of increased spending insisted, and continue to insist, that increasing state spending will result in improved public education performance. The Texas Public Policy Foundation has been saying for some time that spending does not necessarily equate to success. Now it appears that idea is gaining traction world-wide.
This article in The Economist, entitled “The Great Schools Revolution”, points to a number of ideas that are taking hold globally in education reform, one of which is that the argument for more spending has not proven to be the most productive approach to improved education performance:
“The idea that good schooling is about spending money is the one that has been beaten back hardest. Many of the 20 leading economic performers in the OECD [a group of the world’s most developed countries] doubled or tripled their education spending in real terms between 1970 and 1994, yet outcomes in many countries stagnated—or went backwards. Educational performance varies widely even among countries that spend similar amounts per pupil. Such spending is highest in the United States—yet America lags behind other developed countries on overall outcomes in secondary education. Andreas Schleicher, head of analysis at PISA [Programme for International Student Assessment], thinks that only about 10% of the variation in pupil performance has anything to do with money.”
The article goes on to say that a number of factors influence education quality, not least of which are “non-classroom” factors, such as national culture and social class. What it is very clear on, though, is that money is not the path to academic glory. Proponents for increased education spending in Texas should take this kind of research into account before insisting on tapping as many dollars as we can for public education in our state, particularly with a potentially worse budget situation looming for Texas in 2013.
In 2009, Colorado expanded its Medicaid program to include childless adults under 100 percent of the federal poverty limit (FPL). This program was to be paid for by a fee imposed on hospitals and matched by federal funding. Original estimates showed 49,200 eligible citizens with an annual cost of $197.4 million. However, updated estimates have revised the eligible population upwards almost 3 times the original size at 143,000 adults. At also triple the estimates were the costs per person. On an individual basis the costs jumped from $292 a month to $900 a month because these individuals consumed far more health care than expected. These factors raised the projected cost of the program to $1.75 billion, almost nine times what was estimated. In response, Colorado has reduced the program to cover childless adults only up to 10 percent of the poverty and then further capped the program to 10,000 individuals. Other states have had similar experiences trying to cover childless adults. Wisconsin estimated that 24,000 individuals would enroll in their version of the plan in the first year. Within two weeks 25,000 had applied, and within 4 months 67,000 people had enrolled and 70,000 individuals were on a waiting list. In both Indiana and Oregon, the state had to cap enrollment.
This occurs, in part, because of the “woodwork effect”. When a new product or benefit is offered to a new population, individuals come out of the woodwork to take advantage of it. This reveals the limitations of government projections and the power of incentives. Inexperience with the cost per individual of the newly covered population adds to gross underestimations. Why is this so important? ObamaCare expands Medicaid coverage to all childless adults up to 133 percent of the FPL and provides subsidies for health insurance for individuals up to 400 percent of the FPL. Both of these are new benefits and new populations, and both will feel the woodwork effect. The federal government has never before offered health care or subsidies to these populations, and they have limited data available on health care needs. As individuals come forward to take advantage of these benefits, motivated by the individual mandate, costs will skyrocket. If the programs in the states provide an example of what will happen then ObamaCare will have to be scaled back drastically or, better yet, repealed.
Texas’ demand for more charter schools is getting some national attention. This post, from Fox News Latino, features Houston’s YES Prep, one of the state’s more successful open enrollment charter schools. Students at YES, whose ten campuses offer grades 6-12, experience public education very differently than students in more traditional public education settings. The school day is longer, the general workload is more intensive, and students have substantial access to instructors after classroom hours are over. What’s more, students at YES Prep do not graduate high school without first being accepted into a four year college.
This is the sort of high quality public education that should be more widely available in Texas, and parents know it. There are only 5,400 total seats available at YES Prep, and their wait list is currently at 9,000 students. Even with ten campuses up and running, YES is nowhere near meeting its demand. Cases like this should show the Texas legislature that raising the state’s charter cap of 215 schools needs to happen, so that more highly innovative, highly effective charters can open to quickly address the ever growing waitlist. At their last totaling, the Texas Charter School Association put the statewide number at 56,000 students. The demand is there. Let’s give parents and students alike more of what they want.
Some in the liberal media are saying, essentially, "I don't think the Texas economy is that great. It's unemployment rate is in the middle, and even New York has a lower unemployment rate." Oh yeah? Well compare these two sets of graphs, which show changes in working age population and job creation in New York and Texas over the last decade
New York
Texas
The comparison is simply incredible. Over the last ten years New York has had virtually no net job growth; and its labor force moved only a few hundred thousand. Meanwhile, in that same time period, Texas has added 2 million more jobs AND 2 million more people to its labor force.
Nearly on the order of a million people move to Texas every five years, and that's net migration; the city of Austin alone absorbs 60,000 new residents a year and led the nation in job creation in 2010. Here's the most recent report of the Texas Workforce Commission, which shows 32,000 net new jobs in June, and an increase of 117,600 jobs year to date. By contrast, according to BLS, New York state created (BLS 2011 data) barely a thousand jobs in the year to June; unemployment there fell from 8.2 to 8.0 percent largely because the estimated labor force and number of people filing for unemployment fell dramatically. Maybe one of the reasons New York has such low unemployment is that so many New Yorkers are moving to Texas for work.
In December 2009, one Steven Lipsky noticed a problem with his water well at his new home just west of Dallas, Texas. He began to suspect that the source was a nearby natural gas well that Range Resources had built and “fracked” earlier that year to exploit a part of the massive Barnet Shale a mile underground.
The technique of hydraulic fracturing, which permits extraction of oil and gas from impermeable rock such as hard shale, has vastly increased the country’s recoverable reserves of energy. In the last year, the U.S. has doubled its estimate of the recoverable natural gas in the U.S., and a single new find, the Marcellus Shale in Pennsylvania and New York, is thought to contain more total energy than all of Saudi Arabia.
Naturally, the prospect of a boom in fossil fuel production has driven environmentalists crazy. Environmental activists soon made contact with Mr. Lipsky, told him to watch a largely fraudulent documentary called Gasland, and encouraged him to bring EPA into the action quickly. In later summer 2010, he duly filed a complaint with both federal and state regulators.
EPA testing soon showed that there were traces of methane in his drinking water, and that, like the methane deep in the Barnet Shale, it was “thermogenic” rather than “biogenic.” All that proved was that both samples had come from deep underground, which was obvious anyway. But that was all the EPA needed to slap Range Resources with an endangerment finding and remediation order. “We know they’ve polluted the well,” claimed EPA regional administrator Al Armendariz in a television interview at the time. “We know they’re getting natural gas in there.”
In fact, Armendariz didn’t know anything. Read the incredible story of EPA's baseless persecution of Range Resources, over at the Weekly Standard.
Good news for Texas job-seekers—the state’s economy continues to recover at a much faster rate than the rest of the nation.
In fact, according to a recent press release from the Texas Comptroller, Texas’ economy has nearly recovered all of the jobs that were lost during the recession whereas the nation has recovered but a small fraction. From the release:
“Texas has outperformed the nation as both economies recover from the recession. The state has regained 88 percent of the jobs that were lost during the recession, while the nation has recovered 22 percent.” [emphasis mine]
By most any measure, this should speak volumes about Texas’ low-tax, limited government approach and its economic value.
With Governor Perry entering the Presidential race this weekend, there has been a noticeable uptick in the level of scrutiny directed at Texas’ jobs record. Specifically, some in the media have grown dismissive of job creation in the state because some of these new positions entail wage rates that are lower than the national average.
So do the critics have a point? For the answer, we turn to Dr. Steve Pejovich, writing for The Institute for Policy Innovation, who explains why this premise is fundamentally wrong:
The demand for labor, like the demand for all scarce goods, is a function of price. The lower the wage, the more people are hired.
What’s known as the “market-clearing wage” (i.e., price) is the wage at which all people who want to work at that wage have jobs. At any wage above the market-clearing wage not all people who want to work at that wage have jobs.
Government can’t determine the market-clearing level, only markets can. But government can distort it by imposing regulations on business, minimum wage laws, and unions (think of the Boeing case), which force wage rates above the market–clearing level.
[Governor] Perry’s critics are confusing the wage rate with income. The higher the wage rate (above the market-clearing level) the more who are unemployed. That is, high wage rates mean zero income for many. The market-clearing wage rate means positive income for all.
Governments can choose to make labor markets less or more competitive. Perry has chosen the latter for Texas. Yes, the average wage rate in Dallas might be lower than in Detroit, but more people are earning money from work in Dallas than in Detroit. This raises an important question upon which a free society depends: the freedom of choice.
Any person in a right–to-work environment can choose between zero income and the wage he or she could get in the labor market. No person in a union-controlled or government-regulated environment can choose between zero income and the wage at which he or she is willing to work.
No one has to work for a lower wage, but at least in Texas more people can choose that option over being unemployed.
Last week, the Wall Street Journal detailed a poll conducted by Education Next on whether the country should be spending more on public education. The Journal states that when asked whether education spending should increase, 65% of respondents say yes. However, that percentage drops significantly – by about half – when those polled were asked whether their own taxes should be increased to fund that increase.
This is not a terribly surprising result; you would be hard pressed to find anyone that doesn’t think, A, education should be better, and B, a free lunch is a good thing. The problem is that people tend to think more spending automatically equates to an improved education system. This is not the case.
In Texas, we’ve been increasing our education spending steadily over the last decade, with little to show for it on an academic front. So, perhaps another question the Education Next poll should have asked would have been “Do you favor increased education spending if it will not improve our academic performance?” I imagine that also would have put a dent in that 65% figure.
The United States, as a whole, needs to improve its performance in education. We’ve slipped in world education rankings, and we need to be back at the top if we are to remain the global leader we are today. However, improving this country’s education system is not as simple as spending more money it. We need innovation, competition, and flexibility to increase in our public schools, and none of that needs to increase the spending burden in our education sector. A final question, then, for those polled by Education Next – “Would you want to improve education in America at no cost to the taxpayer?” I have to think the yes votes would come in much higher than 65%.
Note: A version of this article first appeared at National Review
The Eleventh Circuit Court of Appeals decision to strike down Obamacare’s individual mandate has received a lot of well-deserved attention. But another issue in the case deserves much more attention than it has received, both because it so important, and because it so interesting. The Eleventh Circuit affirmed Judge Roger Vinson’s ruling that the Medicaid-expansion provisions of the law are constitutional. But, as I explain over at the Daily Caller, the judges totally ignored his provocative reasoning, and did their ruling, and the nation, a disservice.
The Medicaid provisions of Obamacare require that states dramatically expand their Medicaid rolls as a condition of continuing to receive federal Medicaid matching grants. In Texas, these federal Medicaid funds already account for 15 percent of all the funds available for the state budget — a figure that will quickly double under Obamacare.
The Supreme Court has long fretted over the danger that federal conditional grants pose for the federal structure of our Constitution. In South Dakota v. Dole (1987), the Supreme Court made it clear that state participation in conditional federal grant programs must be voluntary “not merely in theory but in fact” and that the conditions cannot be so coercive that they pass the point at which “pressure turns into compulsion.” In a landmark ruling just last June (in an opinion written by Justice Kennedy, no less, and joined by Roberts, Scalia, Thomas, and Alito), the Supreme Court noted that “the individual liberty secured by federalism is not simply derivative of the rights of the States. [. . .] By denying any one government complete jurisdiction over all the concerns of public life, federalism protects the liberty of the individual from arbitrary power.”
That is a profound and potentially far-reaching articulation of the imperative of federalism, and one which the Supreme Court seems increasingly willing to deploy against unbridled national majority rule, the force that has been eroding constitutional restraints on federal power since the New Deal.
It’s important to understand that the Eleventh Circuit did not merely affirm the constitutionality of the Medicaid provisions — that is no surprise. What is interesting is that the court affirmed summary judgment for the federal government as a matter of law. Summary judgment is a peculiar thing. It is the very last step in civil procedure before a full trial on the facts. If a trial court looks at the parties’ allegations and decides that, as to a specific issue, the allegations don’t reveal any issue of material fact, it can grant summary judgment for one of the parties as a matter of law. By granting summary judgment for the federal government, both the district (trial) court and the court of appeals decided that there was no need to find out if the Medicaid-expansion provisions indeed “passed the point at which pressure turns into compulsion.” This was despite the fact that there is a genuine dispute between the federal government and the 26 states suing to stop Obamacare as to how onerous those conditions really are.
What’s implied in the high court ruling is that the federal government can impose whatever conditions it wants on its grants to the states, because there is no level at which the penalty would in fact cross the point at which pressure turns into compulsion. Here the Eleventh Circuit contradicts itself:“To say that the coercion doctrine is not viable or does not exist is to ignore Supreme Court precedent, an exercise this Court will not do. [...] If the government is correct that Congress should be able to place any and all conditions it wants on the money it gives to the states, then the Supreme Court must be the one to say it.” But in fact, that was the essence of the summary judgment, and the Eleventh Circuit affirmed it.
The states should vehemently appeal this aspect of the court’s ruling. The current federalist majority on the Supreme Court could well look upon this ruling as an affront, and return the case to the district court for a full trial on the factual question of whether the Medicaid expansion requirements leave states free to choose, “not merely in theory but in fact.”
But here’s what’s really interesting: A full trial of the facts would only further reveal that Dole’s coercion rule is totally unworkable, because it is based on a logical fallacy. When the federal government uses its taxing power to take money from the states and then returns it to them only on condition that they agree to whatever policy the current congressional majority may prefer — in an area of traditional state concern — there is coercion, pure and simple, whether it’s one dollar or a billion dollars. In exchange for federal funds, the states have come to let the elected representatives of other states displace their own state legislatures in determining state policy. Texas has absolutely no desire to let the congressional delegation of California determine its state policies. But it has no real choice when California and like-minded states deploy the hammer and anvil of federal taxing and spending through a congressional majority.
The real problem raised by Obamacare is not the unprecedented individual mandate, but rather the expansive scope that the Supreme Court has already given to the federal government’s spending power — which is both the root of the Medicaid issue and perhaps the gravest threat to the federal structure of the Constitution. In U.S. v. Butler (1936), the Supreme Court warned that conditional federal grants could become an “instrument for the total subversion of the governmental powers reserved to the individual states.” So it has proved. But in U.S. v. Printz (1997), the Supreme Court ruled that what offends the “dual sovereignty” of the states is an offense to the federal structure of the Constitution, and must be struck down.
By elision, the Eleventh Circuit deftly avoided Judge Vinson’s invitation to extend the logic of Printz to the domain of conditional federal grants. Perhaps it had little choice, given that Dole is both unworkable and (for the moment) a controlling precedent. Unfortunately, we do not have the same “circuit split” on the Medicaid issue that now guarantees the individual mandate’s rapid ascent to the Supreme Court. But, with any luck, the Supremes will grant certiorari on the Medicaid issue, and at long last squarely face how poisonous federal conditional grants are to the whole philosophy of government that shaped our Constitution.
Almost three weeks ago, the Chief Justice of The Supreme Court of Texas assembled a panel of policymakers to hear the findings of a recent report from the Council of State Governments Justice Center. Breaking Schools’ Rules is a highly anticipated report, with media coverage on the front page of the New York Times and nationwide coverage on NPR. Right On Crime attended the event to hear the details from the report.
The report is highly technical and data-intensive, and it does not make any specific policy recommendations so as to maintain political neutrality. The study was prompted by the realization that out of school suspension has been rising steadily for the past decade. The report tracked 900,000 Texas seventh graders (all public school students) over three graduating classes, and it followed them until three years past their anticipated graduation.
The Justice Center chose Texas for its study due to the large public education system, the majority-minority status (less than 50% of students are Caucasian), and the availability of extremely in-depth data that was compiled by the Texas Education Agency. (A representative from CSG indicated that only four other states had collected data as extensively as Texas had – but all of those states were much smaller and less representative.) The study tracked four primary types of punishments (in order from least to most severe): In School Suspension (ISS), Out of School Suspension (OSS), Disciplinary Alternative Education Programs (DAEP), and Juvenile Justice Alternative Education Programs (JJAEP). Tickets from law enforcement were not considered in the study.
Most impressively, CSG ran numerous controlled studies with the data. For instance, in order to evaluate racial bias in the severity of punishments administered, it compared groups with similar socioeconomic and geographic backgrounds, as well as offenses committed.
The study differentiated between discretionary and mandatory disciplinary actions. Mandatory actions are those that administrators are compelled by law to carry out, while discretionary actions are those that grant administrators the freedom to assign punishment as they best see fit. 97% of disciplinary actions are discretionary, which opens a great opportunity for intervention to fix the problems.
The findings contain a number of groundbreaking data points, which could help redirect juvenile justice policy for years to come. For example, a shocking 54% of students were suspended at some point in their middle and high school years, and 15% of those children were suspended eleven times or more. Of children who received disciplinary action, 50% were given ISS, 31% went to OSS, 16% went to DAEPs, and the rest went to JJAEPs.
Children who were disciplined more than eleven times were 56% more likely to repeat a grade, and 59% more likely to drop out.
Among children with emotional disabilities, 90% received a suspension at some point, and 50% were disciplined eleven times or more. Meanwhile, children with documented learning disabilities were significantly less likely to be disciplined.
The numbers suggest that there are many appropriate points for intervention from policymakers, teachers, and families. Texas now has an opportunity to take the national lead in juvenile reform just like it has in adult corrections reform.
- Henry Joel Simmons
Research Fellow, Center for Effective Justice
When enacted correctly, probation saves money and reduces crime rates and recidivism. Probation violators, however, frequently face inconsistent penalties and lax enforcement. According to the Fort Worth Star Telegram, Tarrant County District Judge Mollee Westfall is changing probation in her jurisdiction. As a former prosecutor, she knows that probationers break the rules at an alarmingly high rate, often landing them back in prison. She also knows that this is a massive strain on the county’s prison system. After seeing the successes of the HOPE program in Hawaii, Judge Westfall has set up a pilot program in North Texas to implement similar reforms to straighten probationers up.
Supervision With Intensive enForcemenT, or SWIFT, takes an aggressive stance on probation. The program uses quick punishment to motivate probationers to follow the rules. The concept is simple: every time an offender breaks a rule, they go to the county jail for a short stay. If they fail to turn themselves in, the stay is longer. The system uses numerous mandatory check-ins and meetings to keep tabs on offenders. Miss a meeting and Judge Westfall issues a warrant for your arrest. If you break the rules enough times, your probation is revoked, putting you back behind bars for a long sentence.
The changes stem from necessity. Tarrant County’s prison system is already operating at capacity, and something had to be done to slow prisoner entry or expedite prisoner release. “If you want the rapists and the robbers and the murderers to stay locked up, we can’t put in our one-time drug possessor who has tested positive one time,” said Leighton Iles, director of Tarrant County’s Supervision and Corrections Department.
The county has applied for a federal grant in order to replicate the Hawaii’s much-praised HOPE program. While they await the Justice Department’s decision, Judge Westfall will get as many probationers through the program as she can with the resources she has. Conservative advocates for criminal justice reform are anxiously awaiting the results of the pilot program.
- Henry Joel Simmons
Research Fellow, Center for Effective Justice
An attorney is a constitutional right, but court-appointed defense attorneys have a tarnished history. Thanks to a sizeable grant from the Texas Task Force on Indigent Defense, Lubbock County is moving forward with a restructuring of its public defender program, The Texas Lawyer reports. The task force recently voted to disperse $21.2 million in grants to a number of counties to encourage new approaches to the indigent defense problem, Lubbock County among them. The current framework of judge-appointed counsel can be problematic, as judges are required to remain impartial, and cannot get involved if they suspect that an attorney is inadequately representing his or her client (a frequent problem).
The new system will implement a regional public defender’s office, designed to serve multiple surrounding counties. The attorney in charge of the office will evaluate cases, and appoint legal counsel from within the office. David Slayton, director of Lubbock County court administration said, “We’re hopeful that [the new program] will lead to an improvement in the quality [of indigent defense]…It takes a lot of administrative burden off the judges.” This model allows for a head attorney to supervise and oversee the efforts of the appointed lawyers much better than a judge could.
Lubbock County hopes to have the new office in full operation by January 2012. The task force is very excited about the program’s potential, and it is hoping the new Lubbock office will serve as an example for other counties in the state. Several counties are already receiving funds to implement electronic filing, teleconferencing, and public defender training in order to improve the quality of indigent defense and to reduce costs down the road.
- Henry Joel Simmons
Research Fellow, Center for Effective Justice
Texans concerned about the economic implications of federal protection for the Dunes Sagebrush lizard in the Permian Basin will not find comfort in a recent Wall Street Journal editorial, “Environmentalist Wisdom: Shoot One Owl to Save The Other,” which discusses the apparently futile efforts to save the northern spotted owl and the crushing economic losses which have resulted.
The northern spotted owl has been listed as a threatened species under the Endangered Species Act since 1990. As a result, millions of acres of federal forest are off-limits to logging, a vital industry in the Pacific Northwest:
In the 1980s, before the owl was listed as threatened, nearly 200 sawmills dotted the state of Oregon, churning out eight billion board feet of federal timber a year. Today fewer than 80 mills process only 600 million board feet of federal timber. In Douglas County, for example, several mills dependent on federal timber have closed. Real unemployment in many Oregon counties exceeds 20%, double the national average.
Unfortunately, these drastic measures have not changed the spotted owl’s fate:
Despite a 90% cutback in harvesting on federal lands (which constitute 46% of Oregon and Washington combined), the population of spotted owls continues to decline, as do rural communities that once prospered across the Northwest. In some areas, spotted owls are vanishing at a rate of 9% per year, while on average that rate is 3%.
Protection efforts resulted in millions of acres of unmanaged federal forests, contributing to deadly and costly forest fires. In 2002, the Biscuit Fire in Oregon and California burned nearly 500,000 acres and destroyed nearly $5 billion worth of timber. Unfortunately for the spotted owl, the very effort to save them also devastated them as an estimated 75 pairs of spotted owls died in the fire.
The U.S. Fish and Wildlife Service recently unveiled its newest plan to save the spotted owl, at a cost of $127 million. The final Revised Recovery Plan sets aside even more acreage for habitat. In addition, the Fish and Wildlife Service will remove what it has deemed a “significant and complex threat”—the barred owl. In a Darwinian twist, competition for prey and nesting sites with a larger owl poses one of the biggest hurdles for the spotted owl. But rather than let Mother Nature determine the spotted owl’s fate, the Fish and Wildlife Service will systematically kill barred owls.
Wildlife preservation is a worthwhile goal, but it should not come at the expense of jobs for American families when we possess only limited power to understand or affect the origin and destiny of species.
The Texas Public Policy Foundation is described in a variety of ways, depending on which news outlet or interest groups is doing the describing. We are variously called “conservative,” “libertarian,” “Republican,” and “pro-business.” As for us, we describe ourselves as free-market. There are a variety of reasons for this, one of them being to distinguish between being pro-business and pro-markets. Donald Boudreaux over at Café Hayek describes the difference well in the post below:
Reviewing Jeff Madrick’s Age of Greed, Sebastian Mallaby reports that “In Madrick’s telling, a cabal of conservatives [from the 1970s forward], driven first by greed and second by ‘extreme free-market ideology,’ gradually seized power” (“Why We Deregulated the Banks,” July 31).
Although Mr. Mallaby ably exposes problems with Madrick’s thesis, he misses its fundamental flaw – namely, the fact that adherence to free-market ideology undermines, rather than serves, the anti-social goals of greedy political insiders. Businesspeople who successfully seek political influence nearly always demand protection from the free market. They lobby for regulations and taxes (such as tariffs) that impose disproportionately heavy burdens upon their competitors and, hence, upon consumers. In doing so, such greedy businesspeople follow a course unmistakably opposite the course they’d follow were they really free-market ideologues.
By failing to see that political power unleashes greed to be used to undermine rather than to protect free markets, Jeff Madrick is a useful, if unwitting, idiot for the ‘greedy’ interests that he fancies himself standing in opposition to
According to the Bureau of Labor Statistics, seasonally adjusted, non-farm employment in Texas grew by 32,000 positions from May to June giving Texas the largest month-to-month growth among all states.
As impressive as this statistic is, an even more striking picture of Texas’ job creation prowess begins to emerge when viewed over the long-term and in comparison to other large states.
Consider that year-over-year employment growth in Texas totaled 220,000 new positions from June 2010 to June 2011 – the largest job growth among all other states. The other most populous states did not even come close to matching that figure - California (+157,000), Illinois (+59,000), Florida (+53,000), and New York (+41,900).
Texas’ economic success can be attributed to several factors, but one of the most important is its free-market approach to governance – an approach whose results clearly speak for themselves.
Seasonally adjusted, total non-farm employment growth/decline over a 1-year period
(June 2010 to June 2011)
- Samantha Soliz
Research Fellow, Center for Fiscal Policy
NOTE: This post originally appeared at “Planet Gore” on National Review Online.
From the moment I first became aware of global-warming alarmism many years ago, I asked myself, “Wait a minute — how are they disaggregating the human impact from what the planet would otherwise be doing?” Having studied a lot of biology, evolutionary theory, zoology, etc. at the University of Wisconsin, I knew that we’d been coming out of an ice age for most of the last 100,000 years, that the seas had risen hundreds of feet in that time, and that the lake outside my window was the melted remnant of massive glaciers. It was the 1990s, and the climate was always tossed around as the classic example of “chaos theory.” (Remember that little trend in pop science? It apparently disappeared after coming in contact with Al Gore.)
Well it turned out that scientists had little clue what the planet would be doing in the absence of human activity. Their measures of the human impact on the climate were always highly conjectural — based mostly on a measurable warming trend over the last 150 years, compared with models going back several thousand years, and models predicting future trends. “Climategate” revealed that some of those models were intentionally manipulated to flatten previous short-term variations and exaggerate predictions of future warming. In recent years, more and more scientists have come out to question the alarmists’ claims: One great example was this fascinating essay by Dr. William Happer, a noted physics professor of Princeton University.
Still, I assumed that at least the climate scientists had some firm idea of how much heat a certain amount of carbon dioxide would trap directly and indirectly through increased humidity and cloud cover. Well now it turns out that even on this most essential assumption of all their claims, they didn’t know what they were talking about.
An explosive study based on NASA satellite data collected over the past decade shows that the planet’s atmosphere traps far less heat than any of the most frequently cited models presumed. The study, by Dr. Roy Spencer and Dr. William Braswell of the University of Alabama, was published in the peer-reviewed journal Remote Sensing. This is from the press release:
“The satellite observations suggest there is much more energy lost to space during and after warming than the climate models show,” Spencer said. “There is a huge discrepancy between the data and the forecasts that is especially big over the oceans.”
Not only does the atmosphere release more energy than previously thought, it starts releasing it earlier in a warming cycle. The models forecast that the climate should continue to absorb solar energy until a warming event peaks.
Instead, the satellite data shows the climate system starting to shed energy more than three months before the typical warming event reaches its peak.
“At the peak, satellites show energy being lost while climate models show energy still being gained,” Spencer said.
This is the first time scientists have looked at radiative balances during the months before and after these transient temperature peaks.
Applied to long-term climate change, the research might indicate that the climate is less sensitive to warming due to increased carbon dioxide concentrations in the atmosphere than climate modelers have theorized. A major underpinning of global warming theory is that the slight warming caused by enhanced greenhouse gases should change cloud cover in ways that cause additional warming, which would be a positive feedback cycle.
Instead, the natural ebb and flow of clouds, solar radiation, heat rising from the oceans and a myriad of other factors added to the different time lags in which they impact the atmosphere might make it impossible to isolate or accurately identify which piece of Earth’s changing climate is feedback from manmade greenhouse gases.
“There are simply too many variables to reliably gauge the right number for that,” Spencer said.
Skeptics have long been able to point to inconvenient facts that cast doubt on the climate alarmists’ consensus — for example, the fact that temperatures have apparently risen much less slowly in the last 20 years than in the 20 before that, although everyone agrees there is more CO2 in the atmosphere now then there was then. But this is virtually the first time that central assumptions and predictions of the models used by the International Panel on Climate Change — the basis of climate policy and treaty negotiations around the world — has been flatly refuted by hard evidence. To repair to Karl Popper, the precise theory of the climate alarmists has been falsified by factual data — and must now be modified or abandoned, which is what happens to most theories. The “chaos theory” trend of 20 years ago was right after all — we don’t know everything, in particular where the climate is concerned. The planet may be warming — but there are far too many potential causes for us to really understand what is happening, or to predict what will happen in coming decades. Much more will doubtless be written about this — and heard, in congressional testimony — as folks start to realize just how deeply these new data undermine the claims of the climate alarmists. But this is hopefully the beginning of the end of the Democrats’ demented fascination with imposing devastating burdens on the American economy in the service of a “scientific” consensus that is now facing death by a thousand inconvenient truths.
The global economic downturn has caused every country to reprioritize their spending. Britain achieved part of their budget reductions through spending less on their health care system, the National Health Service (NHS). The NHS is Britain’s government run, single payer health care provider. Any funding that is given to the NHS is ultimately intended to deliver health care to the people of the UK. Accordingly, funding reductions inevitably result in care reductions.
The NHS already rationed care prior to the economic downturn, but now they will have to ration even more to weather the continued economic malaise. Under new NHS contracts knee and hip surgeries will only be provided when the patient is in “severe pain” and cataracts surgeries (previously approved for one eye) will only be provided when the patient’s vision problems “substantially” effect their ability to work. These procedures are often needed by senior citizens, but children will be affected as well. Under new guidelines the NHS will only pay for a tonsillectomy when a child has 7 occurrences of tonsillitis in the previous year and will pay for grommets to improve children’s hearing after 6 months of examination and “exceptional circumstances”.
It is a widely acknowledged hard reality that all people cannot have all the health care they desire at all times. At some point most people will have to decide to pass on health care – an inevitable reality. The question, then, is posed, “If health care is limited, who decides what care I can have?” Government health care, like the NHS and ObamaCare, puts bureaucrats in charge of deciding what care individuals should and should not get. This model is ineffective, inappropriate, and morally wrong. A government bureaucrat does not have the knowledge to make determinations on what care an individual should get nor do they have the right to deny an individual care. Questions of an individual’s health care ought to be left up to the individual in conjunction with their loved ones and their doctor. Few areas of society are more personal and important as health care, and no free society should try to justify taking the freedom to choose in health care away from individuals.
Today marks a special day for free market enthusiasts—the 99th birthday of the late, great economist Dr. Milton Friedman.
During his lifetime, Dr. Friedman distinguished himself by, among other things, challenging the prevailing economic theory of the day (Keynesian economics), leading the Chicago School of monetary economics (a school of thought that rejects Keynesianism in favor of a market-based approach), and championing policies that promoted freedom and individual liberty, such as eliminating the draft, creating a school voucher system, and instituting a “flat tax.”
For his achievements, Dr. Friedman received numerous awards, including a Nobel Memorial Prize for economics, the Presidential Medal of Freedom, and the National Medal of Science. He was indeed a giant among men and his intellect is sorely missed in today’s economic climate.
Here is a short tribute about the life and work of Dr. Milton Friedman from Reason.tv.
- Samantha Soliz
Research Fellow, Center for Fiscal Policy
A recent Wall Street Journal editorial (“A Tale of Two Shale States”) highlights Pennsylvania’s shale gas boom success -- and New York's refusal to develop similarly rich shale gas resources. The Marcellus shale, which covers 65 million acres through Ohio, West Virginia, western Pennsylvania, and southern New York, is believed to contain more natural gas than Saudi Arabia has oil.
Hydraulic fracturing and horizontal drilling on the Marcellus Shale have brought enormous gains in jobs and revenue to Pennsylvania:
Statistics from Pennsylvania bear this out. The state Department of Labor and Industry reports that Marcellus drilling has created 72,000 jobs between the fourth quarter of 2009 and the first quarter of 2011. The average wage for jobs in core Marcellus shale industries is about $73,000, or some $27,000 more than the average for all industries.
The Pennsylvania Department of Revenue says drillers have paid more than $1 billion in state taxes since 2006—and the numbers are swelling. In 2011’s first quarter, 857 oil and gas companies and affiliates paid $238 million in capital stock and foreign franchise taxes, corporate income taxes, sales taxes and employer withholding. This exceeds by some $20 million the total payments in 2010.
The revenue department also identified some $214 million in personal income taxes paid since 2006 that can be attributed to Marcellus shale lease payments to individuals, royalty income and asset sales. And all of this with no evidence of significant environmental harm.
Just across the state line in New York, however, draconian restrictions on hydraulic fracturing or “fracking”, the method used to extract shale gas, effectively created a moratorium on drilling in the Marcellus shale. New York faced a budget deficit of $8.5 billion in fiscal year 2011 and has an overall unemployment rate over 8%. Hispanics (11.8%), blacks (14.3%), and New Yorkers without a high school diploma (12.2%) face staggeringly high unemployment rates. Yet New York continues to shun billions in economic activity and thousands of jobs because of overblown fears of the environmental harms of fracking.
The Manhattan Institute studied what New York stands to gain if it loosens its fracking restrictions:
The Manhattan Institute study shows that a quick end to the moratorium would generate more than $11.4 billion in economic output from 2011 to 2020, 15,000 to 18,000 new jobs, and $1.4 billion in new state and local tax revenue. These are conservative estimates based on a limited area of drilling. If drilling were allowed in the New York City watershed—which Governor Andrew Cuomo is so far rejecting—as well as in the state’s Utica shale formation, the economic gains would be five times larger.
Last Sunday, Texas's chief environmental regulator, Dr. Bryan Shaw, published an excellent op-ed in the Washington Examiner, on the EPA's new cross-state pollution rule. The title says it all: "Is EPA's True Purpose Protecting the Environment or Shutting Down Industry?" As head of the Texas Commission on Environmental Quality, the world's second largest environmental protection agency, he may well ask. Despite Texas's years of success in cleaning and protecting the environment, EPA decided at the last minute to include Texas in its new Cross State Air Pollution Rule, because of the mere possibility that Texas might in the future increase emissions enough to impact ozone levels in other states. Dr. Shaw writes:
Like the others, this new rule will have little impact on the environment. Rather, its chief effect will be to kill jobs, put the brakes on economic growth, increase energy costs and impair our energy security. And in keeping with an emerging pattern of EPA behavior, the new rule was adopted in flagrant violation of due-process rights.
This rule will impose onerous new costs on coal-fired power plants, causing many to shut down, and threaten electrical generation reserve capacity all over the country. These reserve margins are needed to avoid power disruption during times of peak demand. Even temporary loss of reserve capacity risks dangerous blackouts.
For example, American Electric Power announced that, "because of the unrealistic compliance timelines in the EPA proposals, we will have to prematurely shut down nearly 25 percent of our current coal-fired generating capacity, cut hundreds of good power plant jobs, and invest billions of dollars in capital to retire, retrofit and replace coal-fueled power plants."
Given the rule's strict January 2012 compliance deadline, it will be physically impossible to replace the lost capacity with alternative sources such as natural gas, wind or solar. The new rule will not lead to cleaner energy, but rather only to significantly less energy.
On July 13, Kathleen White -- a former Chairman of TCEQ and now director of the Armstrong Center for Energy and the Environment at TPPF -- wrote about the new EPA rule at National Review Online. According to Ms. White, the new rule promises to shut down a huge amount of electrical generating capacity by the January2012 effective date.
In Texas, [the Cross-State Air Pollution Rule] could eliminate the use of lignite coal that now fuels critical base-load electricity generation. According to the National Electric Reliability Council (NERC), the new EPA rules could so abruptly suppress coal-fired generators that basic electric reliability in the U.S. could suffer a loss of up to 100 gigawatts (GW) by 2014 — 10 percent of the nation’s total electric capacity.
With compliance beginning January 2012, the new air-pollution rule leaves many coal-fired power plants with no alternative but to reduce output or shutter entirely. Congress provided almost a decade to implement the acid-rain rules of the 1990s. EPA’s national program to reduce nitrogen oxides allowed almost five years before initial compliance. But the industry will have only a few months to comply with the first phase of this new rule[....] an impossible task.
Ms. White goes on to warn of the dangers for Texas of such an abrupt reduction in electrical capacity:
The abrupt elimination of lignite in the Texas fuel mix could mean the loss of 7,000–13,000 MW of generation capacity in Texas. This could reduce the generating capacity of Texas to as much as 3.8 percent below demand, as projected by the Electric Reliability Council of Texas (ERCOT) for the next two years. This is a sobering statistic for Texas this hot summer: ERCOT has already issued energy-emergency alerts when electric demand threatens to exceed available generation. Under the new rule, power outages could become routine.
On July 19, the CEO of ERCOT (the utility that runs the electrical grid in Texas) released a unprecedented statement warning of the danger of imminent loss of electrical reliability in Texas as a result of the inclusion of Texas in the new EPA rule at the last minute, with woefully little time to comply before the January 2012 deadline:
ERCOT’s May 11 report to the Public Utility Commission on the impact of the proposed environmental regulations did not address the impact of SO2 restrictions on coal plants in ERCOT because these restrictions on Texas were not included as part of the EPA’s earlier rule proposal. We have not had time to fully analyze the entire 1,323-page Cross-State Rule released July 7 or to communicate with the generation owners regarding what their intentions will be. However, initial implications are that the SO2 requirements for Texas added at the last stage of the rule development will have a significant impact on coal generation, which provided 40 percent of the electricity consumed in ERCOT in 2010.
Our concern is that the timing of the new requirements – effective Jan. 1, 2012 – is unreasonable because it does not allow enough time to implement operational responses to ensure reliability. We fear that many of the coal plants in ERCOT will be forced to limit or shut down operations in order to maintain compliance with the new rule, possibly leading to inadequate operating reserve margins with insufficient time to reliably retrofit existing generation or build new, replacement generation.
In the state’s deregulated electric market, the generation owner bears the risk of investment and decides when and where to build new generation, and whether to retire or mothball existing generation, based on market conditions. ERCOT’s role in the competitive market is to provide an outlook for future peak demand and how much generation will be needed to maintain long-term reliability of the electric grid. At this time, it is not clear that ERCOT operations has adequate tools to maintain long-term reliability in the face of the possible loss of a large amount of existing baseload generation in such a short period of time.
ObamaCare has directly impaired economic recovery, a recent study by the Heritage Foundation found. According to the Bureau of Labor Statistics, America averaged an increase of 67,600 private sector jobs per month between January 2009 and April 2010, showing strong signs of economic growth after the recession. On March 23, 2010, ObamaCare became law. Between April 2010 and June 2011, directly following its passage, this growth slowed to a crawl at a mere 6,500 new jobs per month nationwide, less than 10% of the original rate. Could this staggering hit to the economy be a consequence of ObamaCare? Absolutely. It has paralyzed businesses because it discourages employer growth past 50 full-time workers through insurance mandates, and it is vague in the scope of its regulated benefit standards and corresponding cost structures.
According to Section 1513 of the law, every company with more than 50 employees must offer health insurance to its workers as of 2014 or be forced to pay a penalty. Surpassing this cutoff would cause a very significant increase in benefit costs to a growing small business, and it thus disincentivizes expansion. ObamaCare also leaves a great deal of regulatory control in the hands of the Secretary of Health and Human Services (HHS), who will set many of the specific rules that the law itself does not explain. One of these unclear segments is Section 1302, regarding the ‘‘essential health benefits package.” According to the law, “the Secretary shall define the essential health benefits,” which will then be used to determine actuarial values for “bronze, silver, gold, and platinum” levels of coverage. HHS likely won’t issue a proposed rule that defines these standards, much less a final rule, until late 2011 or early 2012. These standards will then shape premium prices. Until then, businesses are in the dark when it comes to the future cost of providing health insurance, and as such, cannot safely make significant workforce increases.
Correlation certainly does not prove causation, but business owners themselves have already voiced their concerns with the effect of these particular regulations on their bottom line. TPPF recently highlighted McKinsey’s survey, which showed that business owners are planning to make major changes to their benefits packages and workforce down the road because of ObamaCare. It appears they may already be shielding themselves from the oncoming hit to their profit margins in 2014.
-Luke Shuffield
Research Fellow, Center for Health Care Policy
Note: A version of this article first appeared at National Review
In recent days, both Rich Lowry and Ramesh Ponnuru (the senior editors of National Review) have come out against the idea of a balanced-budget amendment with spending limitations (Rich here, Ramesh here). In particular, they both dislike the idea of requiring Congress to move on the proposed resolution (S. J. Res. 10, which would then go to the states for ratification) as a condition of raising the debt limit — an idea that has already been endorsed by dozens of Republican members of Congress. They should reconsider their position.
The most basic reason why we have a debt-limit crisis now is that we have allowed the federal government to grow so far beyond its enumerated powers that we are up against artificial debt limits as virtually a last defense against its relentless growth. This is not a fiscal crisis — it is an attempt to halt the very accumulation of federal power that the Federalists promised us would never happen. It’s a constitutional crisis, and it cannot be fixed merely by holding the line on taxes and securing deep spending cuts in the short term.
What has long been clear to many constitutional scholars is now intuitively obvious to Americans of all stripes: The relentless expansion of federal power is destroying self-government at every level of society besides the national one — and with it, the self-reliance and independence that made this country great. It is difficult any longer to see what stands between us and a statist tyranny of the majority. Supporters of the balanced-budget amendment are trying to erect a shield against unrestrained federal power. Conservative skeptics should to do more than say, “Well, that won’t work.”
Ramesh points out that state governments rely so much on federal funds that they would never vote to limit federal spending. But here’s the thing: Those federal funds are conditional, and the conditions are paralyzing state governments’ ability to respond to their citizens’ desires and ideas. They face immediate political danger because they are increasingly unable to provide real representation for those they represent. Conditional federal funds have become a hated fixture of state-budget battles. Indeed, even liberal justices of the Supreme Court have seen conditional federal grants as perhaps the greatest threat to federalism. Washington gets all its money from the states, and then returns it to them only on condition that they adopt federal preferences on a whole range of state policy issues. From the point of view of state legislators, this is not a source of support, it’s a straight-jacket. It’s their money to start with, and most of them would far rather spend it themselves on home-grown ideas. Even among those states that shamefully use the federal machinery to go rent-seeking among their more productive sisters, many state governments would vote to be rid of federal grants altogether if they could keep the tax revenue that finances them.
As Arthur Brooks writes in an instant classic on what’s really at stake in the debt-ceiling talks, “We need tectonic changes, not minor fiddling.” If not a constitutional amendment, then what? Arthur Brooks’s column is a call to action — “property as the means to achieve “social justice.” If you don’t like the constitutional amendment proposed by 47 Republican senators and all the conservatives in the House of Representatives, then let’s please move right along to the consideration of an alternative.
The chorus of governors voicing concern about Medicaid is growing. On July 9 the National Governors Association sent a letter to the President and the Congressional leadership. The letter detailed their concern that Medicaid has been rumored to be one of the programs reduced significantly in the different packages of deficit reduction plans. This letter had one central message:
“We urge you and congressional leaders not to continue to mandate Medicaid program requirements upon states without providing states with the adequate federal funding or federal law flexibility to properly manage this federal-state program.”
Governors from both parties across the country are voicing these concerns as Medicaid costs continue to increase. State budgets across the country are showing that Medicaid is at a tipping point, and the program either needs significantly more money or the states need significantly more freedom. But increasing funding for a broken program is a temporary fix, and when the money runs out Medicaid will still be broken. If more money is not a long term solution then that leaves one option for Medicaid’s future – more freedom for states to take care of their own citizens health care needs.
It’s not just Don Quixote who’s tilting at windmills. Government, it seems, has followed suit.
As recently reported by The Telegraph, 20 percent of the EU’s soaring trillion-euro budget may soon be spent on “fighting climate change.” Wind companies told the EU’s Department of Energy and Climate Change [DECC] that if they were to spend the recommended 100 billion pounds on building thousands of wind turbines, they would be required to build 17 new gas-fired power stations simply to provide back-up for those turbines. As the article states, Britain “will thus be landed in the ludicrous position of having to spend an additional 10 billion pounds on those 17 dedicate power stations… just to make up for the fundamental problem of wind turbines.”
These findings are not specific to Europe. In our study, Gone With the Wind, we analyzed the cost of implementing a large-scale wind energy infrastructure in Texas. The costs are staggering. For instance, subsidies for Texas wind energy through the federal Production Tax Credit should cost taxpayers about $300 million in 2010. The cost of wind Renewable Energy Credits—perhaps $41 million this year—are passed on to consumers through the price of electricity. Additionally, Competitive Renewable Energy Zone transmission lines—being built to transmit electricity from wind in West Texas—will add as much as $1.3 billion annually to electricity bills once the lines have been completed. The extra annual cost to consumers and taxpayers for wind energy could reach $2 billion by 2020.
Don Quixote ends with the protagonist suddenly waking up from his delusions to fully recover his sanity and apologize for the harm he has caused on his “quests.” Hopefully, there will be a similar result for Government windmill tilting.
Texans especially ought to take note of this Reason.TV video discussing the current debate over the debt-ceiling debate. Why?
Well, we are also likely to presented with similar false choices when the Texas Legislature comes back in 2013 to tackle the budget shortfall. They’ll tell us, “Either raise taxes or face drastic cuts that will ruin the economy and harm the people.” But there is always another way to deal with these problems, if we are willing to look hard enough.
Reduce K-12 teachers and administrators to the levels of California, make college professors teach as much as they did 40 years ago, change Medicaid so that Texas can run its health care system the way we know it can be done, and eliminate or reduce the budgets of some vastly overused state agencies, and we’ll will have balanced the Texas budget for years to come.
The problems are not as complicated as many make them seem; for, of course, if the problems were difficult, solutions would be elusive. And we wouldn't be driven to crisis where the only possible answer is increasing the size of government.
Watch the video below to see how Reason’s Nick Gillespie shows the simplicity of solving some of the problems of our day that confound the so called experts:
A few years ago, President Bush signed into law bill that will end light bulbs as we know them. It sets standards for energy "efficiency" that only fluorescent light bulbs can meet today. So unless things change, a de facto ban of incandescent light bulbs will soon take effect.
Hoping to turn things around, the U.S House recently passed the BULB Act, which would allow the use of incandescent bulbs to continue. But its fate is uncertain. The Texas Legislature also passed this session a law that allows bulbs manufactured and sold in Texas to be exempt from the federal standards, based on the fact that Congress can only regulate interstate commerce. The effectiveness of this law remains to be seen.
National Review Online writes that "the fact that a product is superior in some ways does not mean it is superior for all purposes, and it certainly doesn’t give the government the right to ban the competition." We agree.
In fact, the light bulb law highlights the folly of all government energy efficiency programs. Consumers pay millions of dollars each year for "savings" that are supposed to materialize down the road. Of course, they don't, and consumers are left holding the bag for what is basically a failed but expansive attempt to wean America from fossil fuels.
Below is a video that explains more about the issue:
During a US House of Representatives Budget Committee hearing on the Independent Payment Advisory Board (IPAB) Secretary Sebelius confirms that the structure of government health care programs is unsustainable.
While her comments were specific to Medicare, the system that she describes (fee-for-service) is the same system that Medicaid was built on. Medicaid has had more success moving away from fee-for-service through Managed Care Organizations, but many of the perverse incentives still exist. Secretary Sebelius asserts that the federal health care law holds the tools to inject the proper incentives into the program, and this tool is the IPAB. The IPAB is a 15 member board of appointed officials that determine the proper procedures and payments for Medicare enrollees. Free market health care advocates would disagree with her assessment of the IPAB’s capabilities. However, in this circumstance we agree on a major problem and that’s a start.
This morning the US Department of Health and Human Services released the guidelines for states’ to use for setting up their insurance exchanges. HHS’ press release notes,
“Today, the U.S. Department of Health and Human Services (HHS) proposed a framework to assist states in building Affordable Insurance Exchanges, state-based competitive marketplaces where individuals and small businesses will be able to purchase affordable private health insurance and have the same insurance choices as members of Congress… Today’s announcement is designed to help support and guide states in their efforts to implement Exchanges.”
This should come as great news to states seeking guidance in setting up their exchange, but there are a number of regulations left out. In fact, within the proposed rule text HHS says,
“Subjects included in the Affordable Care Act to be addressed in separate rulemaking include but are not limited to: (1) standards for individual eligibility for participation in the Exchange, advance payments of the premium tax credit, cost-sharing reductions, and related CMS–9989-P 12 health programs and appeals of eligibility determinations; (2) standards outlining the Exchange process for issuing certificates of exemption from the individual responsibility requirement and payment under section 1411(a)(4); (3) defining essential health benefits, actuarial value and other benefit design standards; and (4) standards for Exchanges and QHP issuers related to quality.”
In other words, states still do not have guidance on who is eligible, what they are eligible for, the design or cost of the plans offered, or any quality standards. These remaining regulations may be a short list, but they constitute the majority of the substance of exchanges. If a state does not know who is eligible and what they will cost then they have little guidance to understand exactly how an exchange will impact their state. And if a state does not know how an exchange will impact them they cannot adequately prepare for their implementation. Because these guidelines leave out such substantial topics they provide little real guidance to states and stakeholders.
In a recent speech, Republican Florida Sen. Marco Rubio explains that the problem isn’t that we need new taxes, it’s that we need new taxpayers. Sen. Rubio goes on to say that “revenue enhancer” is nothing more than “Washington speak” for more money to Washington. His point is that if we rely on spending we will continue to bury ourselves in debt.
As the Texas Public Policy Foundation has been saying for years, it is jobs, not taxes that create a good economy. As he explains in this video, Sen. Rubio understands this notion.
Earlier this week, the Wall Street Journal produced an opinion column entitled “The Year In School Choice”, which highlights gains in many states regarding increased freedom in education. Thirteen states have formally enacted new choice legislation, and 28 still have some form of choice legislation pending. Among the highlights:
Wisconsin Gov. Scott Walker removed the cap of 22,500 students that was the former maximum participation level in the Milwaukee Parental Choice Program, the nation’s oldest voucher program.
Indiana Gov. Mitch Daniels signed legislation that removed the Indiana charter school cap and made it easier for new charter providers, including universities, to start their schools.
Florida, Georgia, and Oklahoma have created or expanded tuition tax credit programs.
North Carolina and Tennessee eliminated their charter caps.
All of this is excellent news. However, what the article makes clear is that Texas is not moving as aggressively as other states to expand school choice. There were a number of opportunities during the 82nd Legislature to make inroads against or remove the charter cap, as well as good chances to expand virtual education and create Texas’ own education tax credit and grant programs. We, as a state, should be a leader in the school choice movement. Texas should look toward enacting advances similar to those in the states listed above if we are to claim that leadership role.
Now that the legislative special session has ended, many across the state are taking stock of what was accomplished and deciding what needs to be accomplished in the next session. One of the major points of contention is what was done to reform the Texas Windstorm Insurance Association (TWIA), through House Bill 3 (HB 3). The Brownsville Herald article, “Changes to coastal windstorm insurance program praised, criticized,” reviews the reform efforts. Their verdict: everyone is happy that something was done, but no one is happy with what was done.
The Property Casualty Insurers Association of America is satisfied with the reform bill, which brings stability to TWIA by allowing it to sell bonds, before a storm occurs, to cover future claims. The PCI also feels that the bill fosters transparency, by streamlining the dispute resolution process and curtailing lawsuit abuse.
Despite some satisfaction with HB 3, there is still a great deal of criticism; particularly that the “streamlining process” makes it more difficult for policyholders to seek redress for TWIA failures. Another major area of criticism is that HB 3 allows TWIA to offer lower rates to clients that agree to binding arbitration, in which an independent third-party decides the outcome of disputes.
But whether what was done was good or bad, one thing that wasn’t done was working towards getting Texas out of the windstorm business altogether. Fortunately, there was an interim committee named to study this issue, so there made be some progress made between now and 2013. The Texas Public Policy Foundation has done extensive research on the debate surrounding TWIA and the windstorm insurance industry as a whole, in their publication, “Texas Windstorm Insurance,” and offers a number of recommendations on how the problems can be solved.
-Josh Grimes
Research Fellow, Center for Economic Freedom
The Public Utility Commission has dropped its plans to require that energy generators purchase around two percent of their renewable energy from some generation method other than wind. According to an article in the Austin American-Statesman, the “non-wind mandate” was dropped due to fears that it would drive up electricity rates. That would have indeed been the case, and the abandonment of this proposal is going to help keep electricity costs low for consumers, who won’t now be burdened with the high cost of electricity from solar, geothermal, and other types of non-wind renewable generation.
The Texas Public Policy Foundation (TPPF) advocates a free market approach to energy generation that can meet whatever demands are required by the customers. Letting the state choose sources for electricity generation will only increase energy rates and harm economic growth. The Foundation has done extensive research on renewable energy in its publication, "Renewable Energy Experiment".
-Josh Grimes
Research Associate, Center for Economic Freedom
The Texas Legislature decided this year not to pass stringent regulatory controls over credit service organizations. While that is a big victory for most Texas consumers, Dallas residents are not quite as fortunate.
The city of Dallas recently moved forward with plans to regulate credit service organizations, passing an ordinance restricting access to certain small, short term loans (see Addendum Item # 28). There are questions about the legality of this ordinance; however, there are none about its ramifications.
This ordinance will restrict consumer access to short-term loans and ultimately cause prices of loans to rise, thus harming the citizens that this ordinance is designed to protect.
As we concluded in our research paper, Evaluating Consumer Access to Short-Term Lending, consumers understand that that a competitive and vibrant short-term credit market provides them choice and access to needed financial services. There is and will continue to be a market demand for small, short-term loans. Restricting access to these needed services has caused more bounced checks,
Chapter 7 bankruptcies, and greater difficulty with lenders and debt collectors.
After evaluating the burdens and benefits of increased regulation, the Texas Legislature voted “no.” These burdens are the same in Dallas, and will only serve to harm Dallas consumers.
A recent NPR story about fracking and natural gas is worth listening to. It focuses on New York state's decision to allow drilling in the Marcellus Shale in 85% of the state, after years of refusing to allow the practice. The Marcellus Shale some two miles under Pennsylvania and New York state is thought to contain more total energy than all of Saudi Arabia. In Pennsylvania, some 140,000 jobs have been created in the past two years, and many more could be created in New York, where there are nearly 1 million unemployed persons. The NPR report repeats what we have long known -- that fracking and horizontal drilling don't pose any more danger now then in the previous 70 years, where fracking has been used in hundreds of thousands of wells. The report shows that the negative reaction to fracking in places like New York comes simply from the fact that people don't like to see new industrial activity in their regions, even if it means more and better jobs for their neighbors, and from simple fear of the unknown. The environmentalist hysteria in reaction to fracking has been self-defeating, because people are slowly waking up to the fact the fear of fracking is unfounded, while the potential gains to society are historic. Crying wolf at every opportunity is never a good strategy in the long run. Rational cost benefit analysis and rigorous application of scientific method, on the other hand, are good strategies in the long run, and both favor every effort to bring the bounty of America's natural resources home to its working families.
NOTE: This post first appeared in "The Corner" on NationalReview.com.
The chart Andrew Stiles referred to Friday (from an earlier post by Veronique de Rugy) shows only the start of how counterproductive it is to increase taxes on the wealthy. As a result of lower tax rates on the top income earners, not only do they pay a much larger share of all taxes, but they pay much more taxes total — and revenue to the government has increased. This is because lowering taxes on the rich creates more rich people and richer rich people. The federal government gets much more revenue if you impose a 40 percent tax on a large number of very wealthy millionaires than if you impose a 70 percent tax on a small number of less wealthy millionaires.
Every tax has a “revenue-maximizing” point well short of 100 percent. If a tax is set higher than its “revenue-maximizing” point, overall tax revenue to the government will decrease. This is the basic theory behind the Laffer Curve, which states that when taxes are zero percent, revenue to the government is (obviously) zero, but when taxes are 100 percent, revenue to the government is also zero, because by taxing all the income of a particular group of people, you kill all economic activity in that group, so you’re left with nothing to tax. Between those two extremes is a curve whereby revenue to the government rises as you increase taxes from zero percent, but begins to fall as you approach 100 percent taxation — that’s the Laffer Curve.
Arthur Laffer and Ford Scudder explore this phenomenon at length in their brilliant series The Onslaught from the Left. In keeping with what Veronique pointed out, they write, in Part II of the series:
In the year Ronald Reagan took office (1981) the top 1% of income earners as reflected by the Adjusted Gross Income of all tax filers paid 17.58 % of all federal income taxes. Twenty-five years later, in 2005 the top 1% paid 39.8% of all income taxes, representing a greater than doubling of the share of tax payments made by this group.
But even more to the point, from 1981 to 2005 the income taxes paid by the top 1% rose from 1.59% of GDP to 2.96% of GDP. In addition to the huge rise in the percent of GDP paid in income taxes by the top 1% of income earners and the more than doubling of the share of taxes paid by this group was the huge absolute increase in real taxes (2005 dollars using the GDP price deflator [in other words, adjusting for inflation - ML]) from 1981 through 2005. In 1981 total tax payments from from the richest 1% were $98.84 billion, while in 2005 the top 1% paid $368.13 billion in taxes; that’s a 288% increase in 25 years. In rough numbers, that means that each of the richest 1% of filers in 1981 paid a little over $100,000 in 2005 dollars, while in 2005 each filer on average paid over $288,000. And remember that’s inflation-adjusted dollars.”
This astonishing statistic is explained by a simple fact. As a result of reducing taxes on the rich, the rich got much richer — so much so that they wound up paying nearly four times as much total tax (and nearly three times as much tax per rich person) as when taxes were higher.
This also reveals the truth behind the increased income inequality that liberals love to cite as their chief evidence against supply-side economics. In fact, as Laffer explains in Part I of the Onslaught from the Left series, the poor have gotten richer — just not as quickly as the rich have. “The increasingly unequal distribution of income during the era of supply-side economics has resulted from the poor increasing their income at a rate that has not kept pace with the phenomenal gains in income the rich have experienced — not from the poor getting poorer.” He goes on to show that in fact, lower taxes rates have led both to higher income among the bottom 50 percent of income earners and lower total taxes paid by that group.
Most important of all, of course, is the fact that when the rich get richer, they invest more money in the economy, thereby stimulating economic growth. Democrats generally can’t stomach the rich getting richer, even when it means everyone is better off. But you’d think they would at least propose tax policy that increases government revenue. Alas, they so want to punish the rich that they are even willing to lower government revenue in the process.
At a time when a heat wave expands across the United States and the federal government is debating whether to raise the debt ceiling, the U.S. Department of Energy’s Loan Programs Office (LPO) is offering to guarantee financing for three solar panel projects in California for $4.5 billion to First Solar Inc. After taking a closer look, these LPO projects do little to fund efficient energy production or create permanent jobs.
The LPO specifically targets projects that promote clean energy and includes “job creation; reducing dependency on foreign oil; improving our environmental legacy; and enhancing American competitiveness in the global economy of the 21st century.” Moreover, support by the LPO is for borrowers in case they default on their financial obligations while the project is constructed. Therefore, it is clear that these loans are to expand energy production that the government chooses and not by market forces.
The EIA notes that in 2010 only 1% of energy consumption was from solar power. Although this is the case, 15 out of the 23 generation projects by the LPO have been for solar power plants. The cost of these 15 projects has been $16 billion and is 40% of the total cost of all projects that they have guaranteed financing. On the other hand, nuclear power makes up 9% of all energy consumption and has only received $10.33 billion of support.
The benefits of these guarantees are exaggerated. Job creation from these three solar panel projects is estimated to be 1,400 new jobs, which is $3.2 million per job! An additional issue is that many of these jobs are temporary.
A previous guarantee for a solar panel project was for Bright Source Energy in the amount of $1.6 billion that produced 1,000 temporary construction jobs and only 86 permanent jobs. The cost of these permanent jobs was $18.6 million per job created.
This is a huge cost for an energy source that is already subsidized and supported heavily by the federal government, where the average amount provided by the federal government per megawatt hour in 2007 was $24.34 for solar. In contrast, nuclear was only supported by $1.59 per megawatt hour.
The lack of benefits and the substantial costs of these solar panel projects not only distort the energy market, but are a waste of tax dollars. The sources of energy we consume most (i.e. petroleum, natural gas, coal, and nuclear) are not on the government’s to-do-list, but they are on the list to phase out and create a less efficient economy in the process. When it comes to increasing energy efficiency and creating jobs, these LPO guaranteed loans are not the answer.
Vance Ginn
Research Fellow, Armstrong Center for Energy and the Environment
Reforming the Texas Windstorm Insurance Association (TWIA) was a major issue in the recent special legislative session. TWIA was founded to provide low cost windstorm insurance for people living on the Texas coast. However, TWIA’s rates, which are far below the market rate, have forced many private insurers out of the area. As TPPF has documented, in Next Steps to Reforming Texas Windstorm Insurance, “Its unrealistically low rates have made TWIA an unbeatable competitor which is crowding out the market…”
While the effort this session to rectify some of TWIA’s shortcomings is a positive step in the right direction, it missed the major problem: the state of Texas should not be in the windstorm insurance business in the first place. TPPF has noted the problems with government initiatives like this: “As we have seen in state after state along the Gulf Coast, state-run systems end up helping no one.”
There is one ray of hope: Section 60 of the TWIA bill (HB 3) calls for the creation of an interim study committee to look into alternative ways to provide insurance to the seacoast or whether Texas should remove itself from the business altogether. Hopefully, this will help this issue to be resolved sometime in the near future.
Josh Grimes
Research Fellow, Center for Economic Freedom
One of the key issues that pushed the Texas Legislature into a Special Session was inability to agree on how the state’s public schools should be funded. The result of several months of hard work on this issue is a mix of good and bad for school finance.
The formula itself has not radically changed. The basic allotment for students in average daily attendance remains $4,765. School districts still have flexibility in setting their own local tax rate, and the state will still contribute to school districts that struggle with their local base. There are some appropriation differences; the Foundation School Program has seen a reduction of $438,900,000 in fiscal year 2012, and $361,100,000 in fiscal year 2013.
There is also a substantial payment deferral, to the tune of $2.3 billion, from Foundation School Fund 193 to the Texas Education Agency. The intent is to make this payment in September 2013, the next biennium, so that the expenditure won’t count against the current budget. This deferral is not the only one in the new education budget; an assortment of deferrals were needed to make the money work.
I say the results of the school finance debate are mixed for two primary reasons: the good is that Texas funded public education without dipping into the rainy day fund, an option that was on the table as recently as last Saturday.
However, this Legislature may have punted the problem to the 83rd Texas Legislature, which will now have to come up with $4.6 billion, half to pay for the $2.3 billion deferred payment, and half to pay for the $2.3 billion regular payment that will be due to schools in that biennium. Additionally, the new system does not fix the spending problems in Texas schools. We spend more on K-12 education than anything in our state save healthcare, and while deferring these payments might fix the 2011 shortfall, it could set us up for one that will be just as bad (or worse) in 2013. While it is good that our schools will be open for business in August, we still have a long way to go with school finance in Texas.
Austin Energy – the 9th largest community-owned electric utility – has requested proposals for up to 200MW of high cost renewable power, increasing its already large demand for renewable power; and like its other renewable energy proposals, consumers in Austin have no choice but to pay for it.
According to an article in Recharge, Austin Energy has sought proposals for energy from renewable companies, leading to high-cost proposals. They have received roughly 100 proposals, including high cost proposals such as off-shore wind. These proposals are consistent with Austin Energy’s expansive push to use renewable energy.
Austin American Statesman reports that Austin Energy will likely need to collect 35% more revenue by 2020. Those numbers do not include this recent proposal for 200 more MWs of renewable power. Austin Energy even admits that this push for more renewable energy will directly cause an increase in consumer prices.
Rising consumer prices in Austin are the direct opposite of the results seen by the competitive areas of the Texas electricity market. In our Sunset Report on the Texas Public Utility Commission, we noted that prices in Texas are lower now than under a regulated market. In fact, average competitive prices today are almost 10% below average 2001 regulated prices, and the lowest average price is over 30% lower.
The State of Texas should listen to consumers and push for legislation – like SB 940 from the 81st Regular Session – that would increase competition; eventually to all of the areas of ERCOT and alleviate the increasing costs to consumers.
Final Notice: Medicaid Crisis, authored by Dr. Jagadeesh Gokhale, was a first of its kind projection of the costs of Medicaid to the state of Texas with and without the federal health care law. The numbers were astonishing. Medicaid, under the health care law, will consume almost half of Texas’ total budget in 2014-15. Dr. Gokhale went on to publish projections for the four other most populous states in America. The growth of Medicaid did differ between the five most populous states, but the reality was consistent: Medicaid, absent significant reform, will bankrupt state budgets in the coming decades.
Sure, huge states with huge programs like Texas, California, and New York are going to be impacted by Medicaid’s growth. But what about smaller states?
Four new studies show that this unsustainable growth of Medicaid is not insulated to big states or big programs. In Kansas, Medicaid costs in 2014 will be 20% higher with the health care law, but they will still double in the next 8 years without the health care law. In Oklahoma, the health care law is projected to increase state Medicaid spending over the next decade by $11.4 billion, but even without it spending will be $11.6 billion higher than it currently is. In Nevada, during this first ten years after 2014 Medicaid spending will increase $2.6 billion without the health care law, but it will increase $8 billion with the health care law. And new study, released today by the Bluegrass Institute, Kentucky’s Medicaid spending would increase 70 percent between 2009 and 2020 without the health care law. With the health care law Kentucky’s Medicaid spending will increase 80 percent in the same timeframe.
Texas has taken a step toward reducing the cost of federal energy efficiency mandates. State lawmakers passed and Governor Rick Perry signed a bill that exempts any incandescent light bulb manufactured and sold in Texas from the 2007 energy independence act, meant to phase out incandescent light bulbs.
The reason that this is important is due to the fact that most federal energy efficiency programs are designed to increase the cost of energy and thereby decrease the use of energy. The federal light bulb mandate is no different. Look at the cost of the energy efficient bulbs compared to incandescent bulbs: three dollars compared to thirty-five cents.
The federal mandate does not actually “force” anyone to use the energy efficient light bulbs or ban incandescent bulbs. However, it does require all incandescent light bulbs to be twenty-five percent more efficient, which will increase the costs of the bulbs and thereby force them out of the market.
The Foundation has documented the problems with government mandated energy efficiency programs.
The claim that Texans benefit from a state-mandated “increase in energy efficiency services … and a decrease in overall energy consumption” demonstrates a fundamental economic misunderstanding. An uncompensated decrease in a person’s consumption of any economic good is a cost, not a benefit.
Only time will tell what the result of this measure will be, but Texas’ efforts to control its energy usage will help it control its economic future.
-Josh Grimes Research Fellow, Center for Economic Freedom
NOTE: This post first appeared in "The Corner" on NationalReview.com.
As Andrew Stiles mentioned yesterday, House Speaker John Boehner is insisting that the House will not vote to increase the debt limit unless the Dems agree to (1) no tax increases, (2) spending cuts as great as the proposed debt-limit increase, and (3) budget reforms “that will restrict Washington’s ability to spend in the future.” If by the latter he means a constitutional amendment that would impose a balanced budget and strict limits on spending and taxes, some concession on other fronts would be worth it. It would be especially wrong for the GOP to insist on no new taxes at the expense of a constitutional amendment, considering that current levels of taxation are only about half of current spending, insanely enough. The problem here isn’t taxes — it’s the deficit, the debt, and the spending.
Speaker Boehner should tie agreement on the debt-limit increase to passage of Senate Joint Resolution 10, a superb proposal for constitutional amendment that would provide long-term, permanent, and sustainable solutions to virtually every fiscal problem we’re facing now. Passing it out of Congress and getting it to the states for ratification as soon as possible should be an overriding priority of the current debt-limit talks. Filed earlier this year by 47 GOP senators, the amendment would require Congress to pass a balanced budget; federal courts could enforce the amendment only through across-the-board spending cuts. The resolution would hold spending to 18 percent of the previous year’s GPD, which would keep federal spending under the historical “revenue-maximizing” point of federal taxation. It would require supermajorities for increases in taxes and the national debt. The exceptions are extremely strict. The resolution calls for ratification by legislatures in three-fourths of the States, in accordance with Article V of the Constitution, and would go into effect five years after ratification. After the last two years of aggressive federal expansion, much of which has come at the expense of the states’ autonomy and fiscal health, there can be little doubt that most states would ratify the amendment quickly.
The only question is how hard it would be to get from the 30-something easy states to the 38 required for adoption. But if comes down to only a handful of states, millions of fiscally conservative moderates and independents are likely to join conservative in mounting the campaign of the century to ensure the amendment’s adoption. The country has perhaps never been so hungry for some way to stop the relentless expansion of the federal government.
Though we call it a “balanced-budget amendment,” by far the resolution’s most important feature is its limitation on spending to 18 percent of the prior year’s GDP. One result of this provision is that the major entitlement programs — Medicare, Medicaid, and Social Security, which are projected to eat up all federal revenue in a matter of decades — would have to be replaced with sustainable alternatives sooner rather than later. It would not be question of “if,” but only of “when,” and the answer would be “soon.”
Last month, I did an analysis of S.J. Res. 10 for the Texas Public Policy Foundation. The survey contains a detailed section-by-section analysis of the proposed constitutional amendment, along with a detailed history of the growth in federal spending over the past 100 years. A constitutional amendment is necessary in part because the federal government has shattered most of the Constitution’s restrictions on its growth and power. S.J. Res. 10 would ensure that the federal government could control at most one-fifth of the economy.
The national debt is a long-term problem. Let’s focus on a long-term solution.
Among the number of state mandates legislators attempted to change to reduce education costs during the 82nd Legislative Session, perhaps none is more controversial than the class size cap. Otherwise known as the 22:1 teacher/student ratio, it is a rule that can affect both personnel decisions and costs at the district level. A number of legislators introduced legislation that would have raised or at the very least altered the cap. Unfortunately, all were defeated during the session, and though some measures have been re-introduced during the special session that having bearing on this area, they are, in their current form, less aggressive than earlier approaches.
Does Texas need a class size cap? The cap is only firm on Kindergarten through 4th grade classes in Texas. Research indicates that in the lower grade levels, a class size limited to 13-17 students can have a positive impact in closing some achievement gaps for minority students. However, due to the size of Texas’ student population, there is no way to bring the class size cap down that far. We simply do not have the money or the personnel. Once you get beyond the 13-17 range, the educational benefits of smaller classes in lower grade levels become far less discernable. Should our school districts be required to abide by a class size cap whose benefits are murky at best?
The core issue here is not whether limiting class size is a truly effective educational tool. The issue is freedom and flexibility in education practices. Parents, teachers, and principles should be the ones who are choosing how best to educate our students, not state officials here in Austin. Though public school funding has yet to be formally appropriated (the special session will determine the final dollar amounts), many districts still find themselves in troubled financial straits. In some cases these straits are their own doing, in some cases the state’s, and in many cases a combination of the two. Giving them greater flexibility to handle these problems will at the very least ease the tension generated at the state level. This session was a missed chance to make major gains along those lines.
The original tort reform measures in 2003 are proving to be even more successful than anticipated – a good omen for the loser pays bill.
According to a study published in the Journal of the American College of Surgeons, there has been a nearly 80 percent decrease in surgical liability lawsuits at the University of Texas Health Science Center at San Antonio since tort reform was enacted in 2003 –the year Texas passed comprehensive tort reform. That bill dealt primarily with fixing the medical malpractice negligence cases.
The findings show that from 1992 to 2004 about 40 suits were filed for every 100,000 procedures. After the reform measures passed, only about eight lawsuits were filed per 100,000 surgeries. Legal costs at the Center relating to medical malpractice cases declined from $595,000 to $515 annually. In addition, data collected by the Texas Medical Association shows a 60% decrease in medical liability lawsuits in Texas since 2003.
Texans can expect economic benefits to continue with the most recent tort reform measures.
As I discussed in my research paper Returning Justice to the Judicial System, the procedural protections in the loser pays bill will further cut the costs of litigation, allow quicker access to the courts, and create a more efficient judicial system. In particular, the rulemaking authority given to the Supreme Court to allow a motion to dismiss for filing a frivolous lawsuit — something already done in federal courts — will be a great step forward for Texas. The procedural protections in this bill would go a long way toward ensuring that our judicial system dispenses justice according to the merits of the case rather than the size of the wallet; meaning that those people with real grievances will receive their day in court.
Doctors have now returned to Texas and have resumed their trust in our legal system. Loser pays ensures that it is only a matter of time before individuals and businesses do the same.
This week, the consulting firm McKinsey & Company released the detailed methodology and results of its survey of 1,329 American employers about their attitudes regarding federal healthcare reform (ObamaCare). All of the survey respondents had either primary decision-making authority or influence in the decision-making process with regard to medical benefits for their employees. The results provide a stark contrast to the positive projections of the CBO and others who had predicted that ObamaCare will have a negligible impact on the healthcare offerings of employers.
When respondents were asked about their prior knowledge of the new regulations of ObamaCare, 48.7% of all employers admitted that they were either “not at all familiar” with the employer mandate (which will levy penalties against all businesses with more than 50 employees that do not offer health insurance) or “have heard of it, but don’t know much about it.” Since, in many cases, these penalties will cost less than the price of health insurance for all employees, many businesses may simply decide to drop coverage altogether, absorbing the cost of the fine. Although the mandate does not take effect until 2014, such large scale changes in company policy take time to develop and properly implement, and this initial lack of awareness about ObamaCare’s consequences is startling.
Furthermore, the study showed that, while 24% of all employers with “Low” awareness of the details of the new law would “definitely” or “probably” discontinue employee health insurance post-2014, a staggering 54% of those with “High” awareness plan to drop coverage because of the reform’s mandates. In other words, the more decision makers know about ObamaCare’s effect on their businesses, the more likely they are to force their employees to find health insurance on their own. Those figures indicate a severe underestimation of the future costs of the law by the White House, as millions more employees than previously expected may individually seek federal subsidies through the healthcare Exchange.
The facts provided by the McKinsey study are clear: many employers simply do not know about the details of ObamaCare, but the ones who do are preparing to drop coverage and pay the fine.
-Luke Shuffield
Research Fellow, Center for Health Care Policy
Over the last couple of weeks two letters have arrived on President Obama’s desk; one from a group of governors and one from a group of senators. They exhibit significantly different perspectives on the future of Medicaid.
The letter from 29 governors was written “regarding the challenges states face with our Medicaid programs”. They advocated for a full repeal of the PPACA and for 7 guiding principles that revolve around a simple idea: states can serve their citizens better. They state, “Indeed , states have proven themselves to be real innovators in health care delivery while the federal government has operated Medicaid in a very prescriptive manner.” One statement shows a unique belief these governors hold, “The delivery of health care ultimately is personal and local.” They did not advocate for a specific reform package, but instead asked for more flexibility for their state and their citizens. The senators’ letter was different.
The letter that came from a group senators asked the President to resist calls for block granting Medicaid. They claim that fixing or capping federal funding prevents Medicaid from automatically adjusting to changes. According to these senators any less funding or more flexibility will inevitably lead to destruction of benefits for individuals. Accordingly, the Federal government, not the states, must retain control of Medicaid.
These two perspectives are telling. On one hand these senators have spent years in Washington, DC legislating on behalf of constituents hundreds of miles away. They believe in the ability and capacity of the federal government because that is what they see and that is what they know. On the other hand these governors are living in their states and communities on a daily basis, in the trenches some would say. They see the ability and capacity of their citizens. These politicians want more control, but not for the sake of control. The senators want control because they have faith in the federal government, but the governors want control because they have faith in the people.
Despite the abject failure of Medicaid in a fiscal and quality of care sense, these senators continue to press on in pursuit of maintaining the status quo. But make no mistake, the future of quality care for needy individuals rests in the states and their citizens, and these governors are at the forefront of reform.
Last week, the Bureau of Labor Statistics (BLS) released its preliminary job numbers for May 2011 and the Lone Star State continued to show that it is the nation’s economic engine.
According to the Bureau of Labor Statistics, Texas had the largest year-over-year increase in the nation; the fifth largest month-to-month increase and the second largest year-over-year percentage increase in non-farm employment. Additionally, Texas’ unemployment rate continued to trend well-below the national average at 8%, marking the 52nd consecutive month that it has been at or below the national average.
These numbers, impressive as they are, made even more striking in light of how poorly other large, comparable states performed.
According to the new jobs report, other large, populous states—like California and New York —continued their struggle to create jobs. The preliminary data shows that California had the largest decrease in month-over-month employment growth, while New York had the second largest decrease.
Mounting evidence is making one thing clear: Texas’ relatively simple formula of low-taxes + predictable regulatory environment + aggressive tort reform measures is transforming the state into the nation’s premiere place for businesses, jobs, and people. If the state can continue to hold to this approach, I suspect that we can expect a good many more jobs reports like this last one in the future.
-Samantha Soliz
Research Fellow, Center for Fiscal Policy
Because of a single new EPA rule imposing "Maximum Available Control Technology" on coal-fired power plants, utility giant American Electric Power announced recently that it will shutter five coal-fired power plants -- a quarter of its coal fleet serving millions of customers in West Virginia, Indiana, Michigan, and Ohio. By EPA's own calculations, it will cost consumers and businesses more than $10 billion yearly to comply with the new rule, which is aimed chiefly at reducing CO2 emissions. The consensus in the private sector is that the MACT rule will force nearly 1/5th of nation's coal-fired electric generation capacity into retirement. As the Wall Street Journaleditorialized, that will make electric power far more expensive and far less reliable, particularly in the South and Midwest where coal energy is concentrated. The economic rationality of the new rule was amply demonstrated by an Environmental Defense Fund spokesman's reaction to the AEP announcement: "Closing plants is a business decision.... EPA regulations do not require any power plants to shut down." No, not in the sense that you always have the option of operating at a loss.
If the MACT rule goes through on schedule, much of the nation's grid will have no alternative but to shift to natural gas. Luckily, huge abundant stores of natural gas have just become available because of a combination of hydraulic fracturing and horizontal drilling. Robert Bryce had a must read op-ed on this at the Wall Street Journal recently. Not only does fracking and horizontal drilling open up a dazzling national treasure of cheap, clean energy for consumer electricity, but it could lead to a renaissance of American manufacturing. It could even fuel an energy export boom: the U.S. government recently approved the first-ever license to export natural gas from the lower 48 states to all U.S. trading partners. Natural gas in the U.S. now costs less than half of what it does in Europe, creating enormous pressure to develop U.S. exports of natural gas.
Environmentalists are already taking aim, in a campaign of hysteria and persecution, as a recent National Review feature by our own Kathleen Hartnett White reveals.
On November 5th, 2010, the Texas Supreme Court issued an opinion in Severance v. Patterson, a case which the Texas Public Policy Foundation previously discussed here. The case caught the Foundation’s attention because it concerns two issues that are central to TPPF’s mission: private property rights and limited government. The Foundation agreed with the Court’s ruling; however, the Court has since reheard the case.
The Texas Open Beaches Act affirms that the public has acquired an easement through use along most of Texas’ gulf beaches, including the beach in question in this case—Galveston Island’s West Beach. The public easement stops at the vegetation line. Hurricane Rita, however, caused the vegetation line to shift suddenly and significantly landward. The state of Texas argues that Texas law observes a “rolling easement” doctrine that permits the public easement to shift landward in the wake of the hurricane so that the public can use the new beach. Several private property owners, including Ms. Severance, believe this position diminishes their property rights. Ms. Severance chose to contest the state’s argument, and our brief in her support boils down to this:
First, we do not believe that a “rolling easements” doctrine exists in Texas law. We, therefore, think the original opinion was correct on the legal merits, and we encourage the court to reaffirm it.
In addition to the law, however, we want the Court to appreciate two public policy points that have an impact on the principle of limited government:
1) If the Court recognizes a doctrine of “rolling easements,” it will essentially be placing the burden of proof on property owners in these cases. Governments are extremely powerful, and in property rights legislation, one of the checks on this power is the requirement that the government prove its case to the court. If we move to a system wherein the presumption goes to the government and property owners are instead forced to prove their case, we will lose an important “check” in our system.
2) When governments take property, they compensate property owners by using taxpayer dollars. Taxpayers obviously want to know how their money is being spent, so governments are forced to justify their actions to taxpayers through the normal democratic process. A “rolling easement” doctrine allows the government to escape this process because it permits the acquisition of an easement on a new piece of land without having to pay compensation. Because the government would get to dodge the tough job of justifying a public expenditure, we would lose yet another important “check” on government power.
TPPF emphasizes that this case should be decided on its legal merits – and the legal merits compel the court to reaffirm. In addition to the law, however, there are important public policy dimensions to this case, and we filed our amicus brief because we want the Court to be aware of them.
Even the most avid regulator understands that government regulation is not usually popular with the general population. As such, they are always coming up with excuses to justify some the regulations they propose.
Often, the excuse is that the particular market they want to engage is somehow different than other markets. Of course, they say, we don’t support heavy regulation, But this market needs regulation because, well, it is different than all other markets. Funny, though, how they keep finding markets that are different from all other market.
ObamaCare's defenders have sought to manufacture another limiting principle. They claim that health care is unique because everyone will use medical services, health-care costs can be financially ruinous for uninsured individuals, and others will then have to pick up the slack by subsidizing consumers who do not pay their medical bills. Yet any number of national markets, including the housing market, share these same characteristics.
There have been other calls for price regulation because of the market’s alleged inability to properly regulate homeowners insurance prices. Two such criticisms claim there is an inelastic demand for homeowner s insurance but large fluctuations in supply, along with a limited supply. Market critics contend that people have little choice but to buy a fixed amount of insurance, either because they are required to in order to get financing or because they are unwilling to bear the risk of losing the entire value of their home. They also assert that the high cost of entering the Texas homeowner s insurance market keeps the number of companies low.
Other reasons used to justify price regulation of the market include consumer ignorance and stickiness. According to these theories, consumers are too busy or overwhelmed by the complexity of the product, and thus can t really make meaningful choices in the market. This can be proven, critics claim, because of stickiness in the market, i.e., too many consumers staying with their original insurance companies even though there are cheaper alternatives.
We don’t need special laws for special markets. Instead, regulation of all markets should be on the margins keeping the transactions voluntary and free from government interference. We should also provide market participants with a well functioning, inexpensive civil justice system where they can go to right wrongs when needed.
There’s nothing special about individual markets, except that they work.
The dollar has been floating for years with very little public concern. With the continuing economic downturn, it might be time to get concerned.
In his article The Floating Dollar as a Threat to Property Rights, Seth Lipsky discusses the recent concern over the kilogram. It appears that the cylinder of platinum and iridium which defines the weight of a kilogram – and is maintained by the International Bureau of Weights and Measures – has been losing mass. This cylinder’s loss of only a few atoms of mass is creating a “global scramble” to fix the problem. Why isn’t this happening with the dollar?
The dollar has collapsed from 1/35 of an ounce of gold to less than 1/1,300 of an ounce of gold, and at one point in recent months it collapsed to less than 1/1,400 of an ounce of gold. Fed Chairman Ben Bernanke’s response to the devaluation was that he was “puzzled.” He went on to say that there was no “new urgency” to redefine the dollar – let it float.
The founding fathers of our country warned against paper currency, and it wasn’t until Civil War broke out that the President could replace two judges on the Supreme Court in order to pass his laws instituting paper currency as an acceptable form of debt payment. The cases are still known as the Legal Tender Cases. But with the devaluation of our currency, and our economy a shell of its former self, maybe it’s time to revisit the Legal Tender Cases.
States are already starting to reassert their rights. A growing number of states are looking at alternatives to paper money. Virginia has launched the most recent efforts. A bill has been introduced before the General Assembly to set up a joint committee to study the question of returning its currency to gold and silver coins.
Maybe Texas should take a similar look. As George Washington warned, paper money will inevitably “ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.” James Madison goes as far as to call paper money “unconstitutional, for it affects the rights of property as much as taking away equal value in land.”
Even with the warnings and the observable decline of the paper dollar, there is no “global scramble” as there is over the kilogram. We must act on the floating dollar problem, before our property floats away.
In a House hearing on Tuesday, the new manager of the Texas Windstorm Insurance Association (TWIA) stated that TWIA has improved and would be able to handle a sizable storm this year. Since TWIA recently bought re-insurance, that is likely true. But, the bill currently moving through the Legislature still does not get to the real problems with TWIA – its rating practices.
The current bill does have some good provisions in it. The bill calls for more transparency, requires audits of claims after catastrophic weather, requires the association to plan beyond the $2.5 billion in place currently, and also changes the name of TWIA. However, while these provisions will help the association, they will not fix its problems.
The only way to fix TWIA is to fix ratings. TWIA’s lower than market rates have evolved the program from the provider of last resort into the primary provider of windstorm insurance along the Texas coast. Ultimately, taxpayers are liable for TWIA’s burgeoning exposure of over $74 billion dollars. TWIA’s exposure rose 1200% since 1993.
As we pointed out in our publication, Next Steps to Reforming Texas Windstorm Insurance, Texas lawmakers should return TWIA to its original purpose of a safety net, a last resort measure. Without doing so, Texas will return to the same problems we currently face.
An amendment offered to Senate Bill 2 – and adopted on a non-record vote – would require that any rainy day fund balance projected in excess of $6.5 billion at the end of the 2012-13 biennium be directed immediately into the Foundation School Program. If passed, this amendment could siphon as much as $2 billion away from the rainy day fund over the next two years, according to preliminary estimates.
The Texas House and Senate accomplished a historic feat at the end of the regular session mere days ago, when they passed a budget that was an all-funds cut from the preceding biennium, did not raise taxes, and did not squander a penny of the rainy day fund. This amendment would threaten that tremendous accomplishment and undo one of the most important outcomes of the regular session of the 82nd Texas Legislature.
Voters conveyed a clear message last November that they wanted to see the state’s budget shortfall addressed by pruning the overgrowth in spending. With this amendment, the Texas House would respond that it views the budget shortfall as a mere math problem.
School spending has grown far faster than enrollment growth or inflation, in part due to poor decisions by local school districts. Two years ago, the Legislature propped up the school districts with $2.3 billion in federal stimulus funds, with the understanding that these one-time funds would not be replaced. School districts need to be challenged to become more efficient and prudent in how they spend taxpayer dollars, and the time for them to bite the bullet has come.
I encourage Members to remove this provision when Senate Bill 2 comes up on third reading.
Today’s Wall Street Journal reports on a huge new find in the Gulf of Mexico, which Exxon estimates at 700 million barrels of oil -- about 100 times the entire daily oil production of Saudi Arabia, from all its oil wells. The Obama administration is still slow-walking the permits for drilling in the Gulf, having issued only 15 since the end of the moratorium late last year. But one of the permits went to Exxon, and it struck “black gold.”
The great energy irony of recent years is that governments have thrown hundreds of billions of dollars at wind, solar, ethanol and other alternative fuels, yet the major breakthroughs have taken place in the traditional oil and natural gas business. Hydraulic fracturing in shale, horizontal drilling and new seismic techniques are only the best known examples.
A catalogue of the many ways in which the Obama administration tries to disfavor fossil fuel production would be quite a massive undertaking, but the allocation of government subsidies and penalties is a glaring example. Efforts to penalize traditional energy companies are a constant worry -- particularly when the administration pursues policies that drive up the price of oil and gas, which translates into windfall profits for the industry, which leads the administration to call for penalties against it. But the other side of the coin is the wasteful subsidy of non-economical energy sources. It is a particularly embarrassing waste of money when, from the Marcellus Shale to the Barnett Shale to the oil shales of the western states and to Gulf, virtually all the great discoveries and technological innovations in the energy industry are coming in the traditional oil and gas sector.
According to a new study by National Economic Research Associates (NERA) the costs to American families and businesses of just two new EPA rules will exceed $17 billion per year and could reach $200 billion over the next 20 years. These rules are just one small part of a veritable avalanche of new rules that will impose costs in the hundreds of billions on Americans, for hardly any demonstrable environmental benefit. They are in addition to EPA’s greenhouse gas regulations and nearly 30 other rules coming your way in the next few years. TPPF’s Kathleen White has been at the forefront of efforts to increase awareness of the unprecedented regulatory onslaught. (See here and here).
The NERA study focuses on just two of these rules, the Clean Air Transport Rule (CATR) and Utility Maximum Achievable Control Technology (MACT). The two new rules would dramatically increase the retirement of coal fired power plants, and force significant demand to shift to natural gas, which will experience significant price spikes. As a result, U.S. retail electricity prices would increase by an average of 12% by 2016, with regional increases reaching 24%. America could lose 1.4 million job-years by 2020.
Taken together with the costs of other EPA regulations, this regulatory onslaught threatens a veritable calamity for America’s working families, all of whom will see significant increases in costs of living just as the regulations limit the job opportunities they will need to feed their families.
Yesterday, the Austin American-Statesman ran an article titled “State comptroller certifies budget,” informing its audience that Texas Comptroller Susan Combs had verified that sufficient revenues were expected to pay for the 2012-13 budget. For a curious few, the Statesman’s article raised an interesting question: If the Comptroller had certified the budget, then what reason did the Legislature have in taking up SB 1, a major non-tax revenue bill? The answer can be found in the last rider in Article IX.
Sec. 18.115. Contingency for Senate Bill 1811. The All Funds appropriations made for the
Foundation School Program (FSP) in Article III, Texas Education Agency Strategies A.1.1 and A.1.2, are contingent on enactment of SB 1811 or similar legislation by the Eighty-second Legislature, Regular Session, 2011, relating to certain state fiscal matters and that amends Chapter 42 of the Texas Education Code to adjust state aid payments to the level of FSP appropriations made elsewhere in this Act. Should this legislation fail to pass and be enacted, the All Funds appropriations for the FSP made in Article III, Texas Education Agency Strategies A.1.1 and A.1.2, are hereby reduced to zero for each year of the 2012-13 biennium, and the sum-certain appropriation identified in Rider 3 of the Texas Education Agency’s bill pattern is hereby reduced to zero for each year of the 2012-13 biennium.
As the Contingency Rider states above, if SB 1811 failed to pass during the regular session (which it did), then All Funds appropriations for the Foundation School Program would be reduced to zero for the 2012-13 biennium. Since this actually came to pass—which was as surprise to most—it inadvertently freed up about $37 billion or so in revenues that the Comptroller then used to certify the budget. Obviously, the Legislature cannot zero-fund public education, which is the reason for SB 1. But for the moment, at least, the state’s 2012-13 budget technically certifies.
By now most people have seen the report that 30 percent of companies will drop coverage in 2014 due to the PPACA’s regulations on insurance and businesses. The rationale is that it will be financially favorable to stop offering coverage and supplement an employee’s salary instead. This rationale has also been applied to the individual mandate wherein a consumer would rather pay the fine then buy coverage because it is financially favorable.
The PPACA has a number of provisions that will prove to be onerous, even detrimental, to business development in Texas and the nation. With the increasing acknowledgement on both sides of the aisle that a growing economy is the key driver of debt and deficit relief, the key issue of the day, the effects of these provisions warrant significant research.
This survey proves what many analysts have been saying for months, but more importantly it reminds us of the adage of supply siders like Dr. Art Laffer – incentives matter. Incentives truly do matter, and the PPACA incentivizes companies to drop insurance coverage.
Today the Texas House of Representatives will take up and consider SB 1. Part of SB 1 contains a provision commonly known as the “Amazon tax.” The law would required Amazon to collect sales tax on all goods sold to Texas residents.
One person who is quite familiar with the Amazon tax is Oliver Roup, founder and CEO of Califonia’s VigLink, a Google Ventures-backed online marketing company. Roup has already moved his company’s operations out of Illinois into neighboring Indiana in response to the Amazon tax passed this spring by the Illinois Legislature. Now he faces a tougher challenge with a similar law being considered in California, where his company is headquartered.
Roup explains the situation he is facing:
The affiliate tax efforts were last raised in 2009 and vetoed by then governor Schwarzenegger. They've received a new push this year as a result of an Astroturf campaign funded by the big-box retailers seeking to punish their Internet-based competition. A pair of bills recently passed the house and have moved on to the senate.
What we do if one of the laws pass is still being discussed and will depend on the exact content of the laws, the reaction of the retailers and a few other factors. Moving out of state is certainly a possibility - we have already closed an Illinois office and moved to Indiana as a result of a similar law there. More importantly, we think these laws are just bad policy – resulting in lower tax revenue, job flight and reduced investment in the very innovation on which California depends.
When I asked him if Texas seemed like an attractive destination if California passes the tax bill, he responded:
If we did decide to move, it would be critical to only have to do so once. The uncertainty around passage of an affiliate tax makes Texas a difficult destination to contemplate. Given that these laws have such severe consequences for us we need to think not just about the current regulatory climate, but about what it is likely to be in the future. Recent events in Texas give us pause.
Just to make sure I got it straight, I asked Roup if the problem was with Texas, or just with Texas’ current posture towards taxing Internet sales:
Austin is a very attractive potential destination - most importantly there is a strong pool of talented labor but other relevant considerations include the absence of state taxes, favorable climate, welcoming and business friendly culture and easy access back to the San Francisco bay.
Roup confirms that Texas is a great place to live and work, but we must remember that its inherently no better in this regard than California. Texas needs to keep this in mind when proposals like the Amazon tax come up if we want to keep Texas as an attractive destination for companies like Viglink and the jobs they bring. We are winning the jobs competition now because we are also winning the public policy battle over low taxes and less regulation. If we lose the policy battle, we’ll lose the jobs as well.
In my previous post, I explained the ongoing dispute between Amazon and Texas in the state’s ongoing attempt to force Amazon to collect sales tax on goods it and its affiliates sell to Texas residents.
One reason that the state is trying to make Amazon collect the tax because thousands or even millions of its citizens are breaking the law. That’s right, you heard me correctly. A multitude of Texans are breaking the law. In fact, it wouldn’t surprise me if most the people reading this post are lawbreakers.
A little known fact is that Texas doesn’t just have a sales tax. It really has two related taxes, a sales tax and a use tax. The importance of making this distinction is that Texans aren’t only subject to paying a sales when they buy good, they are subject to a tax when they use a good that they have purchased.
The reason for this is that it is long established law that a state cannot tax a transaction that takes place outside of its borders. Among other things, it runs afoul of the commerce clause in the U.S. Constitution, as articulated by the U.S. Supreme Court in Quill v. North Dakota.
To get around this, Texas established the use tax. As the Texas Administrative Code describes it, a “[u]se tax is due on taxable items purchased out of state that are stored, used or consumed in Texas.” So even though the state cannot tax the sales of a good purchased out of state by a Texan, the state can tax the Texan for using the good in Texas.
The Texas Comptroller further explains our responsibilities, “In general, if you purchase a taxable item from an out-of-state retailer without paying Texas tax and use the property in Texas the purchase is subject to use tax and must be reported.”
Perhaps instead of enacting the “Amazon tax,” the state should consider simply enforcing existing law.
The Texas House of Representatives will consider SB 1 on Thursday. One provision in SB 1 is what is known as the “Amazon tax,” which attempts to change the law governing the Texas Sales and Use tax in a way to ensure that Amazon would have to collect sales tax on goods sold to Texans—at least those Texans currently residing in Texas. The Texas Legislature already passed an Amazon Tax this spring, but Gov. Rick Perry vetoed it.
Amazon currently doesn’t collect the sales tax. But last year, the Texas Comptroller decider that Amazon should be doing so. In its 3rd quarter 10 Q filed with the SEC last October, Amazon made the issue public:
In September 2010, the State of Texas issued an assessment of $269 million for uncollected sales taxes for the period from December 2005 to December 2009, including interest and penalties. The State of Texas is alleging that we should have collected sales taxes on applicable sales transactions during those years. We believe that the State of Texas did not provide a sufficient basis for its assessment and that the assessment is without merit. We intend to vigorously defend ourselves in this matter.
Four months after Texas officials told Amazon.com Inc. that it owes $269 million in uncollected sales taxes, the online retail giant has filed a lawsuit demanding that the comptroller's office release the audit information it used in arriving at that amount. … Amazon asked the comptroller's office to explain its basis for the $269 million assessment, but “auditors were not forthcoming with an explanation,” the lawsuit claims. The comptroller's office has refused to provide the information, saying it was protected by attorney-client privilege because “the entire file relating to the audit was ‘prepared by and attorney,’ and thus ... protected from disclosure,” according to the lawsuit. A Dec. 16 opinion issued by the Texas attorney general's office agreed with the comptroller's office that the documents were protected, according to the lawsuit.
In today’s Wall Street Journal, Prof. Richard Epstein and I argue that the Medicaid-expansion provisions of Obama’s health-reform law should be struck down as unconstitutional. This is one of the two main issues — the other being the individual mandate — that will be tested in oral argument before the 11th Circuit Court of Appeals tomorrow.
The law requires states to expand their Medicaid programs as a condition of continuing to receive federal Medicaid matching grants. At issue is the meaning and validity of the Supreme Court’s holding in South Dakota v. Dole (1987) Our op-ed explains:
Under the Patient Protection and Affordable Care Act, states have a choice: Expand their Medicaid rolls or bear the full cost of caring for their state’s current Medicaid population, while continuing to subsidize the Medicaid programs of other states. The constitutional danger of such a scheme has long been recognized. In 1936, the Supreme Court warned in U.S. v. Butler that if conditional federal grants were not restrained the taxing and spending power “could become the instrument for the total subversion of the governmental powers reserved to the individual states.”
And yet the government is comparing this Medicaid requirement to a “voluntary” contract. Does anyone believe that a person is entitled “voluntarily” to continue his journey so long as he pays for all poor people who use the roads? The government’s action is plainly coercive because it necessarily conditions the exercise of one right upon the conscious surrender of a second.
Unfortunately, the Supreme Court’s decision in South Dakota v. Dole (1987) confused matters. Dole let Congress condition 5% of federal highway funds on states’ raising their drinking age to 21. The Court argued that this modest penalty was mere persuasion—not coercion—but cautioned that “in some circumstances, the financial inducement offered by Congress might be so coercive as to pass the point at which ‘pressure turns into compulsion.’”
The question, then, is where that point is. Judge Vinson denied that any such point exists because the federal courts have routinely ignored the Court’s warning in Dole by approving virtually every conditional federal grant program—no matter how intrusive.
The reason why the analysis in Dole has failed to offer any protection for state autonomy is that it is fundamentally wrong to think of coercion as a matter of degree. The government always engages in coercion when it taxes away money from the citizens of several states, only to return it to those states that abide by certain conditions.
There must be some limit on the federal government’s ability to condition grants to the states on their adherence to federal preferences on the range of issues the Framers clearly intended to leave to the states. Otherwise, the federal government will swallow up the people’s ability to govern themselves at the local and state level. In fact, as the ratification debates make clear, the Constitution would never have been ratified if the Framers had known that we would now be facing this relentless accumulation of central government power, which they would have equated with a nascent tyranny. Quaint? Perhaps. Silly? Maybe not so much.
The federal government seems to agree with Judge Vinson’s summary judgment, which was essentially that no conditional federal grant program could be constitutionally coercive, no matter how coercive in fact. They’re fairly sure to win if the issue is returned to Judge Vinson for a full trial. But Judge Vinson seems to have ruled the way he did chiefly because he refused to perpetuate the charade of homage to Dole’s coercion doctrine when the federal courts have upheld virtually every federal program, no matter how coercive in fact. In agreeing with Judge Vinson, the federal government is contradicting a vital premise of Dole, thus falling into what may have been a cleverly set trap on Judge Vinson’s part. Stay tuned.
The state’s newly adopted budget includes a $250 million across-the-board reduction for most of state government; but a certain clause in the budget threatens to undo these cuts and eliminate a quarter of a billion dollars in savings to taxpayers, should certain conditions materialize.
In Article IX, Section 18.25 of the state budget, appropriations to all state agencies and higher education institutions—save the Foundation School Program, the state Medicaid program, and debt service—are proportionally reduced by $250 million for fiscal year 2013. But a handful of paragraphs later, in Article IX, Section 18.55, the reductions are made contingent based on the availability of revenue.
From Section 18.55: After fully funding three other items, “the Comptroller shall, to the extent that funds are available above the sum of the January 2011 Biennial Revenue Estimate and any additional general revenue certified as of the date of the enactment of this Act, restore the $250,000,000 appropriation reductions…” In other words, if the Comptroller finds additional money for state agencies to spend, they will.
All of this begs the question: Is this really the time to consider reversing cuts? National and state economic growth remains uncertain; the state’s 2012-13 budget is already expected to run well-over its appropriated total, requiring a large supplemental in 2013; and, as we’ve shown in the past, state agencies and higher education institutions have, in totality, enjoyed decades of spending growth that has far exceeded population and inflation increases.
Taking all of this into consideration, this may be an instance where the Governor considers putting his line-item veto to use.
-Samantha Soliz
Research Fellow, Center for Fiscal Policy
Despite its billing as a non-tax revenue bill, Senate Bill 1, this session’s major piece of fiscal legislation, actually includes a tax increase for certain businesses.
ARTICLE 9. CIGARETTE TAX STAMPING ALLOWANCE
SECTIONA9.01.AASubsection (a), Section 154.052, Tax Code, is amended to read as follows:
(a) A distributor is, subject to the provisions of Section
154.051, entitled to 2.5 [three] percent of the face value of stamps purchased as a stamping allowance for providing the service of affixing stamps to cigarette packages, except that an out-of-state distributor is entitled to receive only the same percentage of stamping allowance as that given to Texas distributors doing business in the state of the distributor.
At first glance, the tax increase may not be apparent—but follow me here.
Under current law, cigarette distributors are required to administer and collect cigarette taxes on behalf of the state via a stamp-based system. This system requires that each pack of cigarettes be individually stamped and taxes paid—regardless of whether the product is actually sold or not—as soon as the distributor receives the product. Understandably, this kind of system carries with it certain risks and burdens.
And so, in exchange for overseeing this complex and time-consuming tax, distributors retain 3 percent of the amount of the tax they pay to help cover the cost of administration. But Senate Bill 1 proposes to change that.
Under the bill’s proposed language—both in the House and Senate versions—distributors would see the cigarette tax stamp discount reduced from 3 percent to 2.5 percent. The Legislative Budget Board estimates that this reduction will cost businesses $11.63 million in the 2012-13 biennium.
-Samantha Soliz
Research Fellow, Center for Fiscal Policy
“Loser pays” is not just great for the Texas legal climate, its economic impact on the State will be positive as well. Business owner Bobby Jenkins explains in this video how the loser pays law will help small business owners create jobs and grow the Texas economy.
Inflation is an increase in the supply of money. So when the government prints more money, or creates more through bookkeeping transactions at the Federal Reserve, that is inflation. The result of inflation? Higher prices.
But, of course, the government and those who favor big government don’t want you to know that they are the cause of higher prices. So over the last 30 years or so, they have developed a new definition of inflation: Inflation is a rise in the general level of prices. So now, instead of inflation being the cause of higher prices, higher prices are what cause inflation. Or at least higher prices and inflation are one in the same.
This is very convenient for government because with this definition it is difficult to blame rising prices on the government. Instead, we can blame rising prices on wars in the Middle East, bad weather in the Midwest, and wage increases due to an overcharged economy that needs slowing down.
Still, people don’t like rising prices. And should prices rise too fast for too long, people will eventually get upset. But never fear, it looks like Paul Krugman has figured out a way to solve this inconvenient problem as well:
US core inflation has ticked up slightly recently. What’s that about?
I’ve suspected that what we’re really seeing is the inadequacy of even core inflation as a way to purge transitory effects of volatile prices: the measure takes out purchases of food and energy, but it doesn’t take out indirect effects of raw material prices on costs. New research from Goldman Sachs (no link) seems to support that view: it finds that core inflation is getting a temporary bump from the prices of imported raw materials, and will probably subside if the commodity surge is in fact over.
This in turn suggests that policy should really be based on some kind of “supercore” inflation. Should this simply be wage growth? Adam Posen at the Bank of England has certainly gone well down this route, arguing that the relatively high rate of even core inflation in the UK reflects one-off factors and that stagnant wages show that there are few risks. And I totally agree with Posen about the UK policy issues.
Yet there are problems with a wage target — mainly, you don’t want to base policy on the notion that wage gains are always a bad thing. Maybe adding a trend productivity adjustment would do the trick. More systematic thoughts when I have time.
Anyway, the bottom line for now is that neither the Fed nor the ECB should be at all concerned about inflation.
In other words, when measuring inflation, we shouldn’t worry about how much food and energy cost. Neither should we worry about the cost of raw materials.
I suspect what Krugman really wants to do, as he alludes to in the last sentence, is ignore inflation all together. If he could get everyone else to join him, that would make it really easy for people in the government to print more money and thus avoid having to raise taxes to support their spending habits.
While the title is certainly true, some money creation may be necessary to grease the wheels of the economy. It is excessive money/base creation that is the problem. This is the foundation for the money supply growth rate rule that Friedman proposed. The existence of the Fed can be debated, but a rule for their actions should be a must. Even the Taylor Rule would have the Fed funds rate be closer to 1-1.5%, definitely not 0-.25%.
Although Bernanke may have formulated the path to not have another “Great Depression” in his academic research and is the reason that the Fed’s assets have increased from $800 billion to almost $3 trillion since Sept. 2008, he certainly has no clue on how to exit the horrific increase in less liquid assets that is now on their balance sheet. In addition, previous research that I have published shows that many of their liquidity programs were not effective in stimulating particular markets and their quantitative easing (QE) programs have been a disaster!
Government spending restraint in Washington should start now and higher interest rates should be in the near future to provide the means for an independent central bank and reduce the Fed’s incentive to monetize the debt. Unfortunately, the market for interest rates is being distorted by the Fed; therefore, economic growth moving forward will be uncertain and more sluggish than otherwise would be the case.
-Vance Ginn
Research Fellow, Center for Energy and the Environment
After months of wrangling, the state’s budget is nearly complete.
According to the Austin American-Statesman, Texas’ two-year $172 billion budget was just voted out of conference committee and is headed to the House and Senate floors on Saturday for a final vote. If approved by both chambers, the state’s total budget for 2012-13 would come in at $15 billion less than what was spent for the current biennium, representing an 8.1 percent decrease in spending.
Based on summary information from the Legislative Budget Board, the winners in this session’s budget include: Business and Economic Development ($1.17 billion increase in spending) and Public Education ($125.2 million increase). Areas facing the biggest cuts include: Health and Human Services ($11.27 billion cut); Higher Education ($969.1 million cut); and Public Safety and Criminal Justice ($643.2 million cut)— it should be noted, however, that since these totals are based on All Funds, which includes state and federal monies, the expiration of stimulus funds has distorted some of these cuts to appear bigger than what they would be under ordinary circumstances.
Source: Legislative Budget Board
In terms of state dollars, i.e. General Revenue Funds, the winners in this session’s budget are: Public Education ($3 billion increase); Health and Human Services ($700 million increase); and Business and Economic Development ($93.3 million increase). Areas facing the biggest cuts include: Higher Education ($1.2 billion decrease); General Government ($459.9 million decrease); and Public Safety and Criminal Justice ($436.4 million decrease).
According the most recent annual report from the Department of Public Safety, Texas experienced a drop in both violent and non-violent crime rates across the board last year. This is newsworthy on its own, but it is particularly notable that the drop in crime coincides with a statewide drop in incarceration, and an increase in unemployment.
Statewide, violent crime fell 8.3% and non-violent crime fell 5.7%. Specifically, robbery fell a stunning 14.9% and rape fell by 9.2%. Adult arrests dropped 4.6% and juvenile arrests dropped a huge 9.3%.
Dallas is an especially interesting case study. In 2005, Dallas was given the FBI’s “most unsafe city in America” distinction, but it responded by abandoning its tough-on-crime approach. Now, in the DPS report, Dallas led the state with a 10.2% drop in crime – and Big D is currently #52 on the FBI’s list. Grits for Breakfast, a website that follows criminal justice developments in Texas, observes that numbers like this are “calling into question quite a few assumptions about incarceration and crime.”
Houston, San Antonio, Forth Worth, Austin, and El Paso all saw declines in crime rate as well, all coupled with lower incarceration rates than previous years. Meanwhile Round Rock, which stubbornly adheres to the antiquated “lock ‘em up and throw away the key” approach, saw an 8% increase in crime.
-H. Joel Simmons
Research Fellow, Center for Effective Justice
Texas Senate Bill 1116 by Representative Jerry Madden and Senator John Whitmire, which is on the House Calendar today, would address this absurdity by eliminating the practice of schools issuing Class C misdemeanors to students below the age of 12 for minor misbehavior that traditionally would have been dealt with in the school system. Evidence shows that there are more effective disciplinary practices than sending these kids to a municipal court, which can only fine their parents. Students this young are not appropriately held responsible for signing a citation saying that they will appear in court. Under this bill, officers could still arrest such youngsters for any offense for which any person can be arrested, ensuring that school safety will not be compromised.
Finally the proposed bill carries no fiscal note. This is a problem that is solved with a little common sense, not tax dollars. Texas should enhance discipline in schools instead of passing the paddle to municipal courts and putting 4th, 5th, and 6th graders on a path to the juvenile justice system for routine school misbehavior.
In a recent Wall Street Journal op-ed, entitled Inconvenient Truths About ‘Renewable’ Energy, author Matt Ridley examines some of the myths behind the notion of renewable energy. After noting that wind, tide, wave, solar and geothermal energies combined account for less than 0.5% of the world’s energy, he explains that the renewable energies we do use – biomass (mainly wood) and dung – are actually depleting at a rate that does not indicate they are truly renewable. He ultimately concludes “the idea that ‘renewable’ energy is green and clean looks less like a deduction than a superstition.”
When relating this “superstition” to the economic and environmental costs of the environmental regulations being pushed forward by government, we are headed towards real harm. Matt Ridley explains further in this interview:
An excellent budget transparency amendment
was added to SB 1811 in the Texas House of representatives yesterday. The amendment requires the appropriations bill to be patterned along the lines of the agency programs it is funding.
The reason this is needed is because the current strategic pattern of the appropriations bill completely obscures where the money is being spent. Well, one can see what agency is spending the money, but that is about as far as it often goes. It is usually impossible to see how much money is going to which program at an agency. And also impossible to see the source of money for each line item appropriation, i.e., GR, fed funds, etc. This amendment solves these problems.
The bottom line is while the state actually spends money through programs, it appropriates money through strategies. This leaves all but a few agency personnel, appropriators, and LBB staff unable to readily determine where the money is going. So if citizens or even the average legislator want to know how much money the Texas Department of Agriculture is spending on its Texas-Israel Exchange program, good luck. Get ready for a lot open records requests.
This is important because it keeps the eyes of the public off of how our money is being spent. Someone might think the Texas Commission on Environmental Quality’s Texas Emission Reduction Program is a wasteful corporate subsidy? It is, but hard to convince the public of this without knowing how much money is being wasted on it.
For all the good transparency work that has been going on over the last few years, this is the most important of them all because we can’t stop wasteful spending at the agency level once they have the money, it has to be done in the appropriations process.
Here is a link to a policy brief
the Foundation did on HB 2804, the source of this amendment. It would be a great boost for transparency and for taxpayers if the amendment stays in SB 1811 when it goes to conference committee.
In a large bureaucracy, there is perhaps no one better suited to offer up cost-saving ideas than the agency’s day-to-day staff. Until now, however, these employees have had no real forum in which to share their suggestions and ideas—but House Bill 2439 seeks to change all that.
HB 2439, scheduled for a hearing today in Senate Committee on Government Organization, would require each state agency with 1,500 employees or more to setup a website where employees can submit efficiency and operational suggestions. These ideas can then be viewed and voted on by the public in real-time which should, ideally, give agency directors a pretty fair indication of where they should look to cut costs.
And to help the public better understand some of the ideas they are reading about, the bill also instructs the Legislative Budget Board (LBB) to post certain budget-related documents online as they are prepared by the LBB. The cost to do all of this is expected to be minimal.
Assuming the bill makes it out of the Senate, HB 2439 could be a hugely positive step forward in the quest to find efficiencies and promote transparency in the state’s largest bureaucratic institutions.
Higher education transparency got a big boost yesterday when an amendment to Senate Bill 5, authored by State Representative Bill Zedler, was proposed and adopted. The amendment would require most institutions of higher education to create a check register detailing financial transactions made using either appropriated general revenue funds or student tuition and fees or provide a link on the institution’s homepage to the state’s financial transparency website, Where the Money Goes.
If the state’s colleges and universities choose to create a check register, the database must include:
The amount of the payment;
The date of the payment;
A brief description of the purpose of the payment; and
The name of the payee.
By taking this additional step to promote open government, interested taxpayers will have another tool with which to better educate themselves on how and where their tax dollars are being spent by institutions of higher education. That is, assuming the House’s amendment survives the conference committee.
The Daily Caller reported today that approximately 20 percent of the latest ObamaCare waivers given out went to primarily high-priced and luxury establishments in Former Speaker of the House of Representatives Nancy Pelosi’s district, which is predominantly the city of San Francisco. This is the first time we see waivers going to small, luxury-oriented establishments. One establishment named True Spa commented that, “said new government health care regulations, both the federal-level ObamaCare and new local laws in Northern California, have ‘devastated’ the business.”
What is particularly interesting about this is Healthy San Francisco. Healthy San Francisco is the universal health plan for residents of San Francisco financed through a tax on businesses. It has requirement for employers with more than 50 employees to offer health coverage. This has resulted in a health care surcharge on many products especially at restaurants. Certainly, advocates will say that this is exactly why the Administration has given them waivers. They are offering universal coverage in a unique manner, and they deserve to be waived out of ObamaCare regulations that impede that. This is consistent with the Administration’s position on flexibility for entities to develop unique health care models.
What is inconsistent is the lack of waivers for free-market proposals. We don’t see the administration furthering proposals to remove mandated benefits or encourage the use of HSAs. We don’t see the Administration pushing block grants so that states like Texas can move to defined contribution models.
The Administration is pursuing their vision of where America should go with health care, and if they can help out a friend on the way, why not? But what helps friends in San Francisco does not help the country bring down health care costs. This situation is inconsistent with granting real flexibility, but it is consistent with policies that give bureaucracies the ability to make decisions over individuals and businesses.
This May, the Texas Department of Criminal Justice (TDCJ) released an evaluation of released offenders who had completed rehabilitation programs, many of which were expanded in the 2007 budget package. This package allocated $241 million to increasing the capacity of treatment slots and beds in lieu of spending $2 billion to build and operate the 17,332 new prison beds that the Legislative Budget Board projected in January 2007 that the state would need by 2012.
These evaluations are routinely performed to examine the extent to which rehabilitation programs reduce offender re-incarceration and parole revocations. And, for offenders released in 2007, the report found that recidivism rates were significantly lower for those who participated in the programs.
Included among the studied programs were the faith-based InnerChange Freedom Initiative (IFI), the Substance Abuse Felony Punishment (SAFP) Program and the Violent Offender Reentry Initiative (SVORI), as well as other programs aimed at the successful reintegration of offenders. And with the exception of the Pre-Release Substance Abuse Program (PRSAP), one of the smaller programs, all of these programs evaluated reduced the three-year recidivism for program completers. Significantly, the SAFP Program reduced recidivism by almost 14%.
The In-Prison Therapeutic Community (IPTC) reduced recidivism for program completers two and three years after release. Additionally, the Sex Offender Education Program (SOEP) and The Sex Offender Treatment Program (SOTP) reduced recidivism for program completers two and three years after release.
The expanded capacity of these programs has also reduced costs since many inmates approved for parole cannot be released until they go through one of these six-month programs. As Texas House Corrections Committee Chairman Jerry Madden argued, “these new statistics show these programs are cost effective and are working”. Agreeing with Chairman Madden, Senate Criminal Justice Committee Chairman John Whitmire added, “To cut these programs would be an invitation to build more prisons.”
Last week, writing for the Texas Public Policy Foundation, I filed an amicus brief in the 11th Circuit Court of Appeals on behalf of the 26 state attorneys-general who are challenging the constitutionality of Obamacare. The case is on appeal from the federal district court for northern Florida, where Judge Vinson struck down the law, holding that the individual mandate exceeds the power of Congress to regulate commerce “among the several States.” Most attention has focused on this aspect of Judge Vinson’s ruling.
Our brief, however, focuses on another part of Judge Vinson’s ruling, namely his extraordinary finding of summary judgment for the government on the Medicaid expansion provisions of the new health-care law. (See pp. 6–13 of the ruling.) The states had argued that these provisions, which require states to expand Medicaid rolls and absorb part of the cost themselves, constitute an unconstitutional commandeering of state governments through a coercive use of conditional federal funds. This issue tests the limits of the Spending Clause (rather than the Commerce Clause) of the Constitution. Among the controlling cases is South Dakota v. Dole (1987), in which the Supreme Court upheld a federal law that threatened states with the loss of five percent of federal highway funds if they did not raise their drinking age to 21. Writing for the majority, Chief Justice Rehnquist noted, “Our decisions have recognized that, in some circumstances, the financial inducement offered by Congress might be so coercive as to pass the point at which ‘pressure turns into compulsion.’” But in the years since Dole, federal courts have barely paid lip service to the principle of coercion, while in fact upholding virtually every conditional federal grant. Judge Vinson concluded that the federal courts had failed to develop any meaningful doctrine of coercion, and implicitly the federal spending power is unlimited with respect to conditional federal grants. This ruling was perhaps a blessing in disguise. He essentially called the Supreme Court’s bluff: Either affirm coercion in this case, or drop the pretense of a coercion doctrine.
Developing this theme in our brief, we argue that the practice of federal grants to the states conditioned on state compliance with federal policy preferences must have some limit, otherwise there is no way to protect state autonomy or the structure of our Constitution from federal coercion. We argue that if there is no limit in a doctrine of coercion, than it must follow that the whole practice of conditional federal grants is unconstitutional:
If from the Dole Court’s discussion of coercion one were to devise a hypothetical conditional federal grant program to make sure that some such program would qualify as coercive, one might hypothesize an enormous federal grant program, far-reaching conditions, the threatened loss of all funding for non-compliance, and, for good measure, an onerous change in the conditions of the already consented-to and established program, that would both increase the expense of the program to the States and further reduce their regulatory autonomy. In other words, one would hypothesize something like Medicaid and the Medicaid expansion provisions of the ACA. Though an issue of material fact arguably exists as to whether State consent remains a prerogative of the States “in theory and in fact,” it is virtually impossible to imagine what conditional federal grant program could possibly qualify as coercive if the one in the case at bar does not.
One conceptual problem for the Court is that, if the Medicaid expansion provisions of the ACA do not constitute coercion under Dole, then the judgment below must ultimately be vindicated: The spending power is not in fact limited by any coercion doctrine, or by any other protection for State sovereignty. But that would be the same as to hold that Dole itself was wrongly decided. This is because the discussion of coercion in Dole was no mere dictum. The Spending Clause cases of the Supreme Court have all recognized the danger of inducement rising to the level of compulsion, and vitally presupposed that the danger could be guarded against because Courts would be able to distinguish between encouragement and compulsion. […] If conditional federal grants have no limit in a doctrine of coercion, then the exercise of the power to make them has no limit, save such as may be self-imposed by the federal government. But that is precisely the unlimited spending power rejected by the Framers, and by virtually every major Spending Clause case of the Supreme Court since.
Oral argument is scheduled for June 8 in the U.S. Court of Appeals for the 11th Circuit.
In a Texas Tribune article released today, Kate Galbraith asks a great question: “Is the Texas Legislature Raising Utility Rates?” The answer is – yes.
While her article lays out several bills that would raise rates, there is no mention of the energy efficiency bills. I would proffer that those bills would raise rates just as much, if not more than the bills mentioned. The Texas Public Policy Foundation has conducted a study entitled “Energy Efficiency: Is Texas Getting Its Money’s Worth?” indicating that the proposed energy efficiency bills could cost consumers hundreds of millions of dollars.
As the study points out, since 2002, Texas consumers have paid just under $600 million to support the state’s energy efficiency program, and the estimated cost for 2010 was $114.8 million. Increasing this program will only increase the cost. While proponents argue that those costs are offset by future reductions of energy use, the numbers just don’t add up.
When reasonable assumptions are applied to the Public Utility Commission’s (PUCT) data, the potential returns range from 86.3 percent to -11.3 percent. As Dr. Robert Michaels concludes, “There is simply no way, given the existing data and the methodology employed by the PUCT, to properly determine the efficiency – or inefficiency – of the state’s energy efficiency program.”
With no way to currently determine an accurate outcome of these programs, it seems irresponsible to continue to force consumers to pay for them, let alone ask them to pay even more.
On May 9, 2011 Kaiser Health News reveals a study by the Massachusetts Medical Society that cites longer wait times for patients under RomneyCare, up to a month and a half for non-emergency appointments. Long waits for health care are a trademark attribute of government-controlled health care. What is particularly concerning is that this problem will soon not be confined to the borders of Massachusetts as the Affordable Care Act is, admittedly by the administration, modeled after RomneyCare.
This news furthers the Foundation’s conviction that government control over health care is antiquated and ineffective. True health care reform for Texas and the country must be achieved by the innovation and entrepreneurialism that comes with individual liberty in the marketplace.
The Employee Retirement System of Texas’ (ERS) pension benefits are in a better position than its health benefits, and the system as a whole is better off than a number of other states. However, “better” is still not good. In total, ERS is short by an estimated $591 million. The recent Pew report on State and Local pensions showed that in 2008 only 2.5 percent of the $28.6 billion in health care and other retirement obligations in ERS were funded. This is a troubling position for the state’s pension fund to be in. Today, the Texas House of Representatives took a much needed step towards putting ERS on stable footing.
House Bill 1766 by Rep. Myra Crownover requires ERS to offer state employees a Health Savings Account (HSA) option. This is a simple proposal, but one that has seen significant success in the State of Indiana. In 2005 Gov. Mitch Daniels issued an executive order requiring the Indiana pension system to offer an HSA option to its employees. Only 4 percent of Indiana’s employees selected it during the first year, but by 2010, more than 70 percent had selected it voluntarily. In the same year the employees had accumulated a total of $30 million in their savings accounts and saved Indiana more than $20 million. They also saved more than $8 million over their counterparts in traditional PPO plans.
HSAs have proven to bend the cost curve down in health care time and time again. By allowing the individual to accumulate wealth and control spending, the accounts return power over health care to the person instead of the insurance industry or government. The passage of HB 1766 by the Texas House of Representatives is a positive step towards making ERS sustainable while empowering our employees.
Now that the Senate’s budget has been finalized, Texans can make a true side-by-side comparison of the two spending proposals. The comparisons below show: the House budget vs. the current budget (also known as the General Appropriations Act or GAA); the Senate budget vs. the current budget; and the House budget vs. Senate budget. Figures have been rounded where appropriate.
House vs. GAA
The House’s budget proposal totals $164.5 B, a decrease in All Funds appropriations of $17.8 B compared to the current biennium;
The House’s budget proposal would reduce General Revenue Fund appropriations by $3.1 B from the current biennium;
The House’s budget proposal would reduce Federal Funds appropriations by $12.4 B from the current biennium;
As compared to the funding levels in the 2010-11 GAA, the House’s budget proposal would increase All Funds appropriations to two articles: Public Safety and Criminal Justice (+$198 M), and Business and Economic Development (+$59.1 M). Combined, the amounts appropriated in these two articles totals $257 M; and
As compared to the funding levels in the 2010-11 GAA, the House’s budget proposal would decrease All Funds appropriations to eight articles: General Government (–$442 M), Health and Human Services (–$5.6 B), Agencies of Education (–$5.7 B), The Judiciary (–$30 M), Natural Resources (–$349 M), Regulatory ($190 M), General Provisions (–$48 M), and The Legislature (–$41 M).
Senate vs. GAA
The Senate’s budget proposal totals $172.8 B, a decrease in All Funds appropriations of $9.5 B compared to the current biennium;
The Senate’s budget proposal would increase General Revenue Fund appropriations by approximately $1.1 B from the current biennium;
The Senate’s proposed budget would reduce Federal Funds appropriations by $11.2 B from the current biennium;
As compared to the funding levels in the 2010-11 GAA, the Senate’s proposed budget would increase All Funds appropriations to four articles: General Government (+$74 M), Agencies of Education (+$833 M), Public Safety and Criminal Justice (+$937 M), and Business and Economic Development (+$3.4 B). Combined, the amounts appropriated in these four articles totals $5.2 B; and
As compared to the funding levels in the 2010-11 GAA, the Senate’s budget proposal would decrease All Funds appropriations to six articles: Health and Human Services (–$1.9 B), The Judiciary (–$39 M), Natural Resources (–$210), Regulatory (–$345 M), General Provisions (–$6.6 B), and The Legislature (–$13 M).
House vs. Senate
The Senate’s proposed budget appropriates $8.3 B more in All Funds as compared to the House’s proposed budget;
The Senate’s proposed budget appropriates $4.2 B more in GR as compared to the House’s proposed budget;
The Senate’s proposed budget appropriates $1.2 B more in Federal Funds as compared to the House’s proposed budget;
As compared to the House’s budget proposal, the Senate’s proposed budget would increase All Funds appropriations to seven articles: General Government (+$516 M), Health and Human Services (+$3.6 B), Agencies of Education (+$6.5 B), Public Safety and Criminal Justice (+$738 M), Natural Resources (+$138 M), Business and Economic Development (+$3.3 B), and The Legislature (+$28 M); and
As compared to the House’s budget proposal, the Senate’s proposed budget would decrease All Funds appropriations to three articles: The Judiciary (–$8 M), Regulatory (–$154 M), and General Provisions (–$6.5 B).
-Kimberly Kisner
Research Fellow, Center for Fiscal Policy
This weekend, Arlene Wohlgemuth, Executive Director of the Texas Public Policy Foundation, and Scott McCown, Executive Director of the Center on Public Policy Priorities, were featured on the latest edition of KXAN’s Session ’11. Listen as they debate taxes, spending and how they would like to see the rest of the legislative session unfold.
Texas’ economy has proven to be exceedingly good at creating jobs. In fact, it is so good that over the last five years, employment growth in Texas has surpassed that of all other states combined.
According to seasonally adjusted, total non-farm employment data from the Bureau of Labor Statistics, Texas added a net 545,900 jobs between January 2006 and January 2011. By comparison, all other job-adding states only created 183,700 new employment positions over the same period. If you add the 49 states not named Texas, their employment total fell by 5.2 million.
Clearly, Texas is and has been the job creation engine of the U.S.—and it’s not hard to understand why: low taxes, limited government, and a predictable regulatory environment.
In Texas, anyone wanting to practice one of 514 occupations must obtain an occupational license. The occupations licensed extend beyond professionally certified services to horse tooth floaters, hair braiders and weavers, funeral directors, body piercers and referees.
Occupational licensing reduces competition by creating requirements designed to eliminate or displace competitors. For example, when a legislator suggested testing a pilot program for licensing mechanics, numerous mechanics argued that the good mechanics would leave Houston to avoid the added paperwork.
A study from the University of Minnesota discovered, “Occupational licensing reduces employment growth in states that are licensed relative to those that are not regulated.” Occupational licensing has eliminated competition in the marketplace, driving up prices for consumers.
House Bill 1451 would require that every person who breeds more than eleven dogs or cats, at one time, obtain an occupational license. House Bill 1451 would raise the costs for Texas commercial dog and cat breeders through stringent requirements about the housing of such animals.
Further, it would require additional fees for third-party facility inspections to ensure compliance. If the breeder can obtain a license, the licensing department will inspect his facilities at least once every year and a half at the expense of the breeder.
These licensing requirements discourage business growth and could even push Texan commercial dog and cat breeders to other states.
Dan Hammermesh, UT Professor of Economics, noted that licensing requirements nationwide cost an annual total of $34 to $41 billion.
Besides being costly to licensees and taxpayers (it requires an increase of 16 FTEs), House Bill 1451 is unlikely to change much. Research comparing the quality of work in a given field detected little difference between licensed workers and unlicensed workers.
The Texas Legislature should not license dog and cat breeders, but instead should begin to eliminate excess Texas licensing requirements.
-Ben Snodgrass
Research Fellow, Center for Economic Freedom
On May 3rd, during a debate on the Senate Budget, Sen. Leticia Van De Putte pointed out that schools in her district had been forced to lay-off nearly 750 teachers due to education budget cuts. She also stated that if the Senate passed a budget with no rainy day fund money incorporated, the potential to lose even more teachers was there.
Senator Florence Shapiro countered that job saving legislation is on the table (SB 12, as well as HB 400), specifically designed to ease the financial constraints on school districts, giving them greater flexibility regarding minimum teacher pay, non-contract renewal notice, and building furloughs for teachers into the academic calendar for teachers.
Both the House and Senate should look toward getting some form of this education flexibility legislation passed. Sen. Van De Putte’s central concern regarding school funding is valid; public education is going to have to make due with less money than it is used to having. One way to address those financial concerns is to grant the kind of flexibility that HB 400 and similar bills allow for.
A leaner Texas budget is going to emerge from the 82nd Legislature. As we ask school districts change the way they do business to handle the reduced funding, we need to make every tool available to them to do so. HB 400 is one of those tools.
Recently, Texans for Lawsuit Reform released a report showing that the Texas Windstorm Insurance Association (TWIA) paid out millions of dollars in settlement claims without regard for “the facts, the science, the insurance policies, or the law.”
“According to the report, tens of millions of dollars from Ike-related settlements and fees were paid at the discretion of the general manager of TWIA without any oversight or guidance.”
The settlement issue illustrates a larger problem with TWIA. Though originally founded as a last resort protection for high risk areas, TWIA has become the primary provider of windstorm coverage.
TWIA’s unbeatably low rates have evolved the program from a safety net into the primary provider of windstorm insurance. Ultimately, taxpayers are liable for TWIA’s burgeoning exposure of over $74 billion dollars. TWIA’s exposure rose 1200% since 1993.
Extensive misuse of the TWIA program warrants significant reforms. Texas lawmakers should return the Texas Windstorm Insurance Association to its original purpose of a safety net, a last resort measure.
For more information about the Texas Windstorm Insurance Association, see our publication: Next Steps to Reforming Texas Windstorm Insurance.
-Ben Snodgrass
Research Fellow, Center for Economic Freedom
Two prefiled amendments to HB 3790 would impose a new tax on ALL Texans who purchase video/cable services. There are three problems with this proposed new “satellite” or subscription video services tax.
First, it is a new tax on consumers in a state where they already pay some of the highest telecommunications taxes in the country. The average Texan with a landline telephone, cable, and cell phone service pays $318 per year in taxes. And while the new tax would in some cases “replace” existing local franchise fees/taxes on certain video services, it would clearly be an additional tax on video/cable customers who live in unincorporated areas or who get their video service through satellites. If some are concerned that we have an “unlevel playing field” because some consumers pay higher taxes than others, the answer is not to raise taxes on consumers who pay less taxes but to lower taxes on those who pay higher taxes.
Second, the satellite tax is an expansion of the local franchise fee, or tax, which is already far too high. In 2010, consumers who purchased services (telecommunications, electricity, natural gas, etc.) delivered through the local rights-of-way in Texas’ 10 largest cities paid over $429 million dollars in franchise fees/taxes. Over the last three years, collections of the franchise fee/tax in these cities have totaled about $1.2 billion. Yet little more than one percent of this total was actually used by cities to manage the public right-of-way. The rest went to the cities’ general revenue funds. That is why “fee” is a misnomer for the “franchise fee.” Fees are charged to users for the use of something. But with the franchise fee, cities simply tax video services to generate revenues to support spending totally unrelated to the use of the public right-of-way. This also violates transparency standards by which money collected by the state should be used for the reason it is collected.
Third, the satellite tax completely eliminates the already tenuous nexus between the assessment of the fee/tax and the use of the public right-of-way. Regardless of how little of the revenue from the tax is appropriately used, at least the franchise tax is imposed on services that actually use the right-of-way. With the satellite tax, however, the connection would be lost. At this point, the tax on subscription video services would have no justification whatsoever, and becomes just another sales tax. But, of course, consumers already pay a sales tax on their cable and video services. Ultimately, then, consumers of all video services, no matter how the signals are received, would wind up paying two sales taxes for one product.
This new tax—whatever it is called—will harm both Texas consumers and the Texas economy.
HB 1629, expanding the state’s energy efficiency program, is set on the House General State Calendar for today, Tuesday, May 3.
HB 1629 would increase the goals—and the cost—of the state’s energy efficiency program. While energy efficiency is good, expanding Texas’ program administered at the Public Utility Commission is not currently the best way to achieve it.
Market-based energy efficiency has been a key part of America’s and Texas’ economic growth because it has made electricity less expensive so that we can use more of it to make us healthier and wealthier. To the contrary, Texas’ energy efficiency program seems designed to make electricity more expensive so that we will use less of it.
The expense of the state’s program is borne by consumers. Since 2002, Texas consumers have paid $591.1 million to
support the state’s energy efficiency program. The estimated 2010 cost of the program was $114.8 million, which will substantially increase in future years due to the PUC’s recent expansion of the program. These costs are added to consumer’s electricity bill each month.
Now is not the time to heap even more government-mandated costs on Texas consumers.
Additionally, it is doubtful that the state’s program is actually efficient. Our recent study examining the system, Energy Efficiency: Is Texas Getting Its Money's Worth?, by Robert J. Michaels, Ph.D., found that “when reasonable assumptions are applied to the Public Utility Commission’s data, the potential returns of Texas’ energy efficiency program range from 86.3 percent to -11.3 percent. There is simply no way, given the existing data and the methodology employed by the PUCT, to properly determine the efficiency—or inefficiency—of the state’s energy efficiency program.”
This should be no surprise to anyone, since energy efficiency has been achieved successfully in the private sector for centuries, and continues today. A government program that mandates technologies and practices while forcing consumers to pay for them is not likely to be successful.
As noted, the existing program was just expanded last year by the PUC, and will likely double the cost of the existing program within a few years. With costs rising and doubt about the program’s effectiveness, now is not the time to expand the program and increase consumers’ electricity bills. Instead, the Legislature should require the PUC to thoroughly investigate the current program to determine whether it collects the necessary data and uses the proper methodology to even make a proper judgment of its efficiency.
We must not fall into the trap of believing that we use too much energy. This is driven by false claims that energy use hurts the environment. The truth is that over the last 40 years while energy use has significantly increased, so has air quality dramatically improved. The goal of energy efficiency should be to use less energy at less cost for existing uses so that we can use more energy to further improve public health and safety.
Instead of expanding the program, the PUC should be directed to thoroughly review it. If this happens, the data is likely to show that the free market—rather than HB 1629—is the best way for Texan’s to reduce their energy cost and improve the economy.
What happens when a former Secretary of Energy comes to Texas?
When Mr. Pena, former Secretary of Energy, (1997-1998), traveled to Texas, he commended the Texas electricity market as a successful model for the nation to emulate. In selecting his flight from Denver, Mr. Pena “was able to select the best options based on cost, reliability and service.” In the same manner, the Texas electricity sector has flourished under a competitive market where “suppliers must constantly differentiate themselves by finding new and better ways to serve customers.”
While government instituted monopolies control the electricity sector nationwide, Texas has set an example through its competitively designed market. For further information about Texas’ success, please see our recent publication, Competition in the Electricity Market.
-Ben Snodgrass
Research Fellow, Center for Economic Freedom
Recently, the Texas Court of Appeals in Austin ruled against an effort by the Comptroller of Public Accounts to collect sales taxes from the Health Care Services Corporation on items it had resold to the U.S. government. In the end, the court’s decision rested on statutory interpretation—or what the tax law actually meant.
In its opinion — Combs v. Health Care Services Corporation — dated March 16, 2011, the Court explained that when interpreting statutes, they look at legislative intent. In so doing, they give great deference to the agency in charge of implementing the statute. From their ruling, “With regard to a statute that an agency is charged with enforcing, we give serious consideration to the agency’s construction of it, so long as that construction is reasonable and consistent with the statutory language, and this is particularly true when the statute involves complex subject matter within the agency’s area of expertise.”
In this case, the Court gave great deference to the Comptroller’s office, even more so than usual because the statute in question was a tax statute. “Further, statutory exemptions from taxation-like the sale-for-resale exemption-are ‘strictly construed’ against the taxpayer because ‘they undermine equality and uniformity by placing a greater burden on some taxpaying businesses and individuals rather than placing the burden on all taxpayers equally.’” Therefore, the Court will accept an agency’s interpretation of a statute under its authority, unless that interpretation is deemed unreasonable.
Even after interpreting the evidence heavily in favor of the Comptroller, the Court denied all the State’s contentions and affirmed the district court’s judgment. In doing so, the Court commented that “the concept that a tax exemption must be ‘strictly’ construed ‘cannot be used as an excuse to stray from reasonableness.” In finding the Comptroller’s interpretation unreasonable, the Court stated that the Comptroller’s interpretation of the statute “leads to absurd results.”
Despite a recent court ruling upholding federal contractors’ right to a sales tax refund on items resold to the U.S. government, the House will soon consider a “fix” to the exemption that could end up costing taxpayers $200 million or more over the next two years.
The proposed change, buried inside Senate Bill 1811, would work by redefining the “sale for resale” exemption in Texas. In the past, items purchased by contractors for the performance of federal government contracts were exempt from the state’s sales tax. However, under SB 1811, the resale exemption would be restricted to taxable resales and would only be extended to items serving as “an integral part of performing a contract with the federal government.” Given that the definition of “integral part” is somewhat subjective, one can only imagine the legal fights to come over its interpretation.
Perhaps even more troubling, the “fix” was originally intended to reverse the court’s previous decision as it pertained to one company—the Health Care Services Corporation. However, in its current form, the bill will be felt by all contractors in Texas working with the federal government. This could potentially lead to many government contractors relocating to other, more tax-friendly states.
While the state’s finances are undoubtedly a challenge, removing exemptions and raising taxes on businesses and taxpayers is not the right course of action, especially in today’s economy.
The Bill & Melinda Gates Foundation, the world’s largest philanthropy, is teaming up with Pearson, one of the country’s largest developers of education materials, to create a new set of online courses. These courses will align with “common core”, a new set of curriculum standards passed in 40 states over the last several months. This article from the New York Times describes the pairing of these two education power houses in detail.
It is exciting to see two such prominent names in the education community picking up the ball on virtual education. The Gates Foundation has been a champion of improving public education through technological innovation and increased dedication to the STEM (Science Technology Engineering Mathematics) for many years, and the article mentions that with Pearson taking the lead on developing virtual education materials, other curriculum developers will likely follow suit.
With only a month to go in the current legislative session, hopefully Texas lawmakers will take note of national leaders in the education field taking such substantial steps toward enhancing digital learning, such as those in Rep. Ryan Guillen’s HB 3280, and expand virtual education in Texas.
The Independent Market Monitor overlooking Texas’s wholesale electricity market just issued a report finding that “there was no evidence or market manipulation or market power abuse in relation to the widespread power plant outages that occurred the first week of February.”
Ironically, the report was released the same day that the Texas House of Representatives passed, by a vote of 123 – 20, HB 2133, which would allow the Texas Public Utility Commission to “disgorge” revenue from companies that engaged in market power abuse.
The market monitor’s report confirms what we have previously noted, that there is no evidence of any market power abuse, and thus that have brought Texas the most competitive electricity market in the United States. Indeed, for the last six years, the market monitor has found no evidence or market manipulation or market power abuse. Instead, it has repeatedly noted the increased efficiency and competitiveness of the marketplace.
The Legislative Budget Board (LBB) recently released a report providing legislative recommendations for the delivery of services to at-risk youth in Texas. In doing so, the LBB examined the case files of 252 juvenile offenders, making the following findings:
More than half of the offenders had a “substance abuse issue”
Nearly half had a “mental health issue”
More than one-third “have experienced some type of early childhood trauma”
A quarter “have been a victim of abuse or neglect”
About one-fifth of them have been involved in a Child Protective Services intervention
Altogether, the report found that of the 252 juvenile offenders studied, 74 percent have experienced at least one of the above issues.
In light of these findings, State Rep. James White has pledged to work with members of the House Corrections Committee to reform the way that state agencies serve these at-risk youth. According to White, “a lot of social issues contribute to delinquent behavior, and many youth do not receive needed services until they commit crimes and are referred to the local juvenile probation department.”
Incorporating crime prevention into school-based programs, streamlining duplicative services and assessments, and streamlining duplicative services and assessments, and intervening effectively with those youths who simply misbehave in school to divert them from the juvenile justice system, are among the potential reforms the LBB report suggests ought to be considered. As Rep. White argues, “if we can identify young people who are showing at-risk indicators before they engage in criminal behavior, we hopefully can offer services… preventing incarceration.”
The report is valuable because it does not recommend throwing more money at the juvenile crime problem, but instead highlights how through better collaboration and coordination among school, social services providers, and the juvenile justice system and an emphasis on early intervention can maximize the results achieved through existing resources.
-Joseph A. Adams
Research Fellow, Center for Effective Justice
The Daily Cougar, student newspaper for the University of Houston, released this article recently discussing online learning. It absolutely got two things right: that there is great potential cost savings in online learning, and that our high schools probably are not doing the best job they could be of educating our students.
The rest of the article deserves closer examination.
There is a great deal of concern in the piece that online learning is a bastion for student slackers and schools looking for a cheap, misleading way to boost their academic performance. This argument ignores one of the central potentials of online education, that being that it is a way for schools to reach students who have had problems with more traditional learning environments. Might this mean that students who are perceived as “lazy” are drawn to those courses? Certainly. But those courses might also be what it takes to get students who have had problems engaging, or are even at dropout risk, to have an educational avenue that works for them.
Additionally, the article makes the claim that online curriculums tend to be less rigorous and/or inflexible relative to standard curriculums. Neither of these things are true, at least not in Texas. Online courses are held to the same standard as traditional courses regarding TEKS (and soon to be STAAR) readiness; you could make the case that they are held to an even higher one, as online courses have to go through a front-end approval process before they can be offered that traditional courses are not subject to.
Another concern brought forward is that online learning equates to an impersonal learning experience. While a student in an online setting might not have face to face contact with a teacher on a daily basis, the courses and learning experience can still be very personalized. There is currently legislation being considered here in Texas that would allow K-12 online students to complete courses at their own pace, during hours of their choosing, something traditional schools do not currently offer. Further, online courses do allow for a great deal of interaction with the instructor, even if it is not in the traditional face to face sense of the term. Skype, other webcam services, and email all allow for a great deal of communication between student and teacher in an online environment.
Let us be clear- online learning is not a magic bullet that will fix every education problem this country has. It is, however, a powerful tool for improving the existing system, and reaching students who traditional education might not work so well for.
A quick comparison of the current budget, known as the General Appropriations Act (GAA), the House’s engrossed version of the budget, and the Senate’s budget as reported from committee. Note: figures have been rounded where appropriate.
House vs. GAA
The House’s budget proposal would reduce All Funds appropriations by $17.8 B from their funding levels in the 2010-11 GAA;
The House’s budget proposal would reduce General Revenue (GR) appropriations by $3.1 B from their funding levels in the 2010-11 GAA;
The House’s budget proposal would reduce Federal Funds appropriations by $12.4 B;
As compared to the 2010-11 GAA, the House’s budget proposal would increase All Funds appropriations to two articles: Public Safety and Criminal Justice (+$198 M), and Business and Economic Development (+$59.1 M). Combined, the amounts appropriated in these two articles totals $257 M; and
As compared to the 2010-11 GAA, the House’s budget proposal would decrease All Funds appropriations to eight articles: General Government (–$442 M), Health and Human Services (–$5.6 B), Agencies of Education (–$5.7 B), The Judiciary (–$30 M), Natural Resources (–$349 M), Regulatory ($190 M), General Provisions (–$48 M), and The Legislature (–$41 M).
Senate vs. GAA
The Senate’s budget proposal would reduce All Funds appropriations by $5.8 B from their funding levels in the 2010-11 GAA;
The Senate’s budget proposal would increase GR appropriations by approximately $10 M;
The Senate’s proposed budget would reduce Federal Funds appropriations by $9.5 B;
As compared to the 2010-11 GAA, the Senate’s proposed budget would increase All Funds appropriations to four articles: General Government (+$73.6 M), Agencies of Education (+$833 M), Public Safety and Criminal Justice (+$936 M), and Business and Economic Development (+$3.4 B). Combined, the amounts appropriated in these four articles totals $5.2 B; and
As compared to the 2010-11 GAA, the Senate’s budget proposal would decrease All Funds appropriations to six articles: Health and Human Services (–$1.9 B), The Judiciary (–$39 M), Natural Resources (–$210), Regulatory (–$345 M), General Provisions (–$2.9 B), and The Legislature (–$13 M).
House vs. Senate
The Senate’s proposed budget appropriates $12 B more in All Funds as compared to the House’s proposed budget;
The Senate’s proposed budget appropriates $3.1 B more in GR as compared to the House’s proposed budget;
The House’s proposed budget appropriates $367 M more in General Revenue-Dedicated Funds as compared to the Senate’s proposed budget;
The Senate’s proposed budget appropriates $2.9 B more in Federal Funds as compared to the House’s proposed budget;
The Senate’s proposed budget appropriates $6.3 B in Other Funds as compared to the House’s proposed budget;
As compared to the House’s budget proposal, the Senate’s proposed budget would increase All Funds appropriations to seven articles: General Government (+$516 M), Health and Human Services (+$3.6 B), Agencies of Education (+$6.5 B), Public Safety and Criminal Justice (+$738 M), Natural Resources (+$138 M), Business and Economic Development (+$3.3 B), and The Legislature (+$28 M); and
As compared to the House’s budget proposal, the Senate’s proposed budget would decrease All Funds appropriations to three articles: The Judiciary (–$8 M), Regulatory (–$154 M), and General Provisions (–$2.8 B).
What if you, as a taxpayer, were able to receive the same level of public services, if not more, for fewer dollars and never had to worry about public pension crisis? Sounds pretty good, right? Well this is no pie-in-the-sky scheme; this is the power of privatization and its transformative effects are on full-display in a small town in Georgia.
“While cities across the country are cutting services, raising taxes and contemplating bankruptcy, something extraordinary is happening in a suburban community just north of Atlanta, Georgia.
Since incorporating in 2005, Sandy Springs has improved its services, invested tens of millions of dollars in infrastructure and kept taxes flat. And get this: Sandy Springs has no long term liabilities.
This is the story of Sandy Springs, Georgia—the city that outsourced everything.”
With only six weeks of the regular legislative session left, it’s getting crunch time for lawmakers in search of cost-savings and efficiencies. To help remind lawmakers that there are still plenty of opportunities out there to cut spending, here is a quick list of ideas for Article III.
Eliminate Regional Education Service Centers—Savings: $42.75 million;
Eliminate the Pre-Kindergarten Grant program—Savings: $208.6 million;
Reduce State Contribution to Teachers’ Pension Fund to Constitutional Minimum, 6 percent—Savings: $200 million;
Reduce the scope, programs, and functions of the Texas Higher Education Coordinating Board—Savings: $231.54 million;
Reduce Higher Education Formula Funding and Special Items—Savings: $2.03 billion.
TOTAL: $2.7 billion
For details on the recommendations listed above or for more ideas on how to reform the budget as it relates to Health and Human Services, please see: Article III: Education.
Tuesday, we celebrated the “Shot Heard ‘Round the World.” Today, we are celebrating the Texains victory at San Jacinto. Here is a brief history lesson on freedom to help us remember why these battles were so important:
“Our first legal argument is that the government’s attempt to use the Commerce Clause of the Constitution to mandate the purchase of a private product—in this case, health insurance—goes beyond Congress’s power. The reason there has never been a mandate like this in all of American history is because, up until now, everyone knew Congress lacked the power to impose one."
“I often give the example of the colonial period, when the colonists were boycotting British goods while demanding that King George III and Parliament repeal the Stamp Act and the Intolerable Acts. I am sure it was to the king’s dismay, but his own lawyer—the solicitor general—told Parliament that the boycott was legal under British law. In other words, the colonists could not be forced to buy British goods."
“Yet in 2010, we had a president and a Congress who believed they could compel Americans to buy a private product even when the king of England, whom we rebelled against, knew he did not have that power. And back then, we were merely subjects!”
– Ken Cuccinelli, Attorney General of Virginia, explaining Virginia’s lawsuit against ObamaCare.
Our friend Steve Hayward has just released his 2011 Almanac of Environmental Trends. It brings together in one place a record of environmental achievement that is quite at odds with the claims of environmentalist doom-sayers. We have to protect the environment of course, and regulations have an important role to play in that. But the devil is in the details. As I reported in a recent Weekly Standard article, many of the rules EPA has adopted and is in the process of adopting over the last two years will have devastating economic consequences, with little environmental benefit to show for it. The greenhouse gas regulations alone will be an economic disaster:
"According to some estimates, just in the next two years the new regulations could cost 1.4 million jobs and decrease U.S. business investment by 15 percent. One study estimates that GDP will be half a trillion dollars less by 2030. Another concluded the cost of gasoline will rise by 50 percent, electricity by 50 percent, and natural gas by 75 percent over the next 20 years. Transportation costs are the primary variable in food prices – so food prices will be affected. Low income Americans, who are particularly vulnerable to spikes in energy and food prices, will be hardest hit."
Contrary to what many environmentalists believe, sacrificing prosperity on the altar of environmentalism will do the environment no good at all. Economic prosperity is actually indispensable to environmental improvement -- partly because environmental regulations are expensive, and only a rich society can afford them, and partly because economic activity leads to innovation which leads to greater efficiency in energy use. As Steven Hayward explains:
"The ultimate reason environmental conditions in the U.S. have improved so much is economic prosperity and technological innovation. Or course regulation has played a role, but the problem is that our style of environmental regulation relates to the improvements in real conditions in much the same way that police brutality pushes down the crime rate (in other words, the EPA is the environmental equivalent of rogue cops). If you drop back and look at the data for the whole world (as I do in the Introduction to the Almanac), you will see that the nations with the best environmental conditions are those with strong property rights, economic freedom, and prosperity — three things environmentalists hate or define so narrowly as to be meaningless."
HB 2133, giving the Public Utility Commission (PUC) authority to order disgorgement of revenues from electricity companies, is set on the House General State Calendar for Thursday, April 21.
HB 2133 gives the PUC the ability to “order disgorgement of all excess revenue resulting from [a] violation … of the statutes, rules, or protocols relating to wholesale electric markets.” This is in addition to any penalties the PUC might impose.
What this means is that the PUC could order a generator to return any revenue from the sale of electricity into the wholesale market that the PUC determines was earned because of a violation, such as market power abuse. While this sounds reasonable on the surface, there are significant problems with this.
Senate Bill 529 is currently on the Senate Intent calendar for today, April 20th.
SB 529 imposes restrictions on contract negotiations between automobile manufacturers and franchise dealers. The restrictions placed on these contracts restrict the freedom of contract between parties.
Government should not interfere in contractual agreements between two private parties in a market economy. The unintended consequences of doing so could have long-lasting negative ramifications for an industry that is already reeling from government intervention.
The ability to freely contract with private entities is essential to a free market economy and one of the major reasons why Texas has created more jobs over the last five years than all the other states combined. This Legislature should seriously consider the effects of changing the course of direction that has led to the Texas’ economic prosperity.
In this session’s search for cost savings, lawmakers have debated everything from eliminating agencies to charging state employees who park in state garages. But until recently, one promising idea has been practically absent from the conversation—a hiring freeze.
The concept, laid out in House Bill 4, is fairly simple one. Unless absolutely necessary, state agencies would be required to delay hiring any new employees for the near future and would be prevented from diverting those funds to other uses—such as boosting salaries, wages, and benefits of other workers. And yet, in spite of its simplicity, a hiring freeze has the potential to generate some big savings, as seen below with some back-of-the-napkin calculations.
Based on the LBB’s budget summary for CSHB 1, the total number of full-time equivalent (FTE) positions provided for in the proposed budget for fiscal year 2012 amounts to 233,699. Using this figure as our starting point, and after making certain assumptions, we can estimate a minimum cost savings figure.
Let’s assume that—for reasons of public safety or political expediency—all of the FTEs in Article II: Health and Human Services (56,727), the Department of Public Safety (8,152), the Texas Department of Transportation (12,203), and the Texas Department of Criminal Justice (39,935) are off-limits. Based on this reasoning, the total number of FTEs subject to this amendment is reduced to 116,682 for the purposes of this exercise.
Next, we need to subtract the total number of higher education employees included in our total because, as we’ll see below, the amendment does not apply to them.
As defined in Section 317.001 of the Government Code, the term “state agency” does not include institutions of higher education—it is limited to only those entities in the executive, judicial, or legislative branches of state government. Using employment data from the State Auditor’s Office (SAO), we can determine that there were 157,726 FTEs in institutions of higher education for FY 2010, of which, only 50.9 percent of these were paid for by appropriated funds. Assuming the same level of higher education FTEs for FY 2012, the total number of FTEs that the hiring freeze would apply to is reduced by 80,282, leaving us with a total of 36,400 FTEs.
Now, using the SAO’s FY 2010 salary estimate, we can say that the average classified, regular FTE salary for the most recently completed year was $39,265. Assuming a 10% attrition rate for 2012 and 2013, we can then calculate an estimate:
3,640 (10% attrition in frozen FTE’s) X $39,265 (average annual salary per FTE)
$142,924,600 (approximate savings in FY 2012)
3,276 (10% attrition in frozen FTE’s) X $39,265 (average annual salary per FTE)
$128,632,140 (approximate savings in FY 2013)
$271,556,740 estimated savings for 2012-13 biennium
There are few policy initiatives that truly change the way government works, but HB 5 falls in that category. The constitutionally defined relationship between the states and the federal government has been under increasing assault since the beginning of the 20th century. The country is now experiencing the crescendo of federal overreach, particularly in EPA regulation and in health care. The interstate compact may prove to be the very tool needed for the states to use to restore federalism.
An interstate compact is an agreement between two or more states that is sent to Congress for ratification as required by Article I, Section 10 of the U.S. Constitution. Once ratified, the compact supercedes previous federal law. It is the states' opportunity to write federal law.
The State of Texas will face a budgetary crisis in Medicaid funding in the next legislative session. Under current law, the legislature will have to come up with an additional $14-$15 billion in general revenue for that one program alone. Also under current law, the state has almost no flexibility in the program design, i.e., benefits or eligibility, to create a sustainable system.
HB 5, the Health Care Compact, would allow the flexibility the state needs and would return the authority and the funding for Medicaid to the state, should the state so decide. And, that is really what this is about. Who decides?
In the case of HB 5, it's about who decides about your healthcare - a federal bureaucracy or the people of Texas and their elected state legislators. Texas is a beacon of hope for a nation in great need of hope renewed. In order to stoke that beacon brighter we need this reform. We can, and must, be the “city on a hill”. Texas needs HB 5.
With only six weeks of the regular legislative session left, it’s getting crunch time for lawmakers in search of cost-savings and efficiencies. To help remind lawmakers that there are still plenty of opportunities out there to cut spending, here is a quick list of ideas for Article II.
Health and Human Services Related Agencies & Programs
Consolidate the Department of Assistive and Rehabilitative Services into the Department of State Health Services—Savings: $7.2 million;
Reduce TANF Welfare to Work Exemptions—Savings: $10 million;
TOTAL: $84.2 million
For details on the recommendations listed above or for more ideas on how to reform the budget as it relates to Health and Human Services, please see: Article II: Health and Human Services.
With only six weeks of the regular legislative session left, it’s getting crunch time for lawmakers in search of cost-savings and efficiencies. To help remind lawmakers that there are still plenty of opportunities out there to cut spending, here is a quick list of ideas for Articles I, VI, VII, VIII, and X.
General Govt. Related Agencies & Programs
Eliminate the Texas Historical Commission—Savings: $22.2 million;
Eliminate funding for the Texas Film and Music Marketing program—Savings:$64.2 million;
Eliminate GR-Dedicated funding for the Texas Emission Reduction Program—Savings: $246.9 million;
Eliminate the System Benefit Fund—Savings: $109.8 million;
Eliminate the Skills Development Fund—Savings: $75.2 million;
Consolidate all medical boards into one health care regulatory agency—Savings: $8 million;
Eliminate the Healthy Texas program—Savings: $9.95 million;
TOTAL: $536.3 million
According to a recent Economist article, the United States’ faith in the free market is in decline. The article indicates that only 59% of Americans polled agreed that the free market was the best system for the future. It is no wonder that under the current economic climate, with a passion for government spending and regulatory uncertainty, that the confidence in our economic system would become shaky.
Interestingly, the countries with the greatest support for the free market – Germany and Brazil – have seen strong growth in recent years. The graph below indicates there is a correlation between economic growth and confidence in the free market.
SB 661, the PUC Sunset bill, is on Senate Intent for Thursday, April 14th, and may be up for debate. This bill includes many of the recommendations of the Sunset Commission from their review of the Public Utility Commission. While most aspects of the bill are good—please see our Sunset Report on the PUC, there is one provision in particular that represents a significant reversal in the direction of Texas regulatory policy toward our electricity market.
SB 661 gives the Texas Public Utility Commission emergency cease and desist authority. This provision represents a significant expansion of the PUC’s ability to regulate the electricity market and is a reversal of almost two decades of Texas electricity policy. Texas’ movement toward deregulation has given us the most competitive electricity market in the U.S. and brought tremendous economic benefits to the state through billions of dollars of investment and lower electricity prices.
If we are going to undertake a major shift in policy and put these benefits at risk, we should do so only if there is evidence that there is a significant problem in the electricity market. However, this is not the case. Whether the issue is prices, competition, or management of the electric grid, there is no evidence of any significant problems in the Texas wholesale or retail electricity markets. In fact, prices, competition, and transparency in the market are better overall today than at any time since the we started the move toward competition—and still improving.
There is simply no need to give the PUC emergency cease and desist authority. It already has cease and desist authority, and only needs to muster enough evidence to convince a judge to grant a temporary injunction in a case where there is a problem. Allowing the PUC to act first and prove its case later is not the type of regulatory policy that has made Texas the leading creator of jobs in the U.S. over the last ten years.
Since Texas began reducing government regulation of the Texas electricity market, there have been repeated attempts to reverse course and re-impose regulatory controls on the market. In fact, this has been a trend across the United States. Texas is one of the few states where these attempts been successfully rebuffed. Reversing course toward heavier regulation will cause significant harm to Texas consumers and the Texas economy by disrupting the market and creating regulatory uncertainty, which will ultimately increase the cost and the price of electricity in Texas.
One of the major opinions to emerge out of this session’s budget debate is the idea that the state’s 2012-13 budget lacks adequate resources to maintain vital programs and services. And since there is not enough money in the budget to go around, it’s argued, the Legislature should raise additional revenue through higher taxes and fees and raiding the rainy day fund.
The problem with this argument, of course, is that it ignores decades of largesse.
In fiscal year (FY) 1990, Texas’ entire budget totaled about $23 billion; yet by FY 2010, that figure had grown to nearly $93 billion, representing an increase of 300 percent—a rather remarkable level of growth when juxtaposed with population and inflation increases over the same period.
In 1990, Texas’ population numbered about 17 million; by 2010, the state’s population had boomed to a little over 25 million, resulting in an increase of 49 percent. Meanwhile, inflation, as measured by the Consumer Price Index, rose just 66 percent. Combined, the sum of population plus inflation between 1990 and 2010 increased just 115 percent.
So to recap—state spending has increased 300 percent from 1990 to 2010, while population growth plus inflation, arguably the best measure of how fast government spending should be growing, only increased 115 percent, all of which leads me to the question: “If state spending has outstripped population and inflation growth by almost 3-to-1 over the last two decades, how is it possible to claim that Texas government is underfunded?”
A delegation of California lawmakers think Texas is ahead of the curve when it comes to job creation and have organized a “fact-finding” mission to Austin later this week, according to the Austin American-Statesman.
While here in Texas, the group, led by Assemblyman Dan Logue and joined by Lt. Governor Gavin Newsom, will meet with Governor Perry and members of the state legislature to get a better understanding of how the Lone Star State has been so successful in luring jobs and businesses away from others.
“From 2008 to 2010, Texas added more than 165,000 jobs. During that same time period, California lost 1.2 million jobs,” said Logue. “In terms of creating jobs, Texas is clearly doing something right and California is doing something wrong. We are headed there to find out what we can do differently to help create jobs we desperately need in this state.” [emphasis mine]
Though Assemblyman Logue and the rest of the group are sure to learn a lot about the Texas economy in the coming days, it can probably all be boiled down to this: low taxes + predictable regulatory environment + limited government = a superior economy.
SB 18—the primary eminent domain reform bill this session—will hit the House floor this Wednesday, April 13. The bill is the product of six years of work by many parties and is an improvement over current law. However, SB 18 can still be improved. Below are descriptions of three of the pre-filed amendments that would add more substantial property rights protections to SB 18:
The “Buyback” amendment by Rep. Kolkhorst (p. 46): A major flaw with Texas eminent domain law is that once a property has been condemned, it can be used for just about any purpose—the condemnor is not required to use it for the purpose it was taken. SB 18 currently contains a buyback provision that attempts to address this problem by letting a property owner repurchase her property under certain circumstances. However, in most cases a condemnor can get around the buyback provision even if it does not use the property for the use specified in the condemnation proceedings. This amendment adds a new trigger to the buyback provision that would grant property owners the right to repurchase their property if the initial use of the taken property is not the public use for which the property was taken. It applies in all situations and is not tied to the 10 year time frame currently in SB 18, so avoids the concerns that both property rights advocates and condemnors have with the current provision.
The “Public Necessity” amendment by Rep. Sheffield (p. 35): Reflecting the U.S. and Texas constitutions provisions, SB 18 prohibits taking of private property unless the taking is for a public use. While this is a good provision, it falls short of accurately reflecting current takings law on public use. A 2005 3rd Court of Appeals decision in Whittington v. City
of Austin clearly explains the current requirement in law: “There are two aspects to the ‘public use’ requirement. First, the condemnor must intend a use for the property that constitutes a ‘public use’ under Texas law. Second, the condemnation must actually be necessary to advance or achieve the ostensible public use. …. This second aspect of public use is commonly termed the ‘necessity’ or ‘public necessity’ requirement.” This is also seen in the inclusion of the term “necessary” in many sections of statute, such as Section 251.001(a), Local Government Code: “When the governing body of a municipality considers it necessary, the municipality may exercise the right of eminent.” This amendment simply inserts the word “necessary” into SB 18 so that a taking is prohibited unless it is necessary for a public use.
The “Public Use” amendment by Rep. Phil King (p. 58): According to the United States and Texas constitutions, eminent
domain can only be used for a public use. However, the Texas Legislature and Texas courts have closely followed the national trend of blurring the distinction between public use and public purpose. For instance, Sec. 251.001 of the Texas Local Government Code states: “When the governing body of a municipality considers it necessary, the municipality may exercise the right of eminent domain for a public purpose to acquire public or private property, whether located inside or outside the municipality, for any of the following purposes.” This confusion between public use and public purpose is what led the Supreme Court in its Kelo decision to allow takings for the purposes of increasing tax revenue and economic development, rather than limiting takings to public uses like building public schools and roads. This amendment simply inserts the constitutional term “public use” in place of “public purpose” in the provisions in statute that authorize the use of eminent domain for cities, counties and school districts. This is the next step—after banning takings for economic development purposes—to ensure that takings conform with the original vision of public use as contained in the Texas and U.S. constitutions.
The Texas Public Policy Foundation has provided extensive research and commentary on this issue to help Texans understand what is wrong with eminent domain law in Texas and what can be done to fix it.
Here is a brief listing of the resources that are available:
Property rights are the most fundamental of all of our rights. Texans have waited a long time to see them restored. As the Texas House of Representatives debates SB 18, it is worth taking the time—and the risk—to get it right.
As Memorial Day weekend approaches, some experts are predicting that the average price for a gallon of gasoline could soon reach the $5 mark.
According to PFG Best’s oil analyst Phil Flynn, “We could see $5 a gallon if things take a turn in the Middle East. Right now, we’ve lost Libyan oil. If you lose one more country’s oil, or put it at risk, then I think the possibility of $5 a gallon is a real one.”
With the very real possibility that Texas motorists could soon be paying even more at the pump—at last check, the average price for a gallon of Regular Grade gasoline in Texas was $3.71, up from $2.75 one year ago, according to AAA’s Daily Fuel Gauge Report—it is a bit curious to hear some, like the Texas Transportation Commission (TTC), call for “modest increases in taxes and fees.”
While the proposed tax and fee increases are, no doubt, meant to improve transportation funding, now is clearly not the right time to raise taxes, especially when state and local governments can still raise additional revenue for roads and highways without raising taxes (see here, here, and here).
The road ahead is treacherous enough for Texas motorists; there is simply no need to pile on when we don’t have to.
For most Americans, today is an especially great day.
That’s because today, April 12th, is Tax Freedom Day (TFD)—the day when, according to the Tax Foundation, the average American has worked long enough to pay for his or her share of the federal, state, and local tax burden and can finally begin keeping what they earn. This year’s TFD falls on the 102nd day of the year, three days later than it did in 2010.
For those of us here in Texas, our state’s Tax Freedom Day, April 7th, actually fell a bit sooner this year than the U.S. TFD.
Among the other states, Connecticut has the dubious honor of celebrating TFD on the latest date in the Tax Foundation’s study with a date of May 2nd, while Mississippians have the pleasure of celebrating TFD earliest of all the states, with it falling on March 26th.
House Bills 364 & 365 - Undoing the Prohibition on Economic Development Takings
It has been almost six years since the U.S. Supreme Court issued its infamous Kelo v New London case, allowing governments to take property for economic development purposes instead of for only public uses.
Texas responded to Kelo almost immediately by prohibiting takings for economic development purposes in 2005. And in 2009, the citizens of Texas added to this protection by adopting a related constitutional amendment. Yet now, even as the Legislature is moving ahead with more property rights protections in other legislation, HB 364 and HB 365 would unnecessarily undo some of these private property protections.
HB 364 (on the General State Calendar Friday, April 8) would exempt a municipality with a population of more than 1.9 million (Houston) from the constitutional and statutory bans on takings for economic development purpose if a property is occupied by a condominium where “all lawful occupation of or construction activity for the condominium has ceased, or reasonably appears to have ceased, for more than 365 consecutive days.”
HB 364 is a very blunt instrument for unifying title for the purpose of eliminating a vacant lot—especially since there are other ways this issue can be dealt with. It is really a matter of convenience rather than necessity.
HB 365 grants the same exemption to Houston to condemn for economic development purposes, except that it is for when a property is occupied by multi-family dwellings, i.e., apartments or related structures. Yet there is not the same problem with apartments with multiple missing owners as there might be with a condominium. It would undo the private property protections given Texans back in 2005 without justification.
In response to my March 31 op-ed, “Texas Students Should Not Take a Back Seat to Research,” University of Texas-Austin President Bill Powers counters with “At University of Texas, research enhances teaching,” in today’s Houston Chronicle. His response is not so much a rebuttal as a defense for research. I have no quarrel with the value of his selected citations of research, but the picture is much wider than the one he paints.
In my 49 years of working in higher education as a professor and vice president, I have witnessed endlessly that departmental chairs, deans, presidents, and even trustees will never intervene to say that any topic of research has little or no value. Anything goes. No administrator will say, “We do not need to conduct research on how many angels can rest on the head of a pin.” The point survives my exaggeration. I could provide a voluminous list of real examples.
Harry Lewis, former dean at Harvard, writes: “Academic presses now publish books selling fewer than 300 copies. ‘The demands of productivity,’ a humanities editor says, ‘are leading to the production of much more nonsense.’”
The problem here is that such futile research costs taxpayers money and takes professors out of the classroom—leaving students to be taught by teaching assistants.
A few years ago the Texas Public Policy Foundation commissioned research on this problem. Researchers found, for example, that at Texas A&M in the Spring semester 2006, there were 28 sections of freshmen Composition and Rhetoric (English 104), 25 sections of which were taught by young, inexperienced teaching assistants. Professors were given release time from the classroom to conduct research.
The taxpaying public should demand transparency and accountability in all university research.
Retired, I teach at Lone Star Community College just for the pleasure of it; I enjoy seeing light bulbs turn on. Every year a senior faculty member sits in on my class to evaluate my teaching ability, providing me and the administration with a written evaluation. University professors are not subjected to this written evaluation process, either for their teaching or their research. Too bad for students.
A critical professor asked how I know that a professor is “good.” His logic is curious. He is implying that there can be “bad” professors—in which case, why are they permitted to teach? Should bad teachers, including those with tenure, be fired? I suspect that this critic approves of tenure—meaning that bad teachers can’t be fired. He argues in circles.
On the matter of accountability, another curious matter arises. Football coaches, who work with bodies, are subject to intense accountability. Professors, who work with minds, are not. Go figure.
Finally, it is often argued that if we question research, we are “anti-intellectual.” This is a non sequitur because research, as Dean Lewis asserts, can be valuable or it can be “nonsense.”
Yesterday, Congress voted to block a Federal Communications Commission (FCC) initiative to regulate the internet under the guise of “net neutrality.” Supporters of net neutrality will tell you the regulation is necessary to keep the Internet “free and open” and to prevent corporations from slowing down the internet. As explained by the Heritage Foundation, “in this doomsday, apocalyptic, dystopian future, only the FCC can save the day with more and more government regulations.”
The Texas Public Policy Foundation has filed comments with the FCC, as well as released a study entitled “Net Neutrality: Far From Neutral,” opposing the adoption in rule of the proposed principles. The principles are unneeded and, worse, will hinder the achievement of the very goals they are intended to promote. In fact, the current marketplace has fostered investment and innovation, protected users’ interests, and promoted competition, so there is no need for the FCC to step in and create burdensome regulation.
Importantly, the FCC doesn’t even have the legal authority to enact these regulations. Last year, the U.S. Court of Appeals ruled that the FCC’s attempt to regulate the Internet was outside the scope of its authority. That didn’t stop the FCC, though. It went ahead and issued new regulations anyhow.
As FCC commissioner Robert McDowell explains, “everybody wants an open Internet that enhances freedom, but that’s what we have today. We already have enough consumer protection laws on the books to cure many of the hypothesized fears (that some see). The goal should be to make the market more competitive. All we are going to do with this FCC decision is clog up the courts and increase billable hours for lawyers; litigation will supplant innovation.”
Yesterday’s House vote is a step in the right direction of blocking net neutrality rules and ensuring the continued success and innovation of the Internet.
The Supreme Court ruled Monday that an Arizona law allowing individuals who donate money to private school scholarships to receive a tax credit was constitutional. This National Review article details the ruling. While the Arizona program involves only tax credits and no state expenditures, opponents claimed the program essentially directs state tax dollars toward religious private schools. Justice Anthony Kennedy rejected the notion that the money for the scholarships belonged to the state:
“Contributions result from the decisions of private taxpayers regarding their own funds,” he said.
This is a huge victory for proponents of school choice, which is becoming an increasingly bipartisan issue. According to the article, the Obama administration argued strongly to get this ruling, indicating the benefits of school choice have gained substantial momentum over the last few years.
Similar legislation is on the table in Texas this session. HB 1115, by Rep. Ken Paxton, creates a franchise tax credit that would allow businesses to receive tax credits for money donated to education scholarships. The program is obviously not for individual donors, as the Arizona one is, but the principle is the same, and the cost savings are significant. The bill estimates that it could save Texas as much as $80 million over the biennium.
In a session where finance debates and school choice issues have dominated the education landscape, HB 1115 gives Texas a chance to save money and increase options for parents who want the best education possible for their student. The Supreme Court says “go” on tax credits. We should take this ruling and run with it.
What has been the primary cause of rising electricity prices in Texas?
Surprisingly, the answer is renewable energy. State-enacted renewable energy mandates raise the cost of electricity by requiring electricity companies to produce or purchase expensive renewable energy. State and national energy requirements distort the energy market by creating artificial demand for renewable fuel sources that didn’t previously exist. Furthermore, government renewable energy programs work by decreasing electricity consumption, reducing economic growth and decreasing wealth for most Texans.
As costs for renewable fuels rise, Texans will begin to pay mounting costs that producers should have to shoulder. First, building transmission lines to transfer wind-generated electricity from storage in the Competitive Renewable Energy Zones will cost Texans approximately $1.3 billion annually by 2015. Producers pay nothing for these lines. Furthermore, increasing wind generation capacity to utilize the new lines and employing backup generation could cost Texans an additional $1.82 billion per year. In light of these costs, some consider wind energy “the most expensive form of generation we have in Texas.”
Meanwhile, some claim that support to traditional fuels distort the Texas market. Such a claim underestimates the much more market distorting renewable fuel subsidies. For example, wind energy receives $23.37 of subsidy per unit of production; nearly fifteen times more than the nuclear, per-unit, subsidy of $1.59, and nearly 53 times the per-unit subsidy that coal receives.
Several bills in the Texas Legislature would increase the state’s renewable portfolio standard (RPS) and therefore require companies to produce even more electricity from renewable sources. House Bill 774 proposes to require an additional 1,500 megawatts, of non-wind, renewable electricity generation by 2020. This would distort the market further with exorbitant subsidies to costly electricity sources such as solar and others. Instead, Texas should eliminate its current RPS to save Texans as much as $41 million annually.
-Ben Snodgrass
Research Fellow, Center for Economic Freedom
EPA administrator Lisa Jackson was interviewed for a Time magazine piece, "The Republican War on EPA Begins--But Will They Overreach?" Earlier in the week, I ran my own piece on this topic, "EPA's War on American Industry." War analogies are common in political discourse, but I would argue that my analogy is more apt than Time's, because EPA is actually threatening to cause economic damage on the scale of a major war.
EPA is on defense now because a strong majority in both Houses of Congress wants to strip it of the power to regulate greenhouse gases. With possibly enough Democrats to defeat a filibuster, the Senate vote, which is likely to take place this week, will be very close. In what history will remember as one of her more embarrassing moments, Jackson criticized the congressional effort in the interview accompanying the Time story:
The biggest criticism that I've leveled – and I've done it in my hearing testimony – is that what the current efforts do is overrule scientists on a scientific finding. Congress is essentially passing a law that says, We, a bunch of lawmakers, have decided what the science is on this issue. And that to me is what this Congress could be remembered for, more than anything else. History will forget a lot of the day-to-day, inside the beltway discussions about riders and budget and trying to get rid of or defund the EPA, but I don't think that history will forget the first time that politicians made a law to overrule scientists.
The congressional effort has nothing to do with overruling scientists, and everything to do with reclaiming for Congress the enormous responsibility of balancing the interests at stake here. Scientists are in no position to balance the potential danger of climate change vs. the benefits of regulation vs. the costs to society of that regulation -- they have no constitutional power to do so and in fact they have made no attempt to do so. It is Lisa Jackson's EPA that has arrogated to itself the power to regulate virtually all economic activity in the name of preventing climate change. (This would be a tall order -- the seas have risen about 350 feet since the last ice age).
Lisa Jackson can derisively dismiss that "bunch of lawmakers" all she wants, but if the scientific consensus is that Congress should cede the power to regulate the American economy to the EPA, that's just too bad. The Clean Air Act was intended to regulate emissions of pollutants that pose a direct chemical danger to human health. It was not intended, and is not at all structured, to regulate all economic activity in order to manipulate the relative proportions of gases in the atmosphere we breathe, or to counteract cycles of climate change that are not principally the result of human activity. In another arrestingly unhinged comment, Jaskson told Time that the EPA actions are actually "deregulatory" because EPA is generously exempting (for the moment) medium- and small businesses from EPA's newfound power over America's economic activity. She's referring to the Tailoring Rule, in which EPA brazenly rewrites the Clean Air Act standards on emissions because of the "absurd results" (EPA's term) of regulating greenhouse gases according to the black-letter statutory standards. When an executive branch agency starts rewriting its own enabling statute at will, it can expect congressional opposition.
Suffice to say for now that Jackson is egregiously misleading the American public when describes the EPA actions as "deregulatory" and nothing more than a "scientific finding." EPA's bid to regulate greenhouse gases is one of the most audacious and dangerous power grabs in the history of administrative agency actions, and it is no wonder that Congress wants to stop it.
Settlers came to Texas for the hope of a better life and more freedom, often posting the now-famous signs on their door “Gone to Texas”. Many came almost 200 years ago to escape their heavy debt after the Panic of 1819.
Today, people are moving not because of debt they have incurred but because of the debt their state and local governments have incurred. One noteworthy couple will soon be leaving Illinois for Texas. Roger and Tina Keats have been very active in the community and in state politics, but they say enough is enough.
"We have the disadvantage of knowing too much," Tina said. "During the last election I would talk to people about the state's pension liability and the budget deficit and they wouldn't know what I was talking about. Where does it stop? I don't know. Even states like California and New York know they have to do something to get their house in order. This state has not accepted that."
Roger, a former Illinois state senator with a record of fighting corruption in government, said in a letter to friends, “But it is time to go where there is honest, competent and cost effective government. We have chosen to vote with our feet and our wallets.” His letter also pointed to the 67 percent increase in income taxes recently ratified, high sales and property taxes, and the mammoth unfunded pension liability.
The Texas House will debate the appropriations bill this weekend and, along with it, the economic future of our state. Perhaps this is a good time to remember why people are moving their businesses and their families to our state. It is a good time to remember why one-fifth of the jobs created in the nation were created in Texas. Why even with all the growth in population, the unemployment rate is lower than the national average. “Gone to Texas” could have been posted on hundreds of thousands of doors as people from across the nation have voted with their feet in favor of low taxes, jobs, and liberty.
The Board of Education in Douglas County, Colorado has instituted a landmark school choice program. This article from their local NBC affiliate announces the passage of the program, which is the first of its kind in the United States.
What makes this program so strong is that it is open to all who wish to participate, with no eligibility restrictions on student ability or income. The maximum dollar amount of the “education scholarships” is $4,575, or 75% of the district’s per pupil revenue. The remaining 25% goes toward administering the program and additional revenue for the district.
This is a major victory for advocates of school choice. Douglas County has 61,000 students, making it the largest school district in Colorado. If such a substantial district can successfully administer a voucher program, it will show other education leaders that similar programs should be instituted in their areas. Here in Texas, where we are facing an unprecedented budget shortfall, particularly in education funding, options like the Douglas County voucher program should definitely be on the table. It is the right fiscal move, and more importantly, the right move in regards to giving parents the right to choose the best education for their children.
There are some choice options in Texas. We have charter and virtual school systems, and tax credits may be around the corner. This is not to say we could not be doing a great deal more. Currently, there is a hard cap of 215 charter schools in Texas. That needs to go. Virtual education is over-regulated at the state level. Those restrictions should be loosened so school districts and private providers have the greatest possible ability to provide virtual options for their students. Voucher programs like the one in Douglas County are something we do not have at all. As school finance and education mandates are re-worked through this legislative session, we should be focused on constructing an environment that is conducive to allowing our school districts to make similarly bold moves when it comes to school choice.
Recently, legislation was filed that would institute a “loser-pays” system in Texas where the loser pays the litigation costs for the prevailing side. Governor Rick Perry has touted loser-pays as the next step of tort reform in Texas, and as seen in this Wall Street Journal article, he’s right. The costs of our nation's tort system amounts to roughly 2.2% of the total gross domestic product (GDP).
Lawrence McQuillen explains the impact of frivolous lawsuits on the economy in the Wall Street Journal: “[A]ny true estimate of the costs of America’s tort system must also include these dynamic costs of litigation--—the impact on research and development spending, the costs of defensive medicine and the related risk in health-care spending and reduced access to health care, and the loss of output from deaths due to excess liability.” These opportunity costs leave us wondering what benefits society might have seen had not our productive resources been diverted to deal with these harmful lawsuits.
So what is the problem with a loser-pays system? Plaintiffs’ attorneys, like Thomas Melsheimer argue that the litigation costs will skyrocket. He wrote, “It’s really hard to imagine there being much grass-roots support for it once people understand that it could make the ordinary citizen suing Wal-Mart pay for Wal-Mart’s legal fees if they lose,” he said.
However, this argument ignores the fact that a loser- pays system would help overcome the current high transaction costs that bar access to the courts and therefore give greater access to the judicial system to those who have truly been harmed. Such a system would decrease the cost of litigation and ensure that only meritorious claims are heard.
Funding for public education has been the subject of much discussion lately as the legislature considers K -12 budget reductions. So far, the debate has tended to emphasize the short-term impact of the proposed reductions while largely ignoring long-term growth trends in public education.
Since it is disingenuous to only focus on the immediate impact of the reductions, here are a few facts to consider about the long-term trends in spending, employment, and administrative pay in public education.
Decades of Spending Growth. Over the past two decades, public education spending has soared. Between the 1990-91 biennium and the 2010-11 biennium, All Funds appropriations for public education, located in Article III, grew from $12.9 billion to $52.7 billion, an increase of 309 percent. Meanwhile, over the same period, population growth plus inflation increases amounted to just 115.5 percent.
From January 2010 to January 2011, employers in Texas added 253,900 new positions, meaning the Lone Star State was responsible for about a fifth of the nation’s job creation. The states with the next best job growth, California and Pennsylvania, added just 89,400 and 70,300 new jobs, respectively.
Such impressive job creation statistics beg the question: What does Texas know that all of these other states don’t?
The answer, of course, is that Texans understand that meaningful job creation occurs in the private sector and that by reducing the footprint of government, the economy will naturally create jobs on its own.
A report released earlier this week by the Texas Public Interest Research Group (TexPIRG) gave Texas an “A” for its efforts to bring about greater government transparency.
According to the TexPIRG’s report, “Following the Money 2011: How States Rank on Providing Online Access to Government Spending Data,” Texas earned its high mark for the availability and searchability of data, online tools, and the amount of detailed information it maintains online for such things as contractors, contracts, tax expenditures, economic development incentives and grants, ARRA funding, and local government spending.
Much to its credit, Texas was only one of two states to earn an “A” grade this year—the other state being Kentucky.
This year’s high mark represents a significant improvement over last year’s “B” grade.
The front-line in the battle for private property rights is currently in Mount Holly, New Jersey. Until recently, Mount Holly was a community of more than 300 families. The township has bought more than 200 homes under the threat of eminent domain, and has now notified the other home-owners that they will be condemned through eminent domain if they do not accept the offers for their homes.
The Township wants to give the land to a Philadelphia developer, which plans to build hundreds of higher-priced townhouses, apartments and a business center. While this type of taking is not legal in Texas anymore, abuses are still happening. As Texas continues to push eminent domain legislation this session, policymakers should be very mindful of protecting Texans’ fundamental private property rights.
Historically, one of the most vital arguments against cuts in health and human services has been that it “throws granny out of the nursing home.” Today, the Associated Press reports that some Texas lawmakers are beginning to say just that.
Typically, this argument is less than substantive and aimed more at halting debate on health and human services spending than solving problems. Because of restrictions placed on states by ObamaCare and by the stimulus bill that limit the state's flexibility to deal with Medicaid costs, most of the cuts in Medicaid are made up through provider rate reductions –
one of the few significant options left to legislators.
Essentially, the reimbursement rate for nursing homes, as well as other providers, would be reduced by 10 percent under the provisions of the bill currently being debated. Many of the long term care provider
