Nope. That and more in The Insider, Winter 2013, available now.

Editor’s Note: Assembly Lines, James Madison, and Federalism

In “One Piece at a Time,” Johnny Cash tells the story of an assembly line worker who takes home one automobile part at a time in his lunch box. After a number of years, the worker starts putting together his new car that didn’t cost him a dime. He finds, however, that getting the car to run requires some retrofitting of the parts. When he applies for a title, he must declare: “Well, it’s a ’49, ’50, ’51, ’52, ’53, ’54, ’55, ’56, ’57, ’58, ’59 automobile/ It’s a ’60, ’61, ’62, ’63, ’64, ’65, ’66, ’67, ’68, ’69, ’70 automobile.”

Cash’s man, by necessity, focused on the components of his project and forgot to think about how those components would be arranged. Something similar happens when we talk about federalism. We tend to glorify states, emphasize their rights, and think in terms of balancing federal and state power. But just as a pile of automobile parts won’t run unless put together in the right way, merely having some distribution of powers among the states and the federal government will not yield a regime that knows its limits and respects the rights of citizens.

The kind of federalism you get depends on how the powers are arranged. As Michael Greve explains in our cover story, the federalism we have today is too often a cooperative cartel between the states and the federal government. That set-up drives government growth, blurs accountability, and leaves citizens no escape from bad policy regimes. What we need, says Greve, is to recover James Madison’s idea of federalism as a system of competition between the states.

Of course, states do still compete in a number of policy areas. We see that competition in Michigan’s recent right-to-work reforms. Simply put, the state where the assembly line was invented got tired of losing jobs and people to right-to-work states. No amount of union history could forever prevent the learning of the lessons that competition was teaching. We talk with Joe Lehman of the Mackinac Center about Michigan’s historic switch.

In other articles, Rob Gordon shows how conservatives have a better set of ideas for conservation, Salim Furth identifies the reasons for our slow recovery, and Mark Harris provides some everyday tips for think tank cyber security.

Some tips from parent and school choice activist Virginia Walden Ford:

• Go where the parents are—their neighborhoods, community centers, churches—not to ask them to always come to you.
• Communicate with parents regularly through letters, newsletters, media, churches, civic organizations, etc.
• All parents have something they can add—some make speeches; some pass out flyers; each has his own way of contributing.
• It’s all about the follow up: If you present yourself as helping parents, be prepared to go the extra mile to make sure that parents have you with them as they complete the process of finding educational opportunities for their children.
• Make sure that parent meetings start on time, do not last too long, have childcare, refreshments, and are structured to provide the best information possible in order to empower parents.
• Choose your battles. Don’t get into debates with parents, since debating tends to confuse and frustrate parents who are hungry for solutions to educating their children. They ultimately have to make the final decision for their children and have a right to hear all sides. When you encounter opposition, keep your calm and give parents valuable information that will be helpful to them in their search.
• Make sure you have steps that give parents a vision of where you are going and how they fit into that vision. [“School Choice: An Activists Guide,” by Virginia Walden Ford, in “Choosing to Succeed,” ed. Lindsey Burke, January 28, 2013, The Heritage Foundation]

Forty-eight percent of college graduates have jobs that do not require a four-year college education, finds a new study by Richard Vedder, Christopher Denhart, and Jonathan Robe of the Center for College Affordability and Productivity. They also report: “In 1970, fewer than one percent of taxi drivers and two percent of firefighters had college degrees, while now more than 15 percent do in both jobs.” Vedder, Denhart, and Robe contend the country is churning out too many college graduates, and is wasting resources on higher education that could be better spent elsewhere—not the least of which are the years healthy young adults spend not being productive so that they can spend more time socializing.

But what of the many studies showing that college graduates earn a significant wage premium over high school graduates? The authors point out a number of problems with inferring from those data that college is worth the cost. Most crucially, they contend that the value of a college degree lies in the signal it sends potential employers about a graduate’s fitness for employment rather than in the actual education the candidate has received. And as employers have increasingly relied on that signal to screen job applicants, more people have pursued the credential, causing its value for recent graduates to decline.

As labor market realities make the real value of a degree clearer, we might expect fewer people to choose to go to college, and the problem would fix itself. As Vedder, Denhart, and Robe point out, however, there is a major problem with that scenario: Massive federal loan subsidies already incentivize college attendance, and politicians may be planning to increase the subsidies. President Obama, for example, has stated that the nation’s goal should be to increase the number of people attending a four-year college so that “by 2020, America will once again have the highest proportion of college graduates in the world.” [“Why Are Recent College Graduates Underemployed? University Enrollments and Labor Market Realities,” by Richard Veder, Christopher Denhart, and Jonathan Robe, Center for College Affordability and Productivity, January 2013.]

• Celebrate school choice. Next week is National School Choice Week. Hundreds of organizations across the country are holding events to highlight the value of giving families educational options and introducing competition into education.

• If you can’t attend the National Review Institute Summit this weekend, follow the action by checking the Twitter hashtag #NRIsummit. Some of the programs: Does the Constitution Have a Future, Solutions from the States, Do Demographics Doom the Right, and What Is a Conservative Foreign Policy? Heritage President-elect Jim DeMint will give a talk at the Saturday dinner.

• Hear John Mackey, Whole Foods co-founder and author of Conscious Capitalism: Liberating the Heroic Spirit of Business, talk about his vision of free market capitalism as a path of ethical transformation. Mackey will speak at the Cato Institute on February 4, at 5 p.m.

• Assess the accuracy of the movie Zero Dark Thirty. On January 29, at 10 a.m., the American Enterprise Institute will host a panel discussion featuring three CIA veterans who were involved in the hunt for Osama bin Laden.

Note to readers: A short and hectic week left us little time to produce the usual rundown. Instead, we offer below a survey of the most interesting things we read this week. Hope you enjoy the links.

• In his second inaugural address on Monday, President Obama showed his understanding of constitutional government to be very different view from that of the Founders. “Obama wants to reframe the Founding away from its emphasis on the unalienable rights we hold over government to an emphasis on government as the collective expression (and regulator) of everything we do, and the central expression (in the form of President Obama) of the call of history. And today, that call he hears is for government to redefine marriage and heal the planet.” [“Obama’s Radicalism Revealed,” by Matthew Spalding, The Foundry, January 23]

• President Obama’s January 2012 recess appointments of three individuals to the National Labor Relations Board are invalid, according to The U.S. Court of Appeals for the District of Columbia Circuit Court. In a case involving a dispute between a canning company and its union, the Court ruled that the NLRB had no authority to issue an enforcement order in February 2012 because it lacked a quorum. The Court rejected the administration’s theory that recess appointment can be made during normal breaks within a Senate session. The Court further ruled that recess appointments can be made only for vacancies that occur during a recess of the Senate. In other words, the President cannot wait for a recess to make an appointment in order to avoid the need for Senate approval. [Canning v. NLRB, U.S. Court of Appeals for the District of Columbia Circuit Court, January 25]

• Thanks to their state’s renewable energy standards, Californians will end up paying about 13 percent more for their electricity in 2020. That’s on top of an expected increase of nearly 20 percent that will happen because of other new regulations on the energy sector, including a cap-and-trade program. All part of California’s one-state war on global warming. [“The Looming Rate Bomb: The 33 Percent Renewable Electricity Mandate and Electric Prices in California,” by Benjmain Zycher, Pacific Research Institute, January 2013]

• Secretary of State Hillary Clinton takes responsibility for security at American embassies, Secretary of State Hillary Clinton told Congress on Wednesday. In her testimony on what went wrong in Benghazi , Libya, on 9/11/2012, she also asked (seemingly rhetorically): “What difference, at this point, does it make” whether the deaths of four Americans were caused by terrorism or a protest that got out of hand? She further said she couldn’t have been aware of the embassy’s own warnings about its deteriorating security, explaining: “1.43 million cables come to my office. They're all addressed to me.” But, she takes responsibility! [“Clinton on Benghazi: Protest, Terrorist Attack—What Difference Does It Make?” by Helle Dale, The Foundry, January 24; and “Clinton Takes One for Her Team,” by Morgan Lorraine Roach, The Foundry, January 24]

• As both Congress and the Obama administration contemplate new federal money for infrastructure, they might notice what the rest of the world seems to have noticed: private funding for infrastructure works better than public funding. [“Infrastructure Investment: A State, Local, and Private Responsibility,” by Chris Edwards, Cato Institute, January 2013]

• It’s still early days for think tank evaluation, much like stock exchanges were before anyone calculated a price/earnings ratio. But James McGann’s think tank rankings (www.gothinktank.com) have taken a significant step toward answering the question: Which think tanks are most effective? [“Thinking about Think Tanks: Which Ones Are the Best?” by Alejandro Chafuen, Forbes, January 23]

• Despite President Obama’s pro-labor policies, unions have lost more members during Obama’s four years in office so far than they did during President Bush’s eight. [“Why the Unions Are Shrinking,” by Diana Furchtgott-Roth, Washington Examiner, January 22]

• “Technically, according to the National Bureau of Economic Research Business Cycle Dating Committee, the most recent recession ended in June 2009. In theory, the rationale for deficit spending ended on that date as well. Of course, economic conditions today are not very satisfactory. But if it is necessary to run deficits whenever conditions are ‘not very satisfactory,’ when will we not run deficits?” [“16 Tons of Keynesian Economics,” by Arnold Kling, The American, January 22]

• Average hourly wages adjusted for inflation might be liberals’ favorite statistic; but if you understand what it’s really measuring, then you understand that it doesn’t tell the story of middle class stagnation that liberals think it does. But if you believe that tale, then you should tweet it on your iPad or your iPhone, whichever you have handy. [“The Myth of a Stagnant Middle Class,” by Donald Boudreaux and Mark Perry, Wall Street Journal, January 23]

• Part time professors, like part time workers at Taco Bell, are feeling the pinch of ObamaCare mandates, too. Some schools are trying to make sure their part-time teachers do not work more than 30 hours per week, so that they can avoid ObamaCare’s mandate to provide them with health insurance. [“Confused Professors Shocked Schools Are Cutting Their Hours to Avoid Obamacare Penalties,” by Marc Thiessen, AEIdeas, January 23]

• Ponder the challenges facing conservatism at the National Review Institute Summit. Lots of other smart conservatives will be on hand to share their ideas. The cost includes political stars like Rep. Paul Ryan, Sen. Ted Cruz, Gov. Scott Walker, and Mia Love; and also some of your favorite think tankers, like Jim DeMint of The Heritage Foundation, Arthur Brooks of the American Enterprise Institute, John Hood of the John Locke Foundation, and Heather Higgins of Independent Women’s Voice. The Summit begins January 25 at the Omni Shoreham Hotel in Washington, D.C.

• Find out how government policies deepened and prolonged the Great Recession. Casey Mulligan will talk about his new book The Redistribution Recession: How Labor Market Distortions Contracted the Economy at The Heritage Foundation at noon on January 23.

• Hear Os Guiness talk about his new book, A Free People's Suicide: Sustainable Freedom and the American Future. The Tocqueville Forum will host Guiness at its Mortara Center in Washington, D.C.. The talk begins at 6 p.m.

• Make a video answering the question: What is the proper role of government in society. Then send submit it to the Institute for Humane Studies Summer Seminar Video Contest. The deadline is February 15.

•Apply for The Young Conservative Leaders Fellowship, “a unique six-month program that will train young professional conservatives on the philosophical foundations of political conservatism,” sponsored by the Young Conservatives Coalition. Anyone under 40 can apply. Applications are due March 1.

On Wednesday, President Obama observed National Religious Freedom Day, as Presidents usually do, by issuing a proclamation celebrating the enactment in 1786 of the Virginia Statute for Religious Freedom. That statute became a model for the free exercise of religion and establishment clauses in the First Amendment. In closing, the President advised the country: “As we observe Religious Freedom Day, let us remember the legacy of faith and independence we have inherited, and let us honor it by forever upholding our right to exercise our beliefs free from prejudice or persecution.”

Here, here! And a good start would be for the President and his administration to abandon the view that religious freedom means merely the freedom to worship privately as one chooses so long as it doesn’t interfere with the government’s priorities. Religious freedom means the ability to live one’s faith outside places of worship, too. Compelling all employers to provide their employees with insurance coverage for contraception and abortion, as the Department of Health and Human Services has done under ObamaCare, violates the religious freedom of those employers who believe contraception and abortion are wrong. Over 110 plaintiffs, represented in 43 lawsuits, have sued the Department of Health and Human Services over its contraception mandate. Those plaintiffs are simply asking the courts to uphold their rights to exercise their beliefs free from persecution by the government.

See also: The Becket fund’s website, HHS Mandate Information Central; “What Today’s ‘Proclamation on Religious Freedom Day’ Missed,” The Becket Fund for Religious Liberty, January 16; and “The Becket Fund Fights for Religious Liberty,” The Insider, Spring 2012.

There’s a provision in ObamaCare (Section 2716) that forbids the government from requiring doctors to ask their patients if they own a gun. Unfortunately, that’s just about the only privacy protection in the bill, explains Betsey McCaughey:

Section 1311 of the law says that “qualified” insurance plans can pay only those health care providers who follow whatever regulations the Secretary of Health and Human Services imposes to improve “quality.”

That could be everything in medicine.

It could mean telling cardiologists when it is appropriate to use a bypass vs. a stent, or requiring all physicians to ask patients whether they use marijuana. The Secretary will have control over what your doctor does and what is included in your medical record even if you are in a plan you paid for yourself.

Worse still, your medical record will become part of a national electronic database.

The Hitech Act of 2009 and the Obama health law impose penalties on doctors and hospitals beginning in 2015 who do not use electronic medical records, moving the nation toward a unified database where your health history will be stored in one file. [Investor’s Business Daily, January 15]

Proportionally fewer people are working today than in 2000, and the reason is that it is much easier today to get paid for not working, says economist Richard Vedder, who points to food stamps as one example:

From 2000 to 2007, the number of beneficiaries rose from 17.1 million to 26.3 million, according to the Department of Agriculture. That number has leaped to 47.5 million in October 2012. The average benefit per person jumped in 2009 from $102 to $125 per month.

The poor economy does not explain recent increases:

Compare 2010 with October 2012, the last month for which food-stamp data have been reported. The unemployment rate fell to 7.8% from 9.6%, and real GDP was rising steadily if not vigorously. Food-stamp usage should have peaked and probably even begun to decline. Yet the number of recipients rose by 7,223,000. In a period of falling unemployment and rising output, the number of food-stamp recipients grew nearly 10,000 a day.

Vedder also observes that 3.6 million more people receive Social Security disability than in 2000 (despite the fact the number of relatively dangerous jobs has declined); and 6 million more people receive Pell Grants to go to college instead of work than in 2000. When their Pell Grants run out, some of those recipients may end up joining the 115,000 janitors and cleaners in the work force who are also college graduates.  Meanwhile, of course, unemployment benefits have been continuously extended over the past four years. Vedder calculates that if the labor force participation rate today were the same as it was in 2000, the economy would about 5 percent bigger. [Wall Street Journal, January 15]

The point of the Second Amendment isn’t just to allow people to hunt; it’s to allow people to defend themselves. Government limits on magazine sizes, proposed by President Obama this week, arbitrarily interfere with that right, observes Jacob Sullom:

The Glock 17, one of the most popular handguns in America, comes with a 17-round magazine. One of the most popular rifles, the AR-15 (a style made by several manufacturers), comes with a 30-round magazine. 

Measured by what people actually buy and use, magazines that hold more than 10 rounds are hardly outliers. In fact, there are tens (if not hundreds) of millions already in circulation, which is one reason new limits cannot reasonably be expected to have much of an impact on people determined to commit mass murder. 

Another reason is that changing magazines takes one to three seconds, which will rarely make a difference in assaults on unarmed people. The gunman in Connecticut, for example, reportedly fired about 150 rounds, so he must have switched his 30-round magazines at least four times […] .

If magazines holding more than 10 rounds are not useful for self-defense and defense of others, shouldn’t the same limit be imposed on police officers and bodyguards (including the Secret Service agents who protect the president)? And if the additional rounds do provide more protection against armed assailants, it hardly makes sense to cite the threat of such attacks as a reason to deny law-abiding citizens that extra measure of safety. [Reason, January 16]

Trying to raise revenue with a carbon tax of $25 per metric ton will cost the average family of four $1,900 per year in 2016 and lead to average losses of $1,400 per year through 2035. So says the Energy Information Administration, which finds also that such a tax would: “raise the family-of-four energy bill by more than $500 per year (not counting the cost of gasoline); cause gasoline prices to increase by up to $0.50 gallon, or by 10 percent on an average gallon price; and lead to an aggregate loss of more than 1 million jobs by 2016 alone.” [David Kreutzer and Nicolas Loris, “Carbon Tax Would Raise Unemployment, Not Swap Revenue,” The Heritage Foundation, January 8]

The Environmental Protection Agency’s latest response to the Competitive Enterprise Institute’s effort to obtain Administrator Lisa Jackson’s e-mails to outside groups about coal policy could by summed up: Richard Windsor? Who is that?

“Richard Windsor” is the alias that Jackson is reported to have used on a private account to discuss official business. CEI’s Christopher Horner reported in November he had been told of such an account by two high-level EPA officials.  That information was divulged after CEI went to court to force the agency to comply with a May 2012 FOIA request for all of the administrator’s e-mails concerning coal policy.

This week, in response to an order from the U.S. District Court for the District of Columbia, the EPA released 2,100 e-mails out of 12,000 it has promised to release in four tranches. The release consisted entirely of mass mailings and Google alerts. The name “Richard Windsor” does not appear anywhere in these e-mails, but in a cover letter to Horner, the EPA says:

[T]he Administrator uses one secondary official government email account to conduct EPA business. This official account was established for practical purposes, and its contents are maintained in accordance with federal recordkeeping guidelines and are searched in response to FOIA requests. In keeping with past practice, the name on this @epa.gov account has been redacted pursuant to Exemption 6 Personal Privacy and marked Administrator in order to preserve the ongoing utility of the email account and to clearly identify the records as being to or from the Administrator.

This response, says Horner, “signals the agency has gone bunker” and “intends to in essence pretend [the Windsor account] does not exist.” [CEI New Release, January 14]

See also: CEI’s timeline on the scandal at http://cei.org/richard-windsor.

Right about now would be a good time to put an end to “cooperative federalism,” muses Mario Loyola regarding the prospect of federal money for states to conduct background checks on gun purchasers:

Washington should pay for, implement, and be accountable for its own policies. Let the president see how much money he can get out of Congress to implement a background-check program. Meantime, states should make it clear that they will refuse to comply with any cooperative federal-state gun-control program. Quite apart from violating the Second Amendment, such programs — whether the subject matter is gun control or health insurance — are deeply corrosive to the Constitution’s federal structure. And conservatives need to start focusing much more systematically on the dangers of “cooperative federalism.” [National Review, January 14]

Indeed. We’ll have more on this theme in a non-gun-control context in the upcoming issue of The Insider. Stay tuned.

The federal Head Start program spends $8 billion per year trying to help disadvantaged pre-school children become better prepared for grade school. According to a recent report from the government itself, however, the program has almost no measurable impact on school readiness.

The report, released just before Christmas (it had been completed in October), provides the findings of a congressionally-mandated study that tracked 5,000 pre-school children through the third grade. The study compared kids who enrolled in Head Start at age 3 and at age 4 to their peers who did not participate in the program.

It assessed the children on cognitive abilities like math and readings skills, as well as whether they had behavioral problems like hyperactivity or aggressiveness, or had conflicts with teachers or their peers. The report also assessed whether children in the program had better health results than their peers not in the program, and whether the program had an effect on the level and quality of a parent’s engagement with their children. Here’s the nutshell from the report itself:

[T]here were initial positive impacts from having access to Head Start, but by the end of 3rd grade there were very few impacts found for either cohort in any of the four domains of cognitive, social-emotional, health and parenting practices. The few impacts that were found did not show a clear pattern of favorable or unfavorable impacts for children. [“Third Grade Follow-up to the Head Start Impact Study, Final Report,” Department of Health and Human Services, October 2012]

In total, the study assessed 45 measures for third graders, and found two positive and one negative impacts for children who participated in Head Start as 3-year-olds; and four positive and four negative impacts for children who participated as 4-year-olds. [For a rundown of the results, see Lindsey Burke and David B. Muhlhausen, “Head Start Impact Evaluation Report Finally Released,” The Heritage Foundation, January 10, 2013.]

Regulations are supposed to protect consumers, but sometimes it seems like the regulators’ real motivation is to prevent anyone from gaining a competitive advantage by trying a new idea. Cindy Vong’s “spa fish” therapy seems to be a case in point. Vong, represented by the Goldwater Institute, is in court this week challenging the Arizona Board of Cosmetology’s determination that she cannot continue offering this unique service. Darcy Olsen of the Goldwater Institute explains:

The therapy historically has been used to treat psoriasis patients in the Middle East and Asia. Patients dip their feet into baths of tiny, toothless Garra Rufa fish that nibble off dry skin, and voila. […]

“We consider the fish being a tool,” said the Board, and “every tool that comes in contact with a client in Arizona needs to be disinfected or thrown away.” Since you can’t scrub a living fish with Clorox, the board shuttered Vong’s business.

No doubt the treatment isn’t for everyone, but neither are chemical peels or spandex, and they’re not illegal. Like millions of bureaucratic decisions, this one was marked by absurdities. By definition, you can’t sterilize fish. Instead of letting the industry self-regulate, granting Vong an experimental waiver, or working to craft reasonable guidelines for the treatment, the board chose the most destructive path, trampling on Vong’s right to make an honest living and sending workers into the unemployment lines. [Goldwater Institute, January 15]

In its lawsuit, the Goldwater Institute argues that the cosmetology regulators are abridging Vong’s constitutional right to earn an honest living.

• Get ready for National School Choice Week, January 27 – February 2. Across the country there are 3,000 events planned, and folks in all 50 states will be participating. The events will highlight the momentum and the successes of school choice. If your organization is planning on event, make sure you submit it to the National School Choice Week calendar.

• Learn about the Five Pillars of the First Amendment at this year’s Education Policy Conference, January 24 – 26 at the Hilton St. Louis Frontenac.

• Watch the Heritage event on one of the most talked about articles of 2012: What Is Marriage? Man and Woman: A Defense.  

• Appreciate your constitutional right to own a gun, if you so choose, on Gun Appreciation Day, January 19.

• Find out how well you know your libertarianism: Take George Smith’s 30-question libertarian history quiz at Libertarianism.org.

Michael LaFaive reports on the Mackinac Center’s latest analysis of legal sales data and cigarette consumption rates:

We find that New York currently holds the top position as the highest net importer of smuggled cigarettes in 2011, with smuggled cigarettes totaling a staggering 60.9 percent of the total market. Not coincidentally, New York also has the nation’s highest state cigarette tax at $4.35 per pack, plus another $1.50 levied in New York City. […]

Massachusetts increased its cigarette tax from $1.51 to $2.51 per pack in 2010, and in 2011 became an even larger market for smugglers, advancing 13 spots since our 2010 report.

Florida moved up 12 places on the smuggling index after hiking cigarette taxes in 2010 from 33.9 cents per pack to almost $1.34.

Utah moved up 10 positions. You guessed it — the Beehive State increased is cigarette tax from 69.5 cents to $1.70 in 2011. [Mackinac Center, January 8]

The complexity of the tax code is once again the number one taxpayer problem, says the National Taxpayer Advocate in its annual report to Congress:

In 2012, TAS conducted a statistically representative national survey of over 3,300 taxpayers who operate businesses as sole proprietors. Only 16 percent said they believe the tax laws are fair. Only 12 percent said they believe taxpayers pay their fair share of taxes. […]

For fiscal year (FY) 2013, the Joint Committee on Taxation has projected that tax expenditures will come to about $1.09 trillion, while individual income tax revenue is projected to be about $1.36 trillion. This suggests that if Congress were to eliminate all tax expenditures, it could cut individual income tax rates by about 44 percent and still generate about the same amount of revenue. […]

If tax compliance were an industry, it would be one of the largest in the United States. To consume 6.1 billion hours, the “tax industry” requires the equivalent of more than three million full-time workers.

Compliance costs are huge both in absolute terms and relative to the amount of tax revenue collected. Based on Bureau of Labor Statistics data on the hourly cost of an employee, TAS estimates that the costs of complying with the individual and corporate income tax requirements for 2010 amounted to $168 billion — or a staggering 15 percent of aggregate income tax receipts.

According to a tally compiled by a leading publisher of tax information, there have been approximately 4,680 changes to the tax code since 2001, an average of more than one a day. [Internal citations omitted.]

While most taxpayers would probably agree with the National Taxpayer Advocate’s recommendation to simplify the tax code, they might not agree with another of the agency’s recommendations. Later in its report, this agency that is supposed to represent the taxpayers’ interests inside the government reports that the Internal Revenue Service is underfunded. It’s almost as if the people in charge of government have interests that diverge from the people they’re supposed to represent. Didn’t James Buchanan say something like that once or twice?

The Congressional Research Service redid a recent report claiming that reductions in top marginal income tax rates have no effect on economic growth, but it still gets an F from the Tax Foundation’s Stephen Entin. Entin points out that you cannot, as CRS did, simply look at one tax or policy change in isolation to see if it had an effect. A better approach:

The first step is to calculate the “service price” of capital. That is the rate of return, or earnings, on capital needed to cover the cost of the asset, pay any taxes, and leave an investor with enough income after taxes to justify the investment. If one compares the service price for various assets under the old and new laws, one finds that the 1986 Act as a whole raised the service price and reduced the after-tax income from capital investment, which ought to have discouraged capital formation and retarded economic growth. That is exactly what happened following the 1986 Act.

Entin also points out that CRS analysts fail to understand how tax cuts affect the economy, so they look for the wrong measure of success:

Following a tax cut on capital income, the growth rate will surge for a while as additional capital is created by means of increased investment. Once the additional capital is in place, the GDP will return to a more normal rate of growth, but it will be expanding from the new, higher base level as workers have more capital to work with, enhancing their productivity and output. Thus, one should look at the long-term change in the capital stock and the ultimate level of output, not the short-term rise in investment and the short-term change in the growth rate. If one looks only at the growth rate, and not at the level of GDP, one could conclude that the tax rate change has only a temporary benefit, when in fact it is permanently helpful. [Tax Foundation, January 8]

… according to the think that generated those expectations. The RAND Corporation this week issued a reassessment of its 2005 report that claimed adopting electronic health care records could produce significant savings, reports the New York Times:

RAND’s 2005 report was paid for by a group of companies, including General Electric and Cerner Corporation, that have profited by developing and selling electronic records systems to hospitals and physician practices. Cerner’s revenue has nearly tripled since the report was released, to a projected $3 billion in 2013, from $1 billion in 2005.

The report predicted that widespread use of electronic records could save the United States health care system at least $81 billion a year, a figure RAND now says was overstated. The study was widely praised within the technology industry and helped persuade Congress and the Obama administration to authorize billions of dollars in federal stimulus money in 2009 to help hospitals and doctors pay for the installation of electronic records systems. […]

 “The vast sum of stimulus money flowing into health information technology created a ‘race to adopt’ mentality — buy the systems today to get government handouts, but figure out how to make them work tomorrow,” Dr. [David J.] Brailer said. [New York Times, January 10]

James Buchanan, the Nobel Prize winning political-economist who taught us that politicians have their own self interests quite apart from those of their constituents, died at 93 this week. In works such as The Calculus of Consent: Logical Foundations of Constitutional Democracy (co-authored with Gordon Tullock) and The Demand and Supply of Public Goods, Buchanan applied economic analysis to politics and showed how government solutions could be worse than the “market failures” they were supposed to correct. In her remembrance, Amity Shlaes speculates on how Buchanan might have developed his ideas:

I have always wondered whether Buchanan turned to the study of sanctimonious government officials and their interests because he spent time in graduate school on the South Side of Chicago in the late 1940s (the neighborhood where I was later born). Hyde Park was lively, but uneven. Little shops along 55th Street, just north of the university, might thrive, but poor black migrants crowded together in apartments with insufficient heat during the city’s tough winters.

Buchanan earned his doctorate in 1948, about the time the politicians and other civic leaders promised that bulldozing large swaths of the neighborhood and creating new public-private projects would yield a better Hyde Park, prettier and more racially integrated.

But the result felt wrong, especially to residents. The new apartment buildings, in the minimalist international style, themselves felt as cold as winter. Instead of bringing people together, they separated them: One complex quickly became known as Monoxide Island. With the stores gone, there was less life on the streets. Yet Hyde Park locals lacked the vocabulary to criticize the transformation we had been told was progress or reform. Who wants to be construed as “pro-slum”?

Buchanan supplied that vocabulary. Instead of calling urban renewal “reform,” as the officials did, he called it “politics.” It was important, he said, that all such projects, whether urban renewal in Chicago or elsewhere, be viewed honestly, that we look at “politics without romance.”

The housing redevelopment in Hyde Park worked to the advantage of certain interest groups, political or business. Yet the high-and-mighty tone of the anti-slum language masked something. No party involved was any better or any worse than anyone else: They were all pursuing their own interests. Politicians often promoted such ugly ambitious projects not because the projects were good. They did so because the projects enabled politicians to award contracts to important campaign donors. [The Morning Call, January 10]

Buchanan’s ideas help us understand a wide range of public policy problems, including the political dangers of stimulus spending, as David Kreutzer explains:

While other economists debated the appropriate level and timing of federal deficits, Buchanan warned of the danger of deficit finance when it left the world of economic theory and entered the world of political gamesmanship. History has confirmed his theory—unlike economists, politicians will continually prefer to run up the debt. Deficits allow politicians to provide special-interest backers with costly projects during the current election cycle while deferring payment until after the next election. The result has been (as he predicted) a virtually unending string of budget deficits and an ever-rising national debt. [The Foundry, January 9]

To learn more about James Buchanan, see Don Boudreaux’s roundup at Café Hayek [January, 10], as well as The Collected Works of James M. Buchanan at the Online Library of Liberty.

Hong Kong still has the freest economy in the world, while the United States remains stuck in the mostly free category, according to the 2013 Index of Economic Freedom, published this week by The Heritage Foundation and the Wall Street Journal.

On the Index’s scale of zero to 100, the average country score for the world was 59.6 in 2013, about where it has been for the last five years. It was 60.2 in 2008.

The ten freest economies in the world in are Hong Kong, Sinagapore, Australia, New Zealand, Switzerland, Canada, Chile, Mauritius, Denmark, and the United States. The five unfreest economies in the world are Eritrea (173), Venezuela (174), Zimbabwe (175), Cuba (176), and North Korea (177).

The United States had the fifth freest economy in the world in 2008, but has fallen steadily in the rankings since then. The United States scored 76.0 this year, 0.3 points lower than last year. The Unites States’s economic freedom score has declined for six consecutive years since 2007 when its score was 81.2. The Index’s economic freedom score is based on ten components. Most of the U.S. decline over that period is accounted for by lower scores in four of those components: government spending (less is better); investment freedom (free movement of capital), financial freedom (limited bank regulations), and monetary freedom (stable currency). The U.S. scores for property rights, business freedom, and corruption have also all declined in the past six years.

More economic freedom—i.e., the freedom “to work, produce, consume, and invest in any way [a person] please[s], with that freedom both protected by the state and unconstrained by the state”—leads to better health, higher per capita income, more education, and greater environmental protection. And here’s the graph from the 2013 Index of Economic Freedom that shows it:

 [Terry Miller and Anthony Kim, “Chapter 1: Economic Freedom: Global and Regional Patterns,” 2013 Index of Economic Freedom, The Heritage Foundation and The Wall Street Journal, January 2013.]

Sherif Girgis, Ryan Anderson, and Robert George discuss:

• Hear some ideas on how to reduce gun violence without trampling on the Second Amendment. The Cato Institute hosts Craig Whitney, author of Living with Guns: A Liberal’s Case for the Second Amendment.

• Watch the FrackNation, Phelim McAleer and Ann McElhinney’s new documentary on fracking. It premier’s January 22, on AXS TV.

• Are you an aspiring video journalist? If so, get your application in for the 2013 Searle Film Fellowship at Reason.tv. The application deadline is January 15.

• Check out the Foundry’s interview with Jim DeMint, new President-Elect of The Heritage Foundation.

If so, you’re in luck for 2013, because there are now 40,000 new state laws on the books. [MSNBC, December 31, 2012]

Federal lawmakers, meanwhile, passed 219 bills over the past two years. That total, laments Amanda Terkel of the Huffington Post, makes the 112th Congress the least productive ever: “The 112th Congress has done far less than the 80th Congress (1947-1948), which President Harry Truman infamously dubbed the ‘Do-Nothing Congress.’ Those lawmakers passed 906 bills that became law.” [Huffington Post, December 28, 2012]

Two-hundred and nineteen new laws aren’t enough, thinks the Huffington Post writer. She must have been reading really fast. The famous Iowahawk provides an alternate view: “[A] ‘do-nothing Congress’ is sort of like a ‘do-nothing arsonist.’”

General Electric, CitiGroup, Captain Morgan, and Hollywood all won tax credits in the fiscal-cliff deal, but it probably didn’t happen the way you imagine it did, reports Tim Carney:

In late July, Finance Chairman Max Baucus announced the committee would soon convene to craft a bill extending many expiring tax credits. This attracted lobbyists like a raw steak attracts wolves. […]

After packing 50 tax credit extensions into the bill, the committee voted 19 to 5 to pass it. But then it stalled. The Senate left for the conventions and the fall campaign. Meanwhile, House Republicans signaled resistance to some of the extensions – especially for green energy.

One lobbyist said he didn’t worry too much about the Baucus bill because “we knew the House wasn’t going to pass it.” But another lobbyist, who had worked on the Puerto Rico issues, said he saw Baucus’ bill as an important starting point that “set the parameters” of a future fight with House Republicans.

But there never was a fight. Baucus’ bill sat ignored until last week, when the White House sat down with Senate Republicans to craft a deal averting the fiscal cliff.

A Republican Senate aide familiar with the cliff negotiations tells me the White House wanted permanent extensions of a whole slew of corporate tax credits. When Senate Republicans said no, “the White House insisted that the exact language” of the Baucus bill be included in the fiscal cliff deal. “They were absolutely insistent,” another aide tells me. (The White House did not return requests for comment.)

Sure enough, Title II of the fiscal cliff legislation is nearly a word-for-word replication of the Family and Business Tax Cut Certainty Act of 2012. [Washington Examiner, January 2]

Jim DeMint, President-Elect of The Heritage Foundation, on communicating conservative ideas :

Mark Lynas told the Oxford Farming Conference this week that he was wrong:

I want to start with some apologies. For the record, here and upfront, I apologise for having spent several years ripping up GM crops. I am also sorry that I helped to start the anti-GM movement back in the mid 1990s, and that I thereby assisted in demonising an important technological option which can be used to benefit the environment.

As an environmentalist, and someone who believes that everyone in this world has a right to a healthy and nutritious diet of their choosing, I could not have chosen a more counter-productive path. I now regret it completely.

So I guess you’ll be wondering – what happened between 1995 and now that made me not only change my mind but come here and admit it? Well, the answer is fairly simple: I discovered science, and in the process I hope I became a better environmentalist. [MarkLynas.org, January 3]

You, dear taxpayer, are probably paying for your state to participate in meetings of the Council of Chief State School Officers, one of the major organizers of the defacto national education standards known as Common Core. Want to know what those education bureaucrats are planning? You’re out of luck. Because the CCSSO is a private organization, open meetings and open records laws don’t apply, reports Joy Pullman:

State membership in each related CCSSO committee costs $16,000 each year, and states can and do participate in several committees. Lead state Indiana, for example, participates in the math and social studies committees, where 23 and 10 states, respectively, are members, said Indiana Department of Education spokesman Adam Baker. On its latest financial statement, the CCSSO reported $2,187,626 in revenue from membership dues for all activities in 2011.

Multiply just one membership fee by 46 participating states for a minimum of $736,000 in tax dollars the CCSSO receives each year for an initiative reshaping nearly every textbook, replacing nearly all state tests, overhauling teacher training nationwide, providing the basis to measure teachers, and creating nationwide data repositories for student grades, behavior, attendance, and more. […]

Indiana resident Heather Crossin, whose children attend schools implementing the Core, attempted to attend an October 2012 CCSSO meeting in her Indianapolis hometown. Crossin called Michele Parks, a CCSSO meeting planner, to see if she could attend. No, Parks said. Crossin asked to see a list of people on the Social Studies standards writing team: “I was told that was not available for public release,” Crossin said. […]

CCSSO receives tax money from more than state dues. It receives millions from the U.S. Department of Education.

“Approximately 13% and 33% of the Council’s revenue and 25% and 34% of accounts receivable were provided by U.S. Department of Education grants or contracts for fiscal years 2011 and 2010, respectively,” the nonprofit’s 2010-2011 financial statement reads.

Applying the 2011 percentage to that year’s revenues yields an estimated $3,450,930 in CCSSO revenue from the federal government, just in that year. In 2011, $558,000 came from the 2009 stimulus bill for CCSSO’s involvement with one of two networks creating new tests to fit the standards. [Heartland Institute, January 3]

In the fiscal cliff deal, capital gains taxes increased from 15 percent to 23.8 percent. That’s the wrong direction. As Chris Edwards explains, any capital gains tax rate above zero unfairly penalizes the very behavior on which economic growth depends:

[Capital gains taxes] penalizes frugal people and rewards the spendthrift. That’s because earnings are taxed a second time when saved, while immediate consumption does not face a further tax. That makes no sense because it is frugal people—savers—who are the benefactors of the economy since their funds get invested in the new businesses and new capital equipment that generates growth. […]

Another problem is “lock-in,” which occurs when taxpayers delay selling investments that have large unrealized gains in order to avoid the immediate tax hit. […] Economic growth is synonymous with economic change, and thus growth is dependent on capital being moved from older to newer uses. Capital gains taxes create a barrier to that beneficial movement. […]

A key reason for reducing tax rates on both capital gains and dividends is that the underlying income is already taxed at the corporate level. Corporate profits in the United States bear a heavy burden from an average federal-state tax rate of 40 percent. When individuals receive corporate profits in the form of dividends and capital gains, the income is taxed again. By contrast, wage and interest income are only taxed at the individual level because they are deductible to corporations. […]

Double taxation of capital gains and dividends disadvantages corporate equity compared to debt. The result is that firms tend to overleverage, which makes them more unstable and vulnerable during downturns. [“Advantages of Low Capital Gains Tax Rates,” Cato Institute, December 2012]

Observes Kevin Williamson:

Of all the tax cuts of the Bush-Obama era, the income-tax cuts for the so-called rich (households earning $250,000 or more) were the least expensive in terms of forgone revenue. The Bush tax cuts for $250,000-plus were estimated by the CBO to deprive the Treasury of about $80 billion a year; the income-tax cuts for the middle class were estimated to cost $220 billion a year; the payroll-tax holiday, which disproportionately benefits the poor and middle class, cost about $120 billion a year. […]

The expiration of the payroll-tax holiday will reduce the real income of middle-class and working-poor households by around 1.5 percent on average. So while the fiscal-cliff deal raises taxes on those making $400,000 and up, it also raises taxes on workers in the bottom (0.00 percent) income-tax bracket, who do pay payroll taxes. […]

But not all the rich folks got a tax hike. As usual, well-connected special interest groups—from Hollywood to the booze lobby—secured sweetheart deals for their own narrow interests. So the industry that employs Sean Penn and Ed Asner gets a nice fat tax break, and poor people with jobs get the shaft. The people who rail against “corporate welfare” and “crony capitalism” took the time to cut a nice side deal for the rum industry. You will notice that the Bacardi family is not poor. That’s Washington. [National Review Online, January 2]