This is the fifth post in a series covering the advance of educational choice legislation across the country this year. As of my last update in mid-June, there were 13 new or expanded choice programs in 10 states. Since then, South Carolina has adopted a new school choice program and three other states–Florida, Ohio, and Wisconsin–have expanded existing choice programs (including two voucher programs in Ohio), bringing the total to 18. That’s considerably more than the 13 new and expanded programs that led the Wall Street Journal to dub 2011 the “Year of School Choice.”
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Do You or Someone You Love Suffer from PLDD?
I cannot tell you how many loved ones I have lost to this totally preventable illness…
Read the rest of this post →I would like to tell you about a serious condition afflicting thousands of policy analysts. It’s called Petty Little Dictator Disorder, or PLDD, and you or someone you love could be suffering from this epidemic sweeping through our think tanks, advocacy groups, and government offices. According to the description pending for inclusion in the DSM V, here are the warning signs of PLDD:
- Do you spend a fair amount of your time imagining how the government could be used to shape people’s behavior for their own good?
- Do you tell yourself and others that you believe in liberty and stuff but there are negative externalities, information costs, and children who need protecting from their parents, so we need to step in?
- Do you use the word “we” a lot to refer to government action by which you really mean you and your friends?
- Do you consider yourself an expert despite having never really done anything or rigorously studied anything in your life?
- Do you feel the need to communicate your expert opinions in no more than 140 characters more than 1,000 times a year because you need constant reinforcement in the belief that you are changing the world?
- Do you sit in cafes or bars with your colleagues and have conversations that resemble dorm room pot-smoking bull sessions about how it would be best for families to live in apartments above bodegas with the sound of light rail roaring just outside their window because, after all, the life you currently have and enjoy is the same thing that families with three children and a dog should want?
- Do you think science or a panel of experts can identify the right way to do almost anything?
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Scott Walker’s Fiscal Record
Monday is Scott Walker’s turn to join the crowded presidential field. Walker has served as Wisconsin’s Governor since 2011. He rose to prominence quickly after the State Capitol in Madison was overtaken by protesters opposing his labor reforms. Walker has passed a number of government-limiting measures, earning a “B” on Cato’s Governor Report Card in both 2012 and 2014, but he continues to support higher spending.
When Walker took office Wisconsin had a $3.6 billion budget deficit and needed urgent reform. His first big legislative achievement was Act 10 which overhauled the state’s collective bargaining rules and benefit programs for state employees. Under Act 10, state employees must contribute 12 percent of premium costs to their state-provided health insurance plan. In addition, pension contributions are now split evenly between the employee and the employer. In 2015 that contribution was 6.8 percent of income.
Act 10 also limited collective bargaining subjects to base wages, removing the ability to negotiate on overtime, pension, and health benefits. It has saved taxpayers in Wisconsin $3 billion since its passage in 2011.
Walker has also passed several tax cuts while in office. In 2013 Walker signed a plan that cut the state’s personal income tax by almost $500 million a year. The plan consolidated the state’s five income tax brackets into four brackets, with the larger cuts skewed towards the lower end of the income scale. In 2014 the state made further cuts to the lowest income tax bracket. In total, the lowest bracket fell from 4.60 percent to 4 percent. Work is still needed. Wisconsin’s total income tax rate of 7.65 percent is still one of the highest in the country, and its Business Tax Climate is a discouraging 43rd in the nation, according to the Tax Foundation.
Walker has had success on labor and tax issues, but spending continues to grow rapidly in Wisconsin. From fiscal year 2012 to fiscal year 2015, Wisconsin state spending grew 15 percent. For comparison, state spending grew by 8 percent nationally during this period. So while Walker turned a $3.6 billion deficit when he took office into an $800 million surplus by June 2013, he has continued to spend excessively. His budget for fiscal years 2016 and 2017 included another $1 billion in increased spending.
Walker’s policies have targeted numerous areas of Wisconsin’s budget. He reformed the state’s labor laws as they related to state employees and saved $3 billion in four years. He cut personal income taxes. Overall, his actions have helped restore fiscal sanity to Wisconsin. But voters concerned about Washington’s debt and profligacy should be aware Walker’s record of increasing state spending even while cutting taxes.
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Remove Lew, Not Hamilton
![Jack Lew, Alexander Hamilton, $10 Bill](/sites/cato.org/files/styles/pubs_2x/public/wp-content/uploads/2015/07/10-Bill2.jpg?itok=Shr9c-ho)
Just how great was Hamilton? A recent scholarly book by Robert E. Wright and David J. Cowen, Financial Founding Fathers: The Men Who Made America Rich, begins its pantheon of greats with a chapter on Alexander Hamilton. It is aptly titled “The Creator.”
After the Constitution was ratified and George Washington was elected President, the new federal government lacked credibility. Public finances hung like a threatening cloud over the government. Recall that paper money and debt were innovations of the colonial era, and that, once the Revolutionary War began, Americans used these innovations to the maximum. As a result, the United States was born in a sea of debt. A majority of the public favored a debt default. Alexander Hamilton, acting as Washington’s Secretary of the Treasury, was firmly against default. As a matter of principle, he argued that the sanctity of contracts was the foundation of all morality. And as a practical matter, Hamilton argued that good government depended on its ability to fulfill its promises.
Hamilton won the argument and set about digging the country out of its financial debacle. Among other things, Hamilton was – what would today be called – a first-class financial engineer. He established a federal sinking fund to finance the Revolutionary War debt. He also engineered a large debt swap in which the debts of individual states were assumed by the newly created federal government. By August 1791, federal bonds sold above par in Europe, and by 1795, all foreign debts had been paid off. Hamilton’s solution for America’s debt problem provided the country with a credibility and confidence shock.
Doesn’t the 76th Secretary of Treasury have better things to do than to diminish the presence of our 1st and most distinguished Secretary of Treasury?
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The ACA Is Dead — Long Live ObamaCare
My first, but not remotely my last, oped on the Supreme Court’s ruling in King v. Burwell appears in today’s Washington Examiner. Excerpt:
Obamacare supporters are mistaken if they think the Supreme Court’s King v. Burwell ruling settles the issue. Even in defeat, King threatens Obamacare’s survival, because it exposes Obamacare as an illegitimate law…
By overriding the operative language of the statute, the Supreme Court colluded with the president to impose taxes and entitlements that no Congress ever approved; to deprive states of powers Congress granted them to block parts of the ACA; and to disenfranchise Republican and independent voters who swept ACA opponents into state office in 2009, 2010 and 2011 for the purpose of blocking the ACA.
The Supreme Court did not lose its legitimacy with King v. Burwell — it has made worse mistakes. Obamacare did. Having been rewritten over and over by the president and the Supreme Court rather than Congress, Obamacare cannot claim to be a legitimate law.
Remove Lew, Not Hamilton
On June 17th, Treasury Secretary Jack Lew shocked many, including former Chairman of the Federal Reserve Ben Bernanke, when he proclaimed that Alexander Hamilton (1755–1804) – the first and foremost Treasury Secretary – would be demoted and share the ten-dollar bill with a yet unnamed woman. Undaunted by wide-spread criticism, Secretary Lew continued to press his case at an event at the Brookings Institution on July 8th. Asked about the ten-dollar bill’s selection, Secretary Lew insipidly claimed that the ten-dollar bill was the “next up” for redesign to help combat forgery. The diminution of Hamilton, for whatever reason, is simply indefensible.
Just how great was Hamilton? A recent scholarly book by Robert E. Wright and David J. Cowen, Financial Founding Fathers: The Men Who Made America Rich, begins its pantheon of greats with a chapter on Alexander Hamilton. It is aptly titled “The Creator.”
After the Constitution was ratified and George Washington was elected President, the new federal government lacked credibility. Public finances hung like a threatening cloud over the government. Recall that paper money and debt were innovations of the colonial era, and that, once the Revolutionary War began, Americans used these innovations to the maximum. As a result, the United States was born in a sea of debt. A majority of the public favored a debt default. Alexander Hamilton, acting as Washington’s Secretary of the Treasury, was firmly against default. As a matter of principle, he argued that the sanctity of contracts was the foundation of all morality. And as a practical matter, Hamilton argued that good government depended on its ability to fulfill its promises.
Hamilton won the argument and set about digging the country out of its financial debacle. Among other things, Hamilton was – what would today be called – a first-class financial engineer. He established a federal sinking fund to finance the Revolutionary War debt. He also engineered a large debt swap in which the debts of individual states were assumed by the newly created federal government. By August 1791, federal bonds sold above par in Europe, and by 1795, all foreign debts had been paid off. Hamilton’s solution for America’s debt problem provided the country with a credibility and confidence shock.
Doesn’t the 76th Secretary of Treasury have better things to do than to diminish the presence of our 1st and most distinguished Secretary of Treasury?
How Not to Stress Test: UK Edition
![Media Name: so_far_so_good.jpg](/sites/cato.org/files/styles/pubs_2x/public/wp-content/uploads/so_far_so_good.jpg?itok=rx9Jj0vs)
Anyone who follows the stress tests conducted by the Fed and various European banking authorities can’t help poking fun at them. After all, it’s hard to repress a chuckle when, time and again, a bank passes one of these tests with flying colors only to end up failing not long afterwards. Whether it’s Iceland in 2008, Ireland in 2010, or Cyprus in 2013, the story is the same: all three national banking systems collapsed shortly after being signed off as safe following regulatory stress tests.
When putting banks to such a test, a central bank or other banking authority starts by imagining one or more “stressful” scenarios to which banks might be exposed, uses a bunch of models to determine how those scenarios will affect the banks’ capital adequacy (that is, their ratio of capital to assets), and then passes or fails banks depending on whether their capital remains adequate at the end of the test.
The Bank of England reported the results of its first set of annual stress tests in December. Its message was a reassuring one: the UK banks are safe. Unfortunately, there’s no good reason to trust that assessment than there was to trust the others, for the Bank of England’s stress tests are also deeply flawed, in ways that, besides obscuring the significant vulnerability of the UK banking system, actually tend to accentuate it.
For starters, the tests are based on a “risk-weighted asset” metric, which depends on models that underestimate banks’ risks. Worse still, these models are eminently gameable, and banks have every incentive to game them, since doing so can reduce their capital requirements and allow them to distribute greater false profits.
Abundant research—from the Bank of England itself, among other authorities—has convincingly established that lower risk-weighted asset scores do not necessarily mean lower risk. In fact, the risks are often greater; they just happen to be among those that are invisible to the risk measure. We saw precisely this problem in 2008–2009, when UK banks appeared to be well capitalized using risk-weighted asset metrics, but actually turned out to be massively undercapitalized when the financial crisis hit.