Category archives: Economics

Congressmen Defend Federal Role in Blocking D.C. Marijuana Legalization

by Nick Frase

December 17, 2014

Representative Andy Harris (R-MD) has been blacklisted from a local Washington D.C. bike shop, at least according to the sign in their window reading “Andy Harris Not Welcome.” For those planning to visit who want to avoid a similar fate, the cautionary tale here is don’t expect to uphold federal marijuana laws in the District if you want to get your derailleur adjusted.

Earlier this month, Rep. Harris successfully attached bipartisan language to the omnibus spending deal designed to block enactment of a marijuana legalization initiative that the District passed in November. Pot activists have decried the action as an example of an outsider meddling in local affairs. “You don’t serve us, we don’t serve you” is the tagline to their blacklist sign, a reference to the fact that Rep. Harris’ district is in Maryland and not in D.C.

What’s going on, aren’t Republican’s for self-government and local control?

It’s a fair question to ask and one that Rep. Harris along with Rep. Joe Pitts (R-PA) have addressed in a Washington Post op-ed. I won’t attempt to repeat it here but the thrust of the argument is: yes, Republicans are the party of self-government and local control, but they’re also the party of the Constitution and respect for the rule of law.

Federal law is explicit, under the Controlled Substances Act it is unlawful to manufacture, distribute or possess marijuana. Furthermore, Article I, § 8, cl. 17I of the Constitution grants Congress the power to “exercise exclusive Legislation in all Cases whatsoever” over the District of Columbia. The charge that Congress is somehow treating the District unfairly or in a way they would not treat another city ignores the fact that the District is unlike any other city.

Every year, the Appropriations Committee, on which Rep. Harris sits, provides federal payments to the tune of $500,000,000 to the District of Columbia for the cost of judges, court personnel and defendant representation. They provide payments for programs in areas like education and security. The Department of Justice provides payment for federal attorneys to prosecute local crimes and house prisoners. Federal taxpayers do not fund similar activities in any other city.

As Reps. Harris and Pitts rightly point out in their op-ed, if marijuana laws aren’t confusing enough, nearly a quarter of the District is federal park land and is policed by 26 different enforcement agencies—places and personnel that would still answer to federal law, not D.C. legalization.

Congress has a direct responsibility over the District of Columbia. One that apparently gets you kicked out of bike shops.

To the business community: Religious freedom and you - perfect together

by Travis Weber

December 1, 2014

Writing at the Berkley Center’s Religious Freedom Project blog, Samuel Gregg explores the idea – and idea for which new evidence is consistently emerging – that religious freedom is good for business.

Gregg begins by noting historically that as certain religious groups have been marginalized in political life, they have turned their energies toward commerce – and prospered. In other cases, certain groups have been marginalized in their nation’s financial life – thus handicapping the economy. This isn’t good for growth, obviously. Gregg then focuses his attention on the more recently discovered correlation between economic growth and religious freedom:

[T]here is growing evidence that respect for religious freedom tends to correlate with greater economic and business development. One recent academic article, for instance, found (1) a positive relationship between global economic competitiveness and religious freedom, and (2) that religious restrictions and hostilities tended to be detrimental to economic growth.”

Moreover, other rights and freedoms are not entirely unaffected:

[T]he strongest interest that business has in being attentive to the religious freedom of individuals and groups is the fact that substantive infringements upon one form of freedom often have significant and negative implications for other expressions of human liberty. If, for instance, governments can substantially nullify religious liberty, then they are surely capable of repressing any other civil liberty. This included rights with particular economic significance, such as the right to economic initiative and creativity, property rights, and the freedom of businesses to organize themselves in ways they deem necessary to (1) make a profit and (2) treat employees in ways consistent with the owner’s religious beliefs.”

He concludes by noting that, nevertheless:

[M]ore work needs to be done in this area. Correlation is not causation. While there do seem to be significant correlations between restrictions on religious liberty and the economic freedom of individuals and corporate bodies, the case for causation requires further elaboration.”

But, businesses take note!

If … the various forms of liberty are as interdependent as they seem to be, business surely has at least a high degree of self-interest in seeing substantive conceptions of religious liberty and the rights and protections associated with religious freedom prevail.”

Businesses take note, indeed.

Recognizing Family Decline as a Driver for Income Inequality

by Chris Gacek

April 30, 2014

Income inequality has become a hot political topic recently, so I welcome a Wall Street Journal article by Robert Maranto and Michael Crouch. Maranto and Crouch express surprise that the current public and academic debate largely ignores a powerful factor driving income inequality: the rise of single-parent families during the past half-century. The article goes on to describe the indisputable advantages of two-parent families and concludes observing that there are no “quick fixes”:

Welfare reform beginning in the mid-1990s offered only modest marriage incentives and has been insufficient to change entrenched cultural practices. The change must come from long-term societal transformation on this subject, led by political, educational and entertainment elites, similar to the decades-long movements against racism, sexism — and smoking.

The Maranto-Crouch / WSJ article has received some positive notice in other media. On Monday evening Professor Maranto was interviewed by John Batchelor on WABC Radio. (Use this link and begin listening at 31:00 on the player’s counter.)

Maranto has a humorous bio indicating that he is a professor in the Department of Education Reform at the University of Arkansas where Mr. Crouch is a researcher. Apparently, the professor is highly adept at writing very boring books.

Amid Capital Folly, Some Good News from Washington

by Robert Morrison

October 4, 2013

One of our friends teaches at a government institution. When the sequester came, some of the professors and staff were furloughed. Our friend said he could work around the sequester because all of his classes are on one day. He could take his furlough day on another day of the week, he volunteered. He was told, in no uncertain terms, you will now rearrange your schedule to work through this. This has got to hurt. Cancel all your classes and take a furlough.

I’m reminded of the cynical view that H.L. Mencken took of democracy a hundred years ago. The man they called “The Sage of Baltimore” said democracy was the theory that the people should get what they want — and get it good and hard.

Such cynicism was clearly behind the decision to close down the National Mall at the time of the government shutdown. It is good to have knowledgeable guides from the Park Service to help interpret the monuments, to be sure, but many of us have led tours of the Mall ourselves and would be honored to pitch in. I know I will be happy to volunteer.

Closing the Mall was sparked by the same age-old tactic of entrenched bureaucrats called “Closing the Washington Monument.” That tactic says that whenever Congress fails to cough up as much dough as the bureaucrats want, they can respond by closing down the capital’s most popular tourist attraction. But now, of course, the Washington Monument is already closed. This is because of earthquake damage, not bureaucratic bloody-mindedness.

The White House, too, has been closed. President Obama’s administration made that decision for reasons that are hard to recall. We’re sure that his many guests and campaign donors will be able to access the historic halls of what Harry Truman called the People’s House.

My favorite tour guide for the National Mall was the man who starred in the first presidential inauguration to be held on the West Front of the Capitol. In Ronald Reagan’s First Inaugural Address, January 20, 1981, he pointed to the vast expanse and the impressive monuments laid out before him and showed the country and the world what being American means.

I’m told that tens of thousands of prayer meetings are being held on this day, and for that I’m deeply grateful. We are a nation under God, and I believe God intended for us to be free. It would be fitting and good, I think, if on each Inaugural Day in future years it should be declared a day of prayer.

This is the first time in our history that this ceremony has been held, as you’ve been told, on this West Front of the Capitol. Standing here, one faces a magnificent vista, opening up on this city’s special beauty and history. At the end of this open mall are those shrines to the giants on whose shoulders we stand.

Directly in front of me, the monument to a monumental man, George Washington, father of our country. A man of humility who came to greatness reluctantly. He led America out of revolutionary victory into infant nationhood. Off to one side, the stately memorial to Thomas Jefferson. The Declaration of Independence flames with his eloquence. And then, beyond the Reflecting Pool, the dignified columns of the Lincoln Memorial. Whoever would understand in his heart the meaning of America will find it in the life of Abraham Lincoln.

Hearing Washington thus described as a man of humility “who came to greatness reluctantly,” we are led to wonder how things have come to this sad day. We have been told that our current president is one who “hovers over the nations, like a sort of god.” (Newsweek editor Evan Thomas) He is, says presidential historian Michael Beschloss, the smartest man ever to occupy the White House. So how did we get in this mess?

With all the folly evident in Washington, D.C. these days, we can use some good news from George Washington. There’s at least one historic site is still open and welcoming Americans: George Washington’s home at Mount Vernon. This stately mansion is about twenty miles from downtown Washington and it’s one of the best investments you will ever make.

The estate is the property of The Mount Vernon Ladies Association of the Union. It’s been privately owned for its entire existence. Several years ago, a new $187 million Visitors Center was opened that houses theaters, exhibits, gift shops and dining. Most recently, Mount Vernonadded a new feature, the Fred W. Smith National Library for the Study of George Washington. Now, scholars will be able to access old and new materials on the life and influence of George Washington. The George Washington Library cost $106 million — all privately funded. Another great feature is George Washington’s own handsome leather-bound copy of the Constitution with the Bill of Rights. In the margins of this 222-year old document you can see Washington’s neat, handwritten notes on the powers and the duties of the President. This volume cost $9.8 million at auction and was purchased for Mount Vernon, again using all private funds.

Another piece of good news from Washington is the forthcoming (Oct. 23-26) Hillsdale Hostel conference on “The Character and Statesmanship of George Washington.” With lectures, discussions, and presentations, Hillsdale College’s Alan J. Kirby, Jr. Center for Constitutional Studies and Citizenship will work to inform and inspire attendees about the life and work of our first president. I’m planning to attend this event and to report on it.

In 2009, The New Yorker published a most interesting cover portrait for President Obama’s First Inauguration.

It remains my favorite portrait of Barack Obama. It reminds us of the great promise and the greater responsibility that rests on the shoulders of every man who has stood in the place George Washington stood. It shows us how Washington was and remains the model for what a President of the United States should be. For liberals and conservatives, it’s a sobering thought.

Adding Insult to Injury: The Latest Shoe to Drop in Today¿s College Scam

by Chris Gacek

September 12, 2013

It used to be that the quality of an American university or college degree spoke for itself.  An employer could evaluate one’s academic achievement by looking at a transcript and making a fair assessment.  Well, those days appear to be fading fast.  Decades of academic bureaucratic bloat, grade inflation, and dumbing down curricula have had such a profound effect that a standardized, online college exit exam is being introduced in the spring of 2014.  The 90-minute test, produced by the non-profit Council for Aid to Education, is called the Collegiate Learning Assessment Plus (CLA+), and its scores can be shared with employers.

This article and this letters column (“Dear Joyce”/ Joyce Lain Kennedy) from the Chicago Tribune provide good background information on the CLA+.  From these articles it becomes clear that “grade inflation” has destroyed the value of the college transcript.  Here is another interesting observation:

Additionally, some employers are rethinking the value of famous-name institutions.  Is a degree from Harvard or Stanford really worth multiple times that of a solid state university? That rethink is why the CLA+ could level the hiring field by valuing the individual over the institution.

Wow.  So, these bloated educational bureaucracies are producing wildly overpriced educations that may soon have to be validated by a $35 national test that assesses “analysis, problem solving, writing, quantitative reasoning and reading.”  Now that is adding insult to injury.

Food Stamps and Stewardship

by Nathan Oppman

August 23, 2013

In a few months there will once again be the usual chatter regarding the debt ceiling, fiscal cliffs, and heightened rhetoric as interest groups vie for Federal money. The debates often center around the dollars with little to no regard for the actual problems those dollars are supposed to solve.

Consider “food stamps” which now come in the form of a debit card. If one has a debate about whether or not the hungry should be fed, virtually all of us agree that they should. We may disagree on who is actually in need and how they should best receive aid, but we agree that they should be fed. Advocates for increasing federal spending on food aid will argue that the economy has caused many more people to be without jobs and that these people need help. If a policy maker even so much as mentions cutting a dime from such programs he will be immediately vilified by many as “uncompassionate” at best, or “evil” at worst.

My own experience argues for a cautious approach, and why we need to be able to have discussions that go beyond mere rhetoric.

At a previous job, our rear parking lot was near some woods that were often filled with homeless people. They frequently came to us for water and my colleagues and I spoke with many of them on a semi-regular basis. Some of them were genuinely needy, while others stated that they liked being homeless because they were free from responsibility. Many of them had cell phones; all were well-clothed.

Over time I noticed a significant number of them asking for one of my employees. When they asked for him, they did so usually with an appearance of deep concern and seemed to want to see him immediately. I soon discovered the sad reason for their urgency. My employee would take their food stamp debit cards and exchange them at something like a 50% rate for booze. In other words for a $200 card my employee would buy roughly $100 in alcohol for the homeless and then use the card to purchase groceries for himself or others. This system was very efficient and profitable for all parties involved. The homeless were able to continue their habit using government funds and my employee was able to make a 50% return on investment for his trouble.

You may think this kind of thing is rare or hard to do. It is not. This “ring” of fraud is operated largely in the open and there was very little that could be done to stop it. If I were a legislator and suggested there is waste and fraud in the food stamp program, I would be labeled as uncaring.

For the record, I believe strongly in giving to charity and regularly give a portion of my income away. But I also believe in responsibility and stewardship. God has called us to love our neighbors and give to the needy while at the same time wisely managing what he has given us.

It is a wonderful thing that Americans care for the poor, and Christians have a special duty to help them. However, we should not allow that care to cause us to be blind to systematic abuses that actually hurt those the system is intended to help. Love demands that we provide for those around us, but wisdom demands that we not give to those who wantonly throw away what we are entrusting to them. Good stewardship requires honesty and honesty requires us to admit that good intentions are not enough.

What an Overview of the President’s Budget can Tell Us about our Country

by Henry Potrykus

April 10, 2013

The chart above gives the change in federal outlays (spending) and receipts (taxation in normal times) in constant dollars. The use of constant (i.e. not-inflated) dollars allows us to compare these fiscal changes to realGDP growth.

GDP growth gives the overall baseline for where we are going economically - including, relative to the overall economy, where we are going fiscally. GDP growth gives an absolute marker for the above trends: Grow outlays faster than GDP growth and you are guaranteeing to the outlays’ recipients (federal program participants) a larger and larger part of the economy’s produce. Grow receipts faster than GDP growth and you are banking on taxes (or other mechanisms for transferring a monetary share to the government; in the past governments used seigniorage) taking in a larger and larger part of the economy.

For these cases, outlays or receipts grow faster than the overall economy itself sustains.

GDP growth was 3 percent in the past; in our new economy it is now 2 percent. See our recent paper for why.

Now let us prove our bottom line – that things are not getting better for the United States.

Here’s how to know: First, the hoped-for receipts are: A) calling for a lot more taxes, B) based in wishful thinking, or C) some of both.

For (A), see the chart for tax growth over 2013 to 2014: 15 percent + 10 percent = 25 percent total growth in taxes.

On (B), the “longer term” numbers (2015 et seq.) – 5 percent increases in revenue – are not anywhere near what our new economy can deliver from its growth (2 percent increase per year).

Combining the periods 2013 to 2014 and 2015 et seq., we notice some of both the phenomena we listed: Massive tax growth (A; 25 percent) is hoped to begin to put us back into fiscal alignment (that is, tighten down our massive deficit), but (B) longer term calibrations (5 percent growth in receipts) are not aligned with the anemic economic reality the United States now finds itself in (because of the “second demographic transition” – see, again, the hyperlink above and here). Thus, taxes or other means (like seigniorage) must continue to grow and grow and all the while our fiscal picture must continue to degrade and degrade. This signals calamity.

Second, the [weak] receipts recovery seen in 2010 and 2011 (the “real,” not estimated numbers of the chart) is in actuality worse than presented. In the wake of fiscal 2009, the Federal Reserve has been buying up and claiming interest payments on a few trillion dollars in US government debt (through “quantitative easing,” “twists,” and buying other securities). Yes, interest payment [to the Fed] is an outlay. But this payment is remitted back to the Treasury, so it is also a receipt. This has been explained in congressional testimony. Interest that the Fed is paid goes back to the Treasury, after a dividend is paid to certain banks. If this weren’t enough, there is plenty of ambiguity as to who may claim what (this is called “exposure” or “delta” and is a consequence of complicated derivative agreements on this debt – including repos and swaps – between the Reserve and its primary trading partners). Anyway, call this debt $3 trillion Fed-owned paper at 2 percent interest (our Treasury has been paying exceptionally low interest rates), or a $60 billion outlay-receipt per year. This $60 billion is a large share of the receipt growth seen in 2010 and 2011. Receipts are right around $2 trillion. The charted receipt growth of 2 percent in 2010 is $40 billion; the receipt growth of 4 percent in 2011 is $80 billion. Over those years the Fed has been buying more government debt hence claiming more interest payments hence remitting more interest payments. Splitting this growth in remittance, $60 billion, as $20 billion (2010) + $40 billion (2011), it is not hard to see half of the growth in receipts (the “recovery” in receipts) as coming through an act involving money movements (Fed buys debt, remits interest).

Receipts from the economy have not recovered. They cannot reach the levels hoped-for through growth of the economy. Massive (and increasing) taxation is how the current proposal hopes to close an ever-widening chasm in the fiscal landscape. It is, however, the opening of this chasm that exposes the real problem, the weakness of the State: http://marri.us/fiscal.

A Nice Summary of the College Debt Mess

by Chris Gacek

March 9, 2013

Charles Blow of the New York Times has written a very helpful analysis of recent statistics and realities pertaining to the College Debt Crisis.  His column appeared in the March 9th print edition (“A Dangerous ‘New Normal’ in College Debt.”)  See the online article with excellent links to a number of studies, reports.  He begins with the observation, “We are reaching a crisis point in this country’s higher education system.”  A statement that is undeniable. 

He concludes as follows: “Our national educational aspirations and the debt crisis that they’re creating are colliding. We are on an unsustainable track. This will not end well.”  Again, undeniable.

I don’t know if this is sequester-driven brinksmanship or part of a larger budgetary trend, but the Army Times writes that “[t]he Army’s popular Tuition Assistance program is being suspended because of the budget squeeze, although the many thousands of soldiers currently enrolled in courses will be allowed to complete those courses.”  The shutdown began at 5 p.m. EST on March 8th.  If it is the former, it is despicable.  However, I fear that even if sequester-driven politics is in play, the long-term outlook for military budgets keeping up with ever-escalating college tuition is not great.

Debt Doesn’t Take a Holiday

by Chris Gacek

January 24, 2013

I don’t think we are even approaching the point at which American government’s love of debt will shatter, but a couple of noteworthy events took place this week that may indicate that a new day is dawning.

First, the New York Times article described a bond-ratings agency’s actions this way:

Standard & Poor’s removed the United States government from its list of risk-free borrowers for the first time on Friday night, a downgrade that is freighted with symbolic significance but carries few clear financial implications.

If this had happened ten years ago, this announcement would probably have meant more and produced a greater effect.  Maybe.  Unfortunately, the bond-rating agencies’ credibility was shattered after their complicity in the mortgage debt debacle of the late-2000s was exposed. Now, so much of what they say sounds like Charlie Brown’s teacher: Wah-wah-wah-wah…. That will change eventually.

The second event was described in an AP article by Justin Pope:

Moody’s Investors Service on Wednesday downgraded its outlook for the higher education sector to negative across the board, saying even prestigious, top-tier research universities are now under threat from declining enrollment, government spending cuts and even growing public doubts over the value of a college degree.

There has been a great focus on student indebtedness, but much less attention is given to the decades-long binge of building and bureaucracy construction that has taken place at institutions of higher learning.  That doesn’t appear to be Moody’s focus either – or the article’s.  That is why did tuition increases need to exceed inflation for decades?  Moody’s is looking at revenue shortfalls as if spending levels were set atop Mount Sinai.  That’s OK, we will figure it all out, and many schools are going to go broke.  To borrow a phrase: Academia’s chickens are coming home to roost.

It just may be that debt is not so harmless as the Keynesian ethos would lead us to believe.

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