Wednesday, April 30, 2008

A Considerable Burden

Yesterday, the NY Times penned a stinging Editorial which criticized the Supreme Court for upholding Indiana's voter identification law. The law in question required voters to show a valid form of photo identification in order to vote. The Times' Editorial essentially placed the burden of proof on the State to show that such a law is required and is reacting to an existing problem. It states:

It was supposedly passed to prevent people from impersonating others at the polls, but there is no evidence that this has ever happened in Indiana.

First of all, this assumes that a state should not enact a law aimed at preventing a problem from occurring. Rather, the only role the state legislative function should play is reacting to existing problems. The Editorial also leads one to believe that the law produces an extraordinary and unnecessary burden on voters:

The harm it imposes on voters, some of whom will no doubt be discouraged from casting ballots, is considerable.

But in the Majority Opinion by Justice Stevens, the Court concludes:

on the basis of the record that has been made in this litigation, we cannot conclude that the statute imposes 'excessively burdensome requirements' on any class of voters

I have a hard time believing that requiring a photo identification is a considerable burden. What is the tipping point for what we classify as a "considerable burden"? Voter registration is already required to exercise your right. Is the completion of a voting registration form a considerable burden? There are poor people without the internet and they can't download the application with the simple click of a mouse. That seems like an unequal burden than the rest of us must face. These people also may not live near a Post Office so they can't mail the form back. That too seems unfair.

This is certainly meant to be facetious, but voter registration is already inherently regulated to prevent fraud. Does a photo ID aimed at further preventing fraud present a substantial marginal burden from what needed to be done before. From the concurring opinion written by Justice Scalia:

To vote in person in Indiana, everyone must have and present a photo identification
that can be obtained for free. The State draws no classifications, let alone discriminatory ones, except to establish optional absentee and provisional balloting for certain poor, elderly, and institutionalized voters and for religious objectors....Insofar as our election-regulation cases rest upon the requirements of the Fourteenth Amendment...weighing the burden of a nondiscriminatory voting law upon each voter and concomitantly requiring exceptions for vulnerable voters would effectively turn back decades of equal-protection jurisprudence. A voter complaining about such a law’s effect on him has no valid equal-protection claim because, without proof of discriminatory intent, a generally applicable law with disparate impact is not unconstitutional.

Scalia then properly positioned the standard to be on the individual:

It is for state legislatures to weigh the costs and benefits of possible changes to their election codes, and their judgment must prevail unless it imposes a severe and unjustified overall burden upon the right to vote, or is intended to disadvantage a particular class. Judicial review of their handiwork must apply an objective, uniform standard that will enable them to determine, ex ante, whether the burden they impose is too severe.

The Cheese Stands Alone

Tom Toles' cartoon from the Washington Post yesterday captures the political attitude on fiscal responsibility.

Born In A Small Town

Dr. Charles Wheelan puts forth three primary reasons why the economies of small towns are hurting:
  1. The need for fewer farmers because of increased agricultural productivity
  2. Difficulty being a highly skilled professional and living in a small town
  3. The current farm subsidy system compounding the problem

The Fight Over The 10th

Chris Carney (Dem-PA-10th) has decided to hold off on his Democratic Presidential endorsement. Even though he stated he would endorse after the Pennsylvania primary, it seems he has decided to wait even longer after seeing the recent election returns.

For those not familiar, Chris Carney beat Republican incumbent Don Sherwood in 2006 to take control of Pennsylvania's 10th District. The district was safeguarded before the '02 midterm elections when it was redistricted to remove Democratic-leaning Scranton. This made the district a virtual Republican lock and allowed Sherwood to win the next two election unopposed. However, Sherwood's long running extramarital affair was revealed after he was charged with choking his mistress. This put the seat in play for the Democrats.

Of the 14 Counties either entirely within or partially within the 10th Congressional District, Clinton carried 13. The only county Obama won was Union County which contains Bucknell University and one of Obama's stronger political blocs--higher income and college educated/students. Below are the exact Presidential primary results for the counties that are within the district:
  • Bradford County: Clinton 65.8% vs. Obama 34.2% (+31.6%)
  • Lackawanna County: Clinton 73.8% vs. Obama 26.2% (+47.6%)
  • Luzerne County: Clinton 75.1% vs. Obama 24.9% (+50.2%)
  • Lycoming County: Clinton 58.5% vs. Obama 41.5% (+17%)
  • Montour Country: Clinton 60.4% vs. Obama 39.6% (+20.8%)
  • Northumberland County: Clinton 71.7% vs. Obama 28.3% (+43.4%)
  • Pike Country: Clinton 58.7% vs. Obama 41.3% (+17.4%)
  • Snyder County: Clinton 62.5% vs. Obama 37.5% (+25%)
  • Sullivan County: Clinton 68.4% vs. Obama 31.6% (+36.8%)
  • Susquehanna County: Clinton 65.3% vs. Obama 34.7% (+30.6%)
  • Tioga County: Clinton 61.7% vs. Obama 38.3% (+23.4%)
  • Union County: Obama 52.1% vs. Clinton 47.9% (-4.2%)
  • Wayne County: Clinton 62.4% vs. Obama 37.6% (+24.8)
  • Wyoming County: Clinton 69.4% vs. Obama 30.6% (38.8%)
The average margin of victory for Clinton within these counties was almost 30% (28.8%). Quite impressive considering the statewide margin was less than 10%. This poses quite the political conundrum for Carney.

First and foremost, Carney's primary goal is to win reelection and overcome the sophomore slump. If you look at the most recent voter registration data from the state, this district has a fairly substantial Republican advantage. Excluding the counties that are only partial included, the district has 50,000 more registered Republicans than Democrats. This means that Carney has some ground to make up which he has been fighting to overcome. On votes where Democrats have enjoyed a sizeable majority, Carney has been able to break with the party. As it currently stands, he's voted with his party 87.5% of the time which is lower than the average party alignment and near the bottom of the list for all members. This allows Carney to mold the perception that he is a moderate and not way out in left field. In an election year with a largely unpopular President from an opposing party, this moderate image allows Carney to easily avoid ties to President Bush while at the same time not be classified as too liberal. In addition to perpetuating this image, Carney secured the most earmarks of all freshman Democrats by grabbing 21 earmarks worth $18.2 million. Bringing money back to the district is always a plus.

However, assuming Obama wins the nomination, as appears almost certain, one would imagine that Carney can't be too thrilled about sharing a ticket with him. Looking at Obama's election results in these countries, his comments about small towns, and his voting record while in the Senate (which has been called the most liberal by National Journal), he represents the exact appearance that Carney has been trying for so long to avoid. As an uncommitted superdelegate, Carney will be feeling pressure from his party to endorse sooner rather than later. On one hand, if Carney endorses Obama, he is tacitly tied to him and provides Republican with election fodder. The 10th District is a high priority for the Republicans in the fall and even a simple endorsement might place Carney too politically close to Obama. Similarly, if he endorses Clinton by claiming to be following his constituent's will, he risks angering those within the party who want to put an end to the race.

Either way, this race is going to be highly monitored in the coming months.

Monday, April 28, 2008

The Man, The Myth, The Legend...

The intriguing and always polarizing Justice Antonin Scalia was on "60 Minutes" last night. It's a rare appearance that touches upon almost everything (Bush v. Gore, torture, originalism) and does a great job at humanizing him by showing his personal life. At times, you can tell Scalia's judicial philosophy wasn't meant for the 5 second sound bites because it's difficult for the piece to fully detail. His approach, his philosophy, and ability to reason are all meticulously important. He is incredibly knowledgeable and presents a distinct approach. A favorite quote from the segment has to believe Scalia stating: "The Constitution isn't meant to facilitate change: it is meant to impede change." After watching the piece, I couldn't help but wonder why there are no cameras in the courtroom yet because it'd be great to see this guy in action on a daily basis.

Part I

Part II

"Significant Preferencial Affirmative Action Program"

A great commentary in the Wall Street Journal today shines light on the rather abusive nature of the American Bar Association's reaccreditation process. George Mason University is used as a case-in-point. The ABA cited GMU's lack of a "significant preferential affirmative action program." Therefore, GMU tripled its minority student population (from 6.5% to 19% in less than 5 years) at the request of the ABA. In essentially a quid pro quo, the ABA made GMU abandon its established acceptance criteria and accept lesser qualified students in order to satisfy the minority quotas and better GMU's reaccreditation odds.

Just by looking at the raw data over that time period, GMU made substantial progress in diversifying its student population at the request of the ABA. This does not even include the number of minorities who were offered acceptance and didn't enroll. In addition, the ABA noted that GMU's intentions were good as it had a longstanding and active effort to recruit minorities. All the while, the ABA dangled their accreditation in front of them as an instrument for the implementing social goals.

Saturday, April 26, 2008

Deception From All

A Washington Times editorial adds to yesterday's post. The candidates have been particularly vague in describing how they will pay for their promises.

First, the Democratic presidential candidates plan to roll back part of the Bush tax cuts to finance their campaign proposals such as health care, green energy initiatives, etc. However, the Congressional Democrats are already relying upon this revenue to balance the budget by 2013. This essentially means the additional revenue is being counted twice. Clinton and Obama are both Senators and have to be familiar with the Democrat's budgetary proposals. When they campaign and state they will pay for their new polices with revenue that's already been committed, it's deceptive.

Similarly, John McCain has offered pork as a way to pay for some of his tax proposals. The Office of Management and Budget (OMB) counted 11,737 earmarks worth roughly $17 billion for Fiscal Year 2008. However, McCain has often cited an earmark figure of $60 billion because he believes that any initiative traced back to initial funding from an earmark can be removed. Two points of concern with this. First, his estimate is overly optimistic because he trying to use this $60 billion is savings to offset the one-year AMT patch. His rhetoric on earmarks and pork barrel spending leads on to believe that that's where all the government's money is being spent. In reality, less than 1% of all the government's outlays are "earmarks." Secondly, it's hard to imagine this money would simply disappear. Specified earmarks may be cut out, but that money could theoretically be added to the overall budgets of government departments or elsewhere. It would have little affect on the government's overall baseline. This allows Congressional conference chairs to cut deals with bureaucratic leaders so that their departments receive extra money in exchange for tacit agreement of spending on a specified project or region. As it was once explained to me: would you rather have your elected representative deciding how to best spend your money or some appointed bureaucrat?

Friday, April 25, 2008

In Over Their Heads

A great lead editorial today in the Washington Post appropriately called "Who'll Cover the Checks?" The editorial explores the lofty promises made along the campaign trail and the commitment they will require. Granted, it is April and these platforms have a long way to go, but it's always good to stop and look at what's being offered.

It is expected that the Democrats are going to propose increased spending. Frankly, the Democratic fiscal agenda has never sat well with me, but lately I've been growing concerned about the Republican plan.

Tax cuts have become a litmus test within the Republican party. If you want to run, you have to pledge yourself to never raising taxes. Tax cuts aren't a bad thing, nor am I attempting to imply that they are; however, the arguments that Republicans have continually used to justify their pursuit of endless tax cuts are not sound.

For instance, often times you will hear that tax cuts pay for themselves. President Bush has even said: "You cut taxes and the tax revenues increase." This is simply not true, nor close to being true. Nominal revenue declined for three consecutive years (2001, '02, and '03) after the first round of the Bush cuts: this is the first time that has happened since WWII. Furthermore, the Joint Committee on Taxation estimated that the 2001 tax cuts reduced government revenue by $552.5 billion from 2001-2006. The 2003 cuts also added to that reduction.

The macroeconomic effect of any tax cut will not produce enough growth to pay for the revenue lost. Douglas Holtz-Eakin, who is currently McCain's lead economic adviser, was really the first CBO director to do dynamic scoring of tax cuts. He reported that a 10 percent cut in income tax rates would:
... offset between 1 percent and 22 percent of the revenue loss from the tax cut over the first five years and add as much as 5 percent to that loss or offset as much as 32 percent of it over the second five years.

Different tax cuts have different reactions and not all tax cuts are created equal. Some provide more bang for the buck. For instance, a cut in the capital gains rate will spark an increase in short-term revenue because people can choose when they take their gain realizations. Over the long-term though, such a cut does not produce any increased revenue. It is just a short-term spike.

A second popular argument is that tax cuts are needed to "starve the beast." By cutting revenue and producing larger deficits, the government will be forced to lower its spending. Doesn't this sound great in theory? History does not support this idea. If anything, the tax cuts are simply followed by tax increases, and government's hand is not forced to cut spending. Even further proving the point is the recent fiscal track record of Republicans. They enacted Medicare Part D (a significant entitlement increase) and huge increases in both domestic and defense discretionary spending. One thing Congressional Republicans have gotten very wrong is their argument that tax cuts should not have to be paid for with pay-as-you-go rules ("PAYGO"). If Republicans truly believe in "starving the beast," they would fight for these tax cuts to be paid for because PAYGO forces a budget neutral offset--a spending cut. This would be a good thing.

Instead of make the difficult spending choices, tax cuts have been presented as a way to have it all. They have become political handouts for reelection. Using them as political tools instead of strategic economic tools has caused the Republicans to grow fiscally irresponsible.

Targeted taxes cuts can certainly have an economic growth in the short-term. That is not what is being disputed: selling tax cuts as a cure all is. As this blog has noted before, the size of government should and can decrease. By decreasing the size of the government, it is possible to produce an environment where permanent tax relief can exist because there is simply less to pay for. Instead of running large deficits which detrimentally effect our economic future, the government needs to get its house in order. Being fiscally conservative is no easy task, but it will pay in the long run.

Thursday, April 24, 2008

How Much Restructuring Are We Talking?

The Pittsburgh Post-Gazette has a well-timed Editorial. Thus far in the campaign, the Democratic rhetoric has been devoted to discrediting free trade and the "restructuring" of our agreements with other countries. In Ohio, it became quite clear that the primary was about who could better demonstrate their opposition of NAFTA. It was a defining moment in the campaign. When you contrast this with the rhetoric of John McCain, it's obvious that free-trade will be an important issue in the fall, particularly in the northeastern battleground states like Pennsylvania and Ohio. Pennsylvania's economy has progressed more than Ohio's as its unemployment rate (4.9%) looks better than Ohio's (5.7%) and Pennsylvania hasn't been as adversely affected from the mortgage crisis as Ohioans have been.

In tough economic times, low hanging political fruit is offered as a quick fix and presents something to rally around. NAFTA presents a fruit on that tree, and there will be temptation to substitute the sound policy of NAFTA for votes on election day.

The Congressional Budget Office (CBO) examined the effect of NAFTA on trade with Mexico. Since trade with Canada was already heavily liberalized before NAFTA, trade with Mexico provides an accurate measure. First, the report estimated that:
NAFTA increased U.S. exports to Mexico by 2.2 percent ($1.1 billion) in 1994—an effect that rose gradually, reaching 11.3 percent ($10.3 billion) in 2001. Similarly, the agreement boosted imports from Mexico by amounts that rose from 1.9 percent ($0.9 billion) in 1994 to 7.7 percent ($9.4 billion) in 2001.

More important than import/exports is how the trade agreement has affected U.S. GDP. The CBO analysis concluded that:
...estimates from CBO’s model leads to the conclusion that NAFTA has increased U.S. GDP, but by a very small amount—probably no more than a few billion dollars, or a few hundredths of a percent.

Even by this measure, NAFTA still produces a net gain. Certainly, there have been jobs and industries more affected, either in a negative or positive manner, than other professions because of this agreement. However, those jobs lost in the short-term will be replaced. As the world grows more globalized, it is imperative that our economy doesn't operate within isolation. America must advance and stay connected so that we can continue to compete on the international stage. It's dishonest and doing a disservice to our economic future to blame economic problems on NAFTA and free trade.

It's worrisome that as our country looks to move forward, the Democrats are looking to tie our country's hands. The Democrats may be able to use this issue to their advantage in November, but that in now way indicates it's a good policy for our future.

Tuesday, April 22, 2008

Because Today Is Also The Pennsylvania Primary...

The 5 largest employers in the state of Pennsylvania:
  1. Federal Government
  2. State Government
  3. Wal-Mart
  4. City of Philadelphia
  5. School District of Philadelphia

Earth Day

Being Earth Day, it seemed appropriate to tackle an eco-oriented topic. As I'm sure you're familiar with, global warming is a popular buzzword in modern politics. While some refuse to believe in global climate change, the current scientific evidence is pretty solid in demonstrating its existence. Much of the reluctance to accept the theory of global warming seems to exist because of the disdain for the messenger (Al Gore) rather than the substance of the message itself, but that is irrelevant for this entry.

Saving any substantive debate over global warming for another day, it is clear that we are moving forward as a country to confront and address the problem. Currently, green collar jobs have become a popular talking point for politicians along the campaign trail, especially from Senators Clinton and Obama. Green collar jobs are those jobs aimed at helping the country move towards more environmental friendly practices and energy sources. Certainly, this is an admirable goal, but what must be defined is the government's role in facilitating and/or creating such positions.

On Senator Clinton's Presidential Website, she desires to implement a green collar jobs training program, and Senator Obama has presented a similar proposal. Both proposals aspire to create 5 million green jobs.

Additional components of their environmental platforms involve the implementation of a cap-and-trade program to limit carbon emissions. There could be better proposals, but the cap-and-trade structure at least provides an incentive to reduce carbon emissions--either reduce emissions below the cap or purchase credits elsewhere for the failure to do so. There is also further incentive to cut emissions below the cap so that one can bank the credits for later use or sell them for a profitable gain.

Since there exists an incentive to go green within the cap-and-trade platform, I fail to see any additional benefit for throwing billions of dollars into a government training program. Granted, much of the money to pay for green job training will come from cap-and-trade revenues. However, that money could be better invested. The private sector is already responding to the popularity of "green." Consumers are making decisions based on which products are more environmentally friendly, and corporations images are tarnished if they are even perceived to be uncommitted to improving the environment. From this one could even argue that a cap-and-trade structure would not be needed because the private sector will respond to this public demand and cut CO2 emissions. However, from a fiscal perspective, the cap-and-trade system only provides a framework for the private sector to operate within and doesn't necessarily require any large monetary commitments from the government.

The most frustrating aspect of the Democrats' proposals is the way they address the issue: more government involvement. It is clear the private sector is responding, and the free market is working. These jobs are opening up all over the country, and people who never expected to be in such fields are now green collared workers (see a recent Newsweek article). But to hear Democrats talk, nothing is being done. It seems the profits of oil companies has clouded the Democrats' vision and pushed them to believe this can only be a government effort rather than a communal involvement.

Friday, April 18, 2008

Gas Tax Holiday! Hooray?

Today's Editorial in the Scranton Times-Tribune details the economics behind Senator McCain's recently proposed "gas tax holiday."

Senator McCain's plan, as the editorial presents, is based on some rather unsound economics. Removing the $0.184 cpg tax may provide immediate relief at the pump, but it would incentivize increased consumption. McCain recommends implementation of the gas holiday over the summer; however, this period is already when demand is at its greatest. A proposal which would increase consumption during an already extended period would not make sense in the grand scheme of things. McCain certainly could make the argument that removing the gas tax would act as a stimulus, and the forgone federal revenue is the consequence of such a stimulus action. However, an economic stimulus which increases demand on such a supply-sensitive good like oil is risky and could pose long-term complications outweighing any short-term benefits.

Economics of the proposal aside, for those who support a gas holiday, it would be more important for states to act. Most states have a larger tax than the federal government imposes. Take Pennsylvania for instance, the tax is currently $0.312 cpg. While not even the largest state levied gasoline tax, Pennsylvania's tax is almost 60% larger than the federal governments. States have implemented such relief independent of the federal government in the past (i.e. Georgia after Hurricane Katrina). Even though the lose of these state revenues may be more detrimental than federal revenue, those looking to lower the immediate price at the pump as priority number one should look at the state taxes first.

Thursday, April 17, 2008

An Insincere Committment

From an Opinion piece in the Wall Street Journal:

A presidential candidate could of course swear devotion to the First Amendment, while declaring that the amendment's purpose is to protect sports reporting and book collecting. And that candidate could still support government lawsuits against publishers, local bans on newspapers, and draconian restrictions on political commentary.

Civil libertarians who supported such a candidate because of his alleged love for the First Amendment would be foolish. Civil libertarians who support Mr. Obama or Mrs. Clinton because of their purported fealty to the Second Amendment may be bitterly disappointed.

Small Town Stereotyping

Interesting Op-Ed from Dr. Larry M. Bartels of Princeton University in the NY Times today called "Who's Bitter Now?". It notes the perception of people in small towns clinging to guns and religion, which was recently advanced by Senator Obama, is deceptive. Cosmopolitan voters are just as, if not more, likely to be motivated by social issues when voting. Dr. Bartels has also produced further literature disproving the theory that voters make their decisions solely on the basis of such issues and fail to consider economic issues.

Wednesday, April 16, 2008

Expanded Government

U.S. News & World Report's most recent cover story detailed "The Return of Big Government." The article references the 2008 Presidential campaign and some of the candidates' various proposals. There are several points worthy of discussion.

The fact that all candidates in the presidential race are appealing for greater government involvement is rather striking. Whether it entails more government regulation of the financial markets, addressing the country's infrastructure, a stimulus for the slowing economy, or ideas for dealing with the housing crisis, a larger allocation of the federal government's resources will be required. Certainly, there is a difference between the candidates over just how "big" government should be, yet the government seems to be on a path towards a decidedly expanded presence. As the article highlights, a growing sentiment exists for an expanded government role. That pressure was clearly visible in McCain's most recent position shift on tackling the housing crisis. While previously advocating government restraint in bailing out homeowners, McCain suggested the government should play an active role. It may be that this is all simply a short-term reaction to economic difficulties and that an increased government presents the best economic options on the table, but it all underscores the current public attitude in this campaign.

Even if the candidates made a concerted effort to restrict the federal government's growth, mandatory spending is essentially on a trajectory to expand without assistance. The projected growth of Medicare is astounding and largely undiscussed. Unlike discretionary spending, it's growth is on autopilot. While everyone seems to think Social Security is in dire straits, health care costs growing faster than the economy have placed Medicare in a position to substantially influence our long-term fiscal future.

From U.S. News & World Report:
Then there's the American public. The free-market policies of the past 25 years were preceded by a huge decline in American trust in government. But there's little sign that a decade of corporate blunders and scandals—from Enron to Citigroup—or even political fiascoes like Katrina has created a renewed enthusiasm for government. It's more like a pox on both their houses.

People have a fundamental distrust of both the private sector and the government, but the lack or political rhetoric devoted to getting "the government off our back" seems to go along way in demonstrating that an increased role for government may soon be coming. Hopefully, this is only a temporary phenomena aimed at capitalizing on current voting attitudes rather than a new public policy direction.