The Public Policy

The Public Policy

Dave Camp’s Capitulation on Carried Interest

By 3.6.14

Once again, according to a White House summary of his 2015 budget unveiled this week, President Obama will call for “closing loopholes” that he says help “Wall Street.” Once again, upon closer examination, these “loophole closures” are actually tax hikes that will hit Main Street the hardest.

There is something different this year, but that “something” is bad news for taxpayers and entrepreneurs. The difference is that House Ways and Means Committee Chairman Dave Camp (R-Mich.) has unfortunately signed on to some of these destructive proposals in the “tax reform” bill he introduced last week.

In particular, both Obama and Camp’s “carried interest” proposals would tax much of the capital gains of partnerships as ordinary income as well as subject them to hefty payroll taxes for Medicare and Social Security. Small business folks and innovative entrepreneurs who structure their firms as partnerships will be hindered by both the cost and complexity of Obama and Camp’s provisions aimed at “Wall Street” fat cats.

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The Public Policy

Victims of the Common Good

By 2.5.14

“We’re going to take things away from you on behalf of the common good.” So said Hillary Clinton at a fundraiser back in 2004. Conservatives, in a rush to tag Clinton as a Marxist, sometimes strip out the context; she was talking about repealing President Bush’s tax cuts. But her remark is a nice motto for modern progressivism, which constantly demands that the rich finance a bulging public sector that acts for the common good.

This has been the theoretical foundation of the Obama presidency. The stimulus would borrow from a wealthier future generation to energize the economy. Obamacare would take resources from the health insurance companies and give them to the uninsured. Repealing part of the Bush tax cuts would force the rich to “pay their fair share” for programs to help the poor. The government, having defined the common good, then gets to enforce it on its own terms. It’s a nice gig, if you can get it.

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Fannie, Freddie, and the Big One

By 1.17.14

Twenty years ago today, the 6.7-magnitude Northridge Earthquake struck the San Fernando Valley 20 miles northwest of downtown Los Angeles, killing 60, injuring 7,000, and damaging more than 82,000 buildings. The price tag for the quake was a record $20 billion in property damage, only about half of which was insured.

The two decades since Northridge have seen significant efforts to mitigate earthquake risk through retrofitting, as well as the creation of a state agency in California dedicated to providing earthquake insurance to all who seek it. Alas, despite those steps, there is significant evidence that not only are we less prepared for a major quake today than we were in 1994, but that the financial brunt of any such disaster would mostly fall squarely on the shoulders of U.S. taxpayers.

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The Public Policy

Get the Kludge Out

By 1.15.14

Niall Ferguson has characterized the current state of America as “The Great Degeneration.” Another commentator has recently introduced a new term into the public domain to describe our present political and governmental distemper.

In Yuval Levin’s very useful conservative policy journal, National Affairs, we find an honest and perceptive liberal, Professor Steven M. Teles of Johns Hopkins University, decrying the size, complexity, and incoherence, not to mention ineffectiveness, of American government as a “kludgeocracy.”

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The War on Poverty at 50

By 1.8.14

With the 50th anniversary of the war on poverty at hand, the New York Times undertook a guided tour of the vast and murky battlefield, offering a surprising -- for the Times -- admission. To wit, poverty isn't just about what the government does, or doesn't do, for poor people. It's about, in part, how poor people live, voluntarily or otherwise.

The Times didn't make a big deal about what it called "sociological trends (that) help explain why so many children and adults remain poor, even putting the effects of the recession aside." That the story so much as acknowledged the impoverishing effects of family breakdown is the really big deal, given the broad commitment of American liberals to the notion of job-training, better education, minimum-wage hikes and so on as the keys to overthrowing "inequality."

"More parents," the Times story notes, "are raising a child alone, with more infants born out of wedlock. High incarceration rates, especially among black men, keep many families apart. About 30 percent of single mothers live in poverty."

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The Best Way to Cut Spending: Cut Spending

By 12.18.13

We live in an age of mad austerity. Bits of debris crumble portentously off our bridges thanks to dried-up infrastructure funding. Scientists are forever one paycheck away from shutting down their research. What’s left of the civil service has been cut to ribbons by the late sequester. The recent government shutdown nearly annihilated the economy until (in the nick of time!) Republicans finally surrendered.

That’s America right now if you’re on the neo-Keynesian left. To its partisans, the government isn’t a leviathan, but a delicate Jenga tower—pluck a single dollar and you risk toppling everything. This is how a spending cut as piddling as the sequester becomes a nightmare scenario, or why any attempt to balance the budget is regularly denounced as right-wing extremism.

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No Fault Government Contracts

By 12.7.13

The Navy recently christened the USS Gerald Ford in Newport News, Virginia, with considerable fanfare and the traditional smashing of a bottle of champagne across the bow of the ship — the most technologically advanced aircraft carrier the United States has built.

The fancy new ship cost taxpayers $13 billion, including a shameful $2.5 billion cost overrun! That’s an overrun of almost 20%, hardly a rounding error. 

Really? A $2.5 billion overrun. I’m sure taxpayers are scratching their heads wondering who will pay that outrageous tab. Well, since the carrier is being built under a cost-plus, incentive-fee contract , the Navy pays for most of the overruns. That means we taxpayers get stuck with the monster tab!

Meanwhile, the government has spent over $500 million on the Obamacare computer system provided by CGI Federal that malfunctioned and virtually crashed the entire Affordable Care Act program. Simply put, the rollout of the centerpiece of the president’s domestic agenda has been an embarrassment for which he has apologized to the American people on several occasions. But apologies aren’t enough. Where is the accountability?

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Common Core-Uption

By 11.21.13

Arne Duncan finds it “fascinating” that opposition to new Common Core education standards throughout the U.S. is coming from  “white suburban moms who — all of a sudden — their child isn’t as brilliant as they thought they were, and their school isn’t quite as good as they thought they were.”

The U.S. Secretary of Education later said he used a poor choice of words when he spoke to a group of state superintendents last Friday. Yes, definitely. All those women fed a steady diet of the Republicans’ war on their civil rights during last year’s election that then went out and elected his boss just found out what Barack Obama’s administration really thinks of them: selfish segregationists who only care about their own children.

What Duncan cares about, by contrast, is prepping everyone for 21st century jobs, whatever those will be. He does not want any child to be forced to follow a substandard – to borrow the progressive catchphrase for health policies that existed before Obamacare – curriculum that allows a community to “feel better” about itself without academic merit.

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The Unintended Consequences of Credit Card Regulation

By 11.20.13

When you try to regulate things, you’re really regulating people. If there’s one crucial lesson to keep in mind about regulation, this is it. And these days, when regulations cost us over $14,000 per household each year, according to my colleague Wayne Crews’s calculations, it behooves us to consider the unintended consequences of each new regulation, however benevolent its intent. A good place to start is the new regulations on credit card interchange fees.

Counterintuitive as it may seem, merchants who accept credit cards have always paid credit card companies for their use, not the other way around. For an explanation why, watch the classic movie The Card, starring Alec Guinness, about a rakish young entrepreneur who invents an early version of a credit card, the Universal Thrift Club. The merchants who accept the card get more customers because of the availability of credit and the convenience of using a card, so they pay the people who provide that boost to their business.

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