The Heritage Insider: Will public sector workers be free from compelled union fees? Why millennials are struggling, how assimilation stopped working, and more
January 16, 2016
WORKER CHOICE
Judging from the oral arguments in Friedrichs v. California Teachers Association, it looks like there are five Supreme Court Justices who agree that requiring non-union public sector workers to pay for representation they don’t want violates the First Amendment. The days appear to be numbered for the agency shop set-up that the Court created with its 1977 decision in Abood v. Detroit Board of Education. “One [conservative] justice after another (except for Justice Thomas, who as ever was silent) expressed his real doubt—I would say almost amazement—that anybody would think that the Abood synthesis would work.
“Justice Kennedy put a point that is dear to my heart when he said: Look, it may well be that everybody wants higher wages, but it’s also clear that in many ways there are deep conflicts within a union. Some workers in favor of merit raises; some are against them. Some are in favor of seniority; some turn out to be against that. Some think there ought to be differential wages for science teachers and for liberal arts teachers; others think the other way around. He says, these conflicts are absolutely rife and it turns out that if you then look at what a union does, it represents on these issues not only when they are at the bargaining table, but also when they do their lobbying activities.
“And so Justice Roberts, for example, kept asking the question: Could you tell me anything which doesn’t have a political overtone? And it was clear from his answer that even when people talked about mail rooms and co-mileage allowances and lunch breaks, as far as he was concerned all of that had political dimension as well.
“So, looking at the particular case, it seems as though the free riders will lose to the compelled riders by a five-to-four vote. […]
“What will happen is they will come to the conclusion that the Abood effort to draw the line between the political and the economic is no longer viable. They will strike down the decision and it will mark a huge transformation in American law.” —Richard Epstein, “Friedrichs v. California Teachers Association – Post-Argument SCOTUScast,” The Federalist Society, January 13
GROWTH AND INNOVATION
Why are 18- to 29-year-olds more likely to live in poverty today than their counterparts in 1979? Why are they moving back in with mom and dad and delaying life events like getting married? “Government barriers to starting a new business have made it harder than ever for Millennials to chase after their versions of the American Dream. Government regulations have skyrocketed out of control growing from nearly 10,000 pages in 1954 to over 80,000 by 2013. The complexity of the tax code has also made it difficult to do business. In 1954 the tax code was only 14,000 pages long, but by 2013 it reached nearly 74,000.
“Occupational licensing requirements are another barrier. In 1950, only five percent of the American workforce needed a permission slip from the government to work. Today that number is around 30 percent, and it’s costing us up to 2.85 million jobs.
“As government continues to grow, young Americans are beginning to believe the American Dream is dead. To reverse this trend, we need to reduce excessive government regulations that stop job creation. We need to simplify the tax code so Millennials can start new businesses without Uncle Sam intervening. We need to repeal ridiculous occupational licensing requirements that keep the least fortunate among us from working and climbing into the middle class. And lastly, we need to protect the sharing economy from the alliance of big government and special interest groups which seek to undermine innovative services like Uber, Airbnb, and other digital platforms that provide new and exciting economic opportunities for young Americans.” —David Barnes, “2016 State of the Millennial Report: A Review of the Challenges and Opportunities for Young Americans,” Generation Opportunity, January 12
TAXES
While the candidates debate whose corporate tax reform plan is better, we should consider the question: Why do we even have a corporate tax? “The corporate tax is actually a hidden tax on employees, shareholders and consumers. When we raise taxes on corporations, they simply pass the tax along in the form of lower wages, lower dividends, and higher prices.
“The corporate tax is also a double tax in that the corporation’s earnings are taxed once through the corporate tax but then again through the shareholder’s dividend taxes, the employee’s income taxes, and the customer’s sales taxes.
“Because the corporate tax is both a hidden tax and a double tax, the most sensible corporate tax rate should be zero. In fact, there was no corporate income tax in the United States until 1909, and even today the corporate tax provides only about 9 percent of federal revenues.
“What would happen with a zero corporate tax rate? An explosion of economic growth and job creation, and a mad dash of overseas companies re-incorporating in the United States.” —Tom Giovanetti, “Missing the Biggest Point on Corporate Tax Reform,” Institute for Policy Innovation, January 14
Some presidential candidates have embraced the idea of a value-added tax on the theory that consumption taxes are economically more efficient than income taxes. In practice, however, VAT’s have not lived up to that billing. “Unlike state sales taxes, VATs are charged in small amounts along the entire supply chain. The final tax is hidden in the price and borne by consumers, as corporations pass increased costs on to the final user. Due to their hidden nature, VATs tend to grow over time, and 26 of the 33 advanced nations with VATs have raised their rates.
“From 1975 to the present, VAT rates have risen in the U.K. from 8% to 20%. In Norway, they increased from 20% to 25%. These taxes are in addition to European income taxes that are relatively high by American standards.
“For instance, when imposed in 1967, Denmark’s VAT was 10%; it is now 25%, in addition to a top income tax rate of 56%. In 1968, Germany levied a 10% VAT. Germans are more fortunate; their VAT has risen ‘only’ to 19%, and their highest income tax rate is ‘only’ 48%.
“Of the 33 countries in the Organisation for Economic Co-operation and Development with VATs, only Canada, Japan, and Switzerland apply rates under 10%. Thirty have rates of 10% or more, and 21 have rates of 20% or higher. The notion that a VAT will stay at 14% or 16% is not supported by other countries’ experience. […]
“OECD countries, with their VATs, should have higher growth rates than the United States. But since 2009 growth in gross domestic product has averaged 2.2% annually in the United States, compared to an OECD average of 1.8%.” —Diana Furchtgott-Roth, “A Value-Added Tax Is a Terrible Idea,” e21: Economic Policies for the 21st Century, January 14
CITIZENSHIP AND CIVIL SOCIETY
Hayek has the answer to President Obama’s state of the union question: “How can we make our politics reflect what’s best in us, and not what’s worst?” “Friedrich Hayek would have regarded this question as exemplifying the ‘knowledge problem.’ How do we know what is best for us collectively? Only by the revealed preferences of people acting freely in markets. No mastermind can devise a moral plan for us all. Indeed, this insight goes back to Adam Smith, whose companion work to The Wealth of Nations, The Theory of Moral Sentiments, pointed out that reciprocity, the better part of our nature—the propensity to gift things of value or favors—is fundamental to our behavior. Combined with the ‘invisible hand’ of the market, the totality of human behavior can be both self-interested and concerned for others at the same time.
“Indeed, as Nobel laureate Vernon Smith put it,
“As humans, we are born social exchangers, much as we are born to learn naturally, without being taught, any language we hear spoken around us, which language becomes the communication basis of social exchange. In this sense, the property rights that support these spontaneous exchange systems are natural, and it is natural for formalized societies to embody such rights in legal codes that mirror the vast human experience captured in exchange practices.
“In other words, for our politics (in the broad sense of our political institutions) to reflect what is best in us, we should allow the market (again, in its broadest sense, including the market of ideas) to operate. Any attempt to dictate morality by tinkering with institutions and rights will almost certainly backfire, as no-one has the knowledge to be certain of a better outcome.” —Iain Murray, “Three Economists Had the Answer to the President’s Questions,” Competitive Enterprise Institute,” January 13
It’s time for Americans to discuss how and why “assimilation” came be regarded as a racist code word. “The radical reordering of how America absorbs newcomers came not as a response to a demand from below but as a top-down effort led by elites. PayPal founder Peter Thiel and Internet entrepreneur David O. Sacks, among others, call multiculturalism a ‘word game’ that hides a ‘comprehensive and detailed worldview’ and that is used by American leftists to introduce radical policy ideas when ‘an honest discussion would not lead to results that fit the desired agenda.’ Whether this represents an unintentional phenomenon or a deliberate conspiracy, it is hard to deny that to the degree multiculturalism succeeds, it pushes America leftward.
“It is hard to argue, too, that average Americans asked for such a rearrangement. The multicultural revolution is premised on the need for affirmative action to remedy ‘a history of unfavorable treatment,’ in the language of the EEOC. But the vast majority of Asian and Hispanic Americans for whom this ostensible benefit is intended are post-1965 immigrants who sacrificed much to get to U.S. shores, or their children or grandchildren. In other words, they not only lacked any ‘history of unfavorable treatment,’ but they also chose to wave aside the hardships that immigration imposes. These hardships were to them a lesser evil, compared to their problems at home. […]
“As John Skrentny described it, ‘[I]t is striking that the civil-rights administrators—without any public debate, data or legal basis—decided on an ethnoracial standard for victimhood and discrimination that officially divided the country into oppressed (blacks, Latinos, Native American, Asian Americans) and oppressors (all white non-Latinos.)’ Today, many Americans are still unaware of the history of this unilateral reorganization. Most think that the majority-versus-minority discourse has been around forever, not knowing that it was only introduced within the past 50 years.
“America owes itself the opportunity to debate this issue. It is time to stop and ask what bureaucrats, politicians, and academics have done to the American ideals of equal treatment and equal opportunity for all. As Daniel Patrick Moynihan and Nathan Glazer put it in their 1970 introduction to their landmark 1963 book Beyond the Melting Pot, grouping Americans into ‘fantastic categories’ that were each assigned a color on the spectrum is ‘biologically and humanly monstrous.’” —Mike Gonzalez, “Patriotic Assimilation Is an Indispensable Condition in a Land of Immigrants,” The Heritage Foundation, January 8
More on Citizenship and Civil Society
PUBLIC LANDS
The source of conflict over lands in the West is the fact that grazing fees on federal lands are set by government rather than markets. “[The Public Rangelands Improvement Act of 1978] set a formula for calculating grazing fees based on beef prices and rancher costs. When the law was written, most analysts assumed per capita beef consumption would continue to grow as it had the previous several decades. In fact, it declined from 90 pounds to 50 pounds per year. The formula quickly drove down fees to the minimum of $1.35 per cow-month, even as inflation increased the costs to the government of managing the range.
“The 1978 law also allowed the Forest Service and Bureau of Land Management (BLM) to keep half of grazing fees for range improvements. Initially, this fund motivated the agencies to promote rancher interests. But as inflation ate away the value of the fee, agency managers began to view ranchers as freeloaders. Today, the fee contributes will under 1 percent of agency budgets and less than 10 percent of range management costs. Livestock grazing was once a profitable use of federal range lands but now costs taxpayers nearly $10 for every dollar collected in fees.
“Ranching advocates argue that the grazing fee is set correctly because it costs more to graze livestock on federal land than on state or private land. But the BLM and Forest Service represent the sellers, not the buyers, and the price they set should reflect the amount that a seller is willing to accept. Except in cases of charity, no seller would permanently accept less than cost, and costs currently average about $10 per animal unit month. […]
“It doesn’t take much scrutiny to see that domestic grazing is not a viable use of most federal lands. The Forest Service and BLM manage close to 240 million acres of rangelands that produce roughly 12 million cattle-years of feed. While the best pasturelands can support one cow per acre, federal lands require 200 acres for the same animal. This 240 million acres is nearly 10 percent of the nation’s land, yet it produces only about 2 percent of livestock feed in this country, while less than four percent of cattle or sheep ever step on federal lands.” —Randal O’Toole, “Tug-of-War over Federal Lands Leads to Standoff,” Cato Institute, January 13
THIS AND THAT
Are the studies finding conservatives to be more dogmatic just biased toward finding dogmatism in conservatives? [Reason, January 15]
The incandescent light bulb just got way more efficient. How fast can regulators unban them? [Foundation for Economic Education, January 14]
Liberal professors outnumber conservative professors five to one. [Daily Signal, January 14]
Fewer ObamaCare options: Humana told the Securities and Exchange Commission this week that it expects to exit the exchange markets in 2017 because of losses on its plans. [Fox News, January 13]
Two New Mexico legislators and the Institute for Justice are suing Albuquerque’s cops in order to get them to understand that the legislature really did abolish civil asset forfeiture last year and so they need to stop taking people’s property without a criminal conviction. [Institute for Justice, January 15]
California is doing at least one thing right: It’s moving away from public financing of sports stadiums. [Wall Street Journal, January 13]
March for Life will be next Friday, January 22.
13 Hours: The Secret Solidiers of Benghazi tells the story of what really happened on the ground when the diplomatic mission to Libya was attacked. [Daily Signal, January 14]
Is political correctness now required to maintain a Twitter account? [Daily Caller, January 14]
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