Christie Backs Historic School Funding Reform, Tax Cut

New Jersey Gov. Chris Christie (photo credit: Gage Skidmore)

Yesterday in Somerset County, New Jersey, Gov. Chris Christie proposed an amendment to his state’s constitution that, if enacted in a referendum next year, will apportion state aid to local school districts on a per pupil basis.

What would this mean when fully phased in? Each district would receive $6,599, multiplied by the number of students going to school in that district. Aid to special education programs would continue unchanged. This would replace the current system imposed 40 years ago by the New Jersey Supreme Court in which 59 percent of the state aid goes to 23 percent of the student population.

Christie was of course immediately accused by Democrats and New Jersey media of succumbing to racism, since evening out the aid system would reduce budgets in the poorest districts. But the governor noted that the greatest beneficiary of the current system, Asbury Park, has a high school graduation rate hovering around 66 percent, based on a state subsidy of $33,699 per student. He also noted that inner cities like Newark have charter schools achieving superior performance outcomes with per pupil costs about half that of the conventional public schools. Given this track record, it would seem likely that inner-city students and parents will be the biggest winners if the reform becomes law.

Democrats represent many of the suburban school districts that would be able to enjoy the largest cuts in property taxes, a category in which New Jersey leads the nation. Continue Reading

The Politics of Shaming

New Jersey Gov. Chris Christie (photo credit: iprimages via Flickr, CC BY-ND 2.0)

I am often asked by fellow conservatives about my experience with Governor Chris Christie as the Republican nominee for the U.S. Senate in New Jersey in 2014. When I reply that Gov. Christie and his team, after remaining scrupulously neutral during a tightly contested four-way primary, were very helpful to my campaign in terms of fund-raising and party unity, doing all that could reasonably be expected in my uphill general election campaign against Sen. Cory Booker, the predominant reaction is surprise verging in some cases on disbelief.

No doubt some of the surprise traces to the unusual circumstances of my Senate race. In February 2014, I returned to New Jersey at the age of 70 after spending the previous 32 years as a resident of northern Virginia, rented an apartment in my previous hometown of Leonia in northeastern New Jersey, and announced I was running against Sen. Booker as an opponent of the Federal Reserve’s zero interest rate policy and as an advocate of returning the United States to the gold standard. (I did this because after four frustrating years working full time on monetary policy at the American Principles Project, it hit me that if I didn’t try to introduce Fed policy and gold into political debate, no one else would.)

In addition to the solid help I received from the governor in his role as leader of the New Jersey Republican party, I needed one other important thing: a decision by him not to attack or question my support for the gold standard.

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Ted Cruz: The GOP’s Sound Money Candidate

Sen. Ted Cruz (R-TX) (photo credit: Gage Skidmore)

This column from The Daily Caller last week is a great defense of Ted Cruz on the gold standard:

Mr. Cruz has been excoriated for seemingly incompatible statements concerning the U.S. central bank, the Federal Reserve. On the one hand, he has advocated exploring a return to the gold standard, seemingly questioning the Fed’s purpose. On the other hand, he has accused the Fed of implicitly creating the Great Recession by not intervening strongly enough in 2008 to prevent the crash. How can someone want the Fed to do more sometimes, but call into question its existence at other times?

I do not want to put words in Mr. Cruz’s mouth, but in light of the increased public realization of the Fed’s role, it’s important to understand these positions are not inherently contradictory. Mr. Cruz’s critiques make sense if viewed in the context of the inherent knowledge problem monetary policy confronts.

In economics, the knowledge problem is an idea closely associated with the writings of Nobel laureate F. A. Hayek. Applied to monetary policy, the knowledge problem impels the question: how can monetary policymakers know what supply of money will best achieve economic stability? Because, under central banking, the production of money is not subject to market forces, we cannot rely on the usual mechanisms of supply and demand to ensure there is enough money in the economy to satisfy demand for it.

Theoretically, an omniscient central bank would meet changes in money demand with offsetting changes in supply.

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Trump and Sanders Winning the Economic Debate — and Election — by Default

From left: Donald Trump and Sen. Bernie Sanders (I-VT)

Most conservatives believe Donald Trump and Bernie Sanders have wrong solutions to the stagnation in wages and job creation that has marked the American economy since 2000. But Trump and Sanders have proven better vote-getters than conservative candidates because, politically speaking, having wrong answers to a real and widely felt evil is better than offering no answers at all.

The last several Republican debates have been remarkable for the virtual absence of discussion of economic policy, other than Trump’s attacks on establishment lobbyists and donors and demands for “better deals” with our trading partners. It’s true that economic-related questioning by the various debate moderators has been minimal, but that doesn’t explain the non-Trump candidates’ failure to inject the issue on their own initiative.

The conservative candidates and their advisers are well aware from all polling, public and private, that the mediocre state of the economy is a predominant issue among voters, even at times when such events as acts of mass terrorism or the opening of a Supreme Court vacancy dominate the headlines and spike voter concern. That the conservative candidates don’t bring up the economy likely reflects a belief that they don’t have persuasive ideas for accelerating wage and job growth, or perhaps that voters are not smart enough to understand the various ideas they may have but fail to highlight.

Effective abdication of the economic issue by conservative candidates has enormous consequences both for the primaries and the general election.

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Trump’s Tax Plan: A Proposal Reagan Would Approve?

Donald Trump (photo credit: Gage Skidmore)

Donald Trump’s plan for tax reform is the most populist so far seen among the presidential candidates. It is also the most faithful to supply-side principles.

Why? Populism in its root meaning is optimism about the ability of people to make decisions affecting themselves. Its opposite, elitism, is optimism about the ability of elites to make those decisions for them.

Unlike most recent Republican plans, Trump avoids single year expensing for corporate investment in new physical capital (machines and buildings). Though rarely highlighted by its advocates, it is so expensive it preempts the ability to cut personal rates very much, without huge projected deficits.

Instead of single year expensing, Trump’s plan cuts business taxes to 15 percent and personal rates to zero, 10, 20, and 25 percent. Among other things, leaving business depreciation the way it is allows Trump to zero out income taxes for a single person earning under $25,000 and a couple under $50,000. This is, to say the least, an attractive prospect for tens of millions of non-rich Americans.

But populism is not just about popularity. Cutting taxes for individuals and families is a vote of confidence in the ability of ordinary people to make use of their income, rather than sending it on a round trip to government and other elites to decide what they need. It is far more like Ronald Reagan’s tax revolution, which focused on personal tax rate cuts rather than corporate incentives.

Reagan’s tax rate reductions, which saw the top rate on personal income drop from 70 to 28 percent between 1981 and 1988, were successful in both economic and political terms because they trusted the people to make good decisions. Continue Reading

Walker Was the Biggest Winner Last Night

Wisconsin Gov. Scott Walker (photo credit: Gage Skidmore)

If I had to pick a winner of the debate last night, I would say it was Scott Walker for two reasons:

1.) His answer on what he would do as President was future-oriented. He talked about how he cut taxes and spending in Wisconsin, and how he would do the same thing in Washington. Most of the candidates focused on what they have already done. Walker talked about what he would do as President, and that’s important to the voters.

2.) He was unyielding on abortion and avoided a potential “gotcha” moment:

Megyn Kelly: You recently signed a law in Wisconsin that does have an exception for the mother’s life, but you are on record as having objected to it. Would you really let a mother die rather than have an abortion? And with 83 percent of the American public in favor of a life exception, are you too out of the mainstream on this issue to win a general election?

Walker: Well I’m pro-life, I’ve always been pro-life, and I’ve got a position that I think is consistent with many Americans out there in that I believe that is an unborn child that’s in need of protection out there and I’ve said many a time that that unborn child can be protected and there are many other alternatives to also protect the life of the mother. That’s been consistently proven.

Unlike Hillary Clinton, who has a radical position in terms of support for Planned Parenthood, I defunded Planned Parenthood more than four years ago long before any of these videos came out. 

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Making the 21st Century Case for Gold

Photo credit: Bullion Vault via Flickr (CC BY-ND 2.0)


George Gilder is a prophet. He’s been right repeatedly about almost every issue—from sex to Israel to economics—and now he’s back to tackle the most important — yet least debated — issue of our time: money.

Why is money—specifically, the value of our currency—so important? Why is it important to get right?

Many economists believe there is only one factor to worry about when it comes to monetary policy—inflation. But that’s not true — there are plenty of factors to consider. Here is one: Since the U.S. government officially abandoned a gold-backed dollar in 1971, workers’ wages have largely remained stagnant, creating an ever-widening gap between the rich and everyone else.

In his new book, The 21st Century Case for Gold: A New Information Theory of Money, Gilder argues that we need to abandon our failed discretionary money-printing policy in favor of the gold standard. Gilder writes about the inefficiencies of global currency markets and the chronic instability that has defined modern finance. He makes the case that gold is not the archaic monetary system that its critics claim it to be, but instead is the most technologically sound monetary system available—the only system that will work in a 21st century global economy.

Gilder describes a trip he took to China in the late 1980s with monetarism’s most prominent advocate, Milton Friedman. Friedman urged Chinese leaders to get control of their money supply, arguing that, with a stable money supply, economic growth would inevitably follow.

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Audit the Fed is Not Enough

The Marriner S. Eccles Federal Reserve Board Building (photo via Wikimedia Commons, CC BY-SA 3.0)

There’s a lot to admire in Alex Pollock’s Saturday piece in The Wall Street Journal, “It’s High Time to ‘Audit’ the Fed.”  Pollock, a longtime chief executive of the Federal Home Loan Bank of Chicago and currently a resident fellow at the American Enterprise Institute, attacks the faulty premise that the supposed “independence” of the Fed should lead Congress to forgo the wide-ranging audit called for in current legislation.

In reality the Fed is a creature of Congress, which in turn is an elected institution specifically tasked in the Constitution (Article I, Section 8) with coining money and regulating its value. Congress deserves criticism for neglecting its role for so long, not for finally making tentative moves to reestablish that role.

Pollock also correctly notes that the Fed is making its decisions based on an economic model that has been wrong again and again (usually in the direction of excessive optimism about its own policies). He also notes that the Fed has repeatedly ignored or distorted the few guidelines recent Congresses have provided, such as fostering “moderate” (as opposed to zero) interest rates and interpreting price stability as a perpetual mild inflation.

Moreover, Pollock has no illusions about the faulty elitist design of the Fed, which he describes as “a prime example of the dream-world that President Woodrow Wilson imported from the theorists of the German Empire—the notion of government based on the superior knowledge of independent experts that bypasses the messy and undisciplined world of democratic politics.” This sounds great until experience teaches us that “the Fed has no superior economic knowledge. Continue Reading

The Trouble With the Cruz Speech

Sen. Ted Cruz (R-TX) (photo credit: Gage Skidmore, CC BY-SA 2.0)

Steve, you are absolutely right, except you buried the lede.

Ted Cruz’s strategy is smart: he needs to get in the race early, develop a small-donor fundraising strategy, and be seen as a fearless, full-spectrum conservative. He was smart to go to Liberty University, because evangelicals are not only an important part of the GOP base but are also feeling attacked in a whole new way.  It was an excellent, well written and well delivered speech.

But there was a big, obvious hole in the middle of Cruz’s speech: he offered no solutions for the problems he named.

On abortion, for example: why didn’t he promise to fight for the 20 week bill?  On religious liberty, the easy bill to support is the Marriage and Religious Freedom Restoration Act.  His flat tax mentioned a postcard but no rate.

One problem: in the absence of support for specific legislation, the left can claim you are pushing for anything they imagine voters will hate. But the bigger problem is that you are running for president, not messiah—people need solutions to protect the things they hold dear.

Jeff Bell is the Policy Director at American Principles in Action. Continue Reading

Fed Reserve Empire Strikes Back at Rand Paul

The Marriner S. Eccles Federal Reserve Board Building – Washington, DC

In an orchestrated orgy of protests, Fed governors and regional bank presidents have roasted Sen. Rand Paul and his co-sponsors for reintroducing a bill mandating an audit of the Fed. Loretta Mester, president of the Cleveland Fed, wants us to know that such a thought is “misguided.” Why? “They really are about allowing political considerations to influence monetary policy decisions,” she said in a speech in Columbus. “This would be a tremendous mistake, because it would ultimately lead to poorer economic performance.”

What performance? Presumably the Fed wants a pat on the back for the zero-interest-rate policy of the last six-plus years, which has all but abolished bank savings accounts and made it harder for small businesses to access the lines of credit they need to expand—and create new jobs. Or is Ms. Mester talking about the recovery that began in 2009, which is the weakest since the statistics that measure such things began to be kept?

Of course this is about much more than a congressional audit. It is at root the Fed’s desire for zero review and zero debate of a monetary policy that has virtually nationalized lending and seems capable of making stagnation a permanent feature of an economy that not long ago was the most dynamic in the world. God forbid that there should be a political debate about a Fed whose last two chairs are among the most political ever to serve.

And God forbid that Congress should take seriously Article I, Section 8 of the U. Continue Reading