Daily Policy Digest

The Cruel Things Obama Is Doing to the Labor Market

17 May 2013 07:00:58 CDT

ObamaCare mandates will destroy job opportunities for young, unskilled workers in cities and towns across the country, says John C. Goodman, president and CEO of the National Center for Policy Analysis.

With respect to the new health law, the Congressional Budget Office estimates the cost of the minimum benefit package that everyone will be required to have will be $4,750 for individuals and $12,250 for families.
That translates into a minimum health benefit of $2.28 an hour for full-time single workers and about $3 an hour for someone working 30 hours a week.
For family coverage the cost is $5.89 an hour for a 40-hour-a-week employee and $7.85 an hour for a 30-hour-a-week employee.

These are not small changes, and in some instances they can double the cost of labor. Employers have four ways to reduce this burden:

The mandate doesn't apply to firms with fewer than 50 workers.
The mandate doesn't apply to employees who work fewer than 30 hours.
The employer doesn't have to offer or subsidize family coverage.
Rather than provide health insurance, the employer can pay a $2,000 per (full-time) worker fine.

Employers are already reacting to ObamaCare. In fact, there was a huge shift to part-time employment in the fast-food industry beginning in January. The reason: ObamaCare will employ a 12-month "look back." That is, in deciding whether a worker is full-time or part-time next January (when the mandate becomes effective) the government will look at the average weekly hours worked in the previous year.

One fast-food restaurant owner said that the average workweek for his employees has been reduced to 25 hours this year -- compared with 38 last year.
Employees may be able to work part-time at two different restaurants -- both of which avoid the mandate by switching to part-time labor.
On the other hand, they may choose to work fewer hours because as their income rises their marginal tax rate will increase and public assistance subsidies and health insurance exchange subsidies will go down.

Letting part-time workers work more hours can be expensive.

If a 29-hour-a-week employee works one more hour for 50 weeks, that will trigger a $2,000 fine.
Dividing the fine by the additional hours of work, that works out to a $40-an-hour penalty.

Source: John C. Goodman, "The Cruel Things Obama Is Doing to the Labor Market," Forbes, May 27, 2013 (print edition).

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Parent Trigger Laws Empower Parents for School Change

17 May 2013 07:00:57 CDT

In January 2010, California passed a parent trigger law that allows parents to change the administration of a poorly performing public school. After facing significant opposition, a local group of parents has received the nod from the courts that their actions are in fact legal. The court ruling and the group, Desert Trails Parent Union, demonstrate that families and the local community can empower themselves to transform a dysfunctional school system, says Ben Austin, executive director of Parent Revolution and former deputy mayor of Los Angeles.

The Desert Trails Parent Union organized many parents who signed a petition, outlined their objectives, and met with teachers and administration officials.
Despite defenders of the school system perpetrating a campaign of lies, intimidation, fraud and forgeries, a superior court judge has concluded that parents are acting within the parent trigger law.
Following the support of the courts, the parents have convinced the district to allow a high-quality nonprofit charter school operator to take over Desert Trails Elementary.

Amidst a deeply divided political climate, politicians on both sides of the aisle are supporting parent triggers and the idea of giving parents more ability to reform failing schools where their children attend.

A Gallup poll found that 70 percent of respondents favored parent trigger laws.
Opponents of parent trigger laws say that parents have to navigate a maze of bureaucratic hurdles, which limits the ability of parents to be successful.
In California, the State Board of Education is working to streamline the process and remove barriers for parents to organize and address their grievances.

Education professionals say that parents do not possess the necessary knowledge to make meaningful reforms. Given the track record of public education, parent triggers empower parents to take a more active role in their child's education.

As the parent trigger evolves, better models of how to organize parents and encourage district and school participation are being developed.
Six states now have parent trigger laws and more than 10 states are considering implementing the laws in their state.

Source: Ben Austin, "Empowered Families Can Transform the System," Education Next, Summer 2013.

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Parent Trigger: There's a Better Way

17 May 2013 07:00:56 CDT

While parent trigger laws empower parents, families and communities to take an active role in reforming their children's education, the effects of the parent trigger mechanism may be more disappointing than many other options. Because of legal and institutional obstacles, the parent trigger mechanism is not likely to make a huge difference in the long run, says Michael Petrilli, executive vice president of the Thomas B. Fordham Institute.

Two successful campaigns in California led by Parent Revolution have faced significant legal opposition.
With the McKinley Elementary parent trigger campaign in Compton, California, school officials launched an attack on the trigger petition, stating that all signatures need to be verified in person and with photo identification.
When this argument failed, school officials were allowed to cross-reference every signature with student records and pushed for parents' ability to rescind their support -- efforts that resulted in the parent trigger eventually failing.

Parent Revolution, a group that organizes local parents to leverage the parent trigger mechanism, is lobbying the state board of education to tighten its regulations to prevent such blatant obstruction.

In several other districts, parent trigger groups have met with opposition from administration officials who have either rejected the petitions or rejected their recommendations.
Typically, parent trigger mechanisms seek to transform a traditional public school into a charter school.
Because public schools have a virtual monopoly on the education market, they are incredibly reluctant to change the system.

Public schools that have been converted into charter schools come with their own set of problems. Since the schools are technically still part of the public school district, they are sometimes micromanaged by the district or worse, left completely alone. When left completely alone, the quality of a converted charter school can fall, which is counterproductive to the entire goal of improving educational outcomes.

Still, some parents are leveraging the parent trigger to encourage schools to make reforms without actually executing the parent trigger mechanism. The parent trigger is useful because it gets parents involved in their child's education. It is doubtful that it will lead to long-term systematic changes.

Source: Michael Petrilli, "There's a Better Way to Unlock Parent Power," Education Next, Summer 2013.

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Wind Farms Get Pass on Eagle Deaths

17 May 2013 07:00:55 CDT

It happens all too frequently: A soaring golden eagle slams into a wind farm's spinning turbine and falls, mangled and lifeless, to the ground. Killing these iconic birds is not just an irreplaceable loss for a vulnerable species. It's also a federal crime, a charge that the Obama administration has used to prosecute oil companies when birds drown in their waste pits, and power companies when birds are electrocuted by their power lines, says the Associated Press.

But the administration has never fined or prosecuted a wind energy company, even those that flout the law repeatedly. Instead, the government is shielding the industry from liability and helping keep the scope of the deaths secret.

The result is a green industry that's allowed to do not-so-green things. It kills protected species with impunity and conceals the environmental consequences of sprawling wind farms.

More than 573,000 birds are killed by the country's wind farms each year, including 83,000 hunting birds such as hawks, falcons and eagles, according to an estimate published in March in the peer-reviewed Wildlife Society Bulletin.
Getting precise figures is impossible because many companies aren't required to disclose how many birds they kill. And when they do, experts say, the data can be unreliable.

When companies voluntarily report deaths, the Obama administration in many cases refuses to make the information public, saying it belongs to the energy companies or that revealing it would expose trade secrets or implicate ongoing enforcement investigations.

Nearly all the birds being killed are protected under federal environmental laws, which prosecutors have used to generate tens of millions of dollars in fines and settlements from businesses, including oil and gas companies, over the past five years.

By not enforcing the law, the administration provides little incentive for companies to build wind farms where there are fewer birds. And while companies already operating turbines are supposed to avoid killing birds, in reality there's little they can do once the windmills are spinning.

Source: Dina Cappiello, "Wind Farms Get Pass on Eagle Deaths," Associated Press, May 14, 2013.

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Hispanic College Enrollment Rates Pass White College Enrollment Rates

17 May 2013 07:00:54 CDT

For the first time, Hispanic college enrollment rates are higher than the rates for white high school graduates. The milestone is the result of a long-term trend that was boosted by the Great Recession. The growing enrollment rates are probably due to declining labor market outcomes and a new focus on the importance of college, say Richard Fry and Paul Taylor, in a new Pew Research poll.

In 2000, approximately 28 percent of Hispanic students dropped out of high school, compared with just 14 percent in 2011.
The high school dropout rate of white students also declined but by a small amount, from 7 percent in 2000 to 5 percent in 2011.
Hispanics are now much more likely than whites or blacks to enter college immediately.
Sixty-nine percent of Hispanic students who completed high school in 2012 enrolled in college the following October, compared with 67 percent of whites and 63 percent of blacks.
Hispanics between 18 and 24 years of age are less likely than their white counterparts to be enrolled full time.
Seventy-two percent of whites between the ages of 18 and 24 were enrolled at a 4-year college or university in 2011, compared with only 56 percent of Hispanics.
Despite gains in college enrollment, the unemployment rate for Hispanic 16 to 24 year olds is 1 percent higher than that of whites, at 18 percent.

One potential reason why Hispanics are attending college more than whites now is that the Great Recession has been particularly hard on young Hispanics while white youth have had an easier time getting jobs with just a high school diploma or GED.

Another reason could be the increased importance that Latino families are placing on college. A 2009 survey reported that 88 percent of Latinos ages 16 and older agreed that a college degree is necessary to get ahead in life today.

Source: Richard Fry and Paul Taylor, "Hispanic High School Graduates Pass Whites in Rate of College Enrollment," Pew Research Center, May 9, 2013.

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Exporting Natural Gas: Is it Beneficial?

16 May 2013 07:00:53 CDT

U.S. natural gas companies are now reaching the point that they can provide enough gas for U.S. consumption and create extra profit through exports to other countries. This boom in production is one of the first real steps that the United States has been able to take toward energy independence, but some politicians argue that this might create price increases for Americans attempting to buy natural gas, says Steve Chapman, a columnist and editorial writer for the Chicago Tribune.

Current law requires the federal government to approve all sales of U.S. gas abroad.
Among those to express doubts of the benefits of U.S. companies exporting natural gas is President Barack Obama who claims, "I've got to make a decision -- an executive decision broadly about whether or not we export liquefied natural gas at all."

Some congressional Democrats are discouraging him from embracing the exportation of natural gas because of the possible negative impacts it could have on major U.S. corporations' abilities to buy the gas.

Sen. Ron Wyden of Oregon warns that "major gas consumers could find themselves hit hard with energy price hikes and forced to sideline job-creating efforts."
Sen. Debbie Stabenow of Michigan claims that it "makes no sense" to ship U.S. homegrown supplies abroad.

These responses made by congressional Democrats are quite unusual compared to U.S. politicians' typical thought process that reducing imports and promoting exports is good. Some senators believe that letting natural gas leave U.S. soil will sap Americans' ability to use the commodity. Some corporations oppose natural gas exports because they claim that it would become an unfettered export.

Among the corporations are Dow Chemical, Alcoa, Nucor and Eastman Chemical, which argue that selling American natural gas to Americans is good but selling it to foreigners is bad.
These companies fret that foreign buyers will bid up the price of something they buy in great quantity.
Dow complains that exports could "disrupt natural gas supply and pricing."
It has not, however, objected to the "disruptions" that in the past five years have increased supply while slashing prices by two-thirds.

While congressmen and corporations are worried about prices of natural gas inflating, it is not clear that allowing sales abroad would have a substantial impact on American purchasers of the commodity. The sale of natural gas to foreign companies or foreign government will benefit the U.S. economy and U.S. exports, and put the United States back on the map for economic growth.

Source: Steve Chapman, "Democrats Are Holding Energy-and Prosperity-Captive," Reason Magazine, May 9, 2013.

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California Mulls Expanding Role for Nurse Practitioners

16 May 2013 07:00:52 CDT

As the Affordable Care Act increases the number of Americans seeking treatment in the health care system, there will be a shortage of doctors. California, like 15 other states, is considering whether to allow advanced practice nurses more autonomy and authority. The potential move could address some of the shortage of doctors in the future, says Kaiser Health News.

Nurse practitioners are advanced practice registered nurses who have complete additional training beyond that of a registered nurse.
In low-income sections of major cities, like San Francisco's Tenderloin district, nurse practitioners are already providing health care to individuals with reduced access to the health services they need.
In San Francisco, Glide Health Services, which provides coverage to the Tenderloin district, is run primarily by nurse practitioners, with a physician visiting 12 hours a week to sign forms and consult on difficult cases.

Much of the workload on physicians is for fairly common illnesses with standard treatments that nurse practitioners have had the training to diagnose and treat. The low-income individuals who visit Glide Services have been happy with the health care receive, noting that the nurse practitioners are friendly and compassionate.

Current California laws require that nurses treat a patient only after consulting a doctor.
Some lawmakers are attempting to eliminate this requirement, a move that many physicians oppose because they say that nurse practitioners are only one part of the medical team necessary to provide care.
According the California Medical Association, nurse practitioners do not have as much training or know enough about testing and technology as doctors do.

Physicians also note that the proposed legislation does not stipulate that nurse practitioners practice in underserved or underprivileged areas. The question is whether or not nurse practitioners have enough training to provide basic primary care.

A California health economist notes that nurse practitioners are actually more likely to practice where there are more Medicaid patients or in rural communities.
The California bill to allow nurse practitioners to offer treatment without consulting a doctor will go before the Senate appropriates committee next week.

Source: Pauline Bartolone, "California Weighs Expanded Role for Nurse Practitioners," Kaiser Health News, May 9, 2013.

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Texas and California: A Tale of Two Oil States

16 May 2013 07:00:51 CDT

Texas and California offer competing visions for how an economy should be organized. Both states benefit from vast natural resources, including two of the largest oil reserves in the country. Despite this similarity, Texas and California have drastically different economies and economic outlooks, says the Wall Street Journal.

Because of California's environmental restrictions, the state is no longer among the top three oil-producing states in the country.
Texas has more than doubled its oil output since 2005 and now pumps more than 2 million barrels a day, which could double by 2016.
More than 400,000 Texans are employed by the oil and gas industry with an average salary of $100,000 a year.

The oil industry in Texas generates $80 billion a year in economic activity and generated more than $12 billion in taxes in 2012. The tax revenue from oil production helps the state avoid levying an income tax, which encourages business growth. In California, the picture is much different -- oil output is down 21 percent from 2001.

Despite the rising price of oil, which now trades around $95 a barrel, California has continually shunned exploitation of its vast offshore reservoirs.
According to the Department of Energy, the Monterey shale off California's coast could contain twice as much oil as the Bakken shale in North Dakota, which has brought significant wealth to the state in a short period of time.

Much of the difference between Texas' and California's extraction of oil and gas is due to political culture. Californians have elected politicians who believe that fossil fuels are dirty energy. They have also passed cap-and-trade legislation and wagered on many green companies that have gone bankrupt.

California's green energy agenda is in stark juxtaposition to Texas, which has removed barriers to oil production.
Since the recession, Texas has led the nation in job creation with a jobless rate of 6.4 percent while California has the nation's third highest at 9.4 percent.

California has the oil and gas reserves to attain the prosperity that Texas has enjoyed but must first ditch the ultra-green agenda.

Source: "A Tale of Two Oil States," Wall Street Journal, May 5, 2013.

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Regulations Reduce Community Bank Lending

16 May 2013 07:00:50 CDT

While big banks, the ones that are "too-big-to-fail," caused much of the financial crisis, community banks are now suffering the results. Regulations intended to keep another financial crisis from occurring are penalizing local community banks whose business models are not a threat to the financial system. The result is that regulatory compliance is keeping small banks from making more loans and fueling the economic recovery, says Camden Fine, president and chief executive officer of the Independent Community Bankers of America.

Banks with less than $10 billion in assets control only 20 percent of total U.S. banking assets.
Because of the too-big-to-fail designation, large banks enjoy an estimated $83 billion annual taxpayer subsidy in the form of U.S. Treasury guarantees.
With federal guarantees, large banks engage in risky lending that small banks cannot afford to engage in.

Federal Deposit Insurance Corporation data shows that large banks have both the lowest credit quality and surprisingly, the lowest cost of funds. Community banks, which try to focus on building customer relationships rather than transaction volumes, have the highest credit quality, and perversely, the highest cost of funds.

Community banks deal with the same regulatory paperwork, yet have smaller staffs to do so.
Despite the obstacles, community banks are the source of almost 60 percent of small business loans less than $1 million, while the other 40 percent is held by large banks, which makes up less than 5 percent of large banks' total domestic lending.

The regulatory obstacles that community banks face hurt rural communities and the middle class who rely on them. Several steps have been proposed to lighten the paperwork and compliance burden on community banks.

Small banks should be exempted from mortgage rules that require escrow accounts for balloon mortgages and interest-only loans provided the banks originate the loans and hold them in their portfolio.
Red tape should be cut in small business lending that requires repeat information on every new loan application.
All proposed rules on community banks should be analyzed by cost-benefit analysis experts who can determine if a rule's cost will exceed its benefits.
Certain audit rules should also be waived, as well as privacy notice requirements that mandate the mailing of annual notices when no privacy change has occurred.

Source: Camden Fine, "New Regulations Are Strangling Community Banks," Bloomberg News, May 7, 2013.

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Federal Student Loan Programs Subsidize Waste

16 May 2013 07:00:49 CDT

With student loan debt now over $1 trillion, significant and constant attention has been paid to default rates and availability of federal student loans. Less attention has been paid to direct grants and scholarships that are doled out in great sums by the federal and state governments. While the federal student loans programs subsidize waste and wealth distribution, grants and scholarships are in equal need of reform, says Jay Schalin, director of state policy analysis at the Pope Center for Higher Education.

The federal Pell Grant program doled out $35.6 billion in need-based grants to anyone who meets the income limits and enrolls in college.
Need-based grants are different from merit-based aid, which generally redistributes wealth from the working class to more prosperous families.
To fix a system where too many students receive aid, both merit and need should be used when determining grant eligibility.

If merit is left out of the calculation, scholarships quickly become wasteful. According to the National Center for Educational Statistics, 73.7 percent of Pell Grant recipients with SAT scores above 1140 graduated within six years while only 34 percent of their counterparts with SAT scores below 850 did the same.

From 1970 to 2010, the Pell Grant program expanded from 176,000 recipients to 9.6 million recipients.
Some schools, like the Southern University of New Orleans, have 76 percent of students receiving Pell Grants despite a 4 percent four-year graduation rate.
Only 12.9 percent of students with SAT scores below 700 finished school within six years, yet received roughly $5 billion in Pell Grants.

Merit-based scholarships are often extended to students who are not truly exceptional. In Georgia, a student with a B high school average could qualify for a scholarship provided his or her family makes less than $140,000 a year. This high income limit means that many middle- and upper-middle income families receive financial support they do not need.

By considering both need and merit when granting financial aid, much of the waste will be cut from the financial aid system. For some students, this will save them their time and efforts, as well as money.

Source: Jay Schalin, "Federal Student Loan Programs Subsidize Waste and Redistribution to the Wealthy," Forbes, May 6, 2013.

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Data Shows Great Variation in College Results, Earnings

15 May 2013 07:00:48 CDT

Statistics have commonly told people that those with college degrees make significantly more money in their lifetime than those without. Plenty of scientific studies reaffirm these statistics while teachers and politicians reinforce that college is necessary for success in the modern economy. Unfortunately, not all colleges and college degrees are equal and not all children should attend college, says Stephanie Owen and Isabel Sawhill of the Brookings Institution.

Certain schools, majors, occupations and individuals may not be the best investment.
There are many considerations in evaluating the rate of return on education, including the cost of college, the opportunity cost of the time spent in college and forgone earnings.
One estimate places the opportunity cost of getting a four-year degree at $54,000.

The gap between young high school graduates and bachelor's degree holders working full time is $15,000 annually. The gap grows significantly, so that by age 50, bachelor's degree holders average $46,500 more in annual earnings than high school degree holders.

If tuition plus the opportunity cost of college is an estimated $102,000, then the estimated $570,000 in additional lifetime earnings that a bachelor's degree holder earns certainly makes college worth it.
The more competitive a school, the greater return on investment for a bachelor's degree.
In descending order, engineering, computers and math, science, business, physical science, social science, communications, biological sciences, literatures, liberal arts, psychology, arts and education are the degrees that earn the most (or least).
Over a lifetime, architects will earn almost $3.5 million while an educator will earn less than $2 million.

Graduation rates are also highest at the most competitive schools and as school competitiveness decreases, so too do six-year graduation rates. Making this information more readily available would encourage new college students to choose their degree and occupation carefully. The data also shows that colleges need to do more to ensure that their students graduate.

Sources: Stephanie Owen and Isabel Sawhill, "Should Everyone Go to College?" Brookings Institution, May 8, 2013.

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Funeral Industry Anticompetitive

15 May 2013 07:00:47 CDT

Morbid though it may be, there are special interests in the funeral industry that attempt to distort the free market. When monks in Louisiana started selling coffins for half the state average, a state cartel of funeral home owners, acting under the auspices of the Louisiana State Board of Embalmers and Funeral Directors, blocked the monks from selling their coffins by enforcing onerous regulations. Similar legislation or regulations exist in many states, creating a nationwide system of overpriced funerals and caskets, says Eric Boem, a reporter for the Franklin Center for Government and Public Integrity.

In order to continue selling their caskets, the Louisiana monks would have had to build a funeral parlor with room for 30 people, a display room for at least six caskets, an arrangement room and an embalming room, as well as hire a funeral director and pay a full-time salary.

After a failed petition to the state legislature, the monks sued in court and a panel of federal judges upheld a lower court's ruling in favor of monks saying that it was because of funeral homes that consumers were overpaying for funerals.
In almost every single state, regulations exist that are designed to protect funeral homes from open competition and lower prices.

Because there are no repeat customers in the funeral industry and no shortage of customers, there are few competitive forces that would drive prices down. Despite the high costs of a funeral, most grieving consumers do not comparison shop when it comes time to choose their funeral home.

Additionally, many funeral homes go overboard with Mercedes hearses, $5,000 caskets and enormous Victorian homes.
Slowly, a few entrepreneurs are attempting to pry open the funeral industry by offering more affordable funeral services.

One new funeral home in Minnesota caters no-frills funerals to those of modest means. The affordable funeral model has been so successful that the entrepreneur wants to expand, but he faces similar parlor and embalming room requirements that must be overcome.

Slowly, the funeral home industry's stranglehold on the burial market is weakening as courts are ruling that the various requirements dictated by unelected panels of licensed funeral directors are anticompetitive.
While regulations have been struck down in Pennsylvania, Louisiana and Minnesota, many more still exist that keep funeral prices sky high.

Source: Eric Boem, "Grave Robbers: Anti-Competitive Regulations for the Dead," Foundation for Economic Education, May 7, 2013.

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Colleges Cut Prices by Providing More Financial Aid

15 May 2013 07:00:46 CDT

After more than a decade of continuous tuition increases, private U.S. colleges are worried that their high prices could discourage future college-goers. To keep from pricing themselves out of existence, many colleges and universities offer financial assistance to entice students to attend their school. Offerings of financial aid have reached record levels as parents and students have finally honed in on the inflated costs of higher education, says the Wall Street Journal.

The "tuition discount rate" is the reduction off list price afforded by grants and scholarships.
According to the National Association of College and University Business Officers, the tuition discount rate hit an all-time high of 45 percent last fall for incoming freshman.
College consultants expect that even deeper discounts will be offered this coming fall as families focus on cost and value more than prestige.

More than 60 percent of schools increased their discount rate in the fall of 2012. The discounts come at a time when macroeconomic trends point to declining wages, the high cost of college, expanding student debt and an uncertain job market.

Private colleges were more likely to increase their discount; about 13 percent of U.S. undergraduates are enrolled at a private nonprofit college.
Private nonprofit colleges provided 70 percent of all grant aid to undergraduate students in 2009.

Colleges are in a bind because it is unpopular to raise the sticker price, yet their costs are rising at the same time they are expanding aid to remain competitive. The result has been the lowest increase in the sticker price of college, which for about 280 private colleges rose only 3.9 percent in 2012.

Tuition at four-year public colleges and universities continued to rise an average of 4.8 percent in the 2012-2013 academic year.
In the future, some colleges are predicted to merge or fail as higher costs have led to lower enrollment -- some schools are seeing just 20 percent of the students they accepted actually enrolled.

Only the most exclusive colleges and universities have refused to lower their tuitions. Other colleges have simply cut initial prices and offered lower or no tuition discounts in an effort to establish that "the price is the price."

Source: Ruth Simon, "Colleges Cut Prices by Providing More Financial Aid," Wall Street Journal, May 6, 2013.

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Gas Tax on Mileage as an Alternative to Current Federal Gas Tax

15 May 2013 07:00:45 CDT

The idea of a vehicle miles traveled (VMT) tax is being discussed as an alternative to the federal gas tax, and actually tested in states like Oregon and Iowa, says Mark J. Perry, a professor of economics at the Flint campus of the University of Michigan and a scholar at the American Enterprise Institute.

One feature of the VMT tax is that it would require some way to measure travel, creating the possibility that the government will use advanced technology to track movements of every car and truck.

Under one scenario, automobile manufacturers would be required to install a GPS system -- a "black box" -- in every vehicle to measure miles traveled.
The government would then track your vehicle by satellite to follow each vehicle's total travel and calculate the tax.
A large-scale retrofit of existing cars would be necessary, requiring a massive and costly effort, since every car owner would be required to take their car to a station annually to have a black box installed and then read. Motorists would pick up the tab for the GPS, which would cost more than $200 each, plus installation.

The alternatives aren't much better, says Perry.

Another option would require wireless transponders in vehicles to report odometer readings to a central billing office, allowing the tax to be paid when refueling a vehicle at a service station.
But retrofitting thousands of gas stations to support a pay-at-the-pump system would be costly and time-consuming, and hybrids and electric-powered vehicles wouldn't pay their share for highway improvements.

A major drawback to a VMT tax, no matter what method is used to track mileage, is that the cost of implementing it would consume a large share of the revenue being collected.

The U.S. Government Accountability Office estimates that installing GPS systems in 230 million U.S. vehicles could cost up to 33 percent of the revenues generated over a 20-year period.
A VMT tax, moreover, would disproportionately shift the burden of federal road maintenance onto suburban and rural car owners who drive much further distances to and from work, school and for shopping than their urban counterparts.
In addition, the "black box" system would force us to surrender our privacy. Americans would be required to tell government agencies more and more about themselves, including their driving habits.

Shifting to a VMT system serves neither the interests of good government nor the interests of personal privacy.

Source: Mark J. Perry, "Gas Tax on Mileage Shatters Right to Privacy," McClatchy Newspapers, May 2, 2013.

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Five Myths about the Federal Housing Administration

15 May 2013 07:00:44 CDT

The Senate Banking Committee held a hearing recently to discuss the Independent Foreclosure Review, the goal of which is to identify borrowers who suffered financial harm because of errors in their foreclosure processing. Congress could have done better by helping families avoid foreclosure in the first place, but how, asks Edward J. Pinto, a former executive vice president and chief credit officer for Fannie Mae, and a resident fellow at the American Enterprise Institute.

Congress should recognize that for the past 37 years the Federal Housing Administration (FHA) has been the foreclosure leader.

Foreclosures used to be rare in the United States -- even for the FHA.
Yet over this period, 3.14 million mostly working-class families -- 1 in 8 -- who have an FHA-insured loan have seen their American dream end in foreclosure.

This high rate of foreclosure betrays the FHA's original mission of insuring sustainable loans to first-time and low-income borrowers. Further evidence of the FHA's terrible fiscal position is seen in Obama's budget, which has allocated $943 million to bailout the FHA.

Before proposing a bipartisan overhaul, Congress should consider these five myths:

Myth 1: The FHA is held to higher capital standards than the private sector. In fact, today the FHA is insolvent to the tune of at least $31 billion.
Myth 2: The FHA played no role in the housing boom and bust. In reality, the FHA took the lead in crafting the National Homeownership Strategy, which urged doing away with down payments.
Myth 3: The FHA 30-year mortgage is an indispensable part of the American dream. However, for decades, the FHA's usual loan term was for 20 years. For good reason: it builds equity, and thus safety, much faster. It wasn't until the late 1970s that the average loan term became a 30-year one.
Myth 4: High delinquency rates overstate the problem. In reality, nearly 1 in 6 FHA borrowers is delinquent today. The FHA claims this isn't a big problem because borrowers go in and out of delinquency and don't necessarily lose their homes. This ignores the harm of delinquency.
Myth 5: FHA lending is safe and responsible -- it has an 80-year track record. In reality, even as the FHA helped working-class families achieve homeownership following World War II, it was investigated by the FBI as early as 1954 for involvement in fraudulent home improvement schemes.

The FHA has been plagued by fraud and mismanagement and has become synonymous with foreclosure. Worse, the FHA's foreclosures are not evenly distributed. Congress needs to change the FHA now: It sets up American families for failure and threatens taxpayers.

Source: Edward J. Pinto, "Five Myths about the Federal Housing Administration," Roll Call, May 3, 2013.

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