The MC: The Mackinac Center Blog

Lovers of liberty are today recognizing the birthday of intellectual powerhouse and Nobel laureate Milton Friedman, who was born 102 years ago in Brooklyn, New York to immigrant parents. Friedman, who died in 2006, was my intellectual hero.

As I have noted in previous blog posts, Friedman revolutionized the economic science while teaching it to the everyman. He is arguably the most influential economist of the 20th Century, perhaps (unfortunately) next to John Maynard Keynes. Friedman cut so many new paths it is difficult to sum up his contributions to economics and public policy in a book, let alone a blog post.

To give you an idea of how much the world has changed since the popularity of Friedman took off, consider this. In college during the mid-1980s I once asked a professor for a good book on market economics or libertarianism and the only book that came to his mind was “Conscience of a Conservative” [emphasis added] published in 1960 by Senator and presidential nominee Barry Goldwater.

My point here is that before Friedman there were very few options available to the earnest student of limited-government. Today, one could fill a library or two with market-oriented and libertarian books and Friedman’s lifetime of efforts helped make that possible.

His book Free to Choose: A Personal Statement was the most popular non-fiction book of 1980 and its wildly popular video series on PBS was viewed by 3 million Americans, despite the attempts of many leftists to keep it from being aired and viewed. The affable professor was respected — even liked — by people who often disagreed with him, including fellow professors and Nobel laureates.

Friedman was an alternative to Keynes in a world that needed fresh ideas and he delivered: monetarism, price theory, “consumption analysis” to name some academic subjects he influenced as well as public policies of enormous import such the all-volunteer military force and school voucher programs.

Today, the Friedman Foundation for Educational Choice, founded by Milton and Rose, is a leading contributor to the school choice debate nationwide.

Milton Friedman should be remembered today as an intellectual giant whose ideas about limited government continue to resonate around the globe. 

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A classic clip of Friedman:

Today is Dr. Milton Friedman's birthday. The renowned economist who brought economic principles to the masses would have been 102 today.

One of Dr. Friedman's most valuable contributions was his work on education policy. In this regard, Friedman was a visionary. Most people accept the status quo, namely a system of government-run schools, without considering its justification or how it can be improved. 

But in 1955, Dr. Friedman considered the arguments for a public education system and concluded that the valid ones could only justify a taxpayer-supported education system — not an education system of government-run schools.

Dr. Friedman wrote then: 

Governments could require a minimum level of schooling financed by giving parents vouchers redeemable for a specified maximum sum per child per year if spent on “approved” educational services. ... The educational services could be rendered by private enterprises operated for profit, or by non-profit institutions. The role of the government would be limited to insuring that the schools met certain minimum standards.

This system would provide for an educated society, he argued, and would allow parents to choose the best school for their child. Further, Dr. Friedman noted, opening government schools up to competition would create a wide variety of educational options and motivate existing schools to improve.

Dr. Friedman and his wife Rose Friedman spent decades advocating for a system of educational choice. In 1996, 40 years after the publication of Dr. Friedman's article "The Role of Government in Education," the Friedmans went one step further and founded the Friedman Foundation for Educational Choice, which has provided research and advocated for increased educational options.

The Friedmans' commitment to educational choice is inspiring. When they began the Friedman Foundation, few educational choice programs were in existence. Meanwhile, the status quo has been strongly promoted by its beneficiaries, and the political candidates they support. Most people would not have the tenacity to spend decades arguing for a policy that took so long to take hold. 

But the Friedmans understood that complacence was not an option. The status quo has resulted in rampant increases in spending, without demonstrated improvement. The status quo has meant that only Americans wealthy enough to purchase a house of their choosing could choose a public school that worked for them. The status quo has meant that many generations of students never had the opportunity to achieve their true potential.

This commitment to educational choice has resulted in an ever-increasing system of public and private school choice. In Michigan, the number of public charter schools available to families has increased to close to 300 schools, and they have a demonstrated record of producing better educational results. As of 2013, almost 220,000 Michigan students used some form of choice to attend a public school. 

Though it is tempting to simply celebrate these increased options, the best thing we can do today to honor Milton and Rose Friedman's legacy is to remind ourselves that we must not become complacent.

Families are still routinely investigated in some districts for having the audacity to try to send their child to a better school. State officials have allowed some conventional districts to shortchange students for decades, and there are active efforts to take away the educational choices Michigan families have because they threaten the status quo.

Those who suggest that the status quo is the best we can do lack vision. An innovative system of educational choice that prioritizes the needs of families instead of officials is possible in Michigan, if we fight for it.

F. Vincent Vernuccio cited in Teacher Freedom Article

Michigan Teacher says MEA did not provide information on August Opt Out

Watchdog.org tells the story of Rob Wiersema, a Michigan teacher who says the Michigan Education Association did not give him the proper information he needed to opt out of the union.

The MEA has admitted it doesn't explain how teachers can leave. The Mackinac Center's Director of Labor Policy F. Vincent Vernuccio says he is helping to provide teachers with information so that they can make an informed choice in August with the website AugustOptOut.org.

Opponents of right-to-work predicted many negative economic results before Michigan became the country's 24th right-to-work state.

But, as a recent Capitol Confidential article points out, incomes have risen in the first full year since the worker freedom law went into effect. The article was picked up by Fox News, the American Thinker, and Hotair.com

Mackinac Center's effectiveness cited on Fox News and Watchdog.org

Progressives say Mackinac Center is "powerful" and "well-respected"

Opponents of freedom-based solutions paid the Mackinac Center several compliments during a work session at Netroots Nation 2014. The gathering is described as a "giant family reunion for the left."

Both Fox News and Watchdog.org wrote about how the Mackinac Center gains the respect of policy-makers and the public with powerful ideas. Read the Watchdog article here and the Fox News article here.

While the Legislature is on a summer break the Roll Call Report is reviewing key votes of the 2013-2014 session.

Senate Bill 542, Permit more generous government employee health benefits: Passed 38 to 0 in the Senate on October 8, 2013.

To increase from $11,000 to $12,250 the “hard cap” on the amount that a local government or school district can spend for an "individual-plus-spouse" employee health care policy under a 2011 law limiting the cost of such benefits.

Who Voted "Yes" and Who Voted "No"

Senate Bill 272, Authorize corporate and developer “port facility” subsidies: Passed 37 to 1 in the Senate on June 13, 2013

To expand the mission of the Michigan Strategic Fund to include providing undefined subsidies for corporations, developers and other entities involved in port facilities. The House has not taken up the proposal, which was introduced by Sen. Mike Kowall in this and the previous Legislature.

Who Voted "Yes" and Who Voted "No"

Senate Bill 114, Revise commercial rental assessment occupancy formula: Passed 37 to 1 in the Senate on June 13, 2013.

To eliminate the use of occupancy rates in determining the taxable value of commercial rental property. This essentially reverses a 2002 Supreme Court ruling, that the 1994 Proposal A property tax assessment limitations restricted increases for higher occupancy but not decreases for lower occupancy.

Who Voted "Yes" and Who Voted "No"

Senate Bill 283, Repeal annual union PAC contribution “re-up” requirement: Passed 36 to 1 in the Senate on May 22, 2013.

To repeal a requirement that union members or employees of a corporation who wish to have contributions to a union or corporate PAC automatically deducted from their paycheck must affirmatively give consent on an annual basis by means of signing a permission form. The bill would repeal the annual “re-up” requirement. The House has not taken up this measure.

Who Voted "Yes" and Who Voted "No"

Senate Bill 397, Expand a corporate/developer subsidy regime: Passed 33 to 4 in the Senate on September 26, 2013.

To authorize creation of a sixth “Next Michigan Development Corporation,” which is a government agency that gives tax breaks and subsidies to particular corporations or developers selected by political appointees on the entity's board for projects meeting extremely broad "multi-modal commerce" criteria (basically, any form of goods-related commerce). The new entity would be in the Upper Peninsula.

Who Voted "Yes" and Who Voted "No"

Senate Bill 307, Let 278 cities impose additional public safety property tax: Passed 37 to 0 in the Senate on October 16, 2013

To allow cities with less than 70,000 residents impose "special assessment" property taxes to pay for police and fire services. These taxes would be imposed over and above regular property taxes, and require voter approval. According to the Senate Fiscal Agency, this could allow 278 cities to impose these additional taxes. The House has not taken up this proposal.

Who Voted "Yes" and Who Voted "No"

Senate Bill 652, Make state Appeals Court venue for suits against the state: Passed 26 to 11 in the Senate on October 30, 2013.

To establish that the venue for all legal claims against state agencies, commissions, boards, etc. (the state “court of claims”), will no longer be the Ingham County circuit court, and instead will be the state Court of Appeals (which consists of 24 judges elected in four regional elections).

Who Voted "Yes" and Who Voted "No"

Senate Bill 636, Facilitate "land line" transition to cell phones: Passed 32 to 3 in the Senate on December 5, 2013

To streamline regulations on “landline” telephone service providers so as to facilitate transitioning customers to a wireless (cell phone or VOIP) system, and allow phone companies to discontinue landline service after 2016. The bill authorizes appeal procedures for individual customers for whom the replacement service does not work well.

Who Voted "Yes" and Who Voted "No"

Senate Bill 509, Authorize new state Senate office building: Passed 22 to 14 in the Senate on December 4, 2013

To authorize the sale of the Farnum Senate office building in Lansing and construction of a new building for Senators’ offices. The House has not taken up this bill, but Senate Majority Leader Randy Richardville recently revealed that the Secretary of the Senate has issued a Request for Proposals from developers and contractors.

Who Voted "Yes" and Who Voted "No"

Senate Bill 542, Permit more generous government employee health benefits: Passed 108 to 1 in the House on December 11, 2013

The House vote on the bill described above. This was signed into law This was signed by Gov. Rick Snyder on December 22, 2013.

Who Voted "Yes" and Who Voted "No"

Senate Bill 114, Revise commercial rental assessment occupancy formula: Passed 98 to 12 in the House on May 27, 2014

The House vote on the bill described above. This was signed into law on June 12, 2014.

Who Voted "Yes" and Who Voted "No"

Senate Bill 397, Expand a corporate/developer subsidy regime: Passed 87 to 22 in the House on December 11, 2013

The House vote on the bill described above. This was signed into law on December 21, 2013.

Who Voted "Yes" and Who Voted "No"

Senate Bill 652, Make state Appeals Court venue for suits against the state: Passed 57 to 52 in the House on November 6, 2013

The House vote on the bill described above. This was signed into law on November 12, 2013.

Who Voted "Yes" and Who Voted "No"

Senate Bill 636, Facilitate "land line" transition to cell phones: Passed 71 to 39 in the House on March 11, 2014

The House vote on the bill describe above. This was signed into law on March 25, 2014.

Who Voted "Yes" and Who Voted "No"

SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

Why are RTW States Gaining Population?

Better income potential

Population growth, RTW vs. non-RTW states

If you listen to opponents of right-to-work laws, the claims are dire. But if laws allowing workers the choice of whether to pay money to a union lead to such alleged problems, why are so many people moving from forced unionism states to right-to-work states?

My colleague Michael Van Beek takes a look at a new study by Richard Vedder, an Ohio University professor and member of the Mackinac Center Board of Scholars, and researcher Jonathon Robe. Long story short, they show significant gains in income and jobs for right-to-work states.

But they also include the following statistic: “[T]he proportion of the American population living in a right-to-work environment has steadily grown, jumping from about 29 percent in 1970 to 46 percent by 2013.”

Probably the most important economic measure is population growth. In the policy literature, it is often difficult to tease out how much of an effect a single policy has on a state’s economy, but people deciding to uproot their lives and move somewhere helps encapsulate the bulk of what many people desire.

In that measure, right-to-work states are dominating.

Hohman on Personal Property Tax in Detroit News

Prop 1 better than other Great Lake states' reforms

James Hohman, assistant director of fiscal policy, and Scott Drenkard, an economist with the Tax Foundation, write in today’s Detroit News about Proposal 1, which is estimated to save taxpayers about $500 million. You can read Hohman’s full assessment of the ballot measure here.

New Evidence: Right-to-Work Laws Work

Center scholar co-authors CEI study

A 2013 Mackinac Center study found positive economic effects for states with right-to-work laws. RTW states enjoy increased real personal income growth, population growth and employment growth. New evidence supports this finding.

The evidence comes from a Competitive Enterprise Institute study. Authors Richard Vedder (a member of the Center’s Board of Scholars) and Jonathon Robe control for a variety of factors that impact state economic growth. They then compare the performance of RTW states and non-RTW states from 1977 to 2012. A chief finding is “that the overall effect of a RTW law is to increase economic growth rates by 11.5 percentage points.”

Vedder and Robe also analyzed RTW laws' impact on per-capita income. They estimate how much non-RTW states lost in potential income from 1977 to 2012. The median was $3,278 per capita, or about $13,000 annually for a family of four.

This analysis places Michigan as one of the states missing out on the most from not having a RTW law. Michigan suffered the 6th largest state income loss ($34.2 billion) and was 10th in per capita income loss ($3,460).

The study highlights some additional statistics that suggest RTW laws have a positive impact on economic growth. For instance, real personal income in RTW states grew by 165 percent from 1977 to 2012, but only by 99 percent in states without such laws. Measured by per-capita income, states with RTW laws grew by 65 percent, whereas non-RTW states grew by only 50 percent.

Generalizing about the millions of interactions and factors that impact a state’s economy is tricky, and one should always use caution. But a growing amount of evidence suggests that states with RTW laws, by lowering the actual, perceived or future cost of doing business, attract more capital, firms and workers. Eventually these factors add up and contribute to a growing state economy, just as general economic theory would predict.

More Confusion Over 'Affordable Care Act'

Court rules IRS illegally implemented tax credits

In a significant decision issued Tuesday, the United States Court of Appeals for the District of Columbia ruled that the IRS’s implementation of a significant portion of the Affordable Care Act (ACA) was illegal. The case is called Halbig v Burwell, No. 14-5018. The DC Court’s opinion was very much in line with the interpretation of the ACA urged by Michigan Attorney General Bill Schuette, who submitted a supporting brief on behalf of the state of Michigan in cooperation with the states of Kansas and Nebraska.

What the DC Court said was that the clear and unambiguous language of the ACA states that certain tax credits are available only to people who receive their health insurance through a “health exchange” created by one of the 50 states. These tax credits serve as a taxpayer-funded subsidy to those who buy insurance through the exchange. Additionally, the existence of these tax credits affects the penalties that the IRS uses to enforce the insurance mandate for both individuals and businesses. For individuals, the tax credit makes it more likely that a person who does not buy a qualified insurance plan will face a financial penalty. For businesses, the penalty kicks in whenever a business that employs more than 50 people has an employee who receives this tax credit. If the tax credit is not available, then there can be no penalty for the employer.

The states made a choice whether or not to create these exchanges, and Michigan’s legislators voted not to create an exchange but rather let the federal government create one for them. As Attorney General Schuette argued, this was a conscious choice because it excused Michigan businesses and some Michigan individuals from incurring the ACA’s insurance mandate penalties. As the attorneys general stated in their brief:

“[Michigan and the other states] seek to protect their decision to opt out of the benefits and burdens associated with establishing state-run marketplaces for selling qualified health insurance plans under the [ACA]. The Act expressly gives States this option. In States that opt out, federally funded premium assistance tax credits are not available to individuals who purchase insurance through the required fallback federal marketplaces. In turn, large employers (including States and their political subdivisions) are not subject to the employer mandate. But the Internal Revenue Service (“IRS”) has undermined the States’ policy choice by extending federal premium assistance subsidies to them anyway. As a result, the regulations expose otherwise-exempt individuals to the individual mandate and trigger the employer mandate in States—including [Michigan]—that properly chose to avoid these additional regulatory burdens.”

The DC Court said that under the plain wording of the statute, the federally created exchange did not qualify its participants to receive tax credits, and that many of the penalties found in the law do not apply to Michigan and the other states that did not create exchanges. The court said that for them to interpret the statute as the IRS and President Obama want them to do would be rewriting the legislation — which is not the job of the courts.

Does that mean that the subsidy tax credits are not available in Michigan, or that Michigan’s business and residents do not need to worry about the insurance mandate penalties? The answer isn’t clear yet.

In striking down the IRS’s interpretation, the DC Court of Appeals sent the matter back to the lower district court to issue an order in accordance with the appellate court ruling. Whether the IRS’s policy of offering credits to states that did not create exchanges will continue at least temporarily, or whether it will be immediately ended, will be determined by the lower court, unless the matter is first heard by the entire DC Court of Appeals. The makeup of the DC Court of Appeals was recently altered drastically by the addition of three of President Obama’s appointees, after the Senate took the extraordinary step of ending the possible use of the filibuster against appellate court appointees. 

To further cloud the outlook, another federal circuit, on the same day, ruled that the same IRS interpretation was acceptable because the ACA, as written, was ambiguous. The Fourth Circuit, which covers the Carolinas, Virginia, West Virginia and Maryland, held that the IRS has the ability to clarify matters that Congress left ambiguous.

The entire matter may require a decision by the Supreme Court. However, we may find out before then whether or not the current IRS interpretation of extending the tax credits to states like Michigan will continue or has been ended. This depends on what happens in the DC Circuit either at the district court level, or at a sitting of the entire DC Circuit Court of Appeals.