Thursday, August 11, 2011

Education Tax Credits: Taking the Political Offensive

85-90% of America’s K-12 education is government-run. Can a complete separation of education and state be achieved through incremental free market reforms directed over time at the heart of that institution? Or, are such efforts doomed by the intermediate threat of statist inroads into the private school sector, leaving the public school sector essentially off limits to major political challenge unless and until the ideal of free market education can be achieved in a single sweeping transformation?

I addressed those questions in an LTE response in the Summer 2011 issue of The Objective Standard. In light of a recent critique of education tax credits, however, an elaboration of my position is warranted.

Earlier this year, Ari Armstrong leaned in favor of an education tax credit plan shaped in line with a proposal I laid out in the Spring 2011 issue of The Objective Standard. In a more recent essay, he moved in the opposite direction. Though acknowledging that “There might be other good reasons for promoting universal tax credits for education,” Armstrong contends that tax credits nevertheless “will not eliminate government controls over education spending”. Thus tax credits, including my plan, must be rejected. Instead, he promoted a much more subdued reform agenda.

I believe his focus was right the first time. Can there be risks to the private school sector in pursuing tax credits? Yes, but so are there risks in a defensive political strategy, as I will show. The right course of action must be determined within the broad context of the political dynamics of our heavily regulated mixed economy.

I contend that an aggressive incremental approach toward greater and greater educational freedom is not only viable but the only realistic strategy in an economy as mixed – i.e., as government-dominated - as ours, and that free market forces can successfully apply that strategy against the public school sector. Armstrong, unfortunately, seems content to stop well short of taking the political offensive. But this approach is very likely self-defeating, because a mixed economy doesn’t stand still: Beneath the seemingly chaotic surface turmoil, a mixed economy is essentially a tug of war between statism and freedom. There is no fixed status quo between these two absolutes.

Notice how the political “center” keeps moving Left over time. Why is that? By its very nature, mixed economy politics is a game of compromise. And in almost any political compromise, one side scores a net gain, the other a loss. For generations, the predominant winners in the game of compromise have been the statists. But that is not because mixed economy politics inherently favors statism. The reason is that the Left/socialists have always cleaved uncompromisingly to their altruist/collectivist principles, enabling them to make political compromises that nevertheless always moved the ball toward their socialist goal line. On the other hand, the Right/capitalist side largely lacked the philosophical firepower that their case depended upon, leading to political meekness and retreat. A good example of this process in action is the recent healthcare debate, where Obama compromised by “caving” on the “public option”, yet through ObamaCare still scored significant progress toward his goal of universal healthcare. Thus, our mixed economy almost always seems to move away from freedom (For more on this, see my “Extremists vs. the Moderates: Why the Left Keeps Winning, and the Right has been Powerless to Stop It”.)

This dynamic mixed economy pattern can be turned to our favor. As Armstrong emphasizes, “we cannot move closer to that [free market] ideal without advocating the fundamental principles of liberty and individual rights.” We already understand these principles, which our case depends upon. So, to reverse the historic drift toward statism, we can and must take the offensive not just ideologically but also politically. My plan moves us from almost complete statism in education to a mixed system, featuring much expanded freedom. Once in place, it is simply not a given that statism must have the upper hand – until and unless we concede the statists’ premises. Armstrong states that “In a very real sense, the government continues to claim ownership of the funds in question [which is] money … not fundamentally owned by the person who earns it [!].” But that is precisely the political premise that our side can and must turn on its head (See my LTE response in the Summer 2011 issue of TOS). In a very real sense, statism is a government claim to every dollar earned, none of which is held to be fundamentally owned by the person who earned it. Just listen to the Leftists whose political rhetoric is saturated with the premise that every dollar retained by the private sector is in effect a “tax credit” against the government’s automatic claim to that money. Just what premise underpins politicians’ calls to “invest” in education, clean energy, and so on. When it is said that “we” or “society” must solve this or that social ill, what is implied? Statist politicians can and do claim ownership in a variety of ways, but we should never concede the premise of ownership apart from the principle of actual possession of the funds in question.

Armstrong contends that “The fundamental weakness of [my program is that] the government continues to forcibly transfer people's money to education.” That “fundamental weakness”, however, is inherent in this country’s educational system as it currently stands. As a transitional program, the temporary preservation of the taxing powers of the state is a vital component of my proposal. Armstrong worries that “tax credits further entrench the principle that government may force people to spend their earnings on other people's education.” I disagree. Once the choice of how their education dollars can be spent is relegated to the taxpayer, we will be closer to the day when it will be politically feasible to question why he or she must be forced to pay any government-mandated sum. The redistribution principle, already fully entrenched, can only be weakened under tax credits, in my view. This may be debatable but in any event it’s a risk worth taking. Given the political realities of the current system that guarantees every child a K-12 education – in theory if not in practice - this country currently will not stand still for any privatization plan that is perceived to leave any child without a financial means to an education. This will be true for the foreseeable future. Retaining the educational guarantee to each child is not a submission to the statist premises, but recognition of current political realities and, importantly, a nod to the practical and moral imperative to allow time for the development of a private school sector large enough to absorb the tremendous demand that will be unleashed by the ending of public education. If, as a transitional program, retaining some lingering statism for a time is a flaw, then all incremental “free market reforms” across the board are invalidated. Out the window go personal accounts within Social Security: out go Health Savings Accounts: out goes a flat-rate income tax; out go charter schools; out go any political proposals intended to bring greater freedom and fairness from an individual rights perspective, short of sudden and complete laissez-faire; Out, in other words, go free market forces from the political arena.

On the issue of the possible misuse of tax credits, the most deplorable cases have always served as a rationalization for statism. It is precisely in the face of the most despicable practitioners of any given right that freedom’s champions must take their most formidable stand. This is an issue not merely of educational freedom but of freedom, period. Statists don’t need tax credits to justify intrusive laws; just one high-profile despicable case will do– see my post A “Regulation-Free Zone for Home-Schooling Families” Comes Under Attack in NJ”. Here, a single horrific child abuse case involving alleged homeschooling parents has brought a chorus of calls for homeschool registration and curriculum controls where none now exist. After a similar case eight years ago, homeschool forces fought ferociously to kill proposed regulatory legislation. “You would have thought I had suggested the end of the world as we know it,” lamented the legislation’s sponsor after withdrawing her bill. Homeschool liberty’s forces wouldn’t accept guilt-by-association then, and shouldn’t now.

Wouldn’t Armstrong applaud the efforts to keep NJ’s homeschool sector unregulated? If so, that would contradict his position on tax credits. The very same type of arguments that he and TOS correspondents Plafker and McKendree make against my program are being leveled against NJ’s unregulated homeschool sector, and can be and are leveled against a fully free market as well. If the potential for abusive instances disqualify unconditional tax credits, shouldn’t a few instances of actual abuse also justify homeschool regulation in NJ? And if not, wouldn’t fighting to “protect and expand the liberties of homeschoolers” include not just stopping NJ’s proposed regulations but also fighting for the right of homeschoolers’ to spend their education dollars toward their homeschooling efforts?

Likewise, Armstrong’s charge of “rampant corruption a totally uncontrolled [?] tax credit system would promote” could double as an argument against free markets. Where does one see “rampant corruption” in people spending their own money in a manner of their own choosing – the basic premise of a free market – as they would under my plan? In a free market, wouldn’t there also be children whose educational needs will be neglected? If my plan is a political “fantasy” based upon this logic, then what does that say about the political possibilities of an actual free market? Once again, objections raised against my program are no different than those hurled by statists against a free market. If rampant corruption and widespread educational neglect would be the hallmark of my program, then the same must be said of a fully free market; which, after all, means “totally uncontrolled”. And if that were true, then free markets would not work.

In response to the argument that under my plan some will make bad or immoral choices, the proper response is: What about those who make good choices? Freedom will never mean universal rationality: It simply means free.

Perhaps a better way to understand my intent is to put it this way: As I’ve said, my essential purpose is to empower parents to in effect “opt out” of the public school system so as to separate education and state one child at a time. Thus the same arguments—the same principles—that underpin the case for full separation are applicable to each individual taxpayer participating in my program. A key difference between my plan and the one Armstrong laid out in his February essay is that he allows that government must establish limits on how tax credits can be spent, not just on how much can be spent on each child and by each taxpayer. He writes:

Note that our proposal does not really give the taxpayer full choice over his or her resources. Even our plan falls short of the standard of individual rights and free markets, for it requires people to direct a portion of their resources to schools. Real liberty means people can spend their earnings however they wish, whether for schools, medical research, a new business, or a trip to the Bahamas.

But why must it “fall short” at all? If, to revisit a previous point, the proper standard is individual rights and free markets, then does not succumbing to the premise of the government’s continuing “claim [to] ownership of the funds in question” constitute a contradiction of his own standard? Under his plan, as under mine, the taxpayer is spending his own money. “Each taxpayer pays a certain amount for education through various taxes. Whatever that amount is, the taxpayer should be able to decide where that money goes.” Why attach government conditions if “each individual has the right to control his own earnings, and…should be able to fund any school he wishes, or no school at all.” By his original concession to government regulation, Armstrong paved the way to the next logical step – “rethinking” his own plan based upon threats to the private sector; threats that his own concessions allowed in.

My plan links all education tax credits to the sponsorship of a child’s education. It also limits how much can be allocated to each child and the total amount the taxpayer can claim in credits, based upon the current public cost of educating that child and on how much the taxpayer pays in education taxes. The purpose of these restrictions is to maintain our current national commitment to finance the education of every child – which is an intermediate-term political and practical necessity, as I’ve said. Beyond that, the government is out of the picture for the very reasons Armstrong articulates it should be. If a parent has allowable credits of $10,000 and can properly educate his child for $6000, he is free to use the remaining $4000 for “medical research, a new business, or a trip to the Bahamas”. And why not? He has pulled his child from the public schools, relieving the government of that responsibility. He could, of course, send that $4000 to the public schools. But how is giving the government that undeserved windfall justified, but the taxpayer claiming it for non-education expenses “corrupt”? Once he pulls his child from the government schools, why shouldn’t that parent be free precisely “to control his own earnings”. I see no reason to grant the politicians any regulatory concessions or automatic claims to that parent’s money once a child has been moved to the private sector. (This feature of my program has the added benefit of injecting an element of price discipline into the private sector. By allowing that parent to use any unused credits for other purposes, he has an incentive to seek the most cost-effective education he can find. Without it, he will not much care whether his child’s private tuition is $6000 or $9999, since any “savings” gets turned over to the government schools.)

Furthermore, even after a fully free market is established, the debate over government’s role in education – and thus the threat of government controls - will still be with us. The issue is broad and deep. Armstrong accepts that “in a truly free market … parents who do not provide their children with a basic education, as with parents who do not provide adequate nutrition, may be charged with child abuse.” If so, then another “salient point” to keep in mind is that the government must define “basic education” - i.e. there must be “government guidance” – and the government must then implement a way to enforce parental compliance (standardized testing, perhaps?). So again, even in a fully free market, we run into the same fundamental problem as Armstrong fears under tax credits – the potential for an opening wedge of statism.

Indeed, the most complex constitutional and legal challenges for advocates of individual rights revolve around children. Parents certainly have a moral obligation to properly educate their children. Failing to do so certainly constitutes neglect if not outright abuse. Government, in its proper role as a rights-protector, certainly has a role to play in regards to children, whose rights are in effect held “in trust” by the parents. This role is clear-cut in regards to physical abuse. But enforcing an educational obligation by law is problematic, to say the least. Granting government the power to prosecute parents who neglect their children’s educational needs is, in the abstract, a proper function. And drawing a legal line or “wall” between that function and keeping government’s nose out of private education may be feasible. However I’m not at all convinced that it’s possible. So, until it can be shown otherwise, I’ve taken the position – no government say in any child’s private education. (I grappled with this issue for a long time, and only recently did I arrive at my current position. I owe an intellectual debt to TOS’s Craig Biddle for pointing me toward an understanding of the basic contradiction involved in granting government any say in education while struggling to achieve a free market in that field.) The broader point of this is to demonstrate once again that the risks inherent in any reform that retains, for a time, compulsory education taxation do not melt away even if those taxes are repealed and we achieve a fully free market. The debate over the proper role of government, and how that role translates into law, is ever present, and statists will always seek to levy controls on the private sector, just as they have levied an avalanche of mandates on private health insurance. If “tax credits will not eliminate government controls over education spending”, then neither will a free market, if “parents who [in the opinion of government officials] do not provide their children with a basic education … may be charged with child abuse”.

The price of freedom is eternal vigilance,” and it always will be.

Yes, the risks are there. But, consider this very possible scenario. Suppose my plan were to be enacted, but with certain conditions attached by statists; ex. a minimal requirement to teach “the three Rs”, the “basic education” that Armstrong believes government should enforce in a free market. Given the realities of mixed economy politics, that could very well happen, or worse, even over our objections. One never knows how new laws will emerge from the legislative meat grinder. In that case, the odds would still be on the side of free marketeers. For starters, the very fact of my plan’s enactment will have implied strong public support for free market principles – i.e. a large degree of success in educating the public on principles of liberty. This, in turn, would imply a political consensus against serious government intrusion into school governance, limiting the statists’ power. This, coupled with the logic of the program, would leave principled free marketeers with the upper hand and the statists on the defensive – a reverse of the current mixed economy pattern alluded to above. The risk of government interference in the private market would be very manageable. And to the extent that children are moved into the private school sector, we will see an immediate reduction in government involvement in education.

As to the political viability of the program, the lack thereof at any given moment is not a valid argument against an idea. But it must be considered if one wants to make political headway. If “there is simply no way a law such as [mine] would ever pass”, then it is a free market that is truly a “fantasy”.

Armstrong argues that “real education reform” means to “protect and expand the liberties of homeschoolers and private schools, … check runaway spending on government education and seek to disempower the teachers' unions.” Can this really be called reform? These types of initiatives - along with charter schools, NJ’s new Interdistrict Public School Choice Program, and others like them – do not lack merit, within the existing context of government-run schools. But where does real structural reform begin, if we so restrict our political activism? Where does “the standard of individual rights and free markets” come in? Where exactly is “the movement toward true freedom in education” (Emphasis added)? Real education reform, I argue, must be broad and targeted at school taxes – i.e. the government’s hammerlock on education. Significant progress even on Armstrong’s restrained checklist of “real education reform” will remain a steep uphill struggle until control of education dollars is taken out of the hands of government. Absent that, the growth and freedom of the private education sector will remain peripheral and stunted – at best - under the suffocating blanket of the unchallenged status quo, and the tax-fueled power of the teacher’s union will remain largely intact.

We cannot ignore the realities and dynamics of mixed economy politics. We will never get to a free market if we don’t go on offense – indeed, we may well backslide if our strategy is merely to hold the line - and we will never get there all at once. The Alliance for the Separation of School and State outlines how parents and other private institutions could adequately fund the schools once a free market is established. But, how do we get from here to there? We need a strong conduit to bring our educational efforts into the political arena. It’s one thing to say, “each individual has the right to control his own earnings”, and quite another when you can add “and here is my plan to begin to make that happen”. We must be willing to take calculated risks and put forth practical ideas that may be politically challenging today, and then focus our ideological and educational efforts on bringing the public to us. A tax credit program affords the invaluable tool of concretization of the abstract case for free markets. Just two decades ago, school choice was a political pipe dream … a “fantasy” in Armstrong’s terms. Today it is in the cultural “mainstream”. In our era of rampaging statism, education is one area that the political winds are at the backs of free market champions.

We need to think hard about this issue. We must do more than tinker around the edges. I opened with a series of questions. My answers are embodied in my proposal. My final questions to critics: What do we do about that 85-90%? If not school choice through tax credits, then what? If not now, then when?

Mike LaFerrara


As Armstrong mentioned in his essay, The Alliance for the Separation of School and State opposes both vouchers and tax credits. If the omission from my article of that fact conveyed the implication that they would be supportive of my program, it was strictly unintentional. I was well aware of their position, and I obviously disagree with them.

1 comment:

Ari said...

Thanks for the thoughtful reply! My response is here: -Ari