Perspective - December 2013

PERSPECTIVE December 2013

OKLAHOMA COUNCIL OF PUBLIC AFFAIRS

Free-Market Farm Policy

In Case You Missed It On Fox News, OCPA researcher Tina Korbe Dzurisin discussed Mr. Obama’s Gettysburg snub with Megyn Kelly. http://tinyurl.com/mn9mlkf

Standing up for the right to private education, Malala Yousafzai, the Pakistani girl the Taliban tried to murder, is indeed “the bravest school-choice activist.” http://tinyurl.com/nmzmp7f

Oklahoma journalists often tell stories about citizens in need and caring politicians, but they forget to interview Mr. F. http://shar.es/IUUqw

Medicaid harms the poor. http://usat.ly/1hA70Pn

Obamacare forced an Oklahoma grandmother to purchase maternity and pediatric dental coverage. http://shar.es/8smTm

Oklahoma taxpayers are funding “social justice” activism.

Calling Oklahoma City “the Silicon Valley of health care,” the Foundation for Economic Education asks: “Can this man save healthcare?” http://tinyurl.com/oyqp68a

A former OU commencement speaker says conservatives hate America. http://shar.es/EFrXn

http://shar.es/Ivh84

For Oklahoma students, the state, national, and global report cards are in.

In the Tulsa World, I argue for religious freedom on both the east and the west sides of Lewis Avenue.

http://www.ocpathink.org/articles/2545

http://tinyurl.com/qyvtrhy

PERSPECTIVE OCPA Staff

OCPA Trustees

Brandon Dutcher .................................................. Editor

Blake Arnold • Oklahoma City

Tom H. McCasland III • Duncan

Daryl Woodard • Tulsa

Robert D. Avery • Pawhuska

David McLaughlin • Enid

Daniel J. Zaloudek • Tulsa

Lee J. Baxter • Lawton

Lew Meibergen • Enid

Steve W. Beebe • Duncan

Ronald L. Mercer • Bethany

OCPA Researchers

G.T. Blankenship • Oklahoma City

Lloyd Noble II • Tulsa

Steven J. Anderson, MBA

John A. Brock • Tulsa

Mike O’Neal • Edmond

Brandon Dutcher ............................. Senior Vice President

David R. Brown, M.D. • Oklahoma City

Bill Price • Oklahoma City

Kelly Ferguson ....... Marketing & Development Intern

Paul A. Cox • Oklahoma City

Patrick T. Rooney • Oklahoma City

Dacia Harris .............................. Interactive Media Director

William Flanagan • Claremore

Melissa Sandefer • Norman

Rachel Hays .................................... Development Assistant

Josephine Freede • Oklahoma City

Thomas Schroedter • Tulsa

Ann Felton Gilliland • Oklahoma City

Richard L. Sias • Oklahoma City

John T. Hanes • Oklahoma City

Greg Slavonic • Oklahoma City

Brian Bush ..................................... Executive Vice President Michael Carnuccio .................................................... President Clint Colbert .................................................... Office Manager

Cassandra Howard ................................... Executive Liaison Jennie Kleese ............... Development Events Manager

Research Fellow

Tina Dzurisin

Research Associate

Vance Fried, J.D. Research Fellow

Jayson Lusk

Samuel Roberts Noble Distinguished Fellow

Matt Mayer, J.D. Research Fellow

Ralph Harvey • Oklahoma City

John F. Snodgrass • Ardmore

J. Scott Moody, M.A.

Karma Robinson ...... Vice President for Development

John A. Henry III • Oklahoma City

Charles M. Sublett • Tulsa

Mary Santelmann ............................. Operations Assistant

Henry F. Kane • Bartlesville

Robert Sullivan • Tulsa

Andrew C. Spiropoulos, J.D.

Jonathan Small .............................Vice President for Policy

Robert Kane • Tulsa

Lew Ward • Enid

Gene Love • Lawton

William E. Warnock, Jr. • Tulsa

Research Fellow

Milton Friedman Distinguished Fellow

Wendy P. Warcholik, Ph.D. Research Fellow

Perspective is published monthly by the Oklahoma Council of Public Affairs, Inc. , an independent public policy organization. OCPA formulates and promotes public policy research and analysis consistent with the principles of free enterprise and limited government. The views expressed in Perspective are those of the author, and should not be construed as representing any official position of OCPA or its trustees, researchers, or employees.

Toward a Free-Market Farm Policy OCPA executive vice president Brian Bush recently sat down with economist Jayson Lusk, OCPA’s Samuel Roberts Noble Distinguished Fellow, to discuss agricultural subsidies, crop and livestock insurance, and more.

BUSH: There’s been a lot of discussion lately about the farm bill and about the future of farm policy in this country.

Opinions on this topic are numerous and widely varying.

Can you start by explaining the difference of opinions?

LUSK: For more than a half-century, the federal government has played a major role in affecting what farmers plant and what they get paid. Economists are more unanimous on effects of this intervention than they are on almost any other issue—surveys suggest that more than 80 percent of professional economists believe that the United States should eliminate agricultural subsidies. Interestingly, however, only 34 percent of the general public agrees, according to a nationwide survey I conducted three years ago. When I asked more than 1,100 U.S. citizens “are you in favor of the U.S. government subsidizing farmers?” a full 66 percent said “yes.”

What explains the wide gulf between professional economists and the general public?

One explanation may rest with a general lack of understanding of the true effects of farm subsidies and the facts on the ground. According to the U.S. Department of Agriculture (USDA), there are 85,500 farms in Oklahoma, but most of those farms (58.8 percent of them) are very small, selling less than $10,000 per year. The biggest beneficiaries of farm payments, in terms of total dollar payouts, tend to be the largest farms. According to the Environmental Working Group and USDA data, only 31 percent of farms in Oklahoma receive subsidy payments, and 10 percent of the farms in the state collect 74 percent of all the subsidies. In 2010, the top 10 percent of recipients received an average of $49,207 each.

That phenomenon would seem to make sense, given that a farm producing less than $10,000 would likely only be a small portion of that person’s income for the year, whereas the larger farms are the majority of that farmer’s income, making it more likely they would rely on insurance to replace that lost income. Does that explain the discrepancy?

The relationship between on/off-farm income and payments has not been widely studied, but to your point, if you calculate the payout in terms of the percent of production, smaller farmers receive more per bushel produced than larger farmers (larger farmers produce more bushels, so their total payouts are higher). Generally, off-farm income accounts for a large share of farm household income, even for many “large” farms. Farm incomes today are much more diversified than they once were, and off-farm income accounts for a high share of farm household income.

How do those subsidy programs typically play out in Oklahoma? What does it look like on the ground?

The Environmental Working Group estimates that last year the U.S. government paid Oklahoma farmers and land owners more than $382 million in various forms of farm subsidies, mostly direct payments and payments of insurance premiums for wheat farmers. In 2011, Oklahoma wheat farmers received $0.26 from the federal government for every $1 worth of wheat they produced.

Those numbers are staggering at first glance, but was 2011 an unusually bad year, making those numbers look worse than usual? For example, I recall a High Plains Jour-

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Rich nal report from October 2011 which showed winter wheat production was down 42 percent from the previous year, with average yield being roughly 22 bushels per acre— one-third less than the state average of 33 bushels per acre.

Actually, the figures for 2008, 2009, 2010, and 2011 are $0.13, $0.42, $0.20, and $0.26, making the average federal payment per $1 of wheat produced in those years roughly $0.25. These also do not include ad-hoc disaster payments or other forms of assistance administered in those years, so the “true” figure is probably higher.

That is certainly a lot of money, especially in light of our national debt and spending problems. But some might argue that it’s a small price to pay for struggling farmers.

I certainly understand the fear of turning our backs on struggling farmers, but this line of thinking ignores several key facts. First, by and large, farmers aren’t struggling relative to the rest of the U.S. population. The median income of farmers in the U.S. has outpaced that of non-farm households for more than a decade, and has been near record levels in recent years. And, when it comes to the value of assets owned, farmers tend to be far wealthier than the average U.S. household.

I have to admit that is hard to believe. I am the proud son of an Oklahoma wheat producer, and our family has been farming in southwest Oklahoma since before statehood.

Although I would not trade that upbringing and the values I learned there for anything, I don’t remember ever feeling wealthy by monetary standards. Gross income from farming can sometimes surprise people, but the cost of production takes a huge bite out of that. Likewise, the assets a farmer owns are naturally going to be more than the average citizen because farming involves large amounts of land and expensive machinery not owned by the average citizen. Do the numbers you cited account for that?

Great question. And believe me, I value agriculture as much as anyone, so much so that I have dedicated my career to working for an agricultural college. But let me walk you through how I reached this viewpoint. I’m talking about assets here. The value of those assets may “naturally” be higher—but they are higher nonetheless. If the average farm and average non-farm household had to liquidate, the average farm household would be far wealthier. In fact, a great publication on farm household income says, “less than 4 percent of all farm households … had wealth less than the median household level.” That means 96 percent of farms are wealthier than the median U.S. household. Everyone would like to make more money than they actually do, and that includes farmers. But, the data are pretty clear: the average farmer has higher income and much more wealth than the average non-farmer.

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What other concerns do you have with farm payments as they are currently administered?

Well, farmers aren’t necessarily the prime beneficiaries of farm payments. Rather, the research suggests that many of the subsidy dollars flow to land owners (who typically aren’t farmers themselves) in the form of higher land rents. Also, benefits tend to flow to larger farmers. According to a recent Heritage Foundation report, “Nearly 80 percent of farms with gross cash farm income of $250,000–$999,999 receive government payments, compared to 24 percent of farms with gross cash farm income of $10,000–$249,999.” Finally, research shows that one of the effects of farm subsidies is to prevent resources from being allocated from less efficient to more efficient farms, which is hardly good news for those who support farm subsidies on the premise that they secure a steady supply of food for U.S. citizens.

Well, you’ve ruffled my “farm boy” feathers again. I am not an economist, so using gross income numbers may be throwing me a bit. For example, I definitely recall the cost of production eating up much of the gross income. For example, in 2009, the Noble Foundation estimated total expenses for wheat farmers were between $224.50 and $217 per acre, depending on tillage system, against a potential gross income of $254 per acre if the price was at $8/bushel and the yield matched the 10-year state wheat yield average for Oklahoma (about 33 bushels per acre). That means a 1,000 acre what farm, a large farm by the Heritage Foundation report standards, would gross $254,000, also large by their standards, but in reality more than $217,000 of that would have been spent on producing the crop, netting only $37,000 in annual income to support a family.

Could that make those numbers slightly misleading?

I agree that “gross” can be misleading. However, this is the way the USDA reports these figures—by gross income categories. While gross isn’t a good measure of net, I think we can safely say that farms with $900,000 gross are larger than farms with $10,000 gross, which is the point of the comparison being made here.

I see. Changing gears a bit, you and I have also spoken before about some important groups that get left out of these discussions. Can you elaborate on that a bit?

Absolutely. I think it is important that we also consider struggling consumers in this equation. More than 600,000 Oklahomans are on food stamps, and farm subsidies affect what they pay. One recent study in the American Journal of Agricultural Economics argues that the grain subsidies and trade barriers have the equivalent effect on consumers of an 8.4 percent tax on food grains, and a 2.85 percent tax on beef and pork, and a 4.75 percent tax on poultry and eggs (it bears mentioning that cattle, hogs, and poultry are Oklahoma’s most valuable agricultural commodities, accounting

Drug Abuse, Government Dependency, and Rural Decline

By Wendy P. Warcholik

One alarming fact about America’s rural communities is that many of them are dying. Demographically, the major challenge facing rural towns is demographic winter, i.e., exhibiting more deaths than births.

One third of all counties in the U.S. exhibit this phenomenon. Even in fervently pro-life, pro-family Oklahoma, 27 of the state’s 77 counties are experiencing demographic winter.

As rural towns statistically “die,” they fail to provide enough young entrepreneurs and workers for private-sector growth.

As these towns have failed to attract private-sector investment to replace the manufacturing and farming enterprises that have dwindled, government has slowly crowded out the private sector in these rural communities.

In previous work with J. Scott Moody, I show that in 2012 Oklahoma had the 12th smallest private sector in the country at only 67.1 percent—down from 92.8 percent in 1929.

Given that these towns are small to begin with, at some point the calamities that occur as a result of crowding out by government may be such that towns may never recover.

As a city dweller drives through America’s bucolic countryside, the last thing on his or her mind is the alarming drug use that is ravaging America’s heartland. Heroin, meth, bath salts—these drugs are destroying former agricultural and mill towns.

In a November cover story for The Weekly Standard, Geoffrey Norman discusses the unnerving heroin epidemic ravaging the back-road hamlets in Vermont.

Vermont seems, in the abstract, all wrong for this sort of thing. Isn’t heroin the drug of the urban underclass, project housing, and street gangs? Vermont is among the whitest states in the union, and not so many years ago it had more cows than people, more miles of dirt roads than paved. It is, in the general imagination, the home of Ben & Jerry’s and a place where people don’t cook cough syrup for meth, they boil maple sap for syrup.

And yet: The chief of police of Burlington, the state’s only true city, recently estimated that some 15 to 20 organized dealer operations are working his part of the state.

Most have ties to gangs in cities that include Detroit, Chicago, New York, and Philadelphia. They move enough of the drug to bring in almost a million and a half dollars every week. Not a lot by big-city standards but, then, the population of the entire state is barely more than 600,000 people.

As these rural towns have lost their character, which has historically been steeped in an ethos of hard work, pride, and ambition, Norman says these communities have been overrun with “unemployment, welfare, illegitimacy, and drugs.”

What is interesting is many addicts are recipients of public assistance, enabling their drug addictions. For example, one of the employees at the Mandala House, a private drugtreatment house for women, tells Norman: “If you are a single mom in Vermont and you have a cell phone, then you just need to dial 211 and you will be talking to a real person who will tell you what the [welfare] programs are and how you can get on them. You can be an addict and a mom and be taken care of.”

Dialing 211 opens the door to food stamps, child-care financial assistance, long-term care assistance, emergency basic needs, fuel assistance, housing assistance, TANF, and much more. As another Mandala House employee says, “We are enabling these people. We make it too easy for them.”

Norman also notes that of the 60 drug dealers nabbed in a recent bust in Bennington, Vermont, 50 of the dealers are on public assistance.

Though it is heroin that is currently wreaking havoc in small towns all across Vermont, Oklahomans could read Norman’s article and nod knowingly, simply substituting “methamphetamine” for “heroin.”

And as rural towns in Oklahoma and all over the country continue to die statistically and wither economically, paternalistic government programs replace what used to be thriving private-sector communities characterized by personal responsibility. Where government thrives at the expense of economic growth, the people populating these communities suffer as they become addicted to government assistance. Without work to build skills and character, rural towns are breeding generational poverty and hopelessness.

Until taxpayers and their elected officials get serious about policing welfare benefits so that they are only available to the neediest and most deserving, our rural communities will continue to decline and be increasingly undesirable places to live.

OCPA research fellow Wendy P. Warcholik (Ph.D., George Mason University) formerly served as an economist at the U.S. Department of Commerce’s Bureau of Economic Analysis, and was the chief forecasting economist for the Commonwealth of Virginia’s Department of Medical Assistance Services. She is a co-creator (with J. Scott Moody) of the Tax Foundation’s popular “State Business Tax Climate Index.”

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Farm subsidies force consumers to pay more for food, and they also drive up our taxes. for more than 75 percent of the total value of agricultural production in the state in 2011). Not only do agricultural subsidies force consumers to pay more for certain types of foods, and distort farmers’ incentives to provide those things consumers truly demand, they also drive up our taxes. According to one Heritage Foundation report, “If the existing farm bill programs continue as is, it would likely cost about $1 trillion from 2014 to 2023.”

It looks like there are significant efforts under way to reform the farm bill. Do those show any promise?

Existing efforts to overhaul the farm bill include efforts to shift farm subsidies toward crop and livestock insurance. Insurance sounds more free-market-oriented, until one realizes that in 2012 a full 14 billion taxpayer dollars were spent paying 60 percent of farmers’ insurance premiums. Farming is a risky business. But so too is drilling for oil, running a restaurant, writing books, or operating a body shop. There is no uniquely compelling reason why other people’s dollars should be spent insuring against risks in agriculture but not in those industries. I know many great and wonderful people who are farmers, and I admire the hard work they do. But I suspect they’d raise an eyebrow if I sent them a bill for my car insurance premium.

I definitely see your point here, but couldn’t we take the intermediate step of eliminating direct payments and leaving crop insurance programs in place for now? It seems like a phase-out would be preferable, if only because my bias is showing.

In short, yes, I think there are some things the government can and should do to help facilitate the emergence of crop insurance markets, but simply paying almost all of farmer’s premiums and paying off insurance companies isn’t, in my mind, an intermediate step of eliminating direct payments.

If I want to be cynical, it is relabeling a subsidy program to fool the public about what is really going on. That doesn’t mean we shouldn’t have a farm bill. We ought to think about ways that the government can assist producers that are also consistent with free-market principles. A few ideas that

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come to mind: 1. Make sure there are no barriers to development of selffunded private crop insurance, and ensure accurate data are available to price and deliver insurance (one interesting idea here is insurance savings accounts); 2. Make sure American farmers have access to customers all over the world by opening borders and promoting free trade; 3. Ensure American farmers are the most competitive in the world by ensuring they have access to the best technology and science available; and 4. Develop creative ways to pursue environmental and health objectives. The Conservation Reserve Program is a useful program if focused on the most environmentally sensitive lands in a cost-effective manner.

I think we agree that an honest and open discussion is what it will take to move us forward on this issue. I appreciate your time and candor. Oklahoma knows agriculture, and we can be a leader in the fight for these critical policy reforms. There is a better way—the free market—and I’m proud to be working alongside you as we search for a system that allows Oklahoma’s ag producers to thrive.

Jayson Lusk (Ph.D., Kansas State University) is the Samuel Roberts Noble Distinguished Fellow at OCPA and Regents Professor and Willard Sparks Endowed Chair at Oklahoma State University. His new book is The Food Police: A Well-Fed Manifesto about the Politics of Your Plate (Crown Forum, 2013).

Brian Bush (J.D., University of Oklahoma) is OCPA’s executive vice president. He formerly served as director of government relations at Oklahoma Christian University, and also served as an assistant district attorney in Oklahoma County.

Government Is Forcing a Choice that ‘No American Business Should Have to Make’

By David Green

Editor’s note: Last month the U.S. Supreme Court agreed to hear Sebelius v. Hobby Lobby Stores, Inc., in which the Oklahoma-based retailer is challenging Obamacare’s anti-conscience mandate.

When my family and I started our company 40 years ago, we were working out of a garage on a $600 bank loan, assembling miniature picture frames. Our first retail store wasn’t much bigger than most people’s living rooms, but we had faith that we would succeed if we lived and worked according to God’s word.

From there, Hobby Lobby has become one of the nation’s largest arts and crafts retailers, with more than 500 locations in 41 states. Our children grew up into fine business leaders, and today we run Hobby Lobby together, as a family.

We’re Christians, and we run our business on Christian principles. I’ve always said that the first two goals of our business are (1) to run our business in harmony with God’s laws, and (2) to focus on people more than money. And that’s what we’ve tried to do. We close early so our employees can see their families at night. We keep our stores closed on Sundays, one of the week’s biggest shopping days, so that our workers and their families can enjoy a day of rest.

We believe that it is by God’s grace that Hobby Lobby has endured, and he has blessed us and our employees.

We’ve not only added jobs in a weak

economy, we’ve raised wages for the past four years in a row. Our full-time employees start at 80 percent above minimum wage.

But now, our government threatens to change all of that.

A new government healthcare mandate says that our family business must provide what I believe are abortioncausing drugs as part of our health insurance.

Being Christians, we don’t pay for drugs that might cause abortions, which means that we don’t cover emergency contraception, the morning-after pill, or the week-after pill. We believe doing so might end a life after the moment of conception, something that is contrary to our most important beliefs.

It goes against the Biblical principles on which we have run this company since day one.

If we refuse to comply, we could face $1.3 million per day in government fines.

Our government threatens to fine job creators in a bad economy.

Our government threatens to fine a company that’s raised wages four years running.

Our government threatens to fine a family for running its business according to its beliefs. It’s not right.

I know people will say we ought to follow the rules; that it’s the same for everybody. But that’s not true.

The government has exempted thousands of companies from this mandate, for reasons of convenience

or cost. But it won’t exempt them for reasons of religious belief.

So, Hobby Lobby and my family are forced to make a choice. With great reluctance, we filed a lawsuit, represented by the Becket Fund for Religious Liberty, asking a federal court to stop this mandate before it hurts our business.

We don’t like to go running into court, but we no longer have a choice. We believe people are more important than the bottom line and that honoring God is more important than turning a profit.

We were successful in our appeal to the 10th Circuit Court, but the government has appealed the decision to the U.S. Supreme Court. Your prayers for a positive outcome that protects your and our religious liberty will be deeply appreciated.

My family has lived the American dream. We want to continue growing our company and providing great jobs for thousands of employees, but the government is going to make that much more difficult.

The government is forcing us to choose between following our faith and following the law. I say that’s a choice no American and no American business should have to make.

David Green is Chief Executive Officer and Founder of Hobby Lobby Stores, Inc.

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With a Henry Scholarship, ‘We Now Have Hope’

By Brandon Dutcher

An Oklahoma scholarship program for special-needs students is once again under attack, Watchdog.org reports (“Lawsuit by public-school educators attacks Oklahoma scholarship program for special-needs children”).

“A motley crew of plaintiffs has filed a lawsuit asking the Oklahoma courts to toss out the Lindsey Nicole Henry Scholarship for students with disabilities,” adds Oklahoma City University law professor Andrew Spiropoulos.

“This renewed attempt to sever a lifeline for a small group of disabled students is vindictive because these plaintiffs know that these children suffered horribly in public schools. The program enables these children to escape an environment of bullying, ineffective instruction, and profound neglect and find specialized schools where they can blossom and reveal the beauty of their true nature.”

One of the plaintiffs, longtime public-school superintendent Clarence G. Oliver, Jr., professes not to understand why any parent would want to choose anything other than a public school.

After all, “there are steps all along the way for parents to appeal” if they’re not satisfied with their public-school experience, he told Dan Thomas of KOCOTV. “The special education program offered in public schools, in my opinion, is superior to anything that they’ll find in the private schools.”

That’s an odd claim (given that only 6 of every 100 Oklahoma fourth-graders with disabilities are proficient readers), and it’s certainly not persuasive to several parents of special-needs children.

Parents such as Tom Farrell, who writes in the Tulsa World: Only a truly challenged child, who needs more help than the public schools can provide to become independent and productive, would motivate a parent to take them to a

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special-needs school far from their own neighborhood. Merely visiting Town and Country School produces an emotional response in any normal parent. Sweet, gentle-hearted children who simply weren’t prospering in public schools are getting the love, help, and affirmation that they desperately need from teachers and peers. … It is a godsend for them.

To see for yourself what Mr. Farrell means, go to YouTube and type in “Lindsey Nicole Henry Scholarship Stories.” Or consider the words of Robert and Cathy Hansen, the loving grandparents of Dylan Pennington, who uses a Henry Scholarship to attend Trinity School in Oklahoma City.

Dylan has been diagnosed as autistic (on the spectrum), dyslexic, and dysgraphic.

Dylan previously attended an Oklahoma City Public School where he was under an Individualized Education Program (IEP) from age three to nine. Each year he attended this school, he seemed to fall farther and farther behind, both educationally and socially. He received very little help with his learning difficulties and absolutely no help with socialization issues. He did receive strong support at home with completion of homework and other tasks, but that was not enough. The educational system was failing him.

Meetings were held regularly on the IEP and steps were agreed on but never taken. More meetings were held and changes to the IEP were discussed but never made, and again there was no action.

The last year he was in a public school he was assigned to a teacher who was rarely in the classroom. He had a series of substitute teachers and subsequently no consistency in his class environment. We saw our

grandchild becoming a truly lost child, falling through the cracks in the educational system.

Our daughter … enrolled him at Trinity School and applied for the Lindsey Nicole Henry Scholarship.

In the time since, we have watched him thrive not only academically but socially. His birthday parties are now filled with the happy sound of children’s laughter and excitement and no longer are disappointing events where few if any of the invited children bother to attend.

We almost immediately observed a major difference in how he socializes with us and with others. He has learned skills that most children seem to know almost automatically but that he needs to be carefully taught.

We now have hope that our grandson will not have to go through life as a rejected and dismissed person but as a fully functioning and contributing member of society.

Sadly, the plaintiffs are unmoved.

As Spiropoulos explains, “the lawsuit is driven by the education establishment’s furious need to destroy any initiative, no matter how necessary or successful, that it perceives will cost it funding.”

Unfortunately, as KOCO-TV reports, “this group that’s suing to stop that scholarship fund, they say that they’ve got an unlimited amount of funding for the legal battle—they’re willing to take it all the way to the Supreme Court if that’s what it takes to stop this scholarship from helping out special-needs kids.”

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Parental Choice, Not Universal Preschool

By Brandon Dutcher

“Why does Oklahoma still have a universal pre-kindergarten program?”

That’s the question Jennifer Doverspike asks in an excellent article over at TheFederalist.com (“The False Promise of Universal Pre-Kindergarten”).

Doverspike is the founder and editor of Six Forty Nine: Resource-Driven Parenting and the co-founder of Midtown Tulsa Moms. A former intelligence officer at the Defense Intelligence Agency with expertise in counterterrorism and al-Qaida, she is a thorough researcher.

When the evidence points to benefits of early education, she acknowledges those benefits. But she has no patience for the inflated claims of Barack Obama and others about the effects of universal pre-kindergarten. “Preschool for disadvantaged children may have its benefits,” Doverspike writes, “but that does not augur for a state-run program that catches all children.”

[I]f you are an educated parent who spends time talking and learning with your children, your child probably will not gain any extra educational benefit from preschool. Oklahoma makes the classic mistake of assuming the government can do a better job of providing for our children than parents. … An engaged parent can provide “education” necessary for a young child by letting him or her play — a solution far better than formal education, which can hinder a child’s learning skills or negatively impact more rambunctious children, especially boys.

As author Kay Hymowitz recently wrote over at TIME, what the research really suggests “is that it’s parents, not formal education, that makes the difference for young children’s readiness for school and success once they get there.”

There’s also the issue of cost. Public education always wants more money,

but policymakers also have to fix roads and bridges, fund welfare programs, and lock up bad guys. Describing the state-budget realities at 23rd and Lincoln, Oklahoma’s secretary of education and workforce development, Robert Sommers, summed it up nicely: “Resources are limited and competition is fierce.”

Doverspike understands this, and says “it’s laughable that the same people who lament that ‘49th in school spending is not OK’ aren’t noticing the pre-kindergarten parasite stretching the education budget even further.”

After reviewing the evidence, she concludes that Oklahoma’s “state-run pre-kindergarten is not doing its job.

After 15 years, it may be time to try something different.”

Doverspike offers several worthy policy alternatives, the most important of which (in my view) involve parental choice. Specifically, she mentions vouchers, education accounts, and the “Etsy Earner” agenda for education and childcare. As Ben Domenech explains, Etsy Earners are “women who’ve started home businesses or found contracting work to make ends meet and to stay engaged in their careers in the long term, recognizing they’ll have to go back to full-time work as soon as they are able.”

School choice is the great white hope on the right, but they should expand their normal conversation about it to include the parent trigger and education savings accounts which can be used toward Pre-K or

toward child care. The current deductibility limit for child care expenses comes nowhere near the annual cost for most families, which particularly hurts single moms, who have no option but to work and put their kids in homecare or daycare. It also creates a huge incentive to dump kids into Head Start, a failed program which drives up costs for every other type of child care. Either make every penny of childcare expenses deductible, or create a tax-free childcare/ education savings account, perhaps framed more broadly as Childrearing Accounts. The right should look to the example of Arizona’s Empowerment Savings Account program ...

Fortunately, some Oklahoma policymakers are beginning to do just that.

For even though universal pre-kindergarten is “every progressive’s fondest dream,” as Red Jahncke recently wrote in The Wall Street Journal (“The ‘Universal Pre-K’ Fallacy”), it is the wrong vision for one of the most conservative states in the nation.

“Oklahoma has the ability to establish itself as a beacon of federalism and limited government,” Doverspike says.

“It has already gained national attention for its states’-rights-crusading attorney general. The state legislature is working on tax reform, judicial selection, workers’ compensation reform, and tort reform. … Despite those gains, Oklahoma can’t claim the mantle of limited government while the universal pre-kindergarten stands.”

Brandon Dutcher (M.A. in public policy, M.A. in journalism, Regent University) is senior vice president at OCPA. He’s the editor of the book Oklahoma Policy Blueprint, which was praised by Nobel Prize-winning economist Milton Friedman as “thorough, well-informed, and highly sophisticated.” His articles have appeared in Investor’s Business Daily, WORLD magazine, the Tulsa World, The Oklahoman, and in 200 newspapers throughout Oklahoma and the U.S.

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It Is What It Is: The Health Insurance Market and Unintended Consequences

By Patrick B. McGuigan

In broad context, even Pollyanna would be concerned about the sustainability of the American insurance system, especially after a review of health care news from Washington, D.C., Connecticut, Minnesota, and Oklahoma.

Consider the headline on an Education Week story in late November: “K12, Colleges Swept Up in Health-Care Debate.” The authors reviewed “ideological battles over the 2010 federal health-care law.”

Fights surrounding “Obamacare” have been well rehearsed in these pages, but the central challenges now are not “ideological” in the generally accepted sense, but rather practical and financial.

Left, right, center, or nonpolitical, government administrators and policymakers are asking how in the world they are going to pay the bills, if the Affordable Care Act (ACA) stays in force.

U.S. Rep. John Kline, R-Minnesota, despairs over “unintended consequences” from the law, including reductions in the quality of insurance. Is that ideological?

Maybe it states the obvious—which, in some quarters, is an act of courage these days.

In September, for CapitolBeatOK. com, I outlined news about institutions of higher education slashing teaching hours for adjunct professors and graduate assistants, to avoid the 30hour trigger that turns three-quarters employees into full-timers under ACA. Communications specialists for both the University of Oklahoma and the state regents say they have no knowledge of policy shifts to avoid that mandate. A spokesman at Rose State College in Midwest City reported an effort

10 PERSPECTIVE • December 2013

to limit adjunct faculty hours in such a way as to keep part-time employees in part-time status.

Overall, no hard numbers, yet, but eventually we’ll pin down accurate cost estimates in Oklahoma’s higher education system. Answers will have to come campus by campus. The state regents staff does not monitor such things.

Best guess: In Oklahoma, higher education implementation costs will reach millions (see below for the closest thing we now have to a statewide answer).

So what about the K-12 impact? Beyond Oklahoma, here’s one example of how things are progressing, or regressing: The superintendent of Connecticut’s Meriden school district says the various coverage mandates will cost his district $4.6 million over time, the equivalent of 58 teaching positions. One strategy is to ask some staff to elect “high(er) wages for non-benefit-eligible positions.” Other possibilities? Eliminate or reduce jobs, or decrease wages in return for insurance coverage.

Turning north, my Watchdog.org colleague Tom Seward reported last month that “thirty is the magic number in the Affordable Care Act for hardpressed Minnesota school districts scrambling to avoid hundreds of thousands of dollars in penalties and new health coverage costs.

“That’s the cut-off that triggers the ACA requirement for schools to provide health coverage to paraprofessionals, cooks, bus drivers, and other non-teaching employees working 30 or more hours a week. It’s also the magic number that triggers the so-called

‘pay or play’ $2,000-per-worker Internal Revenue Service penalty for employers with more than 50 employees who do not provide coverage.”

Watchdog Minnesota “found that 22,800 non-licensed school employees work between 30 and 39 hours per week, making them eligible for required health benefits under ACA, yet vulnerable to reduced hours to get under the magic number of 30.” Another 22,000 work under 30 hours a week.

Minnesota has about 63,000 non-licensed personnel, the employees most at risk of reductions in force, reduced work hours, and lower prospects for benefits. About 18,000 of those (29 percent of the total) are full-timers.

In the Mayfield district, for 20 “para-

HOW WILL OBAMACARE IMPACT OKLAHOMA’S PUBLIC SCHOOLS, HIGHER EDUCATION SYSTEM, AND STATE EMPLOYEES?

professionals” working more than 30 but less than 40 hours a week, “It came down to spending $157,000 more to provide them with medical insurance, $132,000 in IRS penalties for not extending coverage, or reducing weekly work schedules to 29 hours to avoid the ACA requirement to provide medical benefits.

“The school board voted in June to cut back the 22 employees’ workweek to 29 hours with a $1 an hour increase to help make up for their lost time and compensation.”

Administrators there delayed some cuts after announced delay in ACA mandates, but the issue will arise again, soon.

These snapshots come from Connecticut and Minnesota, but surely things are not as glum in Oklahoma, right?

The answer, complex and incomplete, is pretty grim.

For the private market, Oklahoma may be better off than some states when it comes to absorbing ACA’s market distortions.

Oklahoma Insurance Commissioner John Doak said in late November, “By allowing early renewals, consumers were given the option of keeping their plan for a while longer or shopping for a new one. That decision benefitted Oklahoma consumers and avoided the massive cancellations happening in other states.”

Still, Doak worries about “the next shoe to drop.”

Commissioner Doak pointed to Henry Chao, a ranking official in the Obama administration, whose testimony in late November indicated—in Doak’s words—“as much as 40 percent of the exchange system isn’t even ready! He’s talking about the accounting and payment systems. This is supposed to start in just over a month and right now they can’t even process payments.”

Don’t get sanguine about Oklahoma’s chances to avoid the looming resource assault. Meanwhile, here are the troubling “early returns” on the cost of Obamacare in Oklahoma.

The state Department of Education wants a $59 million increase in spend-

Dr. Smith Goes to Washington As I reported at Watchdog.org earlier this month (“Dr. Smith goes to Washington: Oklahoma doctor gains national prominence supporting free market”), Dr. G. Keith Smith appeared Dec. 2 on Bill O’Reilly’s show on Fox News, though his opposition to the Affordable Care Act is just one of the reasons.

Smith founded the Surgery Center of Oklahoma, which has garnered rave reviews and sympathetic news stories in the regional and national news media, including in Oklahoma’s largest newspaper. He now regularly testifies before Congress.

Since the early 1990s, Smith and his colleagues have rebuffed not only federal health care funding but also most “Big Insurance” requirements. The center is thriving as a model for affordable, market-oriented, cash-basis health care. Further, the facility’s physicians and staff share a commitment to provide reduced-cost or pro bono care for people who need it.

Dr. Smith has become a “go-to” guy for analysts, regardless of philosophy, who want a thoughtful market-oriented critique of the current and emerging state of American health-care delivery.

-PBM ing for the “flexible benefit allowance for local school district education employees”—a cost driven primarily (not exclusively) by ACA costs.

Bill Price, a member of the state Board of Education, talks in layman’s terms: “Obamacare is costing the education system in Oklahoma $59 million.

That is reducing the amount available to pay teachers and improve instruction in Oklahoma.”

Superintendent of Public Instruction Janet Barresi says, “Obamacare is costing millions of dollars.”

That’s just K-12 education, accounted separately from benefits for other state government employees, mostly administered by the state Office of Management and Enterprise Services (OMES).

Spokesman John Estus told me, “OMES projects [ACA] has increased state employee health insurance costs by about $54.8 million in aggregate over the course of plan years 2012, 2013, and 2014.”

The $59 million education boost will require legislative action, while initial ACA costs for much of the rest of state government will be handled by “use of reserve funds and increased premiums.”

So, all told then, we’re looking at about $100 million of increased costs— some front-loaded but some spread over the next two years. That’s the start-up cost for our state employees alone. It does not reflect Oklahoma’s private sector, or the rest of America.

Blend in to this troubling recipe accelerating costs for the private sector, including the individual insurance market enduring shocking insurance premium rate hikes both in exchange and non-exchange states.

It is not tasty: If not repealed and replaced, Obamacare is going to cost the American economy trillions of dollars over the next decade alone.

It is what it is.

Patrick McGuigan (M.A. in history, Oklahoma State University) is editor of CapitolBeatOK.com. He is the editor of seven books on legal policy, and the author or co-author of three books, including Ninth Justice: The Fight for Bork. This year the Washington Post political blog, “The Fix,” designated McGuigan one of the three best political reporters in Oklahoma.

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Obamacare Medicaid Expansion Would Hurt Oklahoma’s Economy

By J. Scott Moody and Wendy P. Warcholik

There is currently a debate raging in state capitals across the country as policymakers dispute the merits of expanding Medicaid under the provisions of the Affordable Care Act (Obamacare). At first glance, expanding Oklahoma’s Medicaid program looks like “free” money since Uncle Sam is promising to pick up the entire tab for the first three years. Who doesn’t like free money?

In reality, Oklahoma has already been growing increasingly dependent on Medicaid and paying a steep economic price. Listening to Obamacare’s siren call to expand Medicaid will only serve to deepen Oklahoma’s dependency.

In fact, according to a recent study by the Henry J. Kaiser Family Foundation, such an expansion would add 261,000 Oklahomans to the Medicaid rolls!

The expansion of Medicaid will come at the expense of long-run economic growth by shrinking Oklahoma’s private sector. A smaller private sector results from two negative impacts of Medicaid expansion.

First, Medicaid expansion will have to be paid for by higher federal and state taxes, leaving less money in the pockets of individuals and businesses and reducing their ability to invest for the future.

Second, greater public spending will crowd out the private sector in competition for scarce labor and capital.

Oklahoma’s policymakers should be very concerned about this “crowding out” of the private sector by government spending. Personal income comes from two sources: the private sector and the

12 PERSPECTIVE • December 2013

public sector. The distinction between the two sectors is important because only the private sector creates new income. The public sector, in contrast, can only redistribute income through taxes and spending. More specifically, public-sector spending consists of personal current transfer receipts (Medicare, Medicaid, Social Security, etc.) and government employee compensation (federal, state, and local).

As a consequence of expanding Medicaid, Oklahoma’s taxpayers will pay a steep price with higher tax bills, lower incomes, and fewer jobs. (See our sidebar for methodological details.)

Table 1 shows the negative economic impact of Medicaid expansion on the average Oklahoma household. Over the next couple of years, Oklahoma’s economy will suffer a drop in personal income of $3.9 billion. The drop in personal income can manifest itself in one of two ways—lower household income

for everyone, or fewer jobs (though the reality will lie somewhere in between).

The economic cost of this tax hike ranges from: • $2,634 less personal income for all households with no private-sector job loss; or, • no change in personal income but the loss of 76,011 private-sector jobs.

In conclusion, Medicaid expansion is not “free,” as there would be economically devastating repercussions to the health of Oklahoma’s economy at a time when the recovery from the “Great Recession” has been tepid.

Clearly, the better option is to shelve Medicaid expansion and reduce government spending, which would, in turn, expand the private sector. The private sector could then get back to work increasing incomes and creating new jobs.

OCPA research fellow J. Scott Moody (M.A., George Mason University) has worked as a public policy economist for more than 13 years. Formerly a senior economist at the Tax Foundation and a senior economist at the Heritage Foundation, he has twice testified before the Ways and Means Committee of the U.S. House of Representatives. His work has appeared in Forbes, CNN Money, State Tax Notes, The Oklahoman, and several other publications.

OCPA research fellow Wendy P. Warcholik (Ph.D., George Mason University) formerly served as an economist at the U.S. Department of Commerce’s Bureau of Economic Analysis, and was the chief forecasting economist for the Commonwealth of Virginia’s Department of Medical Assistance Services. She is a co-creator (with J. Scott Moody) of the Tax Foundation’s popular “State Business Tax Climate Index.”

Research Notes Data for the number of Oklahomans impacted by Medicaid expansion can be found at: http://kff.org/interactive/ zooming-in-health-reform-medicaid-uninsured-local-level/ The economic loss estimates in this study are derived from the significant positive correlation between per-household personal income with the private-sector share of personal income for 2012, as shown in Chart 1. Put simply, the bigger the private sector, the greater the per-household personal income.

States with larger private sectors will grow faster over time than states with smaller private sectors. For example, let’s compare two states that are virtually identical in every way except for the size of the private sector—New Hampshire and Maine. In 2012, New Hampshire had the largest private sector (76.7 percent) and the 12th highest per-household personal income ($122,943), whereas Maine had only the 40th largest private sector (65.8 percent) and the 41st higher per-household personal income ($94,296). As such, New Hampshire’s per-household personal income is 30.4 percent higher, or $27,357, thanks to a more vigorous private sector.

The personal income data are from the Bureau of Economic Analysis (www.bea.gov) and are adjusted into “per household” using data from the Census Bureau (www.census.gov). The increased Medicaid spending under Obamacare was estimated by multiplying the increased number of individuals enrolled in Medicaid (261,000) by the average Medicaid payment per enrollee ($4,782), equaling $1.2 billion. Data for the average Medicaid payment per enrollee can be found at: http://kff.org/medicaid/state-indicator/medicaid-payments-per-enrollee/.

This analysis does not necessarily mean income or employment will decline from present levels, but rather the economic losses will more likely manifest themselves as a reduction in long-run economic growth.

Table 1 Estimated Economic Loss Due to Expanding Medicaid under Obamacare Personal Income Loss or ($) per Household Oklahoma 2,634 or Source: Oklahoma Council of Public Affairs Area

Per-­‐Household Personal Income

$150,000

Job Loss Equivalent 76,011

Chart 1 RelaKonship Between Private-­‐Sector Share and Per-­‐Household Personal Income Calendar Year 2012

$140,000 $130,000 $120,000

Oklahoma

$110,000 $100,000 $90,000

y = 327695x -­‐ 118184 R² = 0.56482

$80,000 $70,000 60%

62%

64%

66%

68%

70%

72%

74%

76%

78%

Private-­‐Sector Share of Personal Income

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@OCPAThink

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1. Friends of OCPA, Cathy and Oklahoma Labor Commissioner Mark Costello, are shown here on post at Fort Sill before hearing keynote speaker Gov. Mike Huckabee.

2. Gov. Mike Huckabee inspired the crowd with his keynote address on leadership, and also shared stories from his days as governor of Arkansas.

3. OCPA’s Brian Bush is shown here with the “Children of Courage” scholarship recipients Nicholas Hamann, Carly Pindell, Kimberlyn Weaver, Brianna Allen, and Ashleigh Smith, with Operation Homefront’s Carol Herrick. Recipients were nominated and chosen based on resiliency, leadership, and achievement. This year’s Freedom Banquet marked the beginning of a new partnership between OCPA and Operation Homefront.

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4. OCPA trustee MG (R) Lee Baxter, Fort Sill Commanding General Mark McDonald, and Operation Homefront executive director Carol Herrick are shown here at the 2013 Freedom Banquet.

5. OCPA trustee Gene Love (right) presents Dr. Gib Gibson with the OCPA Freedom Award. The award is presented to a citizen of Oklahoma who has devoted his or her life to the cause of freedom or has paid a substantial price in its pursuit.

6. Jimmy Dailey, Brenda Spencer-Ragland, and State Sen. Don Barrington mingle at the Patriot Club.

7. OCPA trustee RADM (R) Greg Slavonic, Lawton Mayor Fred Fitch, and Freedom Award recipient Dr. Gib Gibson are pictured here at Fort Sill’s Patriot Club on November 13. OCPA’s 2013 Freedom Banquet was attended by more than 450 people, including active duty military members and their families.

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1401 N. Lincoln Blvd.

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QUOTE UNQUOTE “Oklahoma should not do the Obamacare Medicaid expansion regardless of how it might be creatively packaged.

The Affordable Care Act is bad for Oklahoma and our state taxpayers should not be forced to pick up the cost.”

Oklahoma House Speaker T.W. Shannon

“In the end the therapeutic revolution appears to have gotten one thing terribly wrong. And that one thing is its opening premise: the reduction of the moral to the therapeutic.”

University of Oklahoma professor Wilfred McClay, writing in the fall 2013 issue of The Hedgehog Review

“What goes on in Washington’s halls of power has less to do with lawmaking than with moneymaking. Far from being about policy, much of what happens in Washington is about extorting money.”

Hoover Institution fellow Peter Schweizer, in his new book Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets

“I had my first encounter with the IRS this year, unsurprisingly after the prayer breakfast.”

“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.”

Thomas Sowell

“The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

Thomas Jefferson

“What does it say about the quality of your product when you have trouble giving it Dr. Ben Carson, referring to remarks he made at away?”

a prayer breakfast this year which were critical of Obamacare—while President Obama was sitting just a few feet away

Economist Art Carden, wondering what publicschool educators must think of the large and growing number of homeschoolers in this country