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Volume 3 Number 10 23 Novenber 2011
America takes a day of rest on Thursday to give thanks for all that we have and for the lives of those who made this possible. We wish all Americans a very happy Thanksgiving.
The World Learns to Live Within Its Means
The situation of the last few weeks with Greece, Italy and Spain has important lessons for the rest of the world, including the US. Both the Greek and Italian Governments have been spending more than they have been taking in and borrowing the difference for many years. In each case, the total national debt recently roughly equaled 120% of GDP, and the internatonal banking community responded by dramatically raising the interest rate on new borrowing to roughly triple the rate being charged to countries with smaller debt to GDP ratios. In each case the government proposed austerity measures, the population rioted against the austerity measures, the governments fell and have been replaced with national unity governments. Austerity measures have been implemented and the countries are on the path to healing and survival.J.R. Wilt
What is the good news in all this? First and foremost, World War III was not required to make this happen, as 200 years ago it might well have been. No other country saw Greece, Italy or Spain as easy picking and mobilized to conquor the financially distressed nations, and neither Greece nor Italy nor Spain attempted to conquer a neighbor in an attempt to steal what it needed. Second, the experiment in super-nation building represented by the Eurozone seems to have survived intact and will end up stronger for the experience.
The lesson for the United States is that it is necessary to live within our means also. Our debt is a little over 100% of GDP, but borrowings are running at close to 60% of tax revenue (40% of total expenditures). The day is rapidly approaching when the organizations that lend us money will want to triple our interest rate. We need to plan now and get things under control before that happens. The world is learning; we must learn also.
The world is a zero sum economic game; borrowing by one country must be balanced by savings somewhere else. Right now the world sees the United States as a lender of last resort, but others are fixing their problems while our problems are getting worse. The day will come when the tables turn and we must have our problems solved before that day comes.
From the Editor
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J.R. Wilt, Editor and Publisher
Although the current implementation of public education works well in many areas of the United States, there are still many failing schools. It is a great wrong for the State to force parents to send their children to failing public schools. School Choice is a mechanism to address this wrong. School Choice provides a way for low income parents to obtain financial assistance to provide an adequate education for their children.
H 3407 is the school choice bill currently before the SC House. This bill will allow students from low income families who are attending low performing schools to obtain partial funding (scholarships) for the tuition and transportation required for them to transfer to private schools. Funding for the scholarships is from contributions from private sources to newly created non-profit scholarship organizations. The scholarship organizations are charged with accepting donations from individuals and corporations. Funds can be donated for the benefit of specific individual students. The scholarship organization issues a receipt to the donor of the funds; the donor can attach the receipt to a tax return and claim a tax reduction in the in the amount of the receipt. The scholarship organization is responsible for verifying that the family of the proposed student meets the income criteria, the original and receiving schools meet the criteria set forth in the law, issuing a check directly to the receiving school and reporting the transaction to the state.
This funding technique has been used in Arizona and found to be valid by the US Supreme Court via Case Number 09-987, Arizona Christian School Tuition Organization v. Winn, et al. The Court found that taxpayers do not have standing to protest the funding arrangement because the decision to donate and to whom to donate is made by individuals using their own money. The decision by the state to accept receipts from scholarship organizations as payment for taxes does not by itself imply a burden to taxpayers which could be protested. Further, the Court found that scholarships to religious schools would not violate the establishment clause because the decision to fund the scholarship to a religious school was not being made by the state using tax dollars, but rather by individuals using their own money.
The bill also provides that a taxpayer filing an income tax return and also sending a child to private school may claim a tax credit for 50% of the of the per pupil state aid provided to the school and that parents home schooling children may claim a tax credit up to $1000 per student for home schooling expenses.
Fiscal Impact of H 3407
H 3407 requires the state to monitor the scholarship program and prepare a number of reports annually concerning the impact of the program. The SC State Bureau of Economic Advisers finds that somewhere between $100,000 and $1 million over five years and three FTEs will be required to perform these functions. H 3407 will result in a loss of revenue which the state would otherwise receive under existing law. The complete statement from the Bureau of economic advisers may be found here. A rebuttal from SCRG may be found here.
H 3407 and its companion bill S 414 are known collectively as the Educational Opportunity Act. S 414 was introduced on 20 January 2011, assigned to the Senate Education Committee on the same date and has rested there ever since with no action taken. H 3407 was also introduced on 20 January 2011, and was assigned to the Committee on Ways and Means. This bill was amended and reported out favorably by the Ways and Means Committee on 17 May 2011. Debate was scheduled for 25 May 2011, and the bill was tabled 60 – 59. The Yeas and the Nays on the motion to table in the motion to reconsider are shown here.
Failure of this bill was caused by the unexpected defection of sixteen Republican legislators. The “Spartenberg Six” are Reps. Rita Allison, Doug Brannon, Derham Cole, Mike Forrester, Steve Parker and Eddie Tallon. Ten other Republicans also voted to table H 3407 as follows: Bill Whitmire (District 1 – Oconee County), B.R. Skelton (District 3 – Pickens County), Mike Gambrell (District 7 – Abbeville and Anderson Counties), Gene Pinson, (District 13 – Greenwood), Steve Moss (District 30 – Cherokee County), Marion Frye (District 39 – Lexington and Saluda), Joan Brady, (District 78 - Richland), Jenny Horne (District 94 – Charleston and Dorchester), Dan Cooper (District 10 – Anderson), and David Hiott ( District 4 – Pickens). These sixteen Representatives face retribution from the TEA Party and from Republicans generally because approval of the bill is part of the Republican platform as well as a major TEA Party goal.
Resurrecting this bill from the table and passing it in the House should not be too difficult, but needs to be gotten out of the way during late January or early February. The bill will need to be amended to change the dates of implementation. Pressure needs to be put on the Republican legislators who voted to table the measure on 25 May 2011. Bringing the bill to the floor should not be a problem since the Speaker supported and voted for the bill in May.
Passage in the Senate is is more problematic, since the corresponding bill, S414, has rested in the Senate Education Committee since January 2011. A detailed plan needs to be prepared, but is beyond the scope of this document. FreedomWorks is planning to put substantial resources behind this effort, hosting meetings and Columbia and Rock Hill last month and planning meetings in North Charleston and Conway on Tuesday, November 29. Plans call for many more meetings and also for support in the form of literature and signs.