From the political notebook:

• The always gloomy report of the Social Security and Medicare trustees was released last week. The news focus was that the date for the Social Security trust fund to go broke had been moved up to 2037.

That, however, isn’t the relevant economic date. The relevant date is when annual income begins to fall short of annual expenses.

It is true that both Social Security and Medicare have IOUs from the federal treasury for the surpluses that have been being used for other purposes. But the government will have to raise the money to make good on the IOUs. That means higher taxes, more borrowing, or cuts in other programs.

The Medicare hospitalization fund is already running an annual deficit. For Social Security, annual expenses are expected to exceed annual income in 2016, just seven years from now.

Very shortly, the Social Security surpluses the government is currently using for other purposes will start to decline, beginning the pressure on the general fisc.

After they have come to an end in 2016, the amount the government will have to pump into Social Security and Medicare from sources other than payroll taxes will be small at first.

But it grows pretty quickly. By 2025, it is expected to reach over $500 billion a year.

The day of reckoning for Social Security and Medicare reform is fast approaching.

• Given the circumstances, the fix Legislative Republicans adopted as, they hope, the final tourniquet for this fiscal year, which ends in June, is excusable.

Primarily, they pushed bills due this year into next. Ordinarily, that would be outrageous. But the fall in state revenues has been so deep that it’s hard to work up a lather over any temporizing measures.

Democrats voted almost unanimously against the fix, even though they have recommended postponing payments as a strategy as well.

They objected to a provision requiring school districts to first use excess cash balances to cover their costs in lieu of actually getting their deferred payment next year. But the Democratic argument makes no sense.

School districts have been banking reserves beyond what they can legally spend. These excesses are supposed to be used to reduce property taxes the following year.

So, Democrats complained that using them to reduce what the state actually ends up forking out for its deferred payment to the schools amounted to a property tax increase.

However, the evidence is overwhelming that the districts have not been using excess cash balances to reduce property taxes.

According to the Arizona Tax Research Association, districts have more than doubled their cash balances over the last five years, from $219 million to $443 million.

Moreover, Democrats support reimposing a property tax at the state level. Why cavil at an increase at the local level?

• The lone exception to Democratic opposition came from Sen. Minority Leader Jorge Luis Garcia. He pointed out that using the excess cash balances now reserved more federal stimulus money to offset potential education cuts later. And he’s exactly right.

Independent thinking and actions are rare in politics. Garcia is to be commended for his.

• I attended President Obama’s commencement address at Arizona State University, not as a journalist but as a parent of a graduating student.

A few years ago, I also attended a graduation ceremony at Wells Fargo Arena. The latter was significantly less of a pain in the patoot, but I was struck by the same conclusion: This was a ceremony for the university, not the students.

Yes, my son will remember that Obama spoke at his graduation. And Obama gave a fine commencement address.

But my son petitioned us to get out of there even before his degree was officially conferred by having his college stand up and have a few words of incantation recited by ASU’s president.

There is only one moment that really matters to students and family at these things. That’s when the student’s name is called and he gets to tread across the stage while his clan hoots and hollers. At ASU, there are simply too many graduates to provide the main moment.

This big mega-ritual should be done away with at ASU. Have graduation ceremonies at the school level. Eliminate all the academic folderol and get right to the name-calling, treading and hooting and hollering.

Done right, the thing shouldn’t take more than an hour. And it would be much easier on aging patoots.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

Francisco Peña contemplates a math problem at an AIMS workshop at Pueblo High Magnet School.

After many years as a political observer and erstwhile practitioner, I usually understand why what I think is sensible policy doesn’t get enacted.

Often, there is some interest group opposed. In our political system, intensity matters. An organized group that cares a lot can usually carry the day against policies whose benefits are diffuse.

Our political system also is set up to make big reforms difficult. Incremental change at the margins is more the norm. And usually, that’s a good thing.

And not at all infrequently, my views are in the minority, and not infrequently a very small minority at that.

Nevertheless, the failure of policy to move in the direction I think sensible about a high school graduation test in Arizona perplexes me. It doesn’t disadvantage any organized interest group. It’s not that big of a reform. And I think most people would agree with me, although I might be wrong about that.

Nevertheless, Arizona’s high school graduation test remains stuck in a place that makes no sense, and reform efforts, to the extent they are gaining traction, move in the wrong direction.

Arizona has a high school graduation test, AIMS, that all students must pass to receive their diploma (ignoring the temporizing fudging mechanisms the Legislature has adopted and extended).

However, the test doesn’t really determine whether a student knows what a high school graduate is expected to know. Instead, it is set at a 10th grade level.

So, Arizona can be relatively confident that its high school graduates know what a sophomore in high school should know. Wouldn’t it make more sense to determine if they know what a high school graduate should know?

I think Arizona should have a high school exit exam that actually tests what high school graduates should know. If passage were made a graduation requirement, however, the failure rate would be, at least at first, politically unacceptably high.

So, I’ve proposed a two-tier diploma: a certificate of achievement, representing passage of the test; and a certificate of completion, representing passage of all other graduation requirements but failure to pass the exit exam.

No one would be denied graduation because of the test. But employers and universities could place appropriately differential value on the two diplomas.

An AIMS Task Force formed by the Legislature recently released its recommendations. It said, much to my surprise, that AIMS should remain a 10th grade test and should remain a graduation requirement. However, it should be supplemented by two “college and career readiness” tests in the freshman and junior years.

Now, that would mean that there would still be no way of knowing whether an Arizona high school graduate actually knows what a high school graduate should know.

The desire for new “college and career readiness” tests issues from two growing fallacies.

First, that all students should graduate high school ready for college. Second, that what is necessary to prepare for college is the same thing as is necessary for jobs that don’t require a college degree.

If college is to be what it should be, and not just the new high school, then it should require cognitive abilities and a keen interest in hard academic work that just isn’t universal. And the math skills that an aspiring plumber or carpenter needs just aren’t the same as for an aspiring physicist or economist.

This is an overreaction to the commendable desire not to prematurely track kids, and particularly to avoid lower expectations for low-income and minority students.

But there are plenty of college readiness tests that already exist, and the entry requirements for Arizona universities are not opaque. Avoiding low-expectations is a matter of exhortation, not new tests.

Arizona does, however, need a high school graduation test that actually tests high school graduate knowledge.

Getting one shouldn’t be this difficult.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

Misinformation serves as placebo rather than actually curing our health care system

The Senate Finance Committee held a hearing Tuesday on overhauling the heath care system. Among those testifying was Steven Wojcik (left), vice president of public policy for National Business Group Health.

The country is about to have a very frustrating debate over health care, characterized more by misdirection than an honest discussion of the alternatives.

A good illustration was provided by the Monday confab at the White House, in which health care executives committed to reduce expenditures by $2 trillion over the next decade.

Or did they?

President Obama, in his remarks, said that they did: “They are pledging to cut the rate of growth of national health care spending by 1.5 percentage points each year – an amount that’s equal to over $2 trillion.”

The actual letter signed by the executives, however, says something importantly different:

“We will do our part to achieve your administration’s goal of decreasing by 1.5 percentage points the annual health care spending growth rate – saving $2 trillion or more.”

“Our part” is much different, and far more ambiguous, than “we will do the whole thing.”

This is best seen as collusion by the health care industry and the Obama administration to misdirect the American people.

In the first place, what health care expenditures will be over the next 10 years is unknowable. So, the “pledge” is written on water.

More importantly, the commitment was made by trade associations that don’t actually deliver health care. What happens on the ground with health care costs is unaffected by press events held by politicians and lobbyists.

Most important, what happens on the ground already provides incentives for true economies. There are serious distortions in the health care marketplace, but market share can still be gained by reducing costs and prices.

The real significance of the press event wasn’t the phony pledge of cost savings. The event signaled the political capitulation of the health care industry. They will now accept whatever role in the health care system the politicians assign them.

The more substantive event that happened that day was the release of an “options” paper for health care reform by Senate Finance Chairman Max Baucus and Ranking Member Chuck Grassley.

But, again, “options” is a misnomer. This paper doesn’t really spell out fundamentally different approaches. Instead, the choices are all a variation on a single theme: a government-managed system of private health insurance.

Existing plans would be grandfathered in. But all future health insurance would have to be purchased through a government exchange.

The government would decide the benefit options insurers could offer, and insurers would have to offer all options. Pricing would be strictly circumscribed. Medical underwriting would be prohibited.

The fight over whether there would be a “public option,” a health plan actually administered by the government, is misplaced. If government controls the benefits and pricing of private plans, politicians and bureaucrats are in charge irrespective of whether there is a formal public plan.

The political need for action is driven by the uncertainty over coverage in the American system. The gaps in coverage are hugely worrisome even for those who currently have good insurance.

This uncertainty, however, is easily eliminated at no cost to the taxpayers. There already is a national health care plan, Medicaid for the low income. Universal access could be provided simply by allowing any legal resident to buy into Medicaid at the government’s cost.

The system as a whole, however, makes no sense. Obtaining health insurance through your employer is an artifact of World War II wage and price controls.

Some Republicans want to eliminate this dependence and stimulate a market for individual health insurance. That makes more sense, but the public is unlikely to be comfortable with such a radical restructuring without a government backstop, such as the ability to buy into Medicaid.

This debate will be sad and frustrating.

And the end result will probably be neither fish nor fowl – a system that provides neither the certainty and security of a European-style national health care system, nor the choice and freedom of a vigorous individual health insurance market.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

Former Federal Reserve Chairman Alan Greenspan spelled out what most economists won't say: "Illegal immigration has made a significant contribution to the growth of our economy."

Democrats are in a tough spot on immigration reform. Actually, make that a number of tough spots.

For one thing, they’re caught between pandering to Latino constituents who want them to strike a deal that legalizes millions of illegal immigrants and catering to organized labor, which adamantly opposes the one element of reform Republicans say must be part of the deal: guest workers.

For another, now that Democrats control Congress and the White House, they’ve run out of excuses as to why they’re doing nothing.

But at the same time, they’d rather not do anything because as long as there is a stalemate, they can use the issue against Republicans.

After all, there are two ways to get ahead in politics: Make yourself look good or make your opponent look bad.

The immigration debate – and the xenophobic language that some Republicans have carelessly infused into it – helps Democrats look good to their Latino constituents.

But the spell is wearing off now that Latinos are beginning to wonder why Democrats can’t deliver immigration reform even when they have power. Answer: Because not all of them want to deliver.

It’s hard to know in which camp falls Sen. Chuck Schumer of New York, who recently called a hearing of a Senate subcommittee to explore the feasibility of achieving – or even discussing – immigration reform in the midst of an economic recession.

One of the high points was the testimony of former Federal Reserve Chairman Alan Greenspan, who spelled out what most economists won’t say: “Illegal immigration has made a significant contribution to the growth of our economy.”

Meanwhile, labor claims the bad economy makes it unfeasible to bring in hundreds of thousands of new workers for jobs that Americans should be doing.

But that argument is disingenuous. The unions were just as opposed to guest workers when the economy was good.

That’s because one thing that hasn’t changed is that organized labor still sees itself as being in the protection business – protecting its members from the competition represented by foreign workers.

Democrats favor a reform package that would legalize the undocumented while making a cursory pass at border enforcement. But the package would leave out any mention of guest workers.

Yet ditching guest workers is an effective way to ensure that not a single Republican, in either the House or the Senate, will sign on to the final product. In fact, two of the most forceful champions for immigration forces in the GOP – Arizona Sens. John McCain and Jon Kyl – already have made clear that they won’t support any compromise that doesn’t include a temporary worker program.

That spells doom for the immigration reform movement because Democratic leaders are going to need at least a handful of Republican votes in the Senate – and could use more in the House – to offset the all-but-certain defections of Blue Dogs who won’t go along with what they consider amnesty for illegal immigrants.

So now it’s time for the advocates of comprehensive immigration reform to think strategically, stop playing politics and concentrate on getting results.

They need to rustle up as much support as possible from Republicans and keep guest workers in the mix if it helps them do so.

They need to look for a middle-of-the-road approach that gives the undocumented a chance to legalize their status but stresses the concept of accountability by requiring those who travel that road to acknowledge that they did wrong and attempt to make amends.

The reformers now need to show they hear the concerns on the other side and stop challenging the motives of those who disagree with them.

Not least of all, the reformers need to take advantage of a powerful yet underutilized weapon: personal empathy.

Many Americans have members of their family tree who arrived on these shores only to experience mistreatment or marginalization because they threatened those already here, either by taking jobs or changing the culture.

And it is those Americans who are just waiting to be converted to the cause of immigration reform, provided their concerns are addressed.

As the party in power, it is up to Democrats to begin the conversion. But first, they have to start the conversation.

Ruben Navarrette Jr. is a columnist and editorial board member of The San Diego Union-Tribune. E-mail: ruben.navarrette@uniontrib.com

From the political notebook:

• Within the spending lobby, there is no more firmly held belief than that Arizona is an inexcusably low-tax state.

The basis for this belief is a report on state and local tax collections from the Census Bureau.

For 2006, the most recent year for which figures are available, Arizona ranked 39th among the states in tax collections per capita. Hence the conclusion that, compared to other states, Arizona is among the bottom dwellers.

Too much was always made of this. Arizona ranks 35th in per capita personal income. So, the proper conclusion all along was that the state taxes roughly proportionate to the body politic’s ability to pay.

As it turns out, even that seriously understates Arizona’s tax load.

The Census Bureau figures aroused the suspicions of the indispensible fiscal sleuths at the Arizona Tax Research Association. So, they started digging into the data’s details.

They found that Arizona’s figures were missing huge sums of money. The state education sales tax revenue wasn’t included. The Maricopa County transportation sales tax was omitted. More than half of Arizona’s vehicle license tax was missing.

In all, ATRA found almost $2 billion in unreported tax collections.

If these missing revenues are included, Arizona’s rank increases to 32nd in per capita tax collections. As a percentage of personal income, or capacity to pay, it rises to 15th highest in the country.

So, rather than being a low-tax state, Arizona actually ranks more toward the middle in terms of nominal tax load, and higher than average based upon ability to pay.

Based upon ATRA’s research, the Census Bureau already has added $1.2 billion to Arizona’s tax collections and is studying the rest of the claims.

ATRA has done a lot of good work over the years. This sleuthing is one of its most valuable contributions.

• As much as public policy debates in Arizona are driven by these kinds of cross-state comparisons, the Legislature should take action to ensure that Arizona’s reported data is accurate.

The local government figures for the Census, for example, were being collected by an ASU professor with limited help. It’s just too big of a job, with too little incentive on the part of the entities with the raw data to cooperate, to do it that way.

Arizona expenditure data in the Census reports are undoubtedly as flawed as its tax collection data. Arizona’s reporting on education expenditures for national studies has also been spotty. Sometimes, the Arizona figures have had to be extrapolated.

To ensure accuracy, the Legislature should assign the job of collecting and reporting this data to the Auditor General’s Office.

And it should make the distribution of state-shared revenues to cities and counties and education assistance to school districts dependent on cooperation with the Auditor General’s efforts.

• The historical importance of Jack Kemp was generally understated in the reporting of his passing last week. Kemp changed the central focus of Republican economic policy.

Prior to Kemp, the Republican central focus was on the need to balance budgets through limiting spending.

Kemp argued that instead the central focus should be on fostering expanded economic opportunity through reductions in marginal tax rates.

Ronald Reagan made Kemp’s idea the principal domestic proposal of his 1980 presidential campaign, enacted it after being elected, and it has been the Republicans’ central economic focus ever since.

Kemp was a graduate of Occidental College in Los Angeles. He gave a series of lectures there while I was serving as editor of the campus newspaper. So, I was able to follow him around and get to know him a little. His intellectual appetite for information and policy analysis was nearly exhausting.

Kemp practiced a different kind of politics as well. Newt Gingrich and Karl Rove sought Republican victories by highlighting divisions in which more people sided with Republicans than Democrats.

Kemp was frankly bored when talking to Republican and conservative groups, people who agreed with him. His politics was that of an evangelist. He was always trying to make converts.

He passionately believed that expanding private sector opportunity was a better way to help the disadvantaged than government programs. His sincerity and commitment to building better ladders to success for those at the bottom were transparent.

As Republicans consider how to regroup and regain political traction, they would do very well to try to recapture the spirit of Jack Kemp.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

The state budget for next year that passed out of the House Appropriations Committee last week illustrates that a nominally balanced budget can be achieved without a tax increase.

Whether that is the best course of action is a very difficult question.

As always, some historical perspective is valuable.

After the last recession, state revenues stabilized in 2003. State general fund spending that year was $6.6 billion.

State spending peaked in 2008, at $10.5 billion, or a 60 percent increase in just five years.

The House budget for next year comes in at $9.3 billion. So, that’s a real decrease of more than 11 percent in two years.

But since 2003, it still represents an increase of 41 percent. That’s more than 5 percent a year.

The proposed budget cuts are not small, and certainly not painless. But the proposed end result hardly amounts to a barbaric return to poor houses and one-room schoolhouses.

Instead, the House budget reduces state spending to around where it would have been if it had grown more prudently during the days of plenty.

On the other hand, state general fund revenues are expected to fall $2 billion short of funding that spending. The House budget makes up for that by using federal stimulus money and stealing money from other accounts.

Given that there is still a $2 billion shortfall even after reducing spending growth to a modest level indicates that profligate spending during the Napolitano era is hardly the exclusive culprit.

Nor would the problem not exist if tax cuts had been eschewed during the days of plenty. If state income and state property tax rates were as they were in 2003, they might produce an additional $600 million in revenue, still leaving a $1.4 billion hole.

Simply put, state revenues have run into a severe cyclical downturn that exceeds everyone’s blame game. The conventional wisdom from all sides of the ideological spectrum is pretty much useless and pointless in confronting this situation.

So, what to do?

The House budget is based upon the point of view that the worst thing to do in the current circumstances would be to increase taxes. There is considerable merit to that position. Raising taxes in an economic downturn is a monumentally bad idea.

The House budget illustrates that avoiding a tax increase is doable.

It steals $265 million from cities and counties, which is monstrously unfair and shouldn’t be done. They have their own budget woes and are handling them much more responsibly than is the state.

The other maneuver getting some gas, using excess school district balances, is completely justified. These are funds that should have been used to reduce property taxes and that the districts cannot legally spend anyway.

The money taken from the cities and counties could be replaced, including by deferring some payments if necessary. So, the state could get through next year OK without increasing taxes or borrowing.

But, given a structural deficit of $2 billion, the very same problem faces the state in 2011, with considerably less federal stimulus money to cover it up.

Gov. Jan Brewer says the Legislature should bite the bullet this year and really fix the problem with a tax increase. She’s being less than candid about how much of a tax increase that would take and for how long. But hers is also a position with considerable merit.

The problem – the imbalance between spending and revenues – isn’t going away, and the House budget doesn’t do much to shrink it.

If the Legislature bit the bullet this year, it would make for a much more stable environment for state government and politics.

There are no rights and wrongs here. There are no responsible vs. irresponsible positions. Ideological conventions don’t get you to an end game.

You kick the state government problem down the road until what you hope is a more propitious time to deal with it. Or you fix state government’s problem at a very bad time for the state’s private sector economy.

I’d kick the problem down the road. But I’m not going to reproach those who reach a different conclusion.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

The proposed end games for General Motors and particularly Chrysler illustrate why government shouldn’t have gotten involved in the first place.

It’s worthwhile to begin with the broader picture. Americans used to buy about 17 million new cars and trucks a year. Now, we’re buying fewer than 10 million. That, of course, puts considerable stress on manufacturers with weaker products or financial structures.

How many new cars Americans will want to purchase in the future is unknown. But there can be a high degree of confidence in this: However many it is, someone will sell them to us.

Moreover, they are likely to be produced in the United States. A majority of cars sold by foreign manufacturers in the U.S. are actually built here.

So, why should the federal government care who it is that sells us our cars?

There are two rationales offered. First, to preserve an “American” auto industry. Second, to preserve “American” jobs.

The proposed Chrysler restructuring gives the lie to both rationales.

Under the Obama administration’s proposal, Chrysler would, in essence, be given to Fiat, an Italian company, to operate.

So, how is an Italian car maker operating in Michigan any more “American” than a Japanese manufacturer operating in Kentucky?

And why should the federal government give a market preference – through taxpayer financing and warrantee guarantees – to Italian cars produced by American workers in Michigan over Japanese cars produced by American workers in Kentucky?

The Obama administration’s proposed restructuring is more than just unjustified, however. It dangerously undermines the rule of law, as explicated so beneficially by Friedrich Hayek in his classic, “The Road to Serfdom.”

The essence of the rule of law, according to Hayek, is that what the government will do is known to all economic actors in advance. That government will not act arbitrarily in specific circumstances to favor some economic actors over others.

Chrysler has $6.9 billion in secured debt. Under the law, secured lenders have the first claim on the assets of the debtor in the event of nonpayment.

The Obama administration is attempting to muscle past this law. Under its proposal, the health care trust of the autoworkers union, an unsecured creditor, would forgive 57 percent of what Chrysler owes it, and receive 55 percent of the company’s equity in exchange.

The federal government would forgive about a third of what it would loan Chrysler and receive 8 percent of the company’s equity. Fiat would pay nothing for its 20 percent initial ownership.

The secured creditors, with the first claim on Chrysler’s assets, were asked to forgive 70 percent of what they are owed and receive nothing in equity. When they refused and forced the company into bankruptcy, they were excoriated by Obama – a shameful act by a president who pledged to uphold the law, not make it up as he went along.

The purposed GM restructuring is equally lopsided. The union trust would forgive half of what it is owed and receive 39 percent of the company. The government would forgive half of what it is owed and receive 50 percent of the company.

The other private lenders, in this case unsecured, would forgive 100 percent of what they are owed and receive just 10 percent of the company.

In his recent press conference, Obama said he had no interest in owning or operating car companies. Until this point, I was willing to accept Obama at his word, while fundamentally disagreeing with his economic policies.

Given his actions, however, it’s hard to credit his disclaimer in this instance.

These proposed restructurings are power grabs, pure and simple. The positions of lenders are eviscerated to give control to the union trust and the government.

The emergent companies are given market preference through taxpayer financing and government warrantee guarantees. All to serve no true national purpose.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

Sunflower Electric Cooperative's coal-fired power plant churns out electricity in Holcomb, Kan. Coal-fired electricity is one of the country's primary contributors to greenhouse gases. But more than half the country's electricity is produced from coal.

The pending decision by the Environmental Protection Agency to designate greenhouse gases, particularly carbon dioxide, as a threat to human health and welfare probably marks a point of no return.

One way or another, the United States is going to regulate greenhouse gases.

To the extent human-caused global warming is a real problem, this can be a step forward. It will, however, expose the lie that a transition to a less carbon-intensive economy will be painless or even enriching.

Despite proclamations about the limited nature of its finding, EPA can hardly designate greenhouse gases as a threat under the Clean Air Act without regulating them under the act.

Nor can the agency, as a practical and legal matter, limit its regulation to automobile emissions.

The regulatory structure of the Clean Air Act is technology focused. EPA sets air quality standards. Areas that don’t meet them have to come up with plans that include all reasonable measures that could be taken to come into compliance.

Businesses that emit regulated pollutants have to obtain operating permits and get agency approval of the control technologies they will use.

There are several problems with using this approach to regulate greenhouse gases. In the first place, the problem they cause is global, not local. So, how does the agency set a local standard?

Second, they vastly exceed in volume any other pollutant the agency regulates. The U.S. Chamber of Commerce estimates that more than a million businesses would be subject to technology-focused regulation if greenhouse gases are regulated under the Clean Air Act.

The act’s regulatory structure would be simply overwhelmed.

Clearly the Obama administration wants to use the EPA’s finding to prod Congress into enacting a cap-and-trade program as an alternative to regulating greenhouse gases under the Clean Air Act.

Under cap-and-trade, the government would set a limit on the total quantity of greenhouse gases that could be emitted. Pollution rights could then be traded.

President Obama has proposed that all pollution rights be sold at auction and the proceeds used to pay for making his payroll tax credit permanent and subsidizing alternative energy sources.

Now that it’s for real, however, Congress has discovered an inconvenient reality. If a price is put on carbon, someone has to pay it.

Coal-fired electricity is one of the country’s primary contributors to greenhouse gases. But more than half the country’s electricity is produced from coal.

The prospects of significantly higher electricity bills for average consumers and significantly higher operating costs for energy-intensive manufacturers have spooked even some Democratic members of Congress.

So, they are proposing that some of the pollution rights be given away for free, and proceeds from selling them be used to subsidize utility rates.

This, however, defeats the purpose of the exercise. If carbon doesn’t have a price that hurts, less of it won’t be emitted.

Simply put, if greenhouse gases are to be reduced, those who produce them have to be disadvantaged and those who don’t advantaged. This, however, will mean wrenching changes, within and between industrial sectors, and within and between geographic regions.

Green jobs won’t make the pain go away or be all better.

I am not a global warming denier. I favor a revenue-neutral carbon tax.

A carbon tax eliminates the uncertainty and avoids the bureaucratic and equity problems inherent in the issue of distributing pollution rights under a cap-and-trade regimen. I would use the tax proceeds to reduce payroll and income taxes, so there is no net drain on the private sector economy.

The benefits, however, wouldn’t be distributed commensurate with the costs. They can’t be, if greenhouse gases are truly to be reduced.

If carbon is to be reduced by putting a price on it, someone has to pay the price and not be reimbursed for it.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

From the political notebook:

• It’s not unusual for Arizona to have candidates for secretary of state who don’t really have much interest in the job. That’s understandable. Other than setting some election policy, the office is basically a filing repository.

As the first in line for succession, the secretary of state is also in some respects a governor-in-waiting. And in Arizona’s turbulent politics, that happens not infrequently.

To mask their disinterest in the real duties of the job, these candidates sometimes make up new duties for the office that interest them more.

And sometimes these candidates actually win. Remember Dick Mahoney?

But once in office, they learn that the duties of the secretary of state are as they are, bound by the statutes.

• Now this phenomenon is creeping down the ballot. Take the recent announcement of Democrat Andrei Cherny for state treasurer, for example.

Cherny’s platform consists of an economic plan for the state, revolutionizing the management of state government and acting as the “taxpayer’s bulldog” in sniffing out spending abuse and misuse.

Cherny is thought by Democrats to be an up-and-comer. But that’s a platform for a candidate for governor, not treasurer.

The treasurer’s office is very small, constituting just 25 people out of a state work force of around 35,000. Not exactly much of a platoon to launch a revolution of the management of state government with.

The real duties of the office are rather dull: keep track of and invest the state’s money.

Dull but very important. Close to $40 billion flow through the state accounts and the treasurer manages investments of more than

$10 billion.

Cherny’s views about what the office actually does are worrisome.

Right now, there are tight restrictions on the investments that can be made. For the most part, only investment-grade fixed-income instruments can be purchased. Sixty percent of the state trust fund endowment, mostly to benefit schools, can be invested in equities publicly-traded on national exchanges. For my taste, even that’s too permissive.

Cherny says the state’s portfolio should instead be directed at investing in home-grown alternative energy and high-tech companies.

There’s an argument to be made, although I disagree with it, that there should be some sort of public venture capital fund to make such investments. But not the money state government relies on ultimately to pay the bills.

• In fairness to Cherny, the incumbent treasurer, Republican Dean Martin, is also widely regarded as having an eye for other offices, including governor. And in his inaugural speech, Martin strayed as far from his true duties as Cherny did in his announcement speech.

But Martin, to his credit, has thrown himself into the often mundane minutia of the office.

His cash flow analyses have proven to be a much earlier and more accurate indicator of the state’s financial condition than the prognostications of the various economic pooh-bahs employed by the governor’s office and the Legislature.

• In the Maricopa County wars, County Attorney Andrew Thomas has sued for peace. The Board of Supervisors were undoubtedly relieved that this time Thomas was suing metaphorically rather than literally.

Still, it’s hard to imagine the peace terms.

Thomas turned over the investigation of the court tower and the prosecution of Supervisor Don Stapley to outside counsel.

In the court tower case, he really had no choice. A judge determined that, since lawyers for Thomas had advised the board about the court tower, Thomas couldn’t criminally investigate it.

In the Stapley case, Thomas was on stronger ground. Case law in Arizona does seem to support the notion that elected public attorneys can civilly advise and represent a government unit while criminally pursing wrongful conduct by some of its members.

What Thomas wants in a peace settlement is undoubtedly for the board to dismantle the independent civil litigation unit it is setting up. The board will be reluctant to do that, but public sentiment may swing against it.

Thus far, Thomas has worn the black hat, with his real and apparent conflicts, overblown rhetoric, and Nixonian tendency to see conspiracies against him everywhere.

But he has largely conceded on the conflicts that capture the public’s attention. He was elected to the position, which includes the duty to defend the county in civil litigation.

The board may have difficulty explaining why, given the concessions Thomas has made, it is unwilling to use the public’s choice to do the job.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

More than 3,000 taxpayers expressed their feelings during Tucson's Tax Tea Party April 15 at El Presidio Park.

From the political notebook: Ordinarily, protest politics aren’t my cup of tea.

Protest rallies aren’t places where reasoned arguments get made. And they aren’t really an indication of public sentiment.

When the pro-immigration forces were staging marches around the country, one of the largest occurred in Phoenix.

Yet Arizonans have voted in overwhelming numbers for every ballot measure attempting to make life uncomfortable for illegal immigrants that has been put before them.

Nevertheless, the tea parties that were held around the country April 15 may be the start of something significant.

Fiscal conservatism remains a strongly held sentiment within the body politic.

Fiscal conservatives want lower taxes, smaller government and freer markets. They worry about public debt as representing a tax burden for the future.

Fiscal conservatives also tend to have a strong streak of individualism, philosophically and as a personal trait. So, they are difficult to organize politically.

As a result, their views tend to get under-represented.

Although fiscal conservatives supply a large share of the votes for the Republican Party, it has been taken over by social conservatives, who are more prone to organizing and collective action.

Now, there is a large overlap between fiscal and social conservatives. Many people are both. But one strand tends to be more important to most dual conservatives.

And the extent to which social conservatives have become the dominant face of the Republican Party has alienated some social moderates who are fiscally conservative.

The representation of fiscal conservatism in Arizona has improved markedly as of late.

The Arizona Free Enterprise Club, a local version of the national Club for Growth, was formed.

An Arizona chapter of Americans for Prosperity took over the less organized Arizona Federation of Taxpayers.

Both groups have young, energetic and capable staff leadership in Steve Voeller and Tom Jenney, respectively.

Jenney’s group was one of the key organizers of the tea parties here in Arizona and estimates that a total of 20,000 people showed up.

But, typical of the “don’t tread on me, don’t put my name on any list” nature of the constituency, their names and contact information wasn’t fully captured. Contact information on only about a tenth of the attendees was acquired.

Fiscal conservatives nationwide are fired up over bailouts, stimulus spending and deficits. In Arizona, they are somewhat riled over Gov. Jan Brewer’s tax hike proposal.

The question is whether they can get organized enough to make a difference. The tea parties are an interesting start.

Simcox’s challenge

The announcement that Minuteman founder Chris Simcox will challenge John McCain in the 2010 Republican primary would ordinarily presage a lively, and potentially difficult, race.

Immigration will obviously be the big issue. Republican primary voters are overwhelmingly in favor of more restrictionist policies. And Congress may take on immigration reform before the next election, giving the issue even greater salience.

There is, however, a mixed record on the extent to which immigration moves the choices of even Republican primary voters in candidate races.

An immigration restrictionist, Randy Graf, won an open congressional primary in Tucson in the 2006 election. But an immigration challenge to Jeff Flake fell considerably short in 2004.

My guess is that Barack Obama will prove to be a great Republican unifier in 2010. His proposals to expand the federal government have stunned Republicans and reminded them of what they agree on.

McCain is likely to have a pretty high profile in fighting the Obama administration on a number of fronts. And on the issue of government spending, there’s not been a more aggressive hawk.

If immigration reform does move in Congress, McCain will be in a tough spot.

But, paradoxically, I think Obama will make Republican primary voters highly reluctant to trade a proven fighter for a neophyte of unknown political moxie over immigration.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

Gov. Jan Brewer's tax reform plan includes unspecified pro-growth tax changes to be phased in after a temporary increase in an unspecified tax carries us past the present valley of woe.

The main focus among state government policymakers has been how to pay bills next year.

There are, however, side discussions taking place over how to construct a better tax system.

In fact, part of Gov. Jan Brewer’s plan includes pro-growth tax changes (unspecified) to be phased in after a temporary tax increase (also unspecified) carries us past the present valley of woe.

So, what would a better tax system look like? To answer that question, you first have to ask: What do you want a tax system to do? And the right answer to that question should be: Raise necessary government revenues while doing the least to impede private- sector growth.

Dr. Richard Vedder has done the most thorough research over the years on the relationship between state tax structures and economic growth. He’s looked at four decades of data.

His conclusions have been consistent and statistically robust: States cutting taxes grow faster than states raising them. States relying on consumption taxes grow faster than those that rely on income or property taxes.

Arizona actually already has a pretty good tax system in this regard. Government revenue growth is usually pretty healthy.

So, contrary to all the hand-wringing, there’s not a lot of room for improvement. Any significant gains would likely require big reforms, such as advocated recently by Dr. Art Laffer and his associates in a paper sponsored by the Goldwater Institute and the Arizona Free Enterprise Club.

Laffer proposes that the state’s individual income tax be replaced by a flat-rate of 3.34 percent. The only deductions would be for charitable donations and housing costs, including rents. He also would replace the current corporate income tax and state sales tax with a business value added tax of the same rate.

Lower rates on broader bases are more conducive to economic growth. The value added approach eliminates some of the objection to expanding the sales tax base, since it would also take the place of the corporate income tax, which all businesses already pay.

Adding rent as a deduction ameliorates some of the regressive burden shift that usually results from flat-tax proposals.

Big changes, however, are very difficult politically. The Arizona Chamber recently released a nibble-around-the-edges approach that fleshes out the governor’s general proposition.

The chamber said it could support a temporary sales tax increase if accompanied by permanent elimination of the state property tax and cuts in corporate income and capital gains taxation.

This is typical big business shortsightedness: Increases for others to fund reductions for us. But there is also some rationale to it.

The only tax Arizona has that is actually high by national standards is the business property tax. And Arizona’s corporate income tax is high compared with the state’s individual rate and the corporate rate of nearby states.

Moreover, capital gains and corporate income taxes are the state’s most volatile revenue sources. Reducing reliance on them would add an increment, albeit minor, of stability.

Some want to use the tax code to implement their view of social justice. So, House Democrats want to increase the income tax on affluent Arizonans.

That, however, flies in the face of the Vedder findings. Over the past decade, the economies of nine states that don’t impose individual income taxes grew 76 percent on average, while economies of the nine with the highest marginal rates grew 57 percent on average.

In reality, however, Arizona’s tax system just isn’t that broke. It can be improved, but it doesn’t really need to be fixed.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics. E-mail: robert.robb@arizonarepublic.com

Foreclosures have caused a dramatic decrease in residential property values in Arizona.

Arizona leaders are doing a lot of looking for unicorns these days.

The one they are in particularly hot pursuit of is a state tax structure that isn’t so subject to cyclical fluctuations.

The universities sent out a scouting party for this particular unicorn, called the Fiscal Alternative Choices Team. It recently released a field report.

According to the FACT report, one of the major problems is that Arizona is too reliant on the sales tax. “Collections from the sales tax are volatile across the economic cycle,” the report claimed, “and do not keep pace with economic growth.”

This is a widely held view. It is also manifestly false.

From 1993, when state revenues stabilized from the recession in the early 1990s, until 2007, when state revenues peaked before the current downturn, state sales tax collections grew by 177 percent.

State personal income during the same period grew by 180 percent. From 2000 to 2007, sales tax collections actually grew faster than personal income.

The staff of the Joint Legislative Budget Committee, who unlike academics have to live with the consequences of their misjudgments, reached the opposite conclusion. According to its review of the historical record, “Changes in base sales tax collections generally track Arizona personal income.”

Sales taxes also have generally held up better than other sources during recessions. In the recession of the early 1990s, state collections of both individual and corporate income taxes experienced a one-year decline. Sales tax collections never dipped into the red.

Nor did they the last time state revenues declined in 2002. Individual income tax collections, by contrast, declined more than 9 percent. Corporate income taxes fell 36 percent.

This recession has been different. Last year, state sales tax collections declined more than 3 percent. This year, so far, they are down by more than 11 percent.

This, however, is an unusual recession. And collections from individual and corporate income taxes are also hugely off, even after adjusting for the effect of the individual rate cut that was partially implement during the period.

Many suggest that revenues would be more stable if the state got back into the property tax business.

The FACT report suggests imposing one for the school construction obligations the state took over from local school districts.

That would raise more money. But it wouldn’t make state revenues less volatile. After the commercial real estate depression in the late 1980s, the Arizona property tax base actually shrunk. That’s probably going to happen again with the dramatic decrease in residential property values the state has experienced.

The notion that greater reliance on real estate values would reduce state revenue volatility would seem self-evidently silly. But it persists.

To reduce volatility, the FACT report recommends that the sales and individual income tax bases be expanded and the rates reduced. There are many reasons that could be a good idea. But reducing cyclical volatility isn’t one of them.

Take one of the recommended sales tax base expansions, commercial real estate leases, as an example.

In the first place, such a tax is highly unfair, which is why it was repealed. Commercial office buildings already pay high property taxes, which are passed on to lessees. Then subjecting the lease to a sales tax is piling on.

Regardless, such a tax would be more volatile, not less. In a downturn, commercial lease space contracts and rates go down.

There is simply no evidence that broadening the bases of the sales and individual income tax would reduce their volatility, and the FACT report offers none.

If stability is the goal, then reducing reliance on the two most volatile revenue sources, taxes on corporate income and capital gains, would be the way to go. But the gains in stability would be minor.

There are improvements that can be made in Arizona’s tax structure that would enhance the prospects for long-term economic growth, which in turn could increase state revenues. But they would not do much to reduce the cyclical fluctuations in such revenues.

As I’ve written before, and will undoubtedly write many more times so long as the newspaper gives me this forum, there are no countercyclical tax sources. In an economic downturn, they all go down.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

This April 5 satellite image provided by GeoEye shows the North Korean missile launch facility at Musudan-Ri. Should the United States and Japan vow to shoot down the next North Korean long-range missile? It's worth thinking about, Robert Robb writes.

In his seminal book, “Losing Ground,” Charles Murray used the construct of a “thought experiment” to explore an idea he found fetching but wasn’t willing to embrace fully.

In Murray’s case, the idea was abolishing the welfare system. And his book made clear that, on balance, he was very much inclined to think that would be a good thing.

I’ve had a couple of “thought experiments” going on in my head regarding foreign policy. Unlike Murray, these ideas make me highly uncomfortable. I think they are, on balance, bad ideas and should not be pursued.

Nevertheless, constructive alternatives also don’t seem to exist. So, they seem worth at least thinking about out loud. Here they are.

• Does the world need a new kind of colonialism?

This wouldn’t be the old-style colonialism in which a developed country controls the governance of an undeveloped country to exploit the latter’s natural resources and create a captive market for the former’s exports.

Instead, it would involve temporary governance of highly troubled or dangerous places. Three candidates come to mind.

The first is Somalia. Piracy from its coast threatens world shipping. Al-Qaida sympathizers are a danger to take over. Yet the place hasn’t had stable governance since at least the early 1990s.

The most compelling is Darfur, where the slaughter is heartbreaking and enraging.

And the most dangerous is the Northwest mountainous region of Pakistan, which the Pakistani government seems more inclined to simply cede to the Taliban. The possibility of an al-Qaida safe haven developing there, like in pre-9/11 Afghanistan, is very real.

Various African and U.N. efforts have been undertaken regarding Somalia and Darfur. They have been fruitless and will remain so.

The United States is undertaking military action in the border region in Pakistan. But the U.S. isn’t simply going to take over the place and govern it for awhile.

A few years ago, I advocated that a League of Democratic Nations be formed with an independent constabulary force. This would not be a force consisting of troops loaned by member nations. It would be truly independent, with troops working for the league and with a league command structure.

That way, things that were in the best interest of the collective, but not in the best interest of individual countries to take the lead on, could get done.

Of course, there are serious moral issues with one set of sovereign nations deciding to take over and run the territory of other countries, as well as issues of international law.

And there are serious doubts about the likelihood of success. These are highly dangerous places. Establishing order in them would be difficult and bloody.

Alternatives with a better chance of success, however, aren’t readily at hand.

• Should the United States and Japan vow to shoot down the next North Korean long-range missile?

The diplomatic effort to get North Korea to stop its development of nuclear weapons and curtail its arms trade seems stuck in an endless loop. North Korea makes promises in exchange for assistance, breaks them, and then starts the process all over.

China is the only country with sufficient leverage to put an end to the loop. But China seems to fear instability in North Korea more than its security threat to others.

North Korea’s threat, both intrinsic and as an arms merchant, would be much greater if it develops a long-range missile. So far, its test efforts have failed.

The United States and Japan, which have been conjointly developing missile defenses, could ensure that North Korea’s long-range missile capability remains uncertain by vowing to shoot down any new test rockets.

No one will want to buy long-ranges missiles that haven’t been proved to work. And if North Korea proceeded with a test anyway, it would offer a valuable, although high-stakes, field test of our missile defense technology.

The reaction of North Korea and China to such a vow is difficult to gauge. Right now, the risks probably exceed the potential gains.

But it would be a game-changer, when nothing else seems to have the potential to be.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

Displaced Sudanese women and children seeking medical treatment line up outside the Egyptian military field hospital at Abu Shouk refugee camp, outside the Darfur town of al-Fasher. Would a new kind of colonialism help end the slaughter in Darfur?

From the political notebook:

• The panic that is taking place in school district budgeting is, at best, premature. At worst, it is irresponsible political theater.

In the first place, state general fund support for K-12 education has not been reduced yet.

Although general fund spending for this year was reduced from what was originally appropriated, it remained above what was appropriated last year. A reduction in the rate of increase doesn’t warrant the panic that has seized school districts.

Second, the federal stimulus money available for schools exceeds any cuts that have been proposed.

The state will receive $832 million in federal stimulus money for education, to be split between K-12 and higher education. Exactly how much K-12 will receive is up for grabs, but it certainly should be more than half.

In addition to these funds going through the state, school districts will receive nearly $400 million in stimulus money directly.

The state also gets $185 million in general purpose stimulus money that could be used for K-12 education.

So, there should be around $1 billion in stimulus money potentially available for K-12 education.

The Legislature cut $133 million in general fund support for K-12 in this year’s budget fix. The proposals for next year’s budget being circulated among Republicans have a cut in the range of $350 million. So, the cuts under discussion are far less than the federal stimulus money that might be available.

• Educators also complain about financial squeezes occurring outside the general fund budget debate.

The amount that school districts get from the classroom site fund – revenues distributed from the special education sales tax and increases in state land trust fund income – is expected to go down by nearly $100 million next year.

School districts are complaining about having to absorb some utility costs they have been paying for through a property tax whose authority expires next year. In this case, they have only themselves to blame.

They have known for nine years that this authority went away next year. Rather than responsibly ramping down dependence, they decided to play fiscal chicken, ratcheting up dependence as the deadline approached, counting on the Legislature bailing them out.

That probably isn’t in the cards, which sticks the districts with around $118 million in new expenses to absorb.

But even the reduction in the classroom site fund and absorbing the utility costs doesn’t approach the stimulus money that might be available.

• Things could still turn out badly. To solve the remaining deficit for this year, the Legislature might make additional paper cuts to K-12, backfilling with stimulus funds.

That could leave substantially less stimulus money available to compensate for state general fund cuts next year. Discretionary stimulus money could go to other programs.

The uncertainty, however, illustrates why the panic is at least premature. It also illustrates the wisdom of Republican legislators who wanted to delay the day on which districts had to make teacher contract renewal decisions, which is causing most of the panic.

This was opposed by the teachers’ union and legislative Democrats, who prevented the delay from occurring – suggesting their interest was primarily in promoting the political theater, rather than a sensible school district budgeting process.

• Gov. Jan Brewer’s routine of claiming that anyone who opposes her temporary tax increase just doesn’t understand the problem has gotten tired and needs to be retired.

In the first place, it’s just not true. Many legislators opposing a temporary tax increase are just as or more knowledgeable about the state’s financial condition and the budget options as she is.

In the second place, it doesn’t jibe with her continuing refusal to identify specific budget cuts she would support and specific taxes she would raise.

If Brewer is unwilling to put her self-proclaimed superior knowledge and insight to work by putting specific proposals on the table, she should quit disparaging the ken of those who are.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

Miriam Flores was a third-grade student when the English-language learning lawsuit was filed on her behalf. In the time the case has been languishing, she's graduated from the University of Arizona.

Weird and contorted cases are nothing new to the U.S. Supreme Court.

Still, the justices are likely to find it even stranger than usual when various Arizona worthies stand before them April 20 to argue the adequacy of the state’s funding for students who are English learners.

To begin with, state Attorney General Terry Goddard will be arguing that his client, “the state of Arizona,” is in fact guilty of violating various federal laws.

There is, of course, no such entity as the “state of Arizona” that has confessed to serial legal violations. Goddard is basically his own client.

Goddard used to have some justification for his position, since former Gov. Janet Napolitano also wanted the state to lose the case. And the state Board of Education, a named defendant and mostly composed of Napolitano appointees, took the same position.

But Arizona has a new governor, Jan Brewer. She wrote a letter to Goddard instructing him to, like, you know, defend the state. He wrote back telling her to go fly a kite.

Goddard’s behavior in this case is unconscionable. I can understand a state attorney general saying that he cannot in good conscience defend a particular state law. But the responsible thing to do is to step aside and let someone else defend the statute.

To stay in the case as the state’s lawyer and argue against a duly enacted state law is an act of legal treachery.

Of course, Goddard isn’t the only lawyer in the case with basically himself as a client. The lawyer trying to get additional funding through the federal courts, Tim Hogan of the Arizona Center for Law in the Public Interest, also has solitary client conferences.

The case originally was filed in 1992. Hogan’s nominal clients are all grown up.

Contrary to attorneys general arguing that their state is violating the law, it’s not unusual for public interest lawyers to have nominal rather than active clients. Hogan, however, not only wants to represent himself. He also wants no opposition.

The only entities fighting Hogan are state Superintendent of Public Instruction Tom Horne, Speaker of the House Kirk Adams and Senate President Bob Burns on behalf of the Legislature.

Hogan claims none of them have standing to challenge a lower court decision that the state is inadequately funding English learner education.

Now, the superintendent is a named defendant. The trial judge ordered the Legislature to pass a law and started fining the state when it didn’t.

To a nonlawyer, it is pretty Kafkaesque if someone can be sued or ordered to do something by a judge and not have the right to go to court and say: “Hey, wait a second! This ain’t right.”

The weirdest part of the case is that it’s stuck in a time warp. According to the trial judge, it’s still 2000, when the case was first decided.

Since then, Arizona voters have changed the system of educating English learners, requiring that they be taught in English rather than receive dual language instruction.

A task force has developed programs to do that. State aid for English language learners has been increased and a fund established to which schools can apply if that is insufficient to implement the new state approach.

And the federal government has since passed No Child Left Behind, which requires states to track the progress of English learners and imposes sanctions if they don’t advance.

Opponents claim this new state system also violates federal law because it considers available federal funds in determining additional state help and limits extra state funding to two years.

The technical legal issue is a recondite matter of when changed circumstances warrant vacating a previous court order.

The sensible thing would be to allow Arizona’s new system a chance to operate and see what happens. The early indications are promising.

The question is whether federal law permits the sensible thing.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com