In response to the recent problems in the home mortgage market, the Oregon legislature is considering several bills aimed at protecting consumers from unscrupulous or fraudulent business practices.

On Wednesday February 6th I testfied before the Senate Commerce and Labor Committee and the House Consumer Protection Committee regarding three bills, SB 1064, SB 1090 and HB 3630. Below is the written testimony I submitted to both committees. In each case, my testimony resulted in good questions from committee members and helped focus the debate on how to provide full disclosure to consumers, rather than shut down choices consumer have in the marketplace.

My name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, a Portland-based think tank that promotes individual liberty, personal responsibility and economic opportunity in Oregon.

Before you pass new laws attempting to protect home loan borrowers, I hope you’ll take a step back and think about how such laws can backfire.

The 2007 Oregon legislature capped interest rates on payday loans, effectively putting the lenders out of business. What happens now to the people who relied on those loans? While it’s too early to know for sure in Oregon, we do have some data about what happened in two other states that banned such loans in 2004 and 2005. The preliminary conclusions strengthen my concern that such laws can do more harm than good.

Let me read you the abstract of a report* by the Federal Reserve Bank of New York:

Payday loans are widely condemned as a “predatory debt trap.” We test that claim by researching how households in Georgia and North Carolina have fared since those states banned payday loans in May 2004 and December 2005. Compared with households in all other states, households in Georgia have bounced more checks, complained more to the Federal Trade Commission about lenders and debt collectors, and filed for Chapter 7 bankruptcy protection at a higher rate. North Carolina households have fared about the same. This negative correlation—reduced payday credit supply, increased credit problems—contradicts the debt trap critique of payday lending, but is consistent with the hypothesis that payday credit is preferable to substitutes such as the bounced-check “protection” sold by credit unions and banks or loans from pawnshops.

It appears that banning these borrowing opportunities, even if they appeared to be bad opportunities to lawmakers, ended up hurting the very consumers the bans were meant to help.

I have little problem with bills that require full disclosure and reporting of loan and foreclosure activities. But I urge you to resist substituting your judgment for that of borrowers, lenders and consultants when it comes to the actual terms of such transactions. Chances are you’ll make things worse, not better, for those you’re trying to help.

* Payday Holiday: How Households Fare after Payday Credit Bans, Federal Reserve Bank of New York Staff Report no. 309, Donald P. Morgan and Michael R. Strain, November 2007

Audio of the both hearings are here:

Senate Commerce and Labor My testimony begins at 31:12.

House Consumer Protection My testimony begins at 1:38:55.

The House Interim Committee on Health Care held a lively public hearing and work session yesterday on a proposed Constitutional Amendment which would declare access to health care to be a “fundamental right.” If approved by the February special legislative session, it would be voted on by Oregonians in November.

The key language of Legislative Concept 91 (which became HJR 100 in the special session) reads:

The people of Oregon find that health care is an essential safeguard to human life and dignity and that access to health care is a fundamental right. In order to implement that right, the Legislative Assembly shall establish by law a plan for a system designed to provide every legal resident of the state access to effective and affordable health care on a regular basis.

The hearing started with representatives from Kaiser, Care Oregon and the Oregon Nurses Association testifying in favor of creating this new “fundamental right.”

Then Cascade Policy Institute board member Michael Barton and I testified in opposition. Michael gave the committee a history and philosophy lesson, explaining how the American government was founded on the principle that government does not grant rights, it simply protects our inalienable rights such as those to life, liberty and the pursuit of happiness. He explained that our rights define what we are free to do without interference; they are not goods or services that others must provide for us. He gave each member a copy of his 2006 Cascade Commentary, “Right” to health care violates individual rights, which was published in response to an early version of the current “legislative concept” facing us now.

I followed Michael with a discussion of the political implications. Here is the gist of my testimony:

On a philosophical level, I object to defining health care as a right. On a political level, I understand that government tries to grant such positive rights all the time. In this case, passing this constitutional amendment will make some people feel good. It says that we care deeply about the uninsured, but it only gives intellectual lip service, if that, to the matter of future costs.

More and more people will say “I have a right to not care about the costs, because I have an unqualified right to health care.”

Define health care as a fundamental right and cost control will go out the window - witness the public school system and how the Quality Education Model is now driving massive spending increases for little if any improvement in real quality. I can almost see the just-around-the-corner Quality Health Care Model defining prototype health clinics, with mandated staffing levels, required tests, etc. Innovation will become mired in bureaucratic process.

And who will have the task of controlling the economics? Is this legislature going to assume responsibility for that? An elegantly composed commission? A superhuman future governor? Or do you assume private insurance companies will simply figure it out?

Rather than spend precious political capital trying to create an artificial right to health care, I suggest we spend that capital finding practical ways to drive health care costs down and quality up. Make it easier for more people to afford health care on their own by getting un-needed mandates and insurance regulation out of the way. Then, if you decide that some people still can’t afford it, take a page from the food stamp book, or other such programs where you simply subsidize health care purchases for low-income people. That will distort the economics far less than the route you’re trying to embark on here today.

After our prepared testimony the committee members asked us a number of questions, giving us the opportunity to expand on our position. Chairman Mitch Greenlick seemed to enjoy the back-and-forth; at one point likening it to a good college debate.

Then Rep. Greenlick himself testified in favor of what is really his proposal. The committee then spent a considerable amount of time discussing the pros and cons, before approving it, and the accompanying joint resolution setting the November election (LC 88), on a party line vote.

A key argument against the proposal was made by Rep. Dennis Richardson who observed that, if enacted, a “fundamental right” to health care would seem to trump everything else in the Oregon Constitution. If the legislature comes up with a plan to make good on this “fundamental right” what happens when voters reject the new taxes needed to pay for it?

Since neither education, transportation, criminal justice, or any other state government service is defined as a “fundamental right” in our Constitution, then funding for these services might be cannibalized to fund the one “fundamental right” in that document, health care. But voters won’t be presented with this reality when marking their ballots in November. This potential clash of essential services may make for strange bedfellows in future election battles. Will the teachers union, for example, want to lose funding to the health care providers?

The unintended consequences of this proposal are almost endless. But that’s the way the game is played for now, and the next inning will play out in Salem over the next few weeks. Stay tuned…

Although the phrase “light rail” wasn’t even mentioned in the hearing, it seemed to be the elephant in the room today when the Subcommittee on Transportation and Economic Development of the Joint Ways and Means Committee met to move forward a $100 lottery bond measure to fund transportation projects throughout Oregon.

As introduced in the House, HB 2278 would have required that at least 15 percent of the funding be allocated to each of five regions described in the bill. But when the bill reached this committee, the 15 percent number had somehow been reduced to . . . Read more!

From the 1840s through the 1860s more than 80,000 pioneers walked beside their covered wagons along the Oregon Trail from Missouri to Oregon. They came for progress. They came for opportunity. They came for freedom. The journey was long and dangerous. Some never made it, dying along the way.

Now, some legislators have mixed up preserving the physical path they followed with preserving the ideals which propelled them to make their harrowing journeys.

By a 23 to 6 vote, the Oregon Senate passed SB 823 A that would stop ALL development, including . . . Read more!

House Education Committee votes on our school choice proposal

On Friday, May 11, 2007 supporters of House Bill 3010 convinced the House Education Committee to vote on the issue of giving low-income minority parents a choice in their child’s education.

Using a procedural motion, we attempted to amend HB 3010 into a Senate bill (SB 334A) being considered by the Committee. Both School Choice Working Group board member Esther Hinson and I testified on the amendment.

We reminded committee members that drop-out and reading failure rates continue at alarming rates within . . . Read more!

While waiting to testify on another bill before the House Consumer Protection Committee, I listened to testimony in favor of a bill which would require anyone who cleans or inspects chimneys in Oregon to be licensed as a general contractor (SB 605).

A representative of the State Fire Marshall supported the bill and told the committee that over the last eight years there were 4,689 reported chimney fires in the state, nearly 600 a year.

I then asked to testify in order to clarify whether this bill would really protect consumers, or the chimney sweeps. Here’s a summary of my comments:

I reminded the legislators that they sit on the Consumer Protection Committee, not the . . . Read more!

Thursday, April 5, 2007, was a great day for me personally. I was very proud to be a part of this hearing, which you can listen to here (starting at 1:36:50):

A mostly African American delegation from Portland traveled to the Oregon State Capitol to testify in support of House Bill 3010, the Freedom to Choose My School Grant program. The bill would create a pilot project to allow 1,000 low-income students to take the state funding for their education and go to any school, public or private in Portland.

The bill got a hearing because State Rep. Betty Komp (D-Woodburn) believes that low-income residents of Portland deserve an opportunity to be heard, and she chairs the House Subcommittee on Education Innovation. . . . Read more!

When Sally C. Pipes of the Pacific Research Institute in San Francisco gave invited testimony* before the House Health Care Committee last Wednesday, she briefly commented on the major health care reform bills before the legislature. She noted that all of them had the potential to devolve into a single payer system like the one she is so critical of in her native Canada.

Committee member Rep. Ben Cannon challenged Ms. Pipes, arguing that since none of the bills actually mentioned “single payer” that she might want to be more careful with her use of language. She responded by reiterating that whether or not they actually contained those words, their flawed approaches to health care reform could inevitably lead to a single payer system.

The very fact that a legislator seemed so concerned with keeping “single payer” out of the discussion may mean that those in favor of such a system have concluded that the public won’t go for it. Good news, if it’s true.

*Listen to the entire hearing. Ms. Pipes testimony occupies the first 23 minutes, then two state workers testify, then Ms. Pipes and the state workers answer questions beginning at 34:30 into the hearing. This portion of the hearing ends at 59:00 into the two hour session.

Oregon is often seen as a “progressive” state. But many of the state’s policies make it unnecessarily difficult for the lowest-income members of society to gain a foothold on the economic ladder.

In this legislative briefing, Cascade Policy Institute explores 10 simple ways to lower the tax and regulatory burdens on the poor. . . . Read more!

The legislative debate on whether to finance a rainy day fund by ending the corporate kicker, whether forever or just this year, is complex. Proponents of ending the kicker claim that economists of all stripes agree that the corporate kicker holds no economic benefit for the state.

Noted Oregon economist and Cascade Policy Institute academic advisor Randall Pozdena recently responded to one maker of that claim, Senator Ryan Deckert. Below, with his permission, is Dr. Pozdena’s email message:

—–Original Message—–
From: Randall Pozdena
Sent: Tuesday, March 06, 2007 12:37 PM
To: Senator Ryan Deckert
Subject: Economists DO NOT AGREE about elimination of the corporate kicker.

Dear Senator Deckert: . . . Read more!

There’s no one right or wrong way to hold an election in a democracy. Three times since 1996 Oregon voters have approved the so-called “double majority rule” for local property tax measures in other than general elections. Basically, the rule requires that for a tax measure to pass at least half of all eligible voters must vote, and half of those voting must vote Yes.

In my testimony* before a Senate committee against moves to eliminate the double majority rule, I renamed it the “25 percent rule” because what it really does is require that at least 25 percent of all eligible voters approve a tax increase on everyone else (one-half of all eligible voters showing up multiplied by one-half of those voting Yes = 25 percent).

The Majority Leader of the Oregon House testified before me at the same hearing. In his view, the double majority rule has created a number of “victims,” namely . . . Read more!

Cascade has researched, written and testified about what’s wrong with prevailing wage laws for a long time. Basically, these laws require that higher than market wages be paid to workers on “public works” projects such as roads, schools, courthouses, etc.

Supporters of Oregon’s prevailing wage laws, primairly trade unions, defend them by claiming that the prevailing wage is really just the market wage for a given skill in a given region of the state. The wage rates are set after a compulsory survey is returned to the Oregon Bureau of Labor and Industries stating wages paid by the responding construction firms.

Now, a bill before the Legislature seeks to exempt certain projects, primarily the construction of low-income housing units. Both agencies commissioning such projects and trade unions testified in favor of this exemption. What isn’t clear is why . . . Read more!

Speculation about “peak oil” is an intellectual fad that has been fashionable at various times throughout the past 120 years. Recently it has seized the spotlight again, and the Portland Peak Oil Task Force Report states that, “many experts predict global oil production will peak within five years, and few anticipate a peak later than 2020.”

This forecast is likely to be wrong, just as all previous forecasts of . . . Read more!

Oregon currently has 70 public charter schools which provide for some diversity in the often too regimented public school system. A law passed in 2005 recognizes the value of allowing new, innovative and more flexible ways of educating children within the public school system, yet one provision is hobbling this clear legislative intent.

The law requires that at least half of all students enrolled in an online charter school must live within the school district that charters that school. A bill has been introduced in this legislative session with the sole purpose of removing that artificial barrier to Internet learning. I testified* before the House Education Innovation Subcommittee on February 6th and seemed to get some traction for my position that such a restriction is based on similar fears that the nineteenth century English Luddites had about losing their textile jobs to the new steam powered looms. Today, public school teachers are afraid of losing their jobs if too many students figure out ways to learn online.

The only witness testifying to keep the 50 percent residency rule was, no surprise, a representative of Oregon’s largest teachers union. We’ll be watching this situation closely to see whether Oregon legislators are more concerned about helping kids learn, or about protecting public employee jobs.

*Listen to the entire hearing. My testimony begins at 57:32 into the hearing, followed by some interesting questions from committee members and my responses.

Governor Kulongoski wants the state to offer free or highly subsidized health insurance to all uninsured kids in Oregon by significantly increasing the cigarette tax. His “Health Kids Program” passed out of a House committee on a party line vote Friday and now goes to the Revenue Committee.

This, despite my testimony* listing several problems with the concept, including the concern that we would be taxing a group that has less income, less education, less employment and less health insurance than the average Oregonian.

Of course, smokers are also a relatively powerless minority, so they’re an easy target for those wanting to impose the next step in their vision of universal health insurance. We’ll have to see how this morality play plays out.

*Listen to the entire hearing. My testimony begins at 26:30.