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Monday, November 24, 2014

Hypothecational argument

I guess no one will be surprised by the Gray Lady's position in their op-ed on increasing the size of the E-Rate funding.  That's right, our country's paper of record has once again come down solidly on the side of capitalizing the "R" in "E-Rate."

The rest of the opinion piece?  Not surprisingly, the Times came out strongly in favor of the increase.  They did have the unfortunate honesty to point out that the 16-cent increase that the Chairman talked about is actually, on average, a 48-cent increase per household, since the average American household has 3 phone lines.  But at least they had the discretion not to calculate the cost for businesses.  Not to worry: Commissioner O'Rielly already exaggerated the impact on business for the Chamber of Commerce (see my comment on this post).  Otherwise, I don't have much to say on the article.

I also stumbled across an opposing op-ed in Forbes, written by Tim Worstall.  Actually, the editorial is not about the E-Rate (it's mentioned only in the title and a quote from the Times), it's about "hypothecation."

But first, I'll write a paragraph correcting a misconception described by Mr. Worstall.  Before getting to his thesis, he takes a paragraph to launch a dig at the Times by pointing out that rural areas are underserved by sewer and phone service, so why are we focusing on Internet?  OK, first sewer.  You can live just fine without connecting to a sewage network if you handle your sewage with a septic system.  However, you can't get information from the Internet by installing a digital septic system; you have to be connected to the network.  Phones?  Well, if Mr. Worstall had done any research beyond reading the Times op-ed, he would have found that the idea of universal service originated in 1934 for telephones.  Universal service didn't expand to cover the connection of schools and libraries until 1996. Connecting rural areas to phone service has been the job of the High Cost Program, the largest component of the Universal Service Fund.

The opening of the next paragraphs says, "this isn’t really about phones or the internet, broadband or not."  I should have stopped reading there, but he sucked me in with a new word: "hypothecation."  I think I'd heard it in reference to a mortgage I signed, where it means pledging collateral, but when it comes to taxation, it's the ear-marking of revenue to a particular purpose.

Mr. Worstall makes sound arguments against hypothecation, but I have two problems with his conclusion:
  1. No recommendation concerning politics and taxation should be based on logic, since there are few subjects in which logic and reality are further apart than in politics.
  2. Moving the E-Rate into the Treasury was part of Joe "Bleed It Dry" Barton's plan to scuttle the E-Rate back in 2005.
So, rather than argue logic, I will respond like the Jersey boy I am: "Hey, pally, I got your hypothecation right here!"

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