Today, Joshua Rauh discusses his research into the proposed California wealth tax and the consequences he anticipates it would have on California’s economy; H.R. McMaster comments on this year’s numerous leadership changes in the upper levels of the Pentagon; and Jonathan Rodden speaks to a lesser-appreciated side of Alexander Hamilton, the precocious founder’s ability to forge pragmatic political compromises for the greater national good.
California Policy & Politics
Speaking with Political Breakdown host Marisa Lagos on KQED, Senior Fellow Joshua D. Rauh explains that his examination of California’s Prop 40 ballot measure boils down to fundamental economics: weighing benefits and costs. The costs of the proposal, according to Rauh, are “driving billionaires out of the state” and “discouraging new entrepreneurs from growing their businesses here.” The theoretical benefit of the tax is revenue, he says, but his research has shown that the state may actually lose revenue as a result of actions taken by billionaires in response to the measure—namely, leaving the state and no longer paying California income taxes. Rauh emphasizes that these departures will be harmful to the Golden State’s economy, as heads of enterprises will likely expand their businesses mostly in other jurisdictions even if those firms retain some California footprint. “It is within their legal rights to leave and go elsewhere,” says the economist, encouraging Californians to consider these effects as they formulate their views on Proposition 40. Listen here.
Security and Defense
Speaking on CBS News, Senior Fellow H.R. McMaster commented on US Army Secretary Dan Driscoll’s resigning after months of disagreements with Secretary of Defense Pete Hegseth amid the ongoing war with Iran. “This is not good news for our nation, for the Army,” the retired Army lieutenant general said, “because what you don’t have now is a top, Senate-confirmed civilian or military leader of a service.” McMaster argued that deferred modernization and insufficient troop numbers have already created challenges for the Army, against a backdrop of wars in Ukraine and the Middle East that have shown the enduring necessity of using land forces to control territory. McMaster explained that the politicization of top Pentagon positions and the military generally did not begin under the current administration but has now reached a “dangerous level,” as evidenced by the abrupt departures of Driscoll and several other top officials, including the Navy secretary and Army chief of staff earlier this year. Watch or listen here.
Freedom Frequency
Alexander Hamilton is familiar to many Americans for his scrappy life story, his vision for America, and his unyielding approaches to personal issues like honor and reputation, writes Senior Fellow Jonathan Rodden for the Founders & Fellows series. But Rodden also finds in Hamilton a prototype political economist: a Founder both analytical and rigorous, restrained in his political behavior, and masterful in the art of negotiation. For those who find it odd to speak of “Hamilton” and “compromise” in the same breath, Rodden shows how the prolific writer identified the political stakes of an issue, worked with coalitions, and accepted imperfect resolutions because they were superior to the status quo. In addition to the technical efficiency of policies, Hamilton looked at how incentives could be aligned to create stability. The lesson for today, Rodden says, is not only that vivid leadership can include partial victories as well as triumphs, but also that reason can carry the nation through periods of low trust and high stakes. Read more here.
Economics and Monetary Policy
What role does Fed Chair Kevin Warsh see for the Federal Reserve in today’s economy? His recent speech at the Jackson Hole Economic Policy Symposium gave some insights, discussed in the latest episode of Economics, Applied.
The Big Idea: Jeffrey Schmid, president and CEO of the Federal Reserve Bank of Kansas City and a member of the Federal Open Market Committee, sat down with Senior Fellow and Director of Research Steven J. Davis to unpack how Warsh’s trial by fire as a Fed governor during the 2008 financial crisis—and his formative years as a Hoover fellow mentored by the late George P. Shultz—have shaped his outlook and leadership. Watch or listen here.
Education Policy
On his Education Exchange podcast, Senior Fellow Paul E. Peterson speaks with superintendent of Houston Independent Public School District Mike Miles about his leadership and new book. On absenteeism, Superintendent Miles says Houston offers 25 days of summer instruction to allow students with attendance below 90% to meet state requirements to advance to the next grade level. Commenting on the role of consultants in education, Miles says they have a role, but it’s essential they are not providing different guidance to teachers and to administrators. In Peterson’s interpretation, “The school administrative staff needs to be the people who provide the teachers with the direction that they should be going,” to ensure alignment. Peterson also asks Miles about pushback he’s received from local press over actions including discontinuing the practice of allowing schools to pick their own principals. “I stopped that,” Miles explains, “because the principals that they picked were getting D’s and F’s.” Listen here.
Related Commentary