Voice For Liberty

Author: Bob Weeks

  • Common Sense Economics: What Everyone Should Know About Wealth and Prosperity

    Common Sense Economics: What Everyone Should Know About Wealth and Prosperity
    James D. Gwartney, Richard L. Stroup, and Dwight R. Lee
    St. Martin’s Press, 2005

    This is a wonderful book that can teach anyone what is important to know about economics. It teaches the insights that people can use to understand and evaluate the mechanism of our economy and government themselves. It is not a textbook with charts, graphs, and formulas. It requires no special prerequisite from the reader.

    The book contains four parts: The ten key elements of economics, seven major sources of economic progress, economic progress and the role of government, and twelve key elements of practical personal finance.

    This book promotes a restricted role for government. From page 80: “A government can promote social cooperation and enhance its citizens’ economic welfare primarily in two ways: (1) by providing people with protection for their lives, liberties, and properties (as long as the properties and liberties were acquired without force, fraud, or theft) and (2) by supplying a few select goods that have unusual characteristics that make them difficult to provide through markets.” Later, in the section titled “Government is not a corrective device” we read, “When thinking about government, it is important to recognize that there are fundamental differences between political democracy and markets. When a democratic government levies taxes, it does so through coercion. Dissenting minorities have to pay taxes regardless of whether they receive or value the goods that the taxes supply. … There is no such parallel coercive power in the private sector. Private firms can charge a high price, but they cannot force anyone to buy. Indeed private firms must provide customers with value or they will be unable to attract consumers’ dollars.”

    We also learn that when decisions are made through the political process, it is the majority that wins and sets policy, and the minority must yield to the majority. But when decisions are left to the market, each person can choose what they want. If they want something different from what the majority wants, they can get it without also having to pay for what the majority decided on.

    This part of the book also explains how special-interest groups are usually able to get the government to implement laws and policies that benefit the group at the expense of the rest of the country. An example is the sugar tariff, which is very valuable to a small group of people. They focus tremendous energy and money on getting politicians to keep the tariff in place. The average American may not be aware that the sugar tariff costs them an additional $20 per year in the form of higher prices for products containing sugar, and even if they are aware, well, what’s the use of getting worked up over $20? Even the employees of American candy makers who have moved out of America to somewhere where they can buy sugar at world market prices may not know who to blame for the loss of their job.

    This part of a book also contains a section titled “Unless Restrained by Constitutional Rules, Legislators Will Run Budget Deficits and Spend Excessively.” This is certainly the case with the recent Congress, and in the state of Kansas too, except that our state can’t deficit spend. The root of the problem is this: “Legislators like to spend money on programs to please their constituents. They do not like to tax, since taxes impose a visible cost on voters. Debt is an alternative to current taxes; it pushes the visible cost of government into the future.” The solution, we are told, is political modifications such as a constitutional amendment requiring a balanced budget, or supermajority requirements for spending proposals.

    The book concludes with a good section on personal finance. The authors strongly recommend, as I do, that investors use low-cost stock index funds instead of actively managed funds or individual stocks.

    This book is very easy to read, and contains a great deal of valuable information. I strongly recommend it to people just starting to learn about economics, and to people like me who had some college training in economics, but didn’t really learn how economics and its relation to government affects our wealth, prosperity, and freedom. If you couple this book with Thomas Sowell’s two recent books Basic Economics: A Citizen’s Guide to the Economy, Revised and Expanded Edition and Applied Economics: Thinking Beyond Stage One you will have an excellent understanding of how our economy and government work.

  • Wal-Mart. More hypocrisy.

    Writing from Jackson, Mississippi

    Currently it is quite fashionable to criticize Wal-Mart as the starting point for everything evil about American business. Critics allege that Wal-Mart earns too much profit, pays its employees too little, doesn’t provide its employees health insurance so they have to rely on the government, it exploits low-paid workers in China, and might even be responsible for avian flu, for all I know.

    There is no doubt that Wal-Mart is a powerful force in the economy. The Wall Street Journal on December 3, 2005, wrote “Wal-Mart employs about 1.3 million people, about 1% of the American work force. Its sales, at around $300 billion a year, are equal to 2.5% of U.S. gross domestic product.”

    But bigness doesn’t necessarily translate to profitable: “It is not, however, an especially profitable company. Its net profit margins, at about 3.5% of revenue, are broadly in line with the rest of the retail industry. In fiscal 2004, Microsoft made more money than Wal-Mart on just one-eighth of the sales.”

    Is Wal-Mart bad for poor people? Writing in The Washington Post on November 28, 2005, Sebastian Mallaby wrote: “Wal-Mart’s critics allege that the retailer is bad for poor Americans. This claim is backward: As Jason Furman of New York University puts it, Wal-Mart is ‘a progressive success story.’ Furman advised John ‘Benedict Arnold’ Kerry in the 2004 campaign and has never received any payment from Wal-Mart; he is no corporate apologist. But he points out that Wal-Mart’s discounting on food alone boosts the welfare of American shoppers by at least $50 billion a year. The savings are possibly five times that much if you count all of Wal-Mart’s products.”

    That’s a lot of money saved for consumers. Critics alledge, however, that Wal-Mart suppresses wages. It does, as it turns out. From The Washington Post article again: “Set against these savings for consumers, Wal-Mart’s alleged suppression of wages appears trivial. Arindrajit Dube of the University of California at Berkeley, a leading Wal-Mart critic, has calculated that the firm has caused a $4.7 billion annual loss of wages for workers in the retail sector.” Compare that with the amount that Wal-Mart has saved consumers. “Indeed, Furman points out that the wage suppression is so small that even its “victims” may be better off. Retail workers may take home less pay, but their purchasing power probably still grows thanks to Wal-Mart’s low prices.”

    As for health benefits, John Tierney in The New York Times on November 29, 2005 writes: “Wal-Mart is often denounced for getting ‘corporate welfare’ because some of its employees rely on Medicaid for health care and on other government aid. But so do some employees at other companies or at government institutions like public schools. Wal-Mart offers health benefits that are generally comparable to what other retailers offer.”

    For those who claim that Wal-Mart receives corporate welfare in any form, I think that readers of this website know my feelings on that. Corporate welfare is wrong.

    From The Wall Street Journal again: “But suppose Wal-Mart did look more like the company its detractors would like it to be, with overpaid workers, union work rules, and correspondingly higher prices on goods. It would not only be a less attractive place to shop, and hence a considerably smaller company. It would drive up the cost of living for the millions who shop there, thus hurting those in the bottom half of the income-distribution tables that Wal-Mart’s critics claim to be speaking for. One might expect this fact to trouble the anti-Wal-Mart forces, except that their agenda is very different from what they profess it to be.”

    John Tierney of The New York Times again: “It’s easy to understand the motives of some of Wal-Mart’s enemies. Local merchants don’t want to match its prices. Labor leaders know that they’ll lose members and dues if unionized stores suffer. But why would anyone who claims to be fighting for social justice be so determined to take money out of the pockets of the poor?”

    Whatever your feelings, Wal-Mart operates in the relatively free marketplace, so it must meet the needs of its customers, or it won’t last very long. From The Wall Street Journal again: “To the extent that mom-and-pop stores are threatened by Wal-Mart, it’s because the same people who supposedly so value their Main Street hardware store find that Wal-Mart’s selection, or prices, or parking lot — something about it — is preferable.”

    That’s the free market — people voting with dollars rather than professed feelings — at work.

  • The Random Walk Guide to Investing

    The Random Walk Guide to Investing: Ten Rules for Financial Success
    Burton G. Malkiel
    W.W. Norton & Company, 2003

    The title of this book derives from the author’s famous book A Random Walk Down Wall Street, published in 1973. That book, and this too, refer to the theory of efficient markets. In the author’s words: “The main premise of the theory is that the stock market is an extraordinarily efficient institution for reflecting without delay any information that arises. When news arises, an army of profit-seeking Wall Street professionals pounces on it rapidly, driving stock prices up or down. As a result, stock prices reflect whatever good or bad news there is about each individual company or about the economy as a whole.”

    News is unpredictable. If not predictable and random, it wouldn’t be news, and today’s prices would reflect that information. So the price of a stock tomorrow is based on unpredictable — and therefore random — events. There is nothing contained in the past prices of a stock that has any value in predicting tomorrow’s price.

    This is quite a powerful theory. It has many implications. For example, have you seen the stock analysts on television known as “technical analysts?” They look at charts of past prices, and spotting things like “support,” “resistance,” or “head and shoulders,” they predict what will happen in the future. But according to the efficient markets theory, there is not a single thing in those charts that is useful in predicting future prices.

    It also means that in the long run, there is no hope of beating the market as a whole. That means that a huge chunk of the financial services industry is engaged in selling services that don’t work in the long run or even the short run, and, in fact, are harmful to the average person.

    Consider “actively managed” mutual funds. These are funds where the managers, by using various strategies, attempt to earn large returns. These managers are among the smartest people on Wall Street. Yet each year about 80% fail to “beat the market,” which is to say they didn’t perform as well as broad market indexes such as the S&P 500 index. In fact, for the 10 years ending December 31, 2002, the S&P 500 index beat the average equity mutual fund by 2.09%, and for the 20 years before the same date, by 2.42%.

    Of course, each year there are some funds that do very well, and some that are able to maintain high performance for a few years in a row. These are the funds that everyone talks about, and many people buy. But on page 129 there is a sobering table of figures. It shows the 20 best-performing funds (out of the 851 funds with more than $100 million in assets) from 1997 to 1999. These funds averaged annual returns of 44% to 66% during those years. Their managers were hailed as geniuses and treated as celebrities.

    The next columns of the table report the funds’ rank for the period 2000-2002. The highest rated of these was at position 500 (out of 851 funds). Most were ranked worse than 750, and there are quite a few ranked worse than 830. Their returns averaged negative 32% per year. (In three years at -32% per year, $100 turns into $31.) Patterns like this were found in earlier time periods, too.

    We might think that we would be smart enough to get out of these high-flying funds as they start to tumble. But the managers of most of these funds have wide latitude as to the strategies they can use, and they weren’t smart enough to switch to some other investment. How can the average person expect to know more than these managers?

    Some people believe that they can do well by purchasing last year’s best funds. Professor Malkiel reports on a study where he took the funds with best recent performance, and these portfolios produced below-average returns. He also took Morningstar’s best-rated funds, and found that a portfolio of them produced much lower returns than an index fund. From 1990 to 2002, the Morningstar best rated funds grew in value by about 110% (judging from a graph), while the Wilshire 5,000 Index grew by about 300%. Over a lifetime of investing, that’s the difference in being relieved there’s Social Security and being independently wealthy.

    One of the reasons why actively-managed funds fail to beat the market in the long run is that the actively-managed funds have large costs. Index funds are very inexpensive to operate. Costs like this are very important in investing. Small differences, even just 1% per year, make a lot of difference when subjected to compounding over a lifetime. That’s why Malkiel strongly recommends reducing the costs of investing. Still, many people purchase “load” funds where perhaps as much as 6% of your investment goes to sales charges, and funds that have large ongoing management fees to pay every year (including marketing fees). Now there are “wrap” accounts that many people are lured into using, where the investor pays an annual fee, usually 1% to 3%, for the services of a professional money manager. I recently had experience with someone who had a wrap account from a very large investment company, one whose advertisements on television are commonplace. The advisor charged 1.5% per year, and the investor’s portfolio consisted of a variety of mutual funds, all actively managed, and all of which had high sales charges and high annual fees. This investor had absolutely no hope of earning anything near what an index fund would return.

    It’s no surprise that Malkiel is not well-liked by Wall Street and investment professionals, as the efficient market theory tells us there’s no way to beat the market in the long run. Yet a huge industry tries to sell us products we are led to believe will beat the market. As the advisor I mentioned a moment ago said to me in an effort to get my business after I told him I was a self-directed investor, “You pay a little more, and you earn a lot more.” He may even believe that. The sad fact is that most people have no idea how well their investments are performing. Calculating returns, especially when investment is made periodically, is difficult. Do you remember the Beardstown Ladies, an investment club that produced fabulous reported returns for several years running? It turned out that their calculations treated their contributions as though they were returns that their investments earned. Mistakes like that are easy to make. A few years ago a well-known website had a portfolio-tracking service that I used for a while to track the returns of my 401(k) plan. I thought I was doing really well, until I realized that it treated my twice-monthly contributions as through they were investment returns. I inquired about this, but the service admitted no error. Since then, they have discontinued this “service.”

    The first chapter of this book, titled “Fire Your Investment Advisor,” is quite blunt about its topic. If people are willing to study a little, perhaps by reading a short book like this, and then to trust themselves, I agree. Otherwise, you may want to use the services of an investment professional. In this case, people would do well to use a fee-based planner instead of one who is paid by sales commissions or annual fees.

    The next two chapters explain the four investment categories (cash, bonds, stocks, and real estate), and the important relationship between risk and returns.

    Then the rules start: Start saving and investing now, in order to take advantage of the powerful effect of compounding over time. (“The most powerful force in the universe,” Einstein reportedly said.) Save and invest regularly. Have proper insurance and cash reserves. Invest with an eye towards minimizing taxes. Allocate assets amongst the four categories according to your time horizon and your capacity and temperament towards risk. Diversify appropriately. Bow to the wisdom of the market (this is where the efficient market theory is important). Invest in index funds. Don’t be your own worst enemy: avoid stupid investor tricks.

    This is a valuable book for anyone who is interested in their financial security. Please don’t think that because you may not have a lot of money to invest that it isn’t important for you to take investing seriously. The less money you have, the more important it is to start saving and investing now, and to invest wisely. This book will show you how.

  • Every state left behind

    In Kansas, according to Standard & Poor’s Statewide Education Insights, about 60% to 70% of students are proficient in reading, as evaluated by the Kansas state reading test. But on the National Assessment of Educational Progress tests, only 33% to 35% of Kansas students are proficient. A similar discrepancy exists in the math test scores.

    Diane Ravitch, in the New York Times on November 7, 2005, writes “Idaho claims that 90 percent of its fourth-grade students are proficient in mathematics, but on the federal test only 41 percent reached the Education Department’s standard of proficiency. Similarly, New York reports that nearly 85 percent of its fourth graders meet state standards in mathematics, yet only 36 percent tested as proficient on the national assessment. North Carolina boasts an impressive 92 percent pass rate on the state test, but only 40 percent meet the federal standard.” So this problem is not isolated to Kansas. “Basically, the states have embraced low standards and grade inflation.”

    Ms. Ravitch tells us that the reasons for the huge gaps in proficiency rates include the fact that local education officials and politicians want to present good results, so that we will believe our local officials are doing a good job and that the ever-increasing funds sent to schools are wisely spent. The federal testing program hasn’t faced these pressures.

    What is the danger of these local tests that show fairly good results, when in fact the picture is quite bleak? “The price of this local watering-down is clear. Our fourth-grade students generally do well when compared with their peers in other nations, but eighth-grade students are only average globally, and 12th graders score near the bottom in comparison with students in many European and Asian nations. Even our students who have taken advanced courses in mathematics and physics perform poorly relative to their peers on international tests.”

    Further: “Last month, the National Academy of Sciences released a report warning that our nation’s ‘strategic and economic security,’ as well as our leadership in the development of new technologies, is at risk unless we invest heavily in our human capital; that is, the education of our people. The academy report made clear that many young Americans do not know enough about science, technology or mathematics to understand or contribute to the evolving knowledge-based society.”

    Having produced results like these, the education establishment in Kansas insists on keeping their monopoly on education tax dollars and the minds of young Kansans. We need to rethink the wisdom of this.

  • Book review: Class Warfare

    Class Warfare
    Besieged Schools, Bewildered Parents, Betrayed Kids and the Attack on Excellence
    J. Martin Rochester
    Encounter Books 2002

    In Lake Wobegon, “every child is above average,” Garrison Keillor says. In my personal experience, I can’t think of any parents I know who don’t have children who are not gifted or doing much better than average. After learning about the theory of Multiple Intelligences in chapter four of this book, I now know why all children are gifted.

    Multiple Intelligences is a theory, just over 20 years old, that says that besides the traditional areas of intelligence — linguistic and logical-mathematical — there are these additional areas to consider: spatial, bodily-kinesthetic, musical, interpersonal, and intrapersonal. To this list might soon be added naturalist intelligence, and maybe others.

    On the surface, this seems reasonable. Not everyone is good at the same things. We generally believe that besides the three Rs, it is also good to learn about physical fitness, the arts, and music. What MI does, however, is to treat all abilities as equal. If a child is not good at writing or math, they may possess some other of these intelligences, and that’s just as good.

    MI leads to teaching exercises where, for example, to help learn punctuation symbols, the students might form punctuation marks with their bodies. That’s using bodily-kinesthetic intelligence. Or students might assign an animal sound to each symbol, thereby using naturalist intelligence. If the only way that some students might learn the punctuation symbols is to engage in exercises like these, I can see how that would be good. But with MI, all students must do these things, even if they already understand.

    As an example, the author’s son, for studies in Greek mythology, was assigned a project where he was to “produce a cut-and-paste collage that consisted of pictures, newspaper clippings, or any other items they could cull from newspaper sources that contained references to ancient Greek culture and showed the relevance of that culture to today’s society.” This was the “capstone project in a high school class whose subject was English and which was an honors class no less.” Evidently exercises like these have replaced the written essay or term paper, even for motivated students.

    Other examples: “Choose a chemical element and write two paragraphs telling why it is your favorite. Be creative.” “For homework in the science class, students created collages and drew pictures of scientists.” “… the Clayton High School English teacher who had students produce bright yellow Cliff Notes covers and the CHS history teacher who had students draw a picture of any structure in their neighborhood that had meaning for them” “… required her students to do a project expressing their feelings about prejudice, using any ‘communication’ medium they wanted. This was classical progressive education — note the emphasis on personal affective, emotive learning; the social, ideological agenda of combating prejudice; and the child-centered license to express oneself even if it is not really using language as such.”

    At a time when American students are being outpaced in math and science by students in other countries, when many young people have difficulty composing a coherent sentence, when large numbers of college students must complete remedial work in writing and math before taking regular college courses, this is the present and future of American K-12 education.

    I learned a lot from this book, although I did not read every page of it due to time constraints.

    Does the theory of Multiple Intelligences influence Wichita public schools? It appears that it does. Quite a few schools mention it on their websites. Here is a portion of the Mission/Vision statement from Wichita’s McCollom Elementary School: “Staff will enhance students’ performance using research-based instructional strategies that include multiple intelligences, hands-on and real world experiences.”

    Supplementary reading: Reframing the Mind.

    A joke, the source of which I do not know:

    A Logger Sells a Truckload of Lumber

    1960: “A logger sells a truckload of lumber for $100. His cost of production is 4/5 of this price. What is his profit?”

    1970 (traditional math): “A logger sells a truckload of lumber for $100. His cost of production is 4/5 of this price; in other words, $80. What is his profit?”

    1970 (new math): “A logger exchanges a set L of lumber for a set M of money. The cardinality of set M is 100, and each element is worth $1. Make one hundred dots representing the elements of the set M. The set C of the costs of production contains 20 fewer points than set M. Represent the set C as a subset of M, and answer the following question: What is the cardinality of the set P of profits?”

    1980: “A logger sells a truckload of wood for $100. His cost of production is $80, and his profit is $20. Your assignment: underline the number 20.”

    1990: “By cutting down beautiful forest trees, a logger makes $20. What do you think of this way of making a living? (Topic for class participation: How did the forest birds and squirrels feel?)”

  • Hypocrisy over oil profits abounds

    Writing from Orlando, Florida

    The recent swell of criticism over oil company “windfall” profits, some even coming from people who should know better, is truly remarkable in its hypocrisy.

    It seems that the critics feel that oil companies did nothing extraordinary to earn these profits. Therefore, they don’t deserve them.

    What’s wrong with this criticism? First, I don’t think we want to let the government get in the position of deciding who deserves to keep the profits they earn. It does enough of this already.

    Second, most people would be delighted to find themselves in the position of the oil companies: owning something that is scarce and in high demand. And, a lot of people are in that position, made huge profits, and did little to “deserve” the profits other than being in the right place at the right time. Who are these windfall profiteers that I speak of? They’re homeowners in hot real estate markets, who, by chance, happen to own property that other people are willing to pay high prices for, thereby generating huge windfall profits for those lucky homeowners. Has anyone proposed a windfall tax on these profits?

    (A further irony concerning profits from the sale of one’s own home is that the profit, which is a capital gain, is taxed at rates lower than most people pay on income. Homeowners don’t pay any tax on the first $250,000 (or $500,000 for married taxpayers) of profit, and the rest is taxed at the capital gains tax rate of 15%, and only 5% for those with low incomes. These rates were reduced in 2003. A cut in the capital gains tax rate is usually criticized as a tax cut only for the “wealthy,” but it turns out that many regular people will benefit. I suppose, though, that if your residence that you bought 25 years ago for maybe $50,000 is now worth over a million dollars, you have become “wealthy.”)

    Third, prices are the best way we have to allocate scarce resources. Every other way doesn’t work. But many people forget the lessons of history and think that somehow government can suspend the law of supply and demand.

    Finally, consider who owns these oil companies. If you own any mutual funds, especially index funds, you probably own a piece of these companies.

  • Big government is thoroughly entrenched

    Writing from Orlando, Florida

    The November 16, 2005 Wall Street Journal contains an editorial titled “Fiscal Chicken Hawks.” This article reveals the trivial amounts of federal spending that is being fought over: “The reality is that over the next five years the total federal budget is expected to exceed $13.855 trillion. The Republican faux-Slimfast plan basically erases the rounding error, or the $0.055 trillion, and leaves the $13.8 trillion untouched. To put it another way, the GOP plan reduces the increase in the federal budget by a microscopic 0.25% over the next five years.”

    Faced with even this barely noticeable reduction in spending, advocates of big government are in full fighting trim: “Their Congressional leaders, Nancy Pelosi and Harry Reid, have denounced even these paltry GOP savings as ‘shameful’ and ‘immoral.’ They even brought a dozen Katrina Hurricane victims to Washington, trotted them out in front of the national media, and proceeded to lambaste Republicans for shredding the social safety net.”

    The reality is that federal spending, even under a Republican President and Republican-controlled Congress, has been increasing rapidly, and will probably continue the same way: “For the past five years federal spending on anti-poverty programs has increased by 41%. Medicaid, which provides health care for the poor, is scheduled to grow by 7.9% a year, and under the GOP plan it would grow by 7.5% a year. Either way the program expands by more than double the rate of inflation through 2011.”

    But there is good news. By switching to GEICO, I saved a lot of money on my car insurance. Seriously, our own home state senator has been up to some good work: “Senators Sam Brownback of Kansas and John McCain of Arizona have joined with five first-term Republicans to propose some genuine cost cutting. Their plan would delay the Medicare prescription drug bill, adjust Medicare benefits to seniors with incomes of more than $80,000 a year (or $160,000 for a couple), cancel highway pork projects, end dozens of obsolete spending programs, and cut all domestic discretionary spending programs by 5%.”

    Federal and state spending continues to grow rapidly. Politicians seem unable to resist its allure. If we would realize that almost all this spending is taking money from one person and giving it to someone else to whom it does not belong, we could evaluate this spending in its proper moral context.

  • Catastrophe in Big Easy demonstrates big government’s failure

    Writing from Orlando, Florida

    An excellent article by David Boaz of the Cato Institute titled “Catastrophe in Big Easy Demonstrates Big Government’s Failure” (available here: http://www.cato.org/pub_display.php?pub_id=4819) explains how miserably the government at all levels performed before and after Hurricane Katrina.

    The disaster started long before this year, when government spent a lot of money in Louisiana, but didn’t protect it from hurricanes: “During the Bush administration, Louisiana received far more money for Army Corps of Engineers civil projects than any other state, but it wasn’t spent on levees or flood control. Surprisingly enough, it was spent for unrelated projects favored by Louisiana’s congressional delegation.”

    After the hurricane struck, it seemed that government spent most of its efforts trying to keep out the scores of private-sector entities that were responding to the need. “Meanwhile, despite FEMA’s best efforts, immediately after the hurricane the private sector — businesses, churches, charities, and individuals — began to supply services to the victims.”

    What really hurts is to realize who it is that suffered the most. “Who were the people who suffered most from Hurricane Katrina? The poorest residents of New Orleans, many of them on welfare — the very people the government has lured into decades of dependency. The welfare state has taught generations of poor people to look to government for everything — housing, food, money. Their sense of responsibility and self-reliance had atrophied. When government failed, they had few resources to fall back on.”

    After all this, who could want more government? It seems that some do — quite a few, according to The New York Times, which today published an article titled “Voters Showed Less Appetite for Tax Cuts.” It contains this sentence: “It may be, some analysts suggested, that after the terrorist attacks of Sept. 11, 2001, and this year’s Gulf Coast hurricanes, Americans saw the value of government investment in infrastructure, public safety and other services and are now more willing to pay for it.”

    I think if people looked at the job that government does, compared with what the private sector can do even when it is not required to do so, they would realize that more government is not the answer.

  • Kansas Income Growth Lags

    By Karl Peterjohn

    You will earn more if you do not work in Kansas. That is nothing new but the size and scope of the economic problem facing Kansans has become more vivid. National data has regularly shown that Kansans’ incomes are lower than the national average and this is impacting the economic climate in this state.

    In September, Wichita State University’s Center for Economic Development and Business Research issued a report showing how badly Kansas lagged with the fastest and slowest growing parts of the United States. In this report Kansas vividly contrasted with fast growing Colorado in all of the measurements being used.

    Colorado, which has been benefiting from their Taxpayers Bill Of Rights limits on state and local government spending increases, had the best economy in our region. Colorado was in the ten fastest growing states when total personal income, earnings per job, per capita income, full, and part-time job growth were measured. Naturally, jobs and income then have an impact reflected in Colorado’s fast growing population too.

    What the Wichita State University study did not report was how Kansas measured when compared with all four of our immediate neighbors. This is bad news for Kansas.

    Personal income growth is weak in Kansas. It is one of the lowest in the entire country at 43rd out of the 50 states plus the District of Columbia for a ten year time period ending in 2003. This federal data ranked Colorado as 3rd highest while our other three neighboring states ranked between 28th and 33rd.

    Kansas was a dismal 41st and once again in the bottom 10 when it came to per person or per capita personal income. Colorado was once again in the top ten at number 9 while Nebraska was 12th, Oklahoma 19th, and Missouri 30th. Earnings by place of work was another measurement W.S.U.’s study examined and Kansas again scored badly. Kansas was worst in this region at 37th while Colorado was once again 3rd.

    There was a bit of good news in job growth percentages since Kansas did not score at the bottom in our region. Missouri was at the regional bottom at 37th and Oklahoma was slightly worse than Kansas at 32nd. The growth in jobs could be attributed to other factors like Missouri and until recently Oklahoma both being states without Right To Work laws that have a positive impact upon job availability.

    Jobs, wages, and income are all factors in a society where people can, and do, vote with their feet. Americans have always been a restless lot and the level of jobs, wages, and income are all important factors on where people decide to live. The W.S.U. study looked at population trends. In 1970, there were more Kansans than Coloradans. Today, there are 1.5 million more residents of Colorado than Kansas. During the 1990s in the hey-day of TABOR, Coloradans’ incomes soared and their population grew over 30 percent.

    Government spending advocates like Governor Sebelius have cited the recent growth in state tax revenues as a sign that the Kansas economy is growing. Sadly, the 7.1 percent growth in state revenues in the fiscal year ending June 30 was less than half the national percentage growth in revenues. Tax revenues show a continuing relative decline for Kansas.

    WSU’s survey indicated that Kansas had the lowest population growth in our five state region. This is not a surprise since there is a costly and highly uncertain fiscal climate to own or operate a business in this state. The judicial activism coming from the Kansas courts with a billion dollar price tag raises this uncertainty even higher and that is too recent for this data. Many liberals in Kansas claim that additional spending on government, particularly public schools, is the solution to economic growth. Higher government spending is much more connected with economic stagnation and decline. Kansas, with high property, income, and sales taxes, provides a regional model on why this state is lagging in wages, incomes and job growth and this is hurting population growth here.