Voice For Liberty

Tag: Economic development

  • Kansas and Wichita quick takes: Wednesday November 3, 2010

    Republican Party on probation. Noted conservative figure Richard A. Viguerie of ConservativeHQ.com expressed a common idea: “Voters have given Republicans one more chance to get it right. They are on probation, and if they mess up again, they won’t get another chance. The last time the Republicans were in charge, they became the party of big spending, Big Government, and Big Business. They abandoned the philosophy of Ronald Reagan and cozied up to lobbyists and special interests. And they paid a price at the polls.”

    Limited government and economic freedom not desired. In today’s Wichita Eagle editorial assessing the election results, Rhonda Holman just can’t grasp the importance of limited government and economic freedom to prosperity. Instead, she prefers what some call “nuanced” politicians, who can be pressured by newspapers to vote for big-government boondoggles: “Incumbent Commissioner Dave Unruh and Wichita City Council member Jim Skelton already have proved to be thoughtful leaders; the same cannot be said of Richard Ranzau, whose tea party tendencies could put important county priorities at risk.” The victories of Ranzau — there were two, one in the primary over an Establishment Republican and again in the general election over a Democrat in a Democratic district — were gained the old-fashioned way: by meeting voters and letting them know what he stands for. And he was not bashful in his message of limited government. Both times, voters responded. The Wichita Eagle ought to take notice.

    Future of Sedgwick County Commission. Yesterday’s defeat of incumbent Gwen Welshimer by Jim Skelton replaces a commissioner committed to low taxes and spending with someone with a less convincing record. While Skelton has sometimes voted against TIF districts — he and Paul Gray voted against the $10.3 million Exchange Place TIF district, although they were okay with it at $9.3 million — he firmly believes it is his duty — as city council member and as future county commissioner — to direct the economic development of the region.

    Future of Wichita City Council. Skelton’s move to the county commission means there will be another new face on the council be fore long. Already the spring elections will bring two new faces, as members Sue Schlapp and Paul Gray will be leaving the council due to term limits. Now Skelton will be replaced, either by city council appointment or election next spring, depending on the timing of Skelton’s resignation. That’s a total of three new members. Mayor Carl Brewer and Vice Mayor Jeff Longwell must run for relection in the spring if they want to stay on the council. Brewer has already announced his intent to run.

    Commission criticized as “gutless.” Because Wichita real estate developer Rob Snyder wasn’t granted some $400,000 in taxpayer subsidy because of the action of the Sedgwick County Commission, he criticized the commission as “gutless,” according to Wichita Eagle reporting. When testifying before the Wichita City Council as to the need for his developer welfare, Snyder whined about how that earmarks are now unpopular with the American public and not available to finance his proposed Save-A-Lot grocery store. An earmark — that is to say, a grant of money paid for by U.S. taxpayers — was used as a large part of the financing for the other Save-A-Lot in Wichita at 13th and Grove.

    Kahn to substitute at Pachyderm. A scheduling change means Wichita State University political science professor Mel Kahn will be the presenter at this Friday’s (November 4) meeting of the Wichita Pachyderm Club. The always-interesting and entertaining Kahn will speak on the topic “Do Political Attacks Help or Harm our Republic?” This seems like a timely topic given the recent general and primary elections. The public is welcome at Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club.

  • Kansas and Wichita quick takes: Sunday October 31, 2010

    Wichita city council this week. The agenda for November 2 includes two instances of corporate welfare in the name of economic development (Approval of Forgivable Loan Agreement, Nex-Tech Processing and Approval of Economic Development Incentives, TECT Power, Inc.), an ordinance that cancels the Save-A-Lot TIF district, and revisions to Wichita’s Community Improvement District policy. I’m told that the last item may be deferred at the request of some developers, which — if I were a cynic — might cause me to wonder who is really running things at city hall. When the city had a meeting to discuss the CID policy, the meeting was stacked almost exclusively with those who have an interest in extracting as much economic subsidy as possible from the city.

    Mayor Brewer speaking on Save-A-Lot. On the October 24 edition of the KNSS Radio program Issues 2010, Wichita Mayor Carl Brewer spoke about the Save-A-Lot TIF district and what happened at the Sedgwick County Commission. Brewer said “The city said, okay, you can charge an additional two cents, if that’s what you want to do … But what ended up happening is the county voted against it and said no, we don’t want to let them charge themselves another two cents, and so it was voted down.” The “two cents” the mayor is referring to comes from the Community Improvement District that the city passed to benefit the Save-A-Lot store’s developers. Where the mayor is mistaken is in the role of the Sedgwick County Commission and the action that body took. The Kansas law regarding CIDs — the mayor’s “two cents” — gives no role to counties. Instead, the county commission voted to cancel the TIF district that the city created at the same time it created the CID. Now I can understand how people make misstatements when speaking on live television or radio. But the mayor seemed quite sure of himself. Host Steve McIntosh didn’t pick up on this error. KNSS shows have had other quality control problems recently, as when a host and guest discussed Wichita city council member Paul Gray and his prospects for reelection. Gray can’t run again due to term limits.

    Shop this way. Before addressing the proposed Planeview Save-A-Lot store, the mayor said that regarding the existing Save-A-Lot store at 13th and Grove, the city had to educate people in the surrounding area that they couldn’t buy just a loaf of bread or one item at at time, they had to buy an entire week’s groceries.

    Rasmussen tells us. “With less than a week to go before midterm elections, 32% of Likely U.S. Voters now say the country is heading in the right direction.” See Right Direction or Wrong Track. “Just 12% of Likely U.S. Voters now think Congress is doing a good or excellent job. Sixty-one percent (61%) rate their performance as poor. More at Congressional Performance. “With midterm congressional elections just a week away, the number of voters who view Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid Very Unfavorably have reached their highest levels yet.” See Congressional Favorability Ratings.

    Kansas high schools turn out graduates, but many are unprepared. At the end of a Lawrence Journal-World article on Kansas community colleges, “Responding to a question Thursday, [Jacqueline Vietti, president of Butler County Community College in El Dorado] noted that K-12 schools perhaps needed to place less emphasis on tests and more on the learning process and pointed to what she saw as ‘a disconnect between ACT scores and the preparedness of students’ coming to Butler County…. In a later interview, she acknowledged that 65 percent of recent high school graduates coming to her school require developmental work in math, English or reading.” This tracks with my reporting from earlier this year, which found that “only 26 percent of Kansas students that take the ACT test are ready for college-level coursework in all four areas that ACT considers.”

    Government or private sector. In today’s Wichita Eagle opinion line: “Why would anyone want to take the power away from the government, which is an elected body, elected by the people, and turn the power over to the private sector, which is elected by no one and in which very few have a say?” I might point out to this person that private sector firms must meet the test and demands of consumer preferences each and every day. Politicians, on the other hand, face the voters only every few years when their terms are up. Furthermore, in the private sector, I can choose to buy my produce at Dillons, canned goods at Wal-Mart, snacks at Target, meats at the carneceria, etc. In government, we usually have to choose between Candidate A and B, each in their entirety. We can’t select the things we like about each candidate as we can in the private sector and free markets.

    MSNBC’s Olbermann unhinged. “On Wednesday’s Countdown show, during a 21-minute ‘Special Comment,’ MSNBC host Keith Olbermann warned American voters against electing Tea Party Republicans to power, whom he suggested are ‘unqualified, unstable individuals’ who will take America ‘backward to Jim Crow, or backward to the breadlines of the ‘30s, or backward to hanging union organizers.’ He then made a play off MSNBC’s ‘Lean Forward’ slogan to disparage the Tea Party movement as he declared: ‘Vote backward, vote Tea Party.’” More, including video, at Newsbusters.

    Wichita Eagle to be protested. A little birdie told me: “I have heard that a group calling themselves Women Against Violence plans to picket the Wichita Eagle building on Monday from 11:30 am until 1:30 pm and again at 4:30 pm until 6:30 pm showing their opposition to the Eagle’s endorsement of a political candidate who allegedly assaulted his wife.”

  • Kansas ranks low, says Tax Foundation

    New rankings published by the Tax Foundation indicate that the business tax climate in Kansas is poor. Kansas ranks 35th among the 50 states, just 15 spots from the bottom. In last year’s ranking, Kansas placed 32nd, so our state is slipping relative to other states.

    The economic development strategy of Kansas and Wichita is to offer tax abatements as an inventive to lure or retain industry. The study authors note the problem with this and what this action tries to cover up: “State lawmakers are always mindful of their states’ business tax climates but they are often tempted to lure business with lucrative tax incentives and subsidies instead of broad-based tax reform. … Lawmakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a woeful business tax climate. A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state’s competitiveness.”

    Are taxes and tax policy important? After a review of the literature, the report concludes: “… the general consensus of the literature has progressed to the view that taxes are a substantial factor in the decision-making process for businesses.” But there are some authors who disagree.

    The state business climate index considers these factors: corporate taxes, individual income taxes, sales tax, unemployment tax, and property taxes. Kansas performs best on unemployment taxes, ranking 7th among the states. Our worst raking is 41st in property taxes. In sales tax, Kansas ranks 32nd, and this does take into account the statewide sales tax increase of one cent per dollar that started July 1.

    The report recognizes that taxes are only one of many factors that companies use when deciding where to locate facilities. Kansas’ low ranking means we can make large improvements in this area. If we don’t, we are likely to have to keep up our ad hoc approach to economic development, were we craft special deals under the guise that we know which deals to make.

    The full report is available at the Tax Foundation by clicking on 2011 State Business Tax Climate Index. An introductory article is at Background paper: 2011 State Business Tax Climate Index (Eighth Edition).

  • Business can oppose incentives and use them

    In the campaign for United States Congress from the fourth district of Kansas, Democrat Raj Goyle criticizes leading opponent Republican Mike Pompeo for accepting economic development incentives while opposing their existence.

    A Goyle press release reads: “Already a known outsourcer, Pompeo, in an act of hypocrisy, took government incentivized aid for three of his companies, including Sunflower, Thayer and Sentry. He did this despite repeatedly denouncing government assistance in the private sector.”

    This criticism — that those who oppose government programs nonetheless hypocritically take advantage of them — is an important topic to examine, not only as a campaign issue, but because the conflict that leads to this form of criticism arises often. It’s something that libertarians struggle with daily — and I don’t think Mike Pompeo would describe himself as libertarian.

    In an article examining whether presidential candidate Ron Paul should accept federal matching campaign funds, the libertarian scholar Walter Block described the pervasiveness of government and the impossibility of escaping it:

    For the modern state is so involved in the lives of its citizens that it is the rare individual who does not accept some form of government largesse, whether in the form of money payments, services, or goods of one type or another.

    For example, while not everyone goes to a public school or teaches there, it is the rare individual who does not: walk on statist sidewalks, drive on public roads, carry currency in his pocket, avail himself of the services of governmental libraries, museums, parks, stadiums, etc. Which of us has not entered the premises of the motor vehicle bureau, sued someone in court, posted a letter, attempted to attain a passport, or interacted with government in any of the thousand and one other ways it touches upon our lives?

    This hints at part of the conflict — angst even — that libertarians digest internally as we go about our business in a world dominated by government. I, for example, firmly believe that we would be better off with private ownership of the streets and highways. Each time I drive my car from my driveway onto the government street in front of my house, I think of this. I get it. I understand the conflict that government thrusts on me. It bothers me daily.

    But there’s no other way for me to get to where I want to go. I’m consoled somewhat by the fact that the motor fuel taxes I paid go to building and maintaining the roads. This doesn’t mean, however, that I agree that our system of primarily government ownership of streets and highways is the best system. But it’s the system I am forced to live with, and I try to change it.

    Business firms are generally aware, although not always, of government incentives available for economic development. These incentives are part of the economic and political landscape that business firms face. They have to be recognized and dealt with, just like any other factor such as regulation. If business firm “A” decides not to accept incentives and subsidies when firm “B” does, is this wise, even if accepting subsidy is against the principles of firm “A”?

    I would recommend firm “A” to apply for and accept the subsidy. For one thing, if firm “A” is a public corporation and doesn’t pursue these incentives when they are available, the company is likely to be sued by its shareholders.

    Second, these subsidies are part of the competitive landscape. Even though from a libertarian and conservative view they are wrong and harmful, they still exist. It does no good for a firm to pretend they don’t exist and thereby create a competitive disadvantage for itself. This is especially the case if firms “A” and “B” are direct competitors in the same industry. But even if they are not, these two firms still compete in the same markets for land, labor, capital, and other generic factors.

    Third, firm “A,” like all of us, is paying for these incentives and subsidies. While this may seem like conceding to the power of the state, firm “A” might as well get some back of what it paid for.

    So yes, business firms need to use government incentives and subsidies. At the same time, we need to work for the elimination of these programs. This is difficult, as the more government becomes involved in management and direction of the economy, it becomes harder to get government to stop. We see this in play at Wichita city hall, as more and more firms ask the city council for various forms of assistance or corporate welfare.

    The fight is important, too. The factors that made our country and its economy great are at peril. Gary North wrote in The Snare of Government Subsidies: “… those within the government possess an extremely potent device for expanding political power. By a comprehensive program of direct political intervention into the market, government officials can steadily reduce the opposition of businessmen to the transformation of the market into a bureaucratic, regulated, and even centrally-directed organization. Bureaucracy replaces entrepreneurship as the principal form of economic planning.”

    Returning to the politics of the day: Isn’t is a little strange to hear Goyle, who favors expansion of public-private partnerships, criticize those who use them, even if they are opposed to the idea in principle? Doesn’t Goyle want everyone to be in “the snare” that North describes?

  • Kansas Statehouse renovations examined

    The restoration of the Kansas Statehouse was featured on a recent episode of Sunflower Journeys. While providing an interesting look at the history of the stonecarvings on the building’s exterior, the show made a mistaken argument about the economics of the project.

    During the episode Vance Kelley, a project manager for Treanor Architects, promoted the economic development aspects of the capitol building’s restoration. Since the workers are local, he said that utilizing local labor forces, means that tax dollars get passed along to local merchants: “Actually we’re generating, I think it’s been estimated between six and seven times the amount of money within the local economy. Preservation actually creates jobs. It is economic development in itself.”

    This argument — that government spending of this type creates jobs — is commonly heard from advocates of more government spending. It’s a popular argument among historic preservationists, too, as they seek to justify why their work is so expensive, and why public money should be expended on it.

    Does government spending create jobs? The short answer is no. The primary reason is that government can only spend what it takes from someone else. It might do the taking now, in the form of taxation, or it might borrow, which delays taxation to the future. Either way, many people have less money to spend, save, and invest because of the taxation.

    Kelley’s argument does have a ring of truth to it. Local merchants — Topeka, he means — are benefiting. Taxpayers across the state are taxed to send money to be spent largely in Topeka. This benefit, however, comes at the expense of spending — and related jobs — in other parts of Kansas. This, however, is a selfish argument.

    Kelley may not be aware of the seen and unseen fallacy that pervades popular thinking. When we go to Topeka — or watch taxpayer-funded public television — we can see the glory and magnificence of the government spending on the Kansas Capitol. Finding the harm caused by the taxation necessary to pay for this, however, is disbursed across the state and very difficult to find. But it exists.

    Kelley also referenced the multiplier. That’s the observation that money spent gets spent again, and again, and again. That’s true. But advocates of government spending like Kelley think that only government spending is magically multiplied. The truth is that any spending is multiplied in this way. It’s a natural phenomenon of economics.

    Some people make the argument that people may not spend their money during uncertain times. Instead, they may save it. But where do savings go? Many people put their money in a bank, which then lends it to people who want to spend it. Other people buy stocks or bonds, or pay down debt. Either action provides funds for others to spend. It’s only when people save money by stuffing it in their mattresses that this argument — that government must spend — applies. And very few people do this.

    The further truth is that when spending their own money, people are usually careful. Government? Not so much. Evidence of this is the ornate decorative carvings illustrated in the Sunflower Journeys episode. Few private building are built to this standard, because people — even wealthy people — spending their own money don’t value this frivolity very highly.

    Instead, it’s government, spending taxpayers’ money, that ends up building elaborate monuments to itself.

    There are some cases where government spending creates wealth, such as in the building of needed highways. It does not follow, however, that only government is capable of making this investment. Further, streets and highways are far removed from ornate stonecarvings on a government monument.

  • Kansas and Wichita quick takes: Wednesday October 20, 2010

    Poll: Republicans to win big. Wall Street Journal: “A vigorous post-Labor Day Democratic offensive has failed to diminish the resurgent Republicans’ lead among likely voters, leaving the GOP poised for major gains in congressional elections two weeks away, according to a new Wall Street Journal/NBC News poll. Among likely voters, Republicans hold a 50% to 43% edge, up from a three-percentage-point lead a month ago. … ‘It’s hard to say Democrats are facing anything less than a category four hurricane,’ said Peter Hart, the Democratic pollster who conducts the Journal poll with Republican pollster Bill McInturff. ‘And it’s unlikely the Democratic House will be left standing.’”

    Faust-Goudeau, Ranzau featured. The two major party candidates for Sedgwick County Commission District 4 — Democrat Oletha Faust-Goudeau and Republican Richard Ranzau — are featured in today’s Wichita Eagle. This is an important election, as the balance of power on the commission is at stake.

    Rasmussen: Health care, bailouts, stimulus not popular with voters. “A new Rasmussen Reports national telephone survey finds that most Likely Voters think their representative in Congress does not deserve reelection if he or she voted for the national health care law, the auto bailouts or the $787-billion economic stimulus plan.” The complete story is here.

    Downtown Wichita planning. The people of Wichita need to be wary about the planning for the revitalization of downtown Wichita developed by planning firm Goody Clancy. As Randal O’Toole explains in a passage from his book The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future, planning provides an opportunity for special interests to run over the will of the people: “When confronted with criticism about their plans, planners often point to their public involvement processes. ‘Hundreds of people came to our meetings and commented on our plans,’ they say. ‘So we must be doing something right.’ Wrong. Planning is inherently undemocratic. Efforts to involve the public mainly attract people who have a special interest in the outcome of the plans. … Planning processes are even less likely to attract the public than elections. Getting involved in planning requires a much greater commitment of time than simply voting, and the process is so nebulous that there is no assurance that planners will even listen to the public. … At the same time, some groups have a strong interest in getting involved in planning either for ideological reasons or because planning can enrich their businesses. The usual result when a few special interest get involved in a process ignored by everyone else is to develop a plan that accommodates the special interests at everyone else’s expense.” When we look at who is involved in the Wichita planning, we see these special interests hard at work.

    More corporate welfare in Sedgwick County. Today, without meaningful discussion, the Sedgwick County Commission committed to a $25,000 forgivable loan to TECT Power. The loan agreement specifies targets of employment and wages that TECT must meet. This is not the only corporate welfare the company is seeking. The Wichita Business Journal reports: “The Wichita City Council will be asked to match the Sedgwick County loan, and the company is seeking incentives from the Kansas Department of Commerce.” Does this approach to economic development work? See Kansas spending should be cut, not frozen and In Wichita and Kansas, economic development is not working.

    Heartland policy blog launched. The Heartland Institute has launched Somewhat Reasonable, described as an “in-house” policy blog. In an announcement, HI says: “It is the place friends and fans of The Heartland Institute can keep up with the conversation about free markets, public policy and current events that takes place every day among our fellows and scholars. Heartland staffers don’t always agree, which is part of the fun of working at a libertarian think tank.” Heartland is continually at the forefront of research and advocacy for free markets and economic freedom.

    Tea Parties and the Political Establishment. The Sam Adams Alliance has released a new report that examines the relationship between tea party activists and the political establishment. Its research shows “shows the two entities are united on issue priorities, but differ when it comes to their level of enthusiasm and the Tea Party movement’s ability to accomplish its political goals.” One finding is that the political establishment doesn’t have much confidence in tea party activists’ ability to achieve their goals: “… only about 7 percent of Establishment respondents said the Tea Party knows how to accomplish its goals, while about 41 percent of Tea Party activists surveyed say this is true.” But the establishment needs tea party activists: “42 percent of Establishment respondents said it was ‘very important’ that Tea Partiers work with them.” In conclusion, the study states: “The Tea Parties have knowingly or unknowingly begun to promote a distinctly separate understanding of the political landscape compared to the Establishment’s. The tensions between them illustrate the underlying differences in their conception of the current political environment, their willingness to embrace populist elements, selection of means and tactics, and their acceptance of new entrants into the political world. However they share many of the same issue priorities, indicating that there is opportunity for a closer and more amicable relationship between the two factions.” The full document is at Surface Tension: Tea Parties and the Political Establishment.

    Chevrolet Volt. The Chevrolet Volt plug-in car is suffering a bit of dings in its green-glamour now that GM has revealed that it will use its gasoline motor more often than previously thought. But there are substantive reasons why this car should be scrutinized. Writes Holman W. Jenkins, Jr.: “Cars account for 9% of America’s CO2 output, making power plants a much more sensible target if your worry is global warming. Ironically, the Volt rolls out amid news that an investor is abandoning a big U.S. nuclear project, leaving America more dependent than ever on ‘dirty’ coal for its electricity. Storing electricity — which is what the Volt’s batteries do — is probably the least efficient thing you can do with the output of such plants. Then again, perhaps this explains the rapturous greeting the Volt is receiving from the utility industry. … The Volt’s defenders will shout that the Volt is a blow against terrorism and in favor of energy independence. Two answers: The Volt doesn’t need defenders if it’s a car that consumers want, and that GM can make and sell at a profit. But GM can’t. … The second answer is that even if every American drove a Volt, and every car in America was a Volt, it would not appreciably change the global challenges we face.” More at Volte-Face: GM’s new electric car depends on coal-belching power plants to charge its batteries. What’s the point?

  • In Wichita and Kansas, economic development is not working

    The effort of Wichita and Kansas to retain Hawker Beechcraft, one of our leading employers and a Wichita institution, provides a lesson in the futility of corporate welfare as an economic development policy: Someone is usually willing to pay more. We would be much better off if we start transforming Kansas to a state where all companies are nurtured, not by bureaucratic and political oversight and handouts, but by a low taxing and spending environment, and a reasonable regulatory regime.

    Recently I was shown a listing of all the industrial revenue bonds (IRBs) that Hawker Beechcraft and its predecessors have been authorized over the last 20 years. The number is large: $1.2 billion. This is not money that any governmental body has lent to Hawker Beechcraft. The purpose, instead, of the IRB program is to allow companies to escape paying property tax on property purchased with the bond proceeds. In some cases, companies escape paying sales tax as well.

    It would be difficult to calculate how much tax Hawker Beechcraft and its predecessors have not paid due to the abatements, but it is a lot. The company still pays some property tax. Records from the Sedgwick County Treasurer’s system indicate the company paid $971,073 in tax year 2009.

    When asking for tax breaks like this, companies often point out that they hire many people and pay good wages, so the taxing entities make up their money in other ways. That may be true. In fact, the cost-benefit analysis the city and county use make just that reckoning: if we give up collecting some tax from a company, how much additional tax will we collect from everyone else? Perhaps government officials don’t realize that much of this “benefit” is simply taxes shifted to someone else.

    Nonetheless, politicians and bureaucrats call this making an investment in, say, Hawker Beechcraft or whatever company is asking for tax breaks at the moment. The problem is that we don’t know if investing in these companies is the right investment, if government should be making these investments at all.

    Somewhere in Wichita or Kansas there a small unknown company that has half a dozen or so employees — maybe more, maybe less — that is working on some innovation. If we’re lucky, we have many such companies. These companies could be working on a new technology, manufacturing process, computer software, video game, internet site, food processing technology, retail concept, chemical process, restaurant idea, engineering methodology, agricultural process, airplane wing — we just don’t know. Many will fail. But some will succeed, and few will, hopefully, succeed in a big way.

    But these small startup companies may not fit in to the economic development programs the city and state have. Some people may not even think of looking to government for economic development assistance, as when I interviewed a successful Vietnamese grocer in Wichita. He didn’t know “where to dig” for government handouts.

    Any of these now-small companies could become the next Microsoft, Google, Home Depot, or Pizza Hut. We just don’t know which. But these companies, when in small startup stage, struggle to pay the taxes that large companies are able to escape. Being small, they may also be disproportionally impacted by regulation. It’s not necessarily the case that a small startup aviation company is competing directly with Hawker Beechcraft and is handicapped by the larger company’s tax advantages. But these two companies could be competing for the same employees, for example, and that puts the smaller company at a disadvantage.

    How can we identify which companies are deserving of government subsidy? Which companies should have their tax burden softened at the expense of others? Allocating resources — deciding what to do — in the face of uncertainty is the crux of entrepreneurship. It’s something that government is not equipped to do, as its incentives and motivations are all wrong.

    For politicians, the prime motivation is to be reelected. It is rare that the time horizon of a politician extends beyond the next election.

    For bureaucrats, the motivation is to expand their sphere of influence and power.

    Neither of these motivations are compatible with entrepreneurship. Some are not compatible in any way with running a business. For example, a business firm looks at its employees as a cost that must be managed and controlled if a profit is to be made and the firm survive. But to government, spending on employees is a social benefit, and one that is paid for by someone else.

    Another problem is the nature of knowledge. In a recent issue of Cato Policy Report, Arnold King wrote:

    As Hayek pointed out, knowledge that is important in the economy is dispersed. Consumers understand their own wants and business managers understand their technological opportunities and constraints to a greater degree than they can articulate and to a far greater degree than experts can understand and absorb.

    When knowledge is dispersed but power is concentrated, I call this the knowledge-power discrepancy. Such discrepancies can arise in large firms, where CEOs can fail to appreciate the significance of what is known by some of their subordinates. … With government experts, the knowledge-power discrepancy is particularly acute.

    I emphasized the last sentence to highlight the problem of the dispersed nature of knowledge.

    There are other problems with government management of economic development. We need to move away from this and towards a free market approach to economic development. This will take some time, and until then, we’re forced to defend our industry from other states, as we are presently doing with Hawker Beechcraft.

    But if we don’t start transforming Kansas, we’ll be doing this forever. And someone else always seems to have more money to spend.

  • Kansas business climate: not good

    On this week’s episode of the KAKE Television public affairs program “This Week in Kansas,” Kansas Policy Institute Dave Trabert told host Tim Brown that Kansas tax policy is creating a poor environment for business. “Kansas is becoming increasingly a difficult place to do business,” Trabert said.

    Kansas needs to look at its economic development strategy, he added, to create a system where everyone — small and large business — has an equal opportunity to succeed.

    Brown noted that during this year’s session of the Kansas legislature, the consensus was that taxes — the sales tax in particular — had to be increased. Trabert said the tax increase didn’t have to happen: “Kansas is the only state in our region that took that route. Every other state around us found ways to balance their budget without raising taxes.”

    Trabert also noted that the legislature had two studies that showed a tax increase would cost jobs. Asked by Brown about about the claim that services would have to have been cut if taxes weren’t increased, Trabert said that wasn’t the case. The budget that was passed increased spending by over $200 million. This increase in spending adds to the tax burden in Kansas.

    Regarding the possibility of Hawker Beechcraft moving to Louisiana, Trabert said that state has a top corporate and personal marginal income tax rate that’s about half of that in Kansas. Low tax burden states perform much better than high-tax burden states in private-sector job growth, he said. Low-tax burden states have weathered the recession better, too.

    Trabert also mentioned the out-migration from Kansas, an “early warning signal” that he said has been largely ignored. High-tax burden states are losing population to low-tax burden states. Kansas has lost population due to domestic migration for 11 straight years, he said.

    David Allen Seaton, President of the Winfield Courier newspaper, was part of the panel. He mentioned the split between the Kansas Chamber of Commerce and local chambers of commerce. Local chambers were in favor of more taxes and spending, while the Kansas Chamber strongly opposed it. Seaton’s argument was that the services that government provides — education, Medicare, prisons — is as important to the economic climate as the tax burden. Trabert answered that the choice is presented as either/or: “Either we have to raise revenue, or we have to cut the services we want.” Trabert said we should look to provide services at lower cost.

    An example Trabert provided is the audits of a handful of Kansas school districts, which uncovered ways the districts could save money. He also said that the budget being worked on for next year spends $1 billion more than five or six years ago.

    Testimony presented to Kansas Legislative Committee

    In September Trabert presented testimony to a special committee of the Kansas Legislature. His testimony, which may be read here, provides more detail about the differences in the economies of high-tax burden states as compared to low-tax burden states. On why the low-tax burden states perform better, Trabert wrote: “Both performance comparisons (private sector job growth and domestic migration) make perfect sense. Given the means and opportunity, we all tend to gravitate toward what we perceive to be the best ‘deal.’ Human and financial capital is no different; it will go where it is treated the best. People want to retain more of their earnings and states with the lowest state and local tax burdens let them keep more of their hard?earned money to spend as they wish.”

    According to Trabert’s testimony, the Tax Foundation ranks Kansas as having the 21st highest state and local tax burden in the country. But this is likely to change, as Kansas increased taxes this year, and our neighboring states did not.

    Trabert notes a discrepancy in the definition of the term “income” that may lead some to conclude that the tax burden in Kansas is not rising: “The Kansas Legislative Research Division (KLRD) says [the tax burden is not rising], but they are using the federal government definition of personal income to calculate the tax burden. The problem is that that definition includes money in ‘income’ that is not available to pay taxes, such as employer contributions toward pension funds, health insurance, social security and Medicare. … Over the ten year period ending June 30, 2009, income available to pay taxes went up 38% but state and local taxes shot up 59%, resulting in a significant jump in the tax burden.”

    Trabert recommends that Kansas gradually eliminate both the personal and corporate income tax. Missouri is moving in this direction, and that provides a competitive threat to Kansas.

    For property taxes, limiting the rate of growth would provide relief from rapidly-rising tax burdens.

  • Kansas and Wichita quick takes: Thursday October 14, 2010

    Wichita mayor to lead LKM. City press release: “Wichita Mayor Carl Brewer was elected as the 81st president of the League of Kansas Municipalities (LKM) during the organization’s annual conference Tuesday morning in Overland Park. … He also urged his fellow local leaders to restore the public’s confidence in government. ‘We need to have our citizens recognize the value of competent government, and why our freedoms and security depend on it,’ he said.” As noted a few days ago on these pages, the League of Kansas Municipalities is a special interest group working in favor not of the citizens who live in Kansas towns and cities, but the politicians and bureaucrats that run them — and their cronies — who benefit from the LKM’s advocacy of things like TIF districts, STAR bonds, tax abatements, and eminent domain for economic development. So I don’t know if we should be proud that our mayor is the president of this group.

    Goody Clancy in Topeka, too. The Topeka Capital-Journal reports that Goody Clancy, the planning firm working for Wichita is also working in Topeka.

    FactFinder 12: Pompeo campaign ad. Analysis of an advertisement by Kansas fourth Congressional district candidate Republican Mike Pompeo by Michael Schwanke of KWCH 12 Eyewitness News concludes that Pompeo used some of the techniques that he and Republicans strongly criticized Democrat Raj Goyle for using. Schwanke concludes: “Goyle made those statements, but the ad doesn’t provide complete context.” This is the same issue that got Republicans riled up a few weeks ago.

    Pompeo poll released. The Pompeo campaign has released a poll that was commissioned and paid for by the campaign. The results are Pompeo with 58 percent of the vote, and Goyle with 31 percent. Two minor party candidates get three percent each, and undecided voters are at 16 percent. In its analysis the polling firm notes “the confrontational attacks by Goyle have backfired and have resulted in Goyle’s negative rating increasing substantially.” Candidate-produced polls need to be considered carefully. Goyle’s campaign has released their own polls in August and September which showed a smaller Pompeo lead than public polls. FiveThirtyEight indicates it flags polls which meet its definition of a partisan poll, which it defines as a poll conducted [on behalf of] any current candidate for office. It also says “Nevertheless, they are included in the ratings. If a pollster releases a poll into the public domain, we assume that they are interested in doing their best and most accurate work, regardless of whom the poll is conducted for.” The firm that conducted this poll for Pompeo conducted a poll for the same campaign July 6th through 8th, about a month before the August primary election, with results of Pompeo leading Wink Hartman 27 percent to 21 percent. The actual results were Pompeo 39 percent, Jean Schodorf 24 percent, and Hartman 23 percent. Public polls underestimated Pompeo’s actual vote total, too.

    Kansas legislator Merrick honored. American Legislative Exchange Council, described as a “nonpartisan individual membership organization of state legislators which favors federalism and conservative public policy solutions” has recognized Kansas Representative and Majority Leader Ray Merrick with its highest award. “The American Legislative Exchange Council (ALEC) is pleased to announce that Representative Ray Merrick of the Kansas House of Representatives recently received the highest honor that a setting legislator can receive from the organization — Legislator of the Year. Rep. Merrick received the award at ALEC’s 37th Annual Meeting, held in San Diego, Cal., August 5 — 8, 2010. Nearly 1,500 state legislators, policy experts, and private-sector leaders from across the United States attended three days of intensive discussions on the critical issues facing the states and our nation. This award is given to state legislators who are ALEC members in good standing and have distinguished themselves by advancing, introducing, and/or enacting policies based on the fundamental Jeffersonian principles of free markets, limited government, federalism, and individual liberty.”

    Education reform setback. Wall Street Journal Review & Outlook: “Michelle Rhee described her decision yesterday to step down as Washington, D.C., schools chancellor after 3½ years as ‘heartbreaking.’ We share the sentiment. That one of the nation’s most talented school reformers was forced out does not bode well for students … Ms. Rhee’s resignation ‘won immediate support from the Washington Teachers’ Union,’ a strong signal that her departure is a victory for the adults who run public education, not the kids in failing schools. … One reason education reform is so difficult is because unions believe their political influence and money will outlast even the bravest reformers in the end — which is why they’re cheering today in the District of Columbia.”

    Wichita Eagle voter guide available. Click here. You can get a list of the candidates, along with their responses to questions, customized for your address. The first advance voter ballots were mailed yesterday.

    Kansas Jackass blogger guilty. Kansas Watchdog reports: “Former blogger Jason Croucher entered a plea of guilty to 3 counts of child pornography on Wednesday morning at the U.S. Court House. Croucher’s progressive ‘Kansas Jackass’ blog was widely read by members of the Kansas Legislature and others in Kansas in 2009. The blog is no longer online.” Croucher operated anonymously until “outed” by Earl Glynn and myself, although he planned to become known on his own at some time. His style was to poke fun at his opponents, using anything negative about them as material for his attacks. Rarely was public policy discussed in a meaningful and serious way.

    Wichita Eagle Opinion Line. “Gov. Mark Parkinson: I have six employees. I need to expand my business or quit. Please loan me $1 million to be paid back with my employees’ income tax. Thank you.” A fine example of government intervention crowding out private investment and initiative.