Voice For Liberty

Tag: Free markets

  • Kansas and Wichita quick takes: Monday July 11, 2011

    TIF in Louisiana. Randal O’Toole recently examined the use of tax increment financing in Louisiana. He finds this: “Property tax TIFs are limited to that portion of property taxes that are not already obligated to some specific purpose — and most property taxes are so obligated, so most if not all Louisiana TIFs rely on sales and hotel taxes instead.” This is different from Kansas, where all the property tax, except for the usually small base, benefits the TIF district exclusively. … He describes sales-tax TIFs, which we in Kansas call community improvement districts or CID. While describing them as the least objectionable form of TIF, he notes problems: Why don’t stores just raise their prices? Stores that charge extra sales tax don’t have warning signage. And: “In the end, TIF is still just a way for elected officials to hand out favors to selected developers and other special interests. There is no reason to think that cities in Louisiana that use TIF grow any faster than ones that do not. Instead, all the TIFs do is shuffle new developments around, favoring certain property owners in the TIF districts over owners outside of the TIF districts. TIF may even reduce growth as developers who don’t get TIF subsidies may decide to build elsewhere where they won’t have to compete against subsidized developments.” … All these warnings have been raised before the Wichita City Council. … California has new legislation designed to kill redevelopment districts there, which are like TID districts in Kansas. … The full article is A Different Kind of TIF.

    Overland Park may see tax hike. Ben Hodge reports that Overland Park, the second largest city in Kansas and the largest in Johnson County, may increase its property tax rates. Hodge quotes a Kansas City Star editorial: “One plan from [Overland Park City Manager Bill] Ebel would boost the city’s mill levy by 46 percent and bring in more than $10 million a year in new revenue. The other option, a 41 percent increase, would create an extra $9 million annually.” To which Hodge replies: “So, those are the innovative ideas of today’s Overland Park Council: either a 41% increase, or else a 46% tax increase.” … The Overland Park Chamber of Commerce supports the proposal, which is simply more evidence of the decline of local chambers of commerce. … Hodge’s article is Between a Rock and a Tax Hike.

    Medicinal cannibis to be topic. This Friday’s (July 15th) meeting of the Wichita Pachyderm Club features Dr. Jon Hauxwell, a physician from Hays, speaking on “Medicinal Cannabis.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. Upcoming speakers: On July 22, Steve Anderson, Director of the Budget for Kansas. On July 29, Dennis Taylor, Secretary, Kansas Department of Administration and “The Repealer” on “An Overview of the Office of the Repealer.”

    Employment on a long slow, slide. Wichita’s Malcolm Harris takes a look at the dismal employment numbers from last week. But, there is some better news for Wichita regarding airplane orders.

    We already know it’s hot in Wichita. But now here’s proof. The Weather Channel ranks Wichita as fourth hottest city in the nation — and that’s based on weather, not economic growth or something really desirable. Wichita is also ranked as “Midwest” hottest city.

    Pursuing happiness, not politics. That’s the title of the prologue to the recently-published book The Declaration of Independents: How Libertarian Politics Can Fix What’s Wrong with America by Nick Gillespie and Matt Welch, both of Reason, the libertarian magazine of “Free Minds and Free Markets.” So far, the prologue is all I’ve read, but I can tell — okay, I already knew — that these guys get it. Here’s what I mean: “In 2011, we do not equate happiness with politics; the mere juxtaposition of the words feels obscene. And for good reason: Politics, John Adams’s great-grandson Henry famously observed, ‘has always been the systematic organization of hatreds.’ Every election cycle — and we are always in an election cycle — we are urged to remember that deep down inside we really despise the opposing gang of crooks. We hate their elite (or Podunk) ways, their socialist (or fascist) economics, their reliance on shadowy billionaires with suspect agendas. In a world where mutual gains from trade have lifted a half billion people out of poverty in just the past half decade, politics is one of the last remaining zero-sum games of I win, you lose, where the victor gets to spend everyone else’s money in ways that appall the vanquished, until they switch places again after the next election. We instinctively know that our tax dollars aren’t being spent efficiently; the proof is in the post office, or the permitting offices at city hall, or the neighborhood school. We roll our eyes when President Barack Obama announces a new national competitiveness initiative in his State of the Union address just five years after George W. Bush announced a new American Competitiveness Initiative in his, or when each and every president since Richard Milhous Nixon swears chat this time we’re gonna kick that foreign-oil habit once and for all. And yet, the political status quo keeps steering the Winnebago of state further and further into the ditch.”

    More ‘Economics in One Lesson.’ Tonight (Monday July 11th) Americans For Prosperity Foundation is sponsoring a continuation of the DVD presentation of videos based on Henry Hazlitt’s classic work Economics in One Lesson. The event is Monday from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. The event’s sponsor is Americans for Prosperity, Kansas. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

  • Local chambers of commerce: tax machines in disguise

    The fact that the Overland Park Chamber of Commerce supports a tax increase reminded me of a piece in the Wall Street Journal by Stephen Moore that shows how very often, local chambers of commerce support principles of crony capitalism instead of pro-growth policies that support free enterprise and genuine capitalism.

    We may soon have a test of this in Wichita, where business leaders are tossing about ideas for various forms of tax increases. Again, I distinguish between “business leaders” and “capitalists.”

    Fortunately, the Kansas Chamber of Commerce is generally unwavering in its support of pro-growth, limited government principles. But that’s not the case for most local chambers. Bernie Koch, a booster of local chambers and their big-government policies, recently wrote an op-ed in which he defended the high-tax corporate welfare state model for Kansas.

    Most people probably think that local chambers of commerce, since their membership is mostly business firms, support pro-growth policies that embrace limited government and free markets. But that’s not always the case. Here, in an excerpt from his article “Tax Chambers” Moore explains:

    The Chamber of Commerce, long a supporter of limited government and low taxes, was part of the coalition backing the Reagan revolution in the 1980s. On the national level, the organization still follows a pro-growth agenda — but thanks to an astonishing political transformation, many chambers of commerce on the state and local level have been abandoning these goals. They’re becoming, in effect, lobbyists for big government.

    …

    In as many as half the states, state taxpayer organizations, free market think tanks and small business leaders now complain bitterly that, on a wide range of issues, chambers of commerce deploy their financial resources and lobbying clout to expand the taxing, spending and regulatory authorities of government. This behavior, they note, erodes the very pro-growth climate necessary for businesses — at least those not connected at the hip with government — to prosper. Journalist Tim Carney agrees: All too often, he notes in his recent book, “Rip-Off,” “state and local chambers have become corrupted by the lure of big dollar corporate welfare schemes.”

    …

    “I used to think that public employee unions like the NEA were the main enemy in the struggle for limited government, competition and private sector solutions,” says Mr. Caldera of the Independence Institute. “I was wrong. Our biggest adversary is the special interest business cartel that labels itself ‘the business community’ and its political machine run by chambers and other industry associations.”

    From Stephen Moore in the article “Tax Chambers” published in The Wall Street Journal February 10, 2007. The full article can be found at Liberalism’s Echo Chambers.

  • Kansas jobs creation numbers in perspective

    This week the administration of Kansas Governor Sam Brownback announced job creation figures that, on the surface, sound like good news. But before we celebrate too much, we need to place the job numbers in context and look at the larger picture, specifically whether these economic development wins are good for the Kansas economy.

    The governor’s office announced that since January 10th, almost exactly one-half year ago, the Brownback administration is taking credit for creating 3,163 jobs. These jobs, according to the governor’s office, are in companies that are moving to Kansas or expanding their current operations. Some of the jobs, like those in the recently-announced Mars Chocolate plant to be built in Topeka, won’t start for perhaps two years.

    To place this number on an annual basis, extrapolating to a full year, we get 6,326 jobs created during the first year of Brownback’s term.

    That sound like a lot of jobs. But we need to place that number in context. To do so, I gathered some figures from the Bureau of Labor Statistics, in particular figures for the gross number of jobs created in the private sector. According to BLS, “Gross job gains are the sum of increases in employment from expansions at existing units and the addition of new jobs at opening units.” In other words, jobs created — just like the governor’s definition.

    Looking at the numbers, we find that for the years 2000 to 2009, the Kansas economy created gross jobs in the private sector at the average rate of 293,335 per year. Of course, jobs are lost, too. In Kansas, again for 2000 to 2009, there was a net loss of 61,394 jobs in the private sector. Not a good number.

    Each year, then, many jobs are created and lost, nearly 300,000 per year in Kansas. This illustrates the dynamic nature of the economy. Each year many jobs are created, and many are lost. Even in 2009 — a recession year — the Kansas economy created 232,717 jobs in the private sector. That same year 294,111 jobs were lost. But in most years, the number of jobs created is pretty close to the number of jobs lost.

    Kansas job gains and lossesKansas job gains and losses

    Now we have context. If we compare the 6,326 jobs (the extrapolated annual rate) the state created through its economic development efforts to the average number of private sector jobs created each year, we find that number to be 2.2 percent.

    If we use a recession year (2009) figure for private sector job creation, the state’s efforts amount to 2.7 percent of the jobs created by the private sector economy.

    These numbers, I would say, are small. About one of 40 jobs created in Kansas is created through the efforts of the state’s economic development machinery. This assumes that these jobs would not have been created without government intervention, and I think that’s something we can’t assume one hundred percent.

    These jobs that Brownback takes credit for come at great cost. In the case of Mars, the incentive package is reported to be worth $9 million, or $45,000 for each of the 200 people to be initially hired. I haven’t asked the Department of Commerce for a full rundown of the incentives offered, but in my experience the press releases and news stories based on them understate the full cost of the incentives.

    But in any case, the incentives used by the state’s economic development efforts have costs. Some require the direct expenditure of state funds.

    Some incentives require that the state spend money through the tax system in the form of tax credits. These expenditures made through the tax system have the same fiscal impact on the state’s budget as if the legislature appropriated funds and wrote a check for the amount of the tax credit.

    Other incentives require that the state give up a claim to tax revenue that it would otherwise collect. This means that other taxpayers must make up the difference, unless the state were to reduce spending.

    The cost of these incentives is born by the taxpayers of the state of Kansas. This cost is a negative drag on jobs that would have been created or retained in companies that don’t receive incentives. The Brownback administration knows this, although it doesn’t recognize this job loss when it trumpets its accomplishments in creating new jobs through targeted economic development incentives. One of the major initiatives of Brownback is to reduce Kansas taxes, particularly the personal and corporate income tax, in order to grow the Kansas economy. The governor — correctly — recognizes that low taxes are good for economic growth.

    The governor also needs to recognize that targeted economic development incentives have a cost. That cost is paid in the form of taxes that someone else pays. That cost leads to foregone economic activity, and that leads to lost jobs.

    While the state’s wins in job creation are easy to see — there are government employees paid to make sure we’re aware of them — the lost jobs, however, are spread throughout the state. These job losses don’t often take the form of a large — or even small — business closing or moving to another state, although sometimes it does.

    Instead, the job loss occurs in dribs and drabs across the state. A restaurant manager finds his store is not as busy as last month, so he lets a server go. A small retail outlet finds it can’t quite keep up with its overhead, so it shuts down. These events don’t often make news. The jobs lost are difficult to detect — nearly invisible — although the cumulative impact is very real.

    Instead of relying on traditional, targeted economic development efforts, Kansas needs to follow the advice of Dr. Art Hall. He recommends policies to encourage as much business experimentation as possible. These policies, basically, call for low taxes for all business firms. Then, it is through markets, not the government’s economic development officials, that successful and productive firms are identified.

    Portions of Dr. Hall’s advice was incorporated in Governor Brownback’s economic development plan. Specifically, page 10 of the plan contains this language: “Over the decades, Kansas has enacted a variety of tax policies intended to advance economic development. Many of them provide a meaningful economic incentive to make new investments and create new jobs. Almost all of the policies provide a meaningful incentive to a small number of worthy businesses to the exclusion of tens of thousands of other worthy businesses. The initiatives in this plan seek to end the exclusion. They begin the process of fulfilling the vision that every business matters; they seek to replace the old vision of ‘targeting’ with a new vision of ‘dynamism.’”

    It’s time that the governor and his administration apply this advice. That’s going to be hard to do. The crowing over the Mars deal — the very type of targeted economic development “win” that the plan criticizes — shows that politicians love to be seen as actively pursuing and creating jobs. A dynamic, free market-based job-creating economy requires that politicians and bureaucrats keep their hands off — something that goes against their very nature.

  • Kansas job growth — or lack of it

    The lack of job growth in Kansas should be in the news, as the figures are quite startling and reveal a stagnant Kansas economy when compared to nearby states. It’s also the one-year anniversary of the increase in the state-wide sales tax of one cent per dollar.

    But some want to stick their heads in the sand when it comes to the harmful effect of tax increases and the dismal performance of the Kansas economy. An example is from yesterday, when Wichita Eagle opinion page chief Phillip Brownlee editorialized that “Apparently last year’s sales-tax increase didn’t wreck the Kansas economy, as some predicted.”

    Perhaps Brownlee hasn’t been listening to what others have said. The most startling fact, and one that should be a wake-up call to anyone who cares about the future of Kansas, is the uncovering by the Kansas Policy Institute that Kansas is the only state to have a loss in private sector jobs over the past year.

    All the spending on schools, highways, and other government programs that are supposed to spur our economy to greatness have lead to this: last place. The only state with private-sector job loss. We couldn’t have done worse.

    Here are some charts based on data from the Bureau of Labor Statistics that illustrate. First, here’s the trend in Kansas employment, using January 2009 as the base. Other months are indexed from that number. The chart separately shows the trends in government and private sector employment.

    The effect of the recession on private sector employment has been severe, while government employment has fared much better. But government employees don’t create the wealth necessary to create prosperity for Kansans. Instead, the government jobs are a burden to our economy as they drain resources from the productive private sector.

    Of particular interest is the relative flatness of the curve over the past year. Around that time we’re told the recovery was taking place — it was on June 17, 2010 that President Barack Obama announced the “Summer of Recovery.” But Kansas private sector employment has remained largely unchanged since then.

    Kansas employment trendsKansas employment trends, government and private sector

    Comparing Kansas private sector employment to other states near Kansas produces a grimmer picture. All these states suffered from the recession, but many of these states did not suffer job losses as large as Kansas (on a relative basis).

    Then about a year ago, the trend in most of these states started to improve. But not Kansas.

    Kansas private sector employment trendsKansas private sector employment trends, compared to other states

    Even if one believes that government jobs create prosperity, Kansas has lagged here, too. It should be noted that Kansas has a very large number of government employees compared to its population. Kansas has 717.4 public employees per 10,000 population, which is number 48 in the nation. Only two states have more government employees, compared to population, than Kansas.

    Starting from such a high level of government employment may explain the following chart, where Kansas, when compared to neighboring states, has lagged behind in the change in the number of government jobs.

    Kansas government sector employment trends, compared to other statesKansas government sector employment trends, compared to other states

    Last year supporters of the increase in the sales tax made the case that more government revenue was necessary to avoid decreases in government employment. Judging by the record since then, the cost of the sales tax has been a stagnant Kansas private sector economy at the same time our neighbors are starting to grow employment. This is a policy that must be reversed. We know how to do this — the Rich States, Poor States: The ALEC-Laffer Economic Competitiveness Index report has evidence of polices that work to produce economic growth and those that don’t work. We simply need the will to implement them.

  • Kansas and Wichita quick takes: Tuesday July 5, 2011

    Kansas can choose its future path. Kansas has a choice to make, writes Dave Trabert, President of Kansas Policy Institute: “‘Rich States, Poor States’ is loaded with good policy advice but perhaps the greatest takeaway is that economic prosperity is a matter of choice. Some states choose to create an environment that encourages economic activity; others choose to put a higher value on government growth, which discourages job creation.” The choice we have to make is based on Kansas’ middle-of-the-road ranking in Rich States, Poor States: The ALEC-Laffer Economic Competitiveness Index, a new edition of which was recently released. It is, writes Trabert: “We can either choose to continue the tax-and-spend mentality that continues to drive jobs away or we can choose to become prosperous.” More is at Rich State or Poor State — It’s a Matter of Choice . … Trabert will be speaking in Wichita on this topic this Friday, see the next item.

    Kansas budget to be topic. This Friday’s meeting (July 8th) of the Wichita Pachyderm Club features Dave Trabert, President of Kansas Policy Institute, speaking on the topic “How Kansas ranks in the Rich States, Poor States Economic Competitive Index, and how our state’s ranking can be improved by stabilizing the Kansas budget.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers: On July 15, Jon Hauxwell, MD, speaking on “Medicinal Cannabis.” On July 22, U.S. Representative Mike Pompeo of Wichita on “An update from Washington.” On July 29, Dennis Taylor, Secretary, Kansas Department of Administration and “The Repealer” on “An Overview of the Office of the Repealer.”

    Year of school choice. The Wall Street Journal, in a Review and Outlook piece, notes the progress made throughout the country in advancing greater freedom for parents in educational opportunities for the children. Of particular note is expansion of existing programs in Milwaukee and Indiana. … Schools choice is important, writes the Journal, but alone is not sufficient: “Choice by itself won’t lift U.S. K-12 education to where it needs to be. Eliminating teacher tenure and measuring teachers against student performance are also critical. Standards must be higher than they are. But choice is essential to driving reform because it erodes the union-dominated monopoly that assigns children to schools based on where they live. Unions defend the monopoly to protect jobs for their members, but education should above all serve students and the larger goal of a society in which everyone has an opportunity to prosper.” … In Kansas, reform measures such as these are rarely mentioned, as the state’s education establishment is content with keeping inner-city and disadvantaged kids in poor schools. While Kansas has some good schools, these are largely located in well-to-do suburbs in Johnson County and surrounding Wichita. Families with money, therefore, have opportunities for school choice (of a sort). Poor families don’t have this choice. … In Kansas, tinkering with the teacher tenure formula is all that has been accomplished this year regarding school reform. This is in a state that ranks very low among the states in policies relating to teacher effectiveness, according to the National Council on Teacher Quality. … Kansas Governor Sam Brownback campaigned with an education platform, but it contained mostly weak measures that appeared to be designed by the education establishment. So far Brownback has not come forth with proposals for meaningful reform of schools in Kansas.

    How much does a stimulus job cost? According to the Council of Economic Advisors, all appointed by President Barack Obama, $278,000. If that’s not bad enough, analysis from The Weekly Standard finds that now, the stimulus program is working in reverse: “In other words, over the past six months, the economy would have added or saved more jobs without the ‘stimulus’ than it has with it. In comparison to how things would otherwise have been, the ‘stimulus’ has been working in reverse over the past six months, causing the economy to shed jobs.” Why might the stimulus not be working? Borrowing the money and then “spending it mostly on Democratic constituencies” is to blame, writes Jeffrey H. Anderson.

    More ‘Economics in One Lesson.’ Next Monday (July 11th) Americans For Prosperity Foundation is sponsoring a continuation of the DVD presentation of videos based on Henry Hazlitt’s classic work Economics in One Lesson. The event is Monday from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. The event’s sponsor is Americans for Prosperity, Kansas. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

  • Regulation supports business, not capitalism and free markets

    There are many examples of how the conventional wisdom regarding regulation is wrong: Republicans and conservatives are in bed with government, seeking to unshackle business from the burden of government regulation. Democrats and liberals, on the other hand, are busy crafting regulations to protect the common man from the evils of big business. As it turns out, both Democrats and Republicans love creating regulations, and big business loves these regulations.

    For example, in 2005 Walmart came out in favor of raising the national minimum wage. The company’s CEO said that he was concerned for the plight of working families, and that he thought the minimum wage level of $5.15 per hour was too low. If Walmart — a company the political left loves to hate as much as any other — can be in favor of increased regulation of the workplace, can regulation be a good thing? Had Walmart discovered the joys of big government?

    The answer is yes. Walmart discovered a way of using government regulation as a competitive weapon. This is often the motivation for business support of regulation. In the case of Walmart, it was already paying its employees well over the current minimum wage. At the time, some sources thought that the minimum wage could be raised as much as 50 percent and not cause Walmart any additional cost — its employees already made that much.

    But its competitors didn’t pay wages that high. If the minimum wage rose very much, these competitors to Walmart would be forced to increase their wages. Their costs would rise. Their ability to compete with Walmart would be harmed.

    In short, Walmart supported government regulation as a way to impose higher costs on its competitors. It found a way to compete outside the marketplace. It abandoned principles of free markets and capitalism, and provided a lesson as to the difference between capitalism and business. Many, particularly liberals, make no distinction between business and capitalism. But we need to learn to recognize the difference if we are to have a thriving economy based on free-wheeling, competitive markets that foster innovation, or continue our decline into unproductive crony capitalism.

    In the following excerpt from his book The Big Ripoff: How Big Business and Big Government Steal Your Money, author Timothy P. Carney explains that big business is able to use regulation as a blunt and powerful tool against competitors, and also as a way to improve its image.

    How does regulation help big business?

    Excerpt from The Big Ripoff: How Big Business and Big Government Steal Your Money, by Timothy P. Carney

    If regulation is costly, why would big business favor it? Precisely because it is costly.

    Regulation adds to the basic cost of doing business, thus heightening barriers to entry and reducing the number of competitors. Thinning out the competition allows surviving firms to charge higher prices to customers and demand lower prices from suppliers. Overall regulation adds to overhead and is a net boon to those who can afford it — big business.

    Put another way, regulation can stultify the market. If you’re already at the top, stultification is better than the robust dynamism of the free market. And according to Nobel Laureate economist Milton Friedman:

    The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.

    There is an additional systemic reason why regulation will help big business. Congress passes the laws that order new regulations, and executive branch agencies actually construct the regulations. The politicians and government lawyers who write these rules rarely do so without input. Often the rule makers ask for advice and information from labor unions, consumer groups, environmental groups, and industry itself. Among industry the stakeholders (beltway parlance to describe affected parties) who have the most input are those who can hire the most effective and most connective lobbyists. You can guess this isn’t Mom and Pop.

    As a result, the details of the regulation are often carefully crafted to benefit, or at least not hurt, big business. If something does not hurt you, or hurts you a little while seriously hindering your competition, it is a boon, on balance.

    Another reason big business often cries “regulate me!” is the goodwill factor. If a politician or bureaucrat wants to play a role in some industry, and some executive says, “get lost,” he runs the risk of offending this powerful person. That’s bad diplomacy. Bureaucrats, by their nature, do not like to be told to mind their own business. Supporting the idea of regulation but lobbying for particular details is usually better politics.

  • Kansas and Wichita quick takes: Monday June 27, 2011

    Wichita city council. This week the Wichita City Council considers consent agenda items only, and then has a workshop. Among the consent agenda items are a resolution declaring the city’s intent to use debt financing in the amount of $40 million for the new parking facility at the airport. A companion resolution declares intent to use $160 million in debt financing for the new terminal. Interestingly, these resolutions contain this language: “That a public necessity exists for, and that the public safety, service and welfare will be advanced by …” followed by a description of each project. Really, the city should not lie in this way. … Consent agendas are handy for hiding items like this item: “Authorize payment of $13,025 as a full settlement for all claims arising out of an automobile accident. … This claim arose from a May 31, 2011 automobile accident involving an OCI inspector employed by the City.” … Of interest in the workshop session is an item titled “WSU Economic Development Fiscal Impact Analysis Model.” Here, undoubtedly, analysts from Wichita State University Center for Economic Development and Business Research will tell the council how government spending has a magical power not found in private sector spending.

    Huelskamp on spending as driving economic growth. Speaking of the magical power of government spending, in his questioning (video below) of Congressional Budget Office (CBO) Director Douglas Elmendorf last week, U.S. Representative Tim Huelskamp, who represents the Kansas first district asked if reducing spending is not the best way to grow the economy. Elmendorf replied that there are trade-offs; that higher marginal tax rates do reduce economic activity to some extent. But, he added, that certain forms of government spending are important for economic growth. Huelskamp pressed the director, noting that in his recent report, higher marginal tax rates and more government borrowing are negative factors on growth, asking “So explain to me why reducing spending is not the only alternative?” Director Elmendorf explained cutting spending “that was not itself an investment in economic growth, that would be better for the economy than if one raised [marginal tax rates].” … Huelskamp asked if Medicare and Social Security spending were economic growth drivers. The answers were no, they are not important economic growth drivers in the long term. Some pieces of the defense budget have been, he said. Huelskamp noted we’ve just eliminated a huge chunk of the federal budget as being important to economic growth. … Elmendorf said he did not have a list of the types of federal spending that have been important to economic growth, and he admitted that “we are not good at modeling those effects.” … Huelskamp asked Elmendorf if he could, as follow-up, provide examples of federal government spending that are drivers of economic growth, saying that Ben Bernanke, the Chairman of the Federal Reserve System refuses to identify those. … We’ll have to wait and see how the CBO responds. The report Huelskamp referred to is CBO’s 2011 Long-Term Budget Outlook.

    No Wichita Pachyderm this week. Because of the holiday, the Wichita Pachyderm Club will not meet this week. Upcoming speakers: On July 8, Dave Trabert, President, Kansas Policy Institute, on “Stabilizing the Kansas Budget.” On July 15, Jon Hauxwell, MD, speaking on “Medicinal Cannabis.” On July 22, U.S. Representative Mike Pompeo of Wichita on “An update from Washington.” On July 29, Dennis Taylor, Secretary, Kansas Department of Administration and “The Repealer” on “An Overview of the Office of the Repealer.”

    Government spending secrets. Erick Erickson, RedState: “How bad is Washington spending? Well, there is a new website that’s up called Dirty Spending Secrets with a Q&A format to uncover some of Washington’s dirtiest spending secrets. Several friends of mine have emailed it to me. It’s actually pretty easy to figure out, but also horribly shocking — in the Q&A multiple choice, just go for the worst answer and you’ll probably be right. With the debt ceiling vote coming up, it’s just another reminder of how unserious Washington is when it comes to spending.”

    Wichita city budget input. It’s budget time in Wichita, and the city will take questions and public input this Wednesday (June 29) in a 6:00 pm session in the city council chambers. The event will be broadcast live on the city’s network on Cox cable television channel 7, and questions may be emailed to budgetquestions@wichita.gov

    Fracking facts. The Wall Street Journal has a run-down of the facts about the risks involved in fracking. This is a new technology that has greatly increased the amount of natural gas available in the U.S. and has caused the price (per million British thermal units) to decline from $15 to $4. For example, opponents of fracking claim that the process, in which water and chemicals are injected underground to free gas from confinement in shale formations, contaminates groundwater. Counters the Journal: “The problem with this argument is that the average shale formation is thousands of feet underground, while the average drinking well or aquifer is a few hundred feet deep. Separating the two is solid rock. This geological reality explains why EPA administrator Lisa Jackson, a determined enemy of fossil fuels, recently told Congress that there have been no ‘proven cases where the fracking process itself has affected water.’” … There are risks, of course, to any undertaking like this, and in conclusion the Journal recommends: “Amid this political scrutiny, the industry will have to take great drilling care while better making its public case. In this age of saturation media, a single serious example of water contamination could lead to a political panic that would jeopardize tens of billions of dollars of investment. The industry needs to establish best practices and blow the whistle on drillers that dodge the rules. The question for the rest of us is whether we are serious about domestic energy production. All forms of energy have risks and environmental costs, not least wind (noise and dead birds and bats) and solar (vast expanses of land). Yet renewables are nowhere close to supplying enough energy, even with large subsidies, to maintain America’s standard of living. The shale gas and oil boom is the result of U.S. business innovation and risk-taking. If we let the fear of undocumented pollution kill this boom, we will deserve our fate as a second-class industrial power.”

    Even quicker. Gallup: Americans Regain Some Confidence in Newspapers, TV News: “Americans’ confidence in newspapers and television news rebounded slightly in the past year, having been stuck at record lows since 2007. The 28% of Americans who express a great deal or quite a lot of confidence in newspapers and the 27% who say the same about television news still lag significantly behind the levels of trust seen through much of the 1990s and into 2003.” … Rasmussen on health care: 55% favor health care repeal, just 17 percent say new law will improve quality of care. … Politico: 2012 contenders shun Hill support: “Across Capitol Hill, Republican lawmakers report scant interaction with presidential hopefuls. The chase for congressional backing has been moving at a snail’s pace this year compared with the previous election cycle, a reflection of the slowly forming presidential field, concern in Congress about the strength of the candidates and a desire by White House hopefuls to keep their distance from an unpopular Washington.” … Picket: Bozells look to grow conservative ‘social media army’: “Mr. [Brent Bozell, president of Media Research Center] explained, ‘We looked across the landscape and then across conservatism and we thought that was one thing that was lacking. We weren’t taking advantage of the tools that the Left was taking advantage of with good success and what we found was that there was hunger out there.’” He should have been at AFP’s RightOnline conference in Minneapolis last week. MRC was represented, though. … Investor’s Business Daily Editorial: How Big Government Strangles The Job Creators: “The secretary of the Treasury says taxes must be raised on small business so the federal government can stay big. With that breathtaking statement, he helpfully mapped out the key difference between the parties. … ‘If you don’t touch revenues,’ Geithner said, ‘you have to shrink the overall size of government programs, things like education, to levels that we could not accept as a country.’”

  • Kansas and Wichita quick takes: Friday June 24, 2011

    RightOnline may not follow Netroots. The Netroots Nation conference, tired of having the free market-based RightOnline follow them each year, has maneuvered to block RightOnline from following them to Providence next year. Will it work? More at Netroots Nation Strives To Keep Right Online Away From Next Year’s Convention.

    Ann McElhinney. Speaking at last week’s free market-based RightOnline conference in Minneapolis, filmmaker Ann McElhinney addressed the general session and spoke against CINOs: Conservatives In Name Only, which she defined as anyone who thinks we should subsidize industry, anyone who believes that humans control the weather, anyone who thinks we should not explore and exploit ANWR, anyone who thinks we should not be drilling for oil off our coasts, anyone who thinks it’s okay to terrorize schoolchildren that the world is about to end, anyone who is talking nonsense about fracking, anyone who is against exploiting the oil sands in Alberta — bringing oil from a country that doesn’t believe in stoning women, and anyone who believes we can power our incredible dream with wind or the sunshine. … She criticized those feminists who talk about solar panels and windmills, saying that across Africa and India there are women who “devote a lifetime to washing clothes … a complete waste of time when you could have a washing machine.” She said it is a human rights abuse to deprive a woman of a washing machine. … Video is at Ann McElhinney at 2011 RightOnline.

    Presidential candidate white papers. Club For Growth is an organization that works to “promote public policies that encourage a high growth economy,” believing — as do I — that “prosperity and opportunity come through economic freedom.” To advance this end, it has created a “white paper” for most of the declared Republican presidential candidates, and it’s working on papers for the rest. The papers draw on a variety of sources for data, and seem to be balanced — and tough, too. They’re available by clicking on Club For Growth’s Presidential White Papers: How do the candidates rate as pro-growth economic conservatives.

    Budget briefing book, volume one. Bankrupting America, “an educational project that explores the policies hindering economic opportunity and growth in America,” has released the first volume of its budget briefing book. It’s full of useful information: fact and figures, how much is spent on what, what does “debt ceiling” mean, what is the Ryan budget plan, etc. Volume one is available at Budget Briefing Book: Volume One, with further volumes to come. (sign up for an email notification, if you want.) I found the book easiest to read in full-screen mode.

    Pompeo events. This Sunday (June 26) U.S. Representative Mike Pompeo, a Wichita Republican serving his first term, will hold a public forum at Tri-City Senior Center, 6100 N. Hydraulic in Park City. This event starts at 2:00 pm, and based on my past experience, will last one hour and maybe a little more. … On Tuesday, June 28, 2011, Representative Pompeo and Mrs. Pompeo, along with staff, will host an open house at his congressional district office in Wichita from 3:00 pm to 6:00 pm. The address is 7701 E. Kellogg, Suite 510. It’s the tall office building near the southwest corner of Kellogg and Rock Road.

    Kansas tax competitive position slipped in 2011. Kansas Reporter: “Kansas current tax policies dropped one gauge of the state’s economic competiveness two spots this year, to 27th place among the nation’s 50 states, according to a new survey to be formally unveiled this week in Topeka. The latest reading marks the third time since the annual survey began four years ago, that Kansas has slipped in the rankings, which are compiled by researchers Arthur Laffer, Stephen Moore and Jonathan Williams for the Rich States Poor States rankings on behalf of the American Legislative Exchange Council, or ALEC, a group of 2,000 state legislators that generally advocates for free-market legislative approaches. Kansas’ economic competitiveness, as measured by a blend of 15 indicators of higher or lower tax burdens, was rated 25th best in the nation last year, down from 24 in 2009, but higher than 29th, which the researchers calculated the first year the three compiled their list.” … Jonathan Williams, one of the authors of Rich States, Poor States: The ALEC-Laffer Economic Competitiveness Index made a presentation in Wichita today. A report is forthcoming.

    Redistricting in Kansas. Chapman Rackaway: “This week one of the most contentious processes in politics began in Kansas: redrawing the lines of our U.S. House, State House, State Senate, and State Board of Education districts. After each census, every state must redraw its legislative boundaries to ensure a roughly equal population.” It’s an important process. John Fund of the Wall Street Journal says redistricting is when politicians get to choose their voters. Rackaway believes it will be a struggle in Kansas: “The only certainty is that redistricting will be as contentious a fight in the 2012 legislative session as the budget has been for the last few years. Every constituent group will have a chance to be angered, because the process is a twisty one with numerous stops. The legislature is responsible for drawing and passing redistricting plans, and the Governor has the opportunity to veto.” Concluding, he writes: “Redistricting isn’t the most exciting thing to follow for most people, but the elections they influence are. The research clearly tells us that the best way to ensure safe or competitive legislative districts is to design them that way.” The full article is Insight Kansas: Drawing a Line.

    The price system. A short video explains how prices work in free markets and how important is the information conveyed by prices. This is part one; I’m looking forward to part two. This video is from LearnLiberty.org, a project of Institute for Humane Studies, and many other informative videos are available.

    Even quicker. Cantor Pulls Out of Biden-Led Budget, says Wall Street Journal: “House Majority Leader Eric Cantor Thursday said he was pulling out of the bipartisan budget talks headed by Vice President Joe Biden for now because the group has reached an impasse over taxes that only President Obama and Speaker John Boehner could resolve.” … Rasmussen: 51% now recognize most federal spending goes to defense, Medicare and Social Security. Knowledge is the first step. … CommonSense with Paul Jacob: “Taxpayers fund about half of all medical industry transactions, and governments regulate that as well as a huge chunk of the rest. No wonder medicine is in chaos.” … Michael Petrilli in EducationNext: “As if the teachers unions need another reason to hate charter schools, here’s one: The finding, from a new Fordham Institute report, that when given a chance to opt out of state pension systems, many charter schools take it. Furthermore, a fair number of these charters replace traditional pensions with nothing at all.”

  • Greenwald and Sanders try to defend Social Security, slam Charles and David Koch

    Are the free market critics of Social Security a shadowy “echo chamber” seeking to end the system for the benefit of the rich, or sounding a fact-based alarm that government and its supporters dispute and don’t want you to hear?

    According to a short video by Robert Greenwald, it’s the first choice. But examination of the claims made will lead us to the opposite conclusion, and you’ll wonder why Greenwald has any credibility.

    The video features U.S. Senator from Vermont Bernie Sanders, who describes himself as a democratic socialist. He describes Social Security as a federal program that has been “enormously successful,” so right away we need to take issue with Sanders. Social Security a success? If creating a system where millions of people are dependent on government for their retirement income is a successful program, the government has done just that. What has been the result? As George Reisman recently wrote: “Not surprisingly, in the conviction that the government was now providing for people’s old age, the rate of saving in the United States has declined precipitously over the years, falling all the way to zero in some years.”

    We’ve transitioned from savers to government dependents. For a socialist like Sanders, that may very well have been his goal. He certainly can’t be unhappy with the results.

    Right after this, the video shows images and names of think tank organizations that are funded in part by Charles Koch and/or David Koch, with Sanders claiming these organizations spread “disinformation” about Social Security. The information generated by these think tanks is truthful, however, and an important antidote to a huge whopper of a lie Sanders will spread later on.

    (At this point one might be tempted to ask: What is the interest of the Charles and David Koch in reforming Social Security? John Hinderaker in his Powerline article A Less Than Magnificent Obsession answers this question when he writes: “… does it make any difference to the Kochs’ company, Koch Industries, whether the retirement age is 65 or 68? I can’t imagine why it would. Likewise, the brothers themselves are both billionaires. Whether Social Security is or is not reformed makes zero difference to them personally.” I would say, however, that Charles and David Koch have long advocated for liberty and economic freedom for everyone, and since Social Security is contrary to that, this could explain their interest.)

    A huge focus of the video is raising the retirement age. It’s repeated over and over — so as to scare viewers. As John Hinderaker notes at Powerline, it’s been done before: “proposals to raise the age of Social Security eligibility have been a bipartisan staple of reform proposals for decades. … The bipartisan Bowles-Simpson Commission, which was appointed by President Obama, recommended increasing the age of eligibility.”

    It’s important to note that the Social Security retirement age is simply the age at which one can begin receiving benefits. Contrary to the claims of Sanders in this video, it doesn’t mean that everyone has to keep working until that age. Over the course of a working career, isn’t it possible for someone to save enough to cover the several years between when they decide to quit working and when they’re eligible for Social Security? Or will we let the government — people like Sanders — tell us how long we must work?

    Sanders also says that older people need to retire and get out of the workforce to make way for younger workers to take their jobs. This is an example of the fallacy — followed by nearly all on the political Left, it seems — of believing that the economy is a fixed size, and that one person can have income only if someone else gives up theirs.

    Perhaps the most dangerous lie of Sanders is his claim that Social Security has a $2.6 trillion surplus available to pay future benefits. He’s referring to the Social Security trust fund. Here, Sanders is correct one on level: The system has collected that much more than it has needed to pay benefits, forming the balance referred to in the trust fund. That money has been lent to other federal government agencies, and they spent it all. So while Federal Agency X may owe the trust fund $50 billion, the only way that agency can repay the trust fund is by borrowing or increasing taxes. (Less spending might be another way, but that’s a difficult goal, and we’d be taxed the same for a lower level of services — a tax increase by another name.) See Social Security trust fund: a problem in disguise.

    Sanders dismisses private retirement accounts as risky and dangerous: “You may lose all your retirement savings when you get old.” While true, any reasonable investment strategy designed for the long term has little chance of that happening. Unless, of course, one gets greedy and invests everything in a company like Enron — greed of that type being something Sanders rails against.

    Saving on one’s own, however, isn’t what leftists like Bernie Sanders have in mind. Far better for him, Democrats, and big-government Republicans that people remain dependent on government for their retirement security. Once people save and gain some wealth of their own, they find that they can thrive very nicely without a nanny state government. They find themselves wishing they could have saved more throughout their working lives, rather than making forced contributions to a government retirement plan that’s now broke. Even if not broke, most people would be in a much better position if they could have kept their own and their employers’ payroll tax contributions for their own investment.

    Finally, Sanders makes a major point of “huge campaign contributions” made to advance the interests of Charles and David Koch. Hinderaker chases down some of the actual numbers, and finds that contributions from Koch Industries PAC are sometimes less than what a single labor union has contributed.

    In the end, I’m sure that Sanders said something that’s true in this video. But I can’t bear to watch it again to try and spot it.

    Here’s my video response: