Voice For Liberty

Tag: Free markets

  • Kansas and Wichita quick takes: Wednesday June 22, 2011

    RightOnline, Netroots Nation. The past weekend featured two conferences for online activists: Americans for Prosperity Foundation’s RightOnline and Netroots Nation, sponsored by labor unions. I attended and made two presentations at RightOnline, the conference for those in favor of liberty and economic freedom. 1,655 people attended, according to AFP. I saw some events of the Netroots conference on C-SPAN, including a session with President Barack Obama’s White House Communications Director Dan Pfeiffer. In the session, Obama was criticized many times, and at one point the audience booed. More coverage is at A tale of two political conferences, PICKET: Right Online and Netroots conferences wrap up with few run-ins, Digital Conferences, Blue and Red, in Minneapolis

    The Atlantic Magazine’s Lies: Of Breitbarts, Kochs, and RightOnLine. Warner Todd Huston of Publius’ Forum examines a piece in The Atlantic that covered the recent RightOnline conference in Minneapolis and found it to be lacking. He found: “Unfortunately, the whole thing was filled with opinions stated as fact, misconstructions of facts, and outright lies. Sadly, along with the rest of the Old Media, it seems as if the veracity of The Atlantic has taken a hit in this bad Obama economy. … Now, what would have made Dupuy’s piece actually informative would have been a discussion of the real differences between the Nutrooters and RightOnLine. And there are quite a few. Netroots Nation is chock full of some very wonky programs. The lefties drill down to the deepest Internet facts, figures, and capabilities. On the other hand, RightOnLine has since day one sufficed with Twitter 101, blogging 101, and other beginner’s programs meant to help their local activists learn how to use the Internet to further conservative ideas. RightOnLine has not made arcane wonkiness a part of its programs like Netroots Nation has. The fact is the two conferences are very different in character in this respect.” More at The Atlantic Magazine’s Lies: Of Breitbarts, Kochs, and RightOnLine.

    Fed downgrades economic outlook. Wall Street Journal: “Federal Reserve officials downgraded their assessment of the U.S. economy’s performance Wednesday, but gave no indication they intend to take new steps to boost growth and jobs. … The recovery is continuing at a moderate pace, though ‘somewhat more slowly’ than previously expected, officials said in a statement following the Federal Open Market Committee meeting, echoing remarks made by Fed Chairman Ben Bernanke in a speech earlier this month.” Further: “Though the Fed is less comfortable with the economic outlook, it has less leeway to take new steps to fix it. That’s because underlying inflation also has crept up, making the central bank leery of injecting more money into the financial system.”

    Tax the rich. Burton Folsom: “Economist Alan Reynolds has recently called attention to the latest pronouncement from Robert Reich, the former Secretary of Labor. ‘A 70 percent marginal tax rate on the rich’ is Reich’s solution for the cash crunch in the federal government today. Let the rich pick up the tab. That assumes, of course, that the rich will continue to work hard if they have to send almost three-fourths of their earnings to Uncle Sam. They won’t. They never have. And you wouldn’t either.” … Reynolds’ article in the Wall Street Journal is Why 70% Tax Rates Won’t Work. In it, Reynolds writes: “All this nostalgia about the good old days of 70% tax rates makes it sound as though only the highest incomes would face higher tax rates. In reality, there were a dozen tax rates between 48% and 70% during the 1970s. Moreover — and this is what Mr. Reich and his friends always fail to mention — the individual income tax actually brought in less revenue when the highest tax rate was 70% to 91% than it did when the highest tax rate was 28%.”

    Wichita speaker list announced. The Wichita Pachyderm Club has announced its lineup of speakers for July. The club, which is a Republican club, seeks to provide programs that are informative and that provide members with a variety of viewpoints on important contemporary issues, and historical issues, too. Sometimes this leads to controversy, as there are those who believe that only Republicans and those who parrot the “official” party line should speak at Pachyderm. Although I am not a Pachyderm officer or board member, this month features a speaker, Dr. Jon Hauxwell, who is speaking based on my recommendation and invitation, and whose topic is likely to generate controversy again. The speakers for July: 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.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club.

    FairTax meeting in Wichita. This Thursday (June 23) supporters of FairTax will meet in Wichita. According to event organizers, attendees will hear “new information about the status of the FairTax movement at the national level and how it might affect the Presidential race in 2012.” More from organizers: “The FairTax is a unique solution to the urgent need to create jobs and grow the economy. America now has 35 million Americans under employed or unemployed. The economic disaster was unnecessary and can be reversed by completely repealing our horrible and destructive tax system and replace it with the FairTax.” … While I am sympathetic with their cause, I am not enthusiastic about the FairTax — a national sales tax — for one important reason: it doesn’t address the real problem of a government that is too large and collects too much tax revenue. One of the main platforms of Fairtax is that it would collect the same revenue as the existing tax regime: “dollar-for-dollar federal revenue neutrality.” I quote Murray N. Rothbard on this: “But the libertarian must never support any new tax or tax increase. For example, he must not, while advocating a large cut in income taxes, also call for its replacement by a sales or other form of tax. The reduction or, better, the abolition of a tax is always a noncontradictory reduction of State power and a significant step toward liberty; but its replacement by a new or increased tax elsewhere does just the opposite, for it signifies a new and additional imposition of the State on some other front. The imposition of a new or higher tax flatly contradicts and undercuts the libertarian goal itself.” … The meeting is at 7:00 pm Thursday 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 FairTaxKC.org.

    Obama: Technology seen as job killer. “The story goes that Milton Friedman was once taken to see a massive government project somewhere in Asia. Thousands of workers using shovels were building a canal. Friedman was puzzled. Why weren’t there any excavators or any mechanized earth-moving equipment? A government official explained that using shovels created more jobs. Friedman’s response: ‘Then why not use spoons instead of shovels?’ That story came to mind last week when President Obama linked technology to job losses. ‘There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers,’ he said. ‘You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.’ The president calls this a structural issue — we usually call it progress.” … Russell Roberts goes on to explain that productivity — doing more with less, including less labor — leads to lower costs to business. The Left, of course, says this simply means more profits for business. But in competitive markets, businesses will find they must lower their costs, and that means a higher standard of living for consumers. New jobs get created as people now have more money to spend on new products and services that didn’t exist before, or were so expensive that only the rich could afford them. More at Obama vs. ATMs: Why Technology Doesn’t Destroy Jobs.

    Even quicker. Rasmussen: Just 8% Approve of Job Congress Is Doing: “Voter approval of Congress’ job performance has now fallen to a near five-year low.” … How to Run Public Schools in the 21st Century: Our current models are bad for taxpayers — and calamitous for kids. … The dignity of personal choice: Choosing lifesaving care — or not — shouldn’t be left to bureaucrats. … The Fiscal Pledge We Need: Cut, Cap, Balance: Congress has never failed to increase the debt limit. This makes having a debt limit functionally useless. … Initiative and Referendum under attack, says John Fund: “Politicians always claim to support democracy, but they often come up with creative ways to limit the influence of pesky voters. Now members of the political class in several states are going after voters’ most powerful tool.” See Fund: Power to the People? How Déclassé. … A Shovel-Ready Punch Line: “This is a staggering indictment of the president, the team he assembled, and the journalists who accepted this administration’s arrogant assertions that they knew exactly what to do, how to do it, and what would happen as a result.”

  • Kansas and Wichita quick takes: Monday June 13, 2011

    Wichita City Council. This week the Wichita City Council considers these items: The council will deliberate a contract in the amount of $50,000 with the Kansas World Trade Center for economic development services. KWTC’s mission is to “promote and facilitate international trade through education, communication and research.” … The council will be asked to approve cultural funding allocations approved by the Cultural Funding Committee. The source of these funds is the city’s dedicated property tax for the arts, which is estimated to bring in $3,165,897 next year. The best thing the council could do for citizens is to forgo this funding, reduce taxes, and let citizens choose how to allocate their funds based on their own preferences. Instead, we have a committee deciding which arts Wichitans should be taxed to pay for. … The council will be asked to approve spending $194,849 on a contract with a firm to produce the Wichita bicycle master plan. … Another contract to be considered spends $87,253 to produce a transit community outreach and input study. … As always, the agenda packet is available at Wichita city council agendas.

    Arts jobs lost already? The Wichita Eagle’s Rhonda Holman is already bemoaning the lost arts jobs, writing this about Kansas Governor Sam Brownback: “He alone bears the responsibility for five lost jobs today as the Kansas Arts Commission’s funding runs out.” A few of the comments left to the article got the economics right, reminding Holman that these jobs at the Kansas Arts Commission are government jobs, not arts jobs. This is a distinction that is often overlooked by our state’s largest newspaper.

    American politics, viewed from down under. James Paterson, an Australian, writes about the inability of left-wing media to understand a conservative grassroots political movement: “Ever since the rise of the Tea Party in the United States and the community revolt against the Gillard Government’s carbon tax, progressive journalists and commentators have struggled to grapple with the idea of a grassroots political movement that isn’t left wing. More used to anti-war moratoriums and union-led protests for equal pay or refugee rights, many left-leaning journalists appear to be on a mission to uncover the ‘real’ cause of public dissent from their favoured big-government agenda, particularly regarding climate change.” Paterson notes how the media has latched on to Charles and David Koch as the driving force behind this political movement. But, he writes: “But political movements can’t just be conjured up at the behest of billionaire businessmen, media moguls or talk-show hosts. And they certainly can’t be directed exclusively by them to serve their commercial interests. If that were the case, what took them so long? Why did the Koch brothers — who were involved in libertarian activism as early as the 1970s — not ‘create’ the Tea Party to tackle US President Jimmy Carter, or Bill Clinton, decades ago?” A good question, I might add. Concluding: “As much as it might disappoint some commentators, most conservative philanthropists are simply passionate about the philosophy of individual liberty and personal freedom, just as others are committed to human rights or finding a cure for cancer. Surprisingly, even ordinary people can subscribe to these beliefs, and they don’t need to be told by a reclusive billionaire or wacky media personality how to think.”

    California parent trigger attacked. California has a new and innovative school reform law called the “parent trigger.” If a majority of the parents for a school sign a petition calling for the trigger to be invoked, the school must undergo one of several reform measures, such as, as described in Locking the Parent Trigger: “close the school and let the students enroll in a higher-performing campus nearby; convert the school to an independent charter; fire half the teaching staff and replace the administration; extend school hours and revise the curriculum under a federally recommended turnaround plan; or adopt an ‘alternative governance’ model, which could include anything from establishing a school-site council to handing over the school to the local district superintendent.” The City Journal article tells of an effort by the state’s anti-choice education establishment to interfere with and overturn the law.

    Medical board’s powers. Many are not aware of the role of the Independent Payment Advisory Board, or IPAB, which was established by the Patient Protection and Affordable Care Act. This board is charged with holding down the costs of medical care under ObamaCare. In his column Government by the ‘experts’ George Will describes some of this board’s extreme powers, such as the board’s proposals becoming law unless Congress takes action to oppose, and that action requires three-fifths majority vote. He quotes U.S. Supreme Court Justice Antonin Scalia: “I anticipate that Congress will find delegation of its lawmaking powers much more attractive in the future. … I foresee all manner of ‘expert’ bodies, insulated from the political process, to which Congress will delegate various portions of its lawmaking responsibility. How tempting to create an expert Medical Commission … to dispose of such thorny, ‘no-win’ political issues as the withholding of life-support systems in federally funded hospitals.” … This topic of Congress brushing aside its responsibility to make tough decisions came up in my recent interview with U.S. Representative Mike Pompeo of Wichita, in which I reported: “Pompeo said that over the last 25 or 30 years Congress has been unwilling to create ‘substantive markers’ in legislation. Instead, it creates vague laws and funds administrative agencies to implement them. These agencies are less accountable than elected officials, and Congress has handed over much authority to them.”

    Chief Justice to speak in Wichita. This Friday (June 17th) the Wichita Pachyderm Club features Honorable Lawton R. Nuss, Kansas Supreme Court Chief Justice, speaking on the topic “The State of the Kansas Courts.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers: On June 24, Jim Mason, Naturalist at the Great Plains Nature Center will have a presentation and book signing. Mason is author of Wichita’s Riverside Parks, published in April 2011. On July 1 there will be no meeting due to the Independence Day holiday. On July 8, Dave Trabert, President, Kansas Policy Institute, on “Stabilizing the Kansas Budget.”

    More ‘Economics in One Lesson.’ Tonight (June 13) 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 (June 13) at 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.

    Climate change resource launched. The Heartland Institute has launched an online resource dedicated to providing information about climate change and related topics. Titled ClimateWiki, Heartland writes that the website “covers an immensely complicated subject with hard scientific facts, not the scare-mongering and politicization found at Wikipedia, other ‘alarmist’ climate research sites and the mainstream media.” … Heartland will host the International Conference on Climate Change later this month.

  • Wichita and its political class

    The discussion at yesterday’s Wichita City Council meeting provided an opportunity for citizens to discover the difference in the thinking of the political class and those who value limited government and capitalism.

    At issue was Mid-Continent Instruments, Inc., which asked the city for a forgivable loan of $10,000. It received the same last week from Sedgwick County. According to city documents, the State of Kansas through its Department of Commerce is also contributing $503,055 in forgivable loans, sales tax exemptions, training grants, and tax credits.

    At the city council meeting Clinton Coen, a young man who ran for city council earlier this year, spoke against this measure, which he called corporate welfare.

    In response to Coen, Council Member James Clendenin (district 3, south and southeast Wichita) asked if we should ignore companies that want to do business here, or should we allow them to leave? Implicit in the question is that the threat dangled by Mid-Continent is real: that unless the city gives them $10,000, they will expand somewhere else. How citizens and council members feel about this issue largely depends on their perceived genuineness of this threat.

    When Coen recommended that the city cut spending, Clendenin said “I can guarantee you, from what I have seen, this city government has cut a tremendous amount of spending.” When pressed by Coen for examples of cuts, he demurred. Clendenin also said that the $10,000 is needed to show the city’s commitment to the company.

    Perhaps coming to the rescue of her younger and less experienced colleague, Council Member Janet Miller asked City Manager Bob Layton how much has been cut from the budget, and he replied “we’ve cut over $20 million in the general fund over three years.”

    In saying that, Layton is using the language and mind-set of bureaucrats and politicians. In this world, it’s a cut if spending does not rise as fast as planned or hoped for. As you can see from the accompanying chart, Wichita general fund spending has not been cut in recent years. It has risen in each of the last three years, and plans are for it to keep rising.

    Wichita general fund spending

    This illustrates a divide between the thinking of the political class and regular people. Blurring the distinction between plans and reality lets politicians and bureaucrats present a fiscally responsible image — they cut the budget, after all — and increase spending at the same time. It’s a message that misinforms citizens about the important facts.

    Miller also praised the return on investment the city receives for its spending on economic development, citing Wichita State University Center for Economic Development and Business Research and the cost-benefit calculations it performs. These calculations take the cost of providing the incentives and compare it to the returns the city and other governmental entities receive.

    What is rarely mentioned, and what I think most people would be surprised to learn, is that the “returns” used in these calculations is manifested in the form of increased tax revenue. It’s not like in the private sector, where business firms attempt to increase their sales and profits by providing a product or service that people willingly buy. No, the city increases its revenue (we can’t call it profit) by collecting more taxes.

    It’s another difference between the political class and everyone else: The political class craves tax revenue.

    Aside from this, the cost-benefit calculations for the city don’t include the entire cost. The cost doesn’t include the county’s contribution, the majority of which comes from residents of its largest city, which is Wichita. Then, there’s the half-million in subsidy from the state, with a large portion of that paid for by the people of Wichita.

    But even if you believe these calculations, there’s the problem of right-sizing the investment. If an investment of $10,000 has such glowing returns — last week Sedgwick County Commissioner Jim Skelton called the decision a “no-brainer” — why can’t we invest more? If we really believe this investment is good, we should wonder why the city council and county commission are so timid.

    Since the applicant company is located in his district, Council Member Pete Meitzner (district 2, east Wichita), praised the company and the state’s incentives, and made a motion to approve the forgivable loan. All council members except Michael O’Donnell (district 4, south and southwest Wichita) voted yes.

    Going forward

    While the political class praises these subsidies and the companies that apply for them, not many are willing to confront the reality of the system we’re creating. Some, like O’Donnell and Sedgwick County Commissioner Richard Ranzau, have recognized that when government is seen as eager to grant these subsidies, it prompts other companies to apply. The lure of a subsidy may cause them to arrange their business affairs so as to conform — or appear to conform — to the guidelines government has for its various subsidy programs. Companies may do this without regard to underlying economic wisdom.

    We also need to recognize that besides simple greed for public money, businesses have another reason to apply for these subsidies: If a publicly-traded company doesn’t seek them, its shareholders would wonder why the company didn’t exercise its fiduciary duty to do so. But this just perpetuates the system, and so increasing amounts of economic development fall under the direction of government programs.

    While most people see this rise in corporate welfare as harmful — I call it a moral hazard — the political class is pleased with this arrangement. As Meitzner said in making his motion, he was proud that Wichita “won out” over the other city Mid-Continent Instruments considered moving to.

    Another harmful effect of these actions is to create a reputation for having an uncompetitive business environment. Not only must businesses of all types pay for the cost of these subsidies, some face direct competition by a government-subsidized competitor. This is the situation Wichita-area hotels face as a result of the city granting millions in subsidy to a hotel developer to build a Fairfield Inn downtown.

    Even those not in direct competition face increased costs as they attempt to hire labor, buy supplies, and seek access to capital in competition with government-subsidized firms. Could this uneven competitive landscape be a factor that business firms consider in deciding where to locate and invest?

    We can expect to see more government intervention in economic development and more corporate welfare. Former council member Sue Schlapp in April took a job with the Kansas Department of Commerce. Her job title is “senior constituent liaison,” which I think can be better described as “customer service agent for the corporate welfare state.” Her office is in Wichita city hall.

    Increasingly we see politicians and bureaucrats making decisions based on incorrect and misleading information, such as claiming that the city’s general fund budget has been cut when spending has increased. Sometimes they are fed incorrect information, as in the case of a presentation at Sedgwick County Commission that bordered on fraudulent.

    Sometimes, I think, officeholders just don’t care. It’s easiest to go along with the flow and not raise ripples. They participate in groundbreakings and get their photograph in the newspaper and on television that way. Which brings up an important question: why do none of our city’s mainstream media outlets report on these matters?

  • Kansas and Wichita quick takes: Monday June 6, 2011

    Wichita school superintendent to speak. This Friday’s meeting (June 10) of the Wichita Pachyderm Club features John Allison, Superintendent of USD 259, the Wichita public school district, on “An update from USD 259.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers: On June 17, The Honorable Lawton R. Nuss, Kansas Supreme Court Chief Justice on “The State of the Kansas Courts.” On June 24, Jim Mason, Naturalist at the Great Plains Nature Center will have a presentation and book signing. Mason is author of Wichita’s Riverside Parks, published in April 2011. On July 1, Jay M. Price, Director of the Public History Program at Wichita State University, speaking on “Classes of Values in Kansas History.” On July 8, Dave Trabert, President, Kansas Policy Institute, on “Stabilizing the Kansas Budget.”

    TIF in California and Kansas. In California’s Secret Government: Redevelopment agencies blight the Golden State Steven Greenhut discusses Redevelopment Agencies (RDAs) in California, which is the way that state implements tax increment financing (TIF). In California RDAs are separate agencies with their own boards. Fortunately, Kansas TIF law doesn’t create these separate agencies. But we have TIF and its wild claims. Greenhut cites the claims of RDA boosters in California: “… agencies explicitly advance various goals beyond blight removal, claiming to boost economic development, provide affordable housing, reenergize downtowns, and create hundreds of thousands of jobs in the process.” But: “Do these lofty growth claims hold water? Redevelopment officials arrive at them by taking credit for every new job and every new economic activity in a redevelopment area. But that isn’t a plausible boast. Crunching the numbers, [Michael] Dardia found that after correcting for local real-estate trends, ‘redevelopment projects do not increase property values by enough to account for the tax increment revenues they receive. Overall, the agencies stimulated enough growth to cover just above half of those tax revenues. The rest resulted from local trends.’” In the follow-up article Proving the Redevelopment Rule: Evidence from Southern California that RDAs don’t work Greenhut discusses eminent domain, or the threat of it. While Kansas has an eminent domain law that seemingly provides protection to property owners who don’t want to sell, the threat of its use is still available. Greenhut cites an attorney who fights these battles, noting “most cities don’t need to use eminent domain, any more than most muggers need to use the handgun pointed at their victims’ heads. Brandishing it usually is enough to convince an owner to give in.” The Wichita City Council, when considering TIF districts and other special tax districts, has been asked to explicitly disavow the use of eminent domain so that this threat is no longer available. But the mayor and council members will not extend that protection to citizens.

    More ‘Economics in One Lesson.’ Next Monday (June 13) 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 (June 13) at 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.

    ‘Running on Empty’ tour in Kansas. This week Americans for Prosperity Foundation is bringing the Running on Empty tour to Topeka (Thursday June 9th) and Kansas City (Friday June 10th). AFP writes: “Since President Obama took office, gas prices have nearly doubled. The administration refuses to develop American energy sources … American energy sources that could help gas prices, electricity prices, and food prices come down. Americans are running on empty and the administration needs to hear how regulations and restriction to domestic resources are affecting working families who rely on affordable energy to commute to work, go to school activities and shop for family groceries. Join us on the Running on Empty Tour to learn what executive actions the Administration can take to bring down fuel costs and bring stability to the market and send them your gas bill!” For more information on these two area events, click on National Running on Empty Tour to Stop in Topeka & Kansas City.

    MRCTV announced. Media Research Center, a conservative media watchdog organization and think tank, has announced MRCTV, a video site. In its announcement, MRC wrote: “Many Conservatives have long felt that YouTube has two sets of rules, one for conservative videos and one for everyone else. Videos that are critical of liberals or present a conservative point of view are often mysteriously removed from YouTube. This is frustrating for everyone, but especially for conservative websites that rely on videos to get their message across. ”

    Kansas census data added. The Institute for Policy & Social Research at KU has added 2010 U.S. Census data. Besides this, the institute holds much other data and resources. Click on Kansas Data.

    Markets: exploitation or empowerment? Do markets lead to a centralization of political and economic power, or do markets decentralize and disseminate wealth? In an eight-minute video from LearnLiberty.org, a project of Institute for Humane Studies, Antony Davies presents evidence and concludes that markets and free trade empower individuals rather than exploit them.

  • For Wichita, Save-A-Lot teaches a lesson

    The announcement that a Save-A-Lot grocery store will proceed — contrary to the claims of developers and city staff who rely on their information — should provide a lesson that yes, economic development in Wichita can and will happen without public assistance. Additionally, examination of the public hearing for this matter before the Wichita City Council last September should teach us to be very cautious in relying on the claims of people who have a huge economic stake in obtaining public assistance.

    At a city council public hearing on both the Community Improvement District and Tax Increment financing district last September, developer Rob Snyder sought public assistance in the form of a tax increment financing district (TIF) and a Community Improvement District (CID). Over a period of years, the two forms of subsidy were estimated to be worth $900,000 to the developer. The project’s total cost was presented as slightly over $2 million.

    (By the way, in its recent coverage of this matter, the Wichita Eagle has an incorrect recording of events. The Eagle reported, referring to the Wichita City Council and Sedgwick County Commission: “The boards ultimately rejected the financing, despite support from some officials.” Actually, the city council unanimously approved both the CID and TIF. Then, the county commission exercised its statutory prerogative to veto the formation of a TIF district. The commission has no authority to intervene in the formation of CIDs.)

    As part of his presentation to the council Allen Bell, Wichita’s Director of Urban Development explained that to be eligible for TIF, developers must demonstrate a “gap,” that is, an analytical finding that conventional financing is not sufficient for the project, and public assistance is required: “We’ve done that. We know, for example, from the developer’s perspective in terms of how much they will make in lease payments from the Save-A-Lot operator, how much that is, and how much debt that will support, and how much funds the developer can raise personally for this project. That has, in fact, left a gap, and these numbers that you’ve seen today reflect what that gap is.”

    Snyder told the council that without the public assistance, there will be no grocery store: “We have researched every possible way, how do we make this project work with the existing funding that’s available to us. … We might as well say if for some reason we can’t figure out how to get this funding to go through, there won’t be a shopping center over there.”

    Greg Ferris, a former city council member who lobbies local government on behalf of clients, was adamant in his insistence that the grocery store could not be built without public financing: “There will not be a building on that corner if this is not passed today. … That new building would not be built. I absolutely can tell you that because we have spent months … trying to figure out a way to finance a project in that area. A grocery store is not going to move into the Planeview area to service those people just like they didn’t move into the area at 13th and Grove until the city subsidized that with several hundred thousand dollars of city money. … What you’ve heard is misinformation. … This project just won’t happen and the people of Planeview will suffer.”

    Now, we see that the financing gap has been closed, and without government assistance. The claims that a grocery store can’t be built in that neighborhood without welfare for developers have been demonstrated to be false.

    Wichita Mayor Carl Brewer has referred to those who oppose government intervention like TIF and CID as “naysayers.” Here’s an example where free markets, capitalism, and economic freedom have overcome Wichita’s true naysayers: those who say it can’t happen without government intervention.

    A message from John Todd: “This Wednesday (June 8th) at 2:00 pm there will be a groundbreaking ceremony for the new Planeview Save-A-Lot grocery store located on the southeast corner of George Washington Boulevard and Pawnee. This project was initially proposed with $900,000 in CID and TIF public subsidies for the developer that were approved by the Wichita City Council last fall. When the Sedgwick County Commission rejected giving the county’s portion of the TIF generated real estate taxes to the developer and away from the public treasury, the project appeared to be dead. The Wichita Eagle recently reported that the Save-A-Lot grocery store owner has now decided to develop the project on his own with his own financing. Perhaps it is appropriate for those citizens who appreciate businesses who develop market-driven projects in Wichita and Sedgwick County on their own nickel to show their appreciation to the grocery store owner/developer by attending the groundbreaking ceremony and personally thanking him.”

  • Stossel: The state against blacks

    John Stossel’s most recent television program was titled The State Against Blacks, and it dealt with the topics of affirmative action, welfare, and the minimum wage.

    A featured guest on the show was Dr. Walter E. Williams, an economist at George Mason University. His most recent book is on this topic, and it’s titled Race and Economics: How Much Can Be Blamed on Discrimination? A preview of the book is available at that link.

    On welfare, Williams told Stossel: “The welfare state has done to black Americans what slavery could not have done, the harshest Jim Crow laws and racism could not have done — namely, break up the black family. Today, just slightly over 30 percent of black kids live in two-parent families.” He contrasted this with much higher numbers of intact families in the past. A video clip is below.

    In another clip from the show, Williams discusses the war on poverty and how the minimum wage is harmful to those it is meant to help.

    Summarizing at the end of the show, Stossel told the audience that limited government — not an expansive welfare state — is best for everyone, including the poor, immigrants, and minorities:

    There’s no question that in America that blacks, on average, are economically behind whites. Average black household income is about 40 percent less than for whites. Why? Other minorities were once that far behind, but they prospered. In 1910 Chinese immigrants were 10 percent poorer than other Americans. Their grandkids, in 1985, were 35 percent richer than other Americans.

    Other minorities rose out of poverty: Italians, Hungarians, the Irish, and so on. So why not most blacks? Because just at the time that blacks like Walter Williams were lifting themselves out of poverty, President Johnson created a government war on poverty. Trillions of your dollars were spent on welfare programs that unintentionally reward dependency.

    And then came more regulation like licensing rules and minimum wage rules that stifle entrepreneurship. Politicians like Jessie Jackson say racism is why blacks still struggle today. But Walter Williams taught me that’s just nonsense. There is still racism today. But if that’s such an obstacle, explain the success of black immigrants in America. Their skin is just as dark, but they knew well they’d proposer. Immigrants from Jamaica are poorer than the average American, but a few years later their kids are one percent richer than the average American.

    Why? For one reason, it’s harder for immigrants to get government assistance. They don’t grow up in a culture of handouts, so they’re forced to make it on their own. And that makes all the difference. What helps poor people most is limited government, simple rules that everyone understands, that leave newcomers free to braid hair, for example, or drive taxis, or start companies.

    If the state keeps the peace but then gets out of our way, people prosper. I didn’t understand that until Walter Williams taught me. And many Americans still don’t get it.

    Stossel’s column on this topic is Is Government Aid Helping or Hurting Blacks? Video from Williams’ 1985 PBS documentary “State Against Blacks” is available here. Video from the “Good Intentions” series is here.

  • Arts won’t go away in Kansas

    Supporters of government-funded art in Kansas are lashing out at Kansas Governor Sam Brownback for his decision to cancel funding for the Kansas Arts Commission. An example is the Wichita Eagle’s Rhonda Holman in her editorial A state for the arts?

    In her editorial Holman makes the claim that eliminating the Kansas Arts Commission exposes Kansas to the risk of losing federal and other funds. Many government art supporters state that the loss of funds in a certainty. But as I wrote earlier this year when I covered a hearing before a Kansas Senate committee, Kansas Legislative Research Department made inquiries to the Arts Alliance and the NEA. The answers from both agencies indicate that it is unclear as to whether the new Kansas Arts Foundation would be eligible to receive grants. In particular, the NEA answered, according to Legislative Research, “the potential exists for Kansas to forfeit its ability to receive National Endowment for the Arts funding depending on how the new entity in structured …”

    A related — and more important to public policy — question is why do we send tax money to Washington, only to have to jump through federally-designed hoops to get it back? We shouldn’t argue for the perpetuation of such a system just so we can receive matching grants.

    Holman and others make the case that the arts funding that Brownback canceled is small — “minuscule in the context of the state’s $13.8 billion budget,” she wrote. It’s not only a financial matter, although this factor alone is reason enough to cancel this funding. The arguments of supporters of this funding, small amount that it is, illustrate some of the worse aspects of government and public policy.

    Government funded arts supporters promote the government funding as an investment that pays off for Kansas taxpayers. They have studies that say it does. But these studies have little credibility, as shown in Arts funding in Kansas. These studies purportedly show that spending on the arts has a magic power that is not present when people spend their own money on the things they value most highly. But these studies, like most, rely on several economic fallacies. Henry Hazlitt, writing in Economics in One Lesson, explains.

    Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine — the special pleading of selfish interests. While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for then plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.

    The proposed funding for the arts commission is a clear illustration of the problem with many pleas for public funding. A small group of people will benefit powerfully from this spending. What about the rest of us? Government-funded arts supporters make the case that the cost of the funding is just 29 cents per person in Kansas. Who of us will get worked up over such a small cost?

    The Public Choice school of economics calls this the problem of concentrated benefits and dispersed costs. It’s a huge problem.

    Besides the financial aspects of government funding of arts, there’s the artistic issue itself. There are very important reasons to keep government away from art. Lawrence W. Reed wrote in What’s Wrong with Government Funding of the Arts? of the harm of turning over responsibility to the government for things we value and find worthwhile:

    I can think of an endless list of desirable, enriching things in life, of which very few carry an automatic tag that says, “Must be provided by taxes and politicians.” Such things include good books, nice lawns, nutritious food, and smiling faces. A rich culture consists, as you know, of so many good things that have nothing to do with government, and thank God they don’t. We should seek to nurture those things privately and voluntarily because “private” and “voluntary” are key indicators that people are awake to them and believe in them. The surest way I know to sap the vitality of almost any worthwhile endeavor is to send a message that says, “You can slack off of that; the government will now do it.” That sort of “flight from responsibility,” frankly, is at the source of many societal ills today: many people don’t take care of their parents in their old age because a federal program will do it; others have abandoned their children because until recent welfare reforms, they’d get a bigger check if they did.

    The boosters of government arts funding in Kansas make the case that arts are important. Therefore, they say, government must be involved.

    But actually, the opposite is true. The more important to our culture we believe the arts to be, the stronger the case for getting government out of its funding. Here’s why. In a statement opposing the elimination of the Kansas Arts Commission, former executive director Llewellyn Crain explained that “The Kansas Arts Commission provides valuable seed money that leverages private funds …”

    This “seed money” effect is precisely why government should not be funding arts. David Boaz explains:

    Defenders of arts funding seem blithely unaware of this danger when they praise the role of the national endowments as an imprimatur or seal of approval on artists and arts groups. Jane Alexander says, “The Federal role is small but very vital. We are a stimulus for leveraging state, local and private money. We are a linchpin for the puzzle of arts funding, a remarkably efficient way of stimulating private money.” Drama critic Robert Brustein asks, “How could the [National Endowment for the Arts] be ‘privatized’ and still retain its purpose as a funding agency functioning as a stamp of approval for deserving art?” … I suggest that that is just the kind of power no government in a free society should have.

    We give up a lot when we turn over this power to government bureaucrats and arts commission cronies. Again I turn to David Boaz, who in his book The Politics of Freedom: Taking on The Left, The Right and Threats to Our Liberties wrote this in a chapter titled “The Separation of Art and State”:

    It is precisely because art has power, because it deals with basic human truths, that it must be kept separate from government. Government, as I noted earlier, involves the organization of coercion. In a free society coercion should be reserved only for such essential functions of government as protecting rights and punishing criminals. People should not be forced to contribute money to artistic endeavors that they may not approve, nor should artists be forced to trim their sails to meet government standards.

    Government funding of anything involves government control. That insight, of course, is part of our folk wisdom: “He who pays the piper calls the tune.” “Who takes the king’s shilling sings the king’s song.”

    Around the country Kansas is being portrayed by government arts supporters as having taken a giant step backwards. For those who value the tenets of classical liberalism — liberty, individualism, skepticism about power, spontaneous order, free markets, limited government, and peace, to name a few — Kansas has moved forward, although I don’t imagine for a moment that all these attributes were motivators for Brownback’s decision. It’s sad and telling that arts supporters, who often claim to express the human soul and condition through their art — a viewpoint that ought to be sympathetic to classical liberalism — are not able to grasp the importance of this decision.

  • Kansas and Wichita quick takes: Tuesday May 31, 2011

    Pachyderm to feature DA Foulston. This Friday (June 3) the Wichita Pachyderm Club features Nola Tedesco Foulston, District Attorney for the Eighteenth Judicial District of Kansas, whose boundaries are coincident with Sedgwick County. Foulston’s topic will be “An office overview and current events at the Eighteenth Judicial District of Kansas District Attorney’s office.” Foulston, a Democrat, was elected to her office in 1988 and has served continuously since then. … Appearances by speakers other than Republicans at Pachyderm often generate controversy, and this week is no exception. Pachyderm is a Republican club, and the mission statement of the national organization reads: “Promote active citizen involvement and education in government and politics through the formation and support of grassroots, Republican clubs across America.” Some feel that an appearance at Pachyderm will bolster Foulston’s re-election prospects, should she decide to run again next year. Others believe that no Democrat should be be a speaker — ever. In my opinion, the sentiment of the Pachyderm board and of many of the club’s regular attendees is that while Pachyderm is indeed Republican and conservative, the club’s mission of political education and civic engagement allows — in fact, encourages — appearances by prominent officeholders of any political party. In any county, the District Attorney is a powerful force in local government, with broad discretion as to the prosecution of criminal cases. This is a speaker that the members of Pachyderm should be encouraged to hear, even though members may not agree with her politics. …. Foulston will likely face several tough questions from the usually spirited Pachyderm audience. … Upcoming speakers: On June 10, John Allison, Superintendent of USD 259, the Wichita public school district, on “An update from USD 259.” On June 17, The Honorable Lawton R. Nuss, Kansas Supreme Court Chief Justice on “The State of the Kansas Courts.” On June 24, Jim Mason, Naturalist at the Great Plains Nature Center will have a presentation and book signing. Mason is author of Wichita’s Riverside Parks, published in April 2011. On July 1, Jay M. Price, Director of the Public History Program at Wichita State University, speaking on “Classes of Values in Kansas History.” On July 8, Dave Trabert, President, Kansas Policy Institute, on “Stabilizing the Kansas Budget.”

    Sedgwick County Commission. In its Wednesday meeting, the Sedgwick County Commission will consider making two forgivable loans for the purposes of economic development. These loans have become popular with economic development officials, and often the City of Wichita and Sedgwick County make loans of equal amount to the same company. … The program works by loaning the company an amount of money, with the entire amount paid out at once. Then, if performance goals are met over a period of time, the loan (and interest) is forgiven. Otherwise, portions of it, with interest, may become due. Often the term of the loan is four or five years, with a portion of the loan forgiven each year if goals are met. The performance goals are usually the number of full-time or equivalent employees. … The Golf Warehouse in northeast Wichita is asking for a $48,000 forgivable loan. It recently received a loan of that amount from the City of Wichita. Mid-Continent Instrument, Inc. is asking for $10,000. … Usually economic development incentives are accompanied by a cost-benefit study performed by Wichita State University Center for Economic Development and Business Research. The county hasn’t supplied such analysis for these two items.

    Kansas budget signed. On Saturday — a holiday weekend day — Kansas Governor Sam Brownback signed the budget bill. He used his line-item veto authority to strike an across-the-board reduction in spending, preferring to make targeted cuts instead. Although the governor had proposed ending funding for public broadcasting, the legislature included funding, and the governor did not veto it. … Most controversial of the governor’s handful of changes to the bill will be his veto of funding for the Kansas Arts Commission. This action was not a surprise, as recently the administration laid off all the commission’s employees. Associated Press reports that the chairman of the commission isn’t ruling out a lawsuit.

    KPERS suit threatened. Changes made by the Kansas Legislature to Kansas Public Employees Retirement System, or KPERS have caused state employee organizations to consider a lawsuit, according to Associated Press reporting. The changes made this year are mild compared to the changes that must be made if KPERS is ever to become self-sustaining. The threat of a lawsuit over these minor changes doesn’t foretell a future of cooperation from state employees in making the much larger reforms that must be made.

    Stimulus jobs — or not. Malcolm Harris calls attention to an analysis of the job-creation performance of the 2009 stimulus bill. The working paper is titled The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled. Its goal, according to authors Timothy Conley and Bill Dupor, is to “understand the causal effect on employment of the government spending component of the ARRA.” The key finding is this: “Our benchmark point estimates suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs.” That’s a net loss of jobs. … The authors note there is “appreciable estimation uncertainty” in the estimates. Still, they are able to conclude: “However, our estimates are precise enough to state that we find no evidence of large positive private-sector job effects.” … The report includes a section summarizing other researchers’ findings, which usually find that the stimulus program created or save many jobs. The studies that find large job creation usually rely on “fiscal policy multipliers,” a Keynesian economics concept.

    Government doesn’t create jobs. Investor’s Business Daily relies partly on the Conley and Dupor paper in its editorial Government Doesn’t Create Jobs. IBD asks “In a joint op-ed with the British prime minister, President Obama admits that jobs are created by an innovative private sector. So why is he strangling ours with regulations, rules and taxes? We would hope it was a candid admission of the truth rather than just boilerplate rhetoric in an op-ed in the Times of London by President Obama and British Prime Minister David Cameron. But there it was: ‘Governments do not create jobs; bold people and innovative businesses do.’” Continuing: “For once, the president is spot on. Businesses create jobs to fill a need, and their incentive is profit. Businesses invest; governments can only spend. Businesses create wealth, as do their employees. Government consumes wealth and sucks the economic oxygen out of the room. Its employees create paperwork and regulations that restrict economic growth.”

  • Pickens criticism illustrates divide between free markets and intervention

    Last week’s criticism by energy investor T. Boone Pickens of U.S. Representative Mike Pompeo, a Wichita Republican serving his first term, continues to illustrate the difference between those who believe in economic freedom and free markets, and those — like Pickens — who invest in politicians, bureaucrats, and the hope of a government subsidy.

    Pickens is pushing H.R. 1380: New Alternative Transportation to Give Americans Solutions Act of 2011, or NAT GAS act. The bill provides a variety of subsidies, implemented through tax credits, to producers and users of natural gas. The goal is to promote the use of natural gas as the fuel the nation uses for transportation.

    In his op-ed in the Wichita Eagle, Pickens was critical of Pompeo for his stance in favor of free markets and in opposition to subsidies. His criticism, however, was inconsistent and contradictory. Further, Pompeo’s position on this issue is clear, as part of a resolution he introduced reads: eliminate existing energy subsidies.

    There was another target of Pickens’ criticism. He didn’t mention the company by name, but there were several thinly-veiled references to Wichita-based Koch Industries. Charles Koch and his brother David Koch have emerged as prominent defenders of economic freedom and the freedom and prosperity it generates. Charles Koch, in particular, has been outspoken in his criticism of the type of subsidies that Pickens seeks. Koch’s op-ed, also in the Wichita Eagle and on Koch Industries website at Advancing economic freedom, was pointed in its criticism of corporate welfare: “Our government made a point of reforming its welfare policies for individuals but not for corporations. … Unfair programs that favor certain companies — such as the current well-intentioned but misguided suggestion that the natural-gas industry should receive enormous new subsidies — don’t just happen. They are promoted, in large part, by those seeking to profit politically, rather than by competing in a market where consumers vote with their wallets.”

    In a statement on the company’s Viewpoint website, Dr. Richard Fink, Executive Vice President of Koch Industries, continued to explain the harm of government intervention, saying “Koch has consistently opposed subsidies that distort markets. We maintain that the marketplace, while not perfect, is the best mechanism for allocating resources to consumers. People deciding what fuels to purchase, instead of the government, is best for consumers and our country. Likewise, if natural gas vehicles are truly advantageous and economically efficient, then consumers will demand that they be developed without political mandates that exhaust more taxpayer dollars.”

    Fink continues, “We do not question T. Boone Pickens’ intentions or integrity in this debate. We recognize his experience in the energy markets and take him at his word that he thinks this is a good idea. However, we believe history has demonstrated over and over that these subsidies end up undermining the long term prosperity of the country. For these principled reasons, we oppose this bill to give tax incentives to buyers and makers of natural gas-powered vehicles and related infrastructure. We also consistently oppose subsidies for all other fuels whether or not we benefit from them.”

    Pickens would probably object to the use of the term “subsidy,” as the legislation he pushes grants “credits,” a term that sounds fairly benign. Timothy P. Carney, writing in the Washington Examiner, provides an explanation of the difference: “Pickens draws two dividing lines in the piece: tax credit vs. grant, and permanent versus temporary. A temporary subsidy is certainly better than an indefinite or permanent one. The tax credit question is trickier. Many free-market champions support every tax break ever proposed (Ron Paul, for instance). Other free market types (like me, probably) think that tax credits act as subsidies which distort the market, and ultimately lead to tax hikes on others. One of the bad things about tax credits is that they reward businesses for following political signals rather than market signals, but they do it in a way that allow the beneficiaries, like Pickens, to act as if they’re not on the public dole. Sure, a tax credit (most of the time) isn’t a handout, but the favored product (like ethanol or natural gas) only succeeds because its competition is taxed at high rates. So tax credits are the socially acceptable form of corporate welfare.” (emphasis added)

    While Carney usually gets things just right, I’ll disagree with him that the question of tax credits is tricky: They have the same economic effect as a grant or subsidy. They engineer the behavior the government wants. But Carney is right about the confusing appearance of tax credits, allowing them to be “the socially acceptable form of corporate welfare.” Unless we really think about it, that is.

    In any discussion of Pickens and natural gas, we must recognize that he is an investor in gas and another energy technology related to gas: wind power. In 2008 Pickens ordered 667 wind turbines worth $2 billion from General Electric with plans to build a large wind power plant in Texas. Wind power is highly dependent on government subsidy, with supporters claiming the industry will be devastated unless Congress continues to renew the subsidies.

    At one time Pickens wanted to use wind power to generate electricity, and the natural gas saved would be used to power transportation. But there’s another relationship between wind power and gas, and it stems from the unreliability and variability of wind power. It’s difficult to quickly adjust the output of most power plants. But natural gas turbine plants are an exception. Kansas recently saw one of its major electric utilities complete a new natural gas power plant. The need for the plant was at least partly created by its investment in wind: A document produced by Westar titled The Greenhouse Gas Challenge noted the “Construction of the 665 MW natural gas-fired Emporia Energy Center, providing the ability to efficiently follow the variability of wind generation.” In another document announcing a request for a rate increase it stated “Our Emporia Energy Center is excellent for following the variability of wind production.”

    At the time of these investments by Pickens and Westar, the price of natural gas was high. Now it is low — so low, and the prospects for future low prices certain enough that Pickens has abandoned his wind farm projects. Even with all the subsidy granted to wind power, it’s cheaper to generate electricity with gas.

    (Pickens has been left with many wind turbines he can’t use. According to the Wall Street Journal: “He’s hoping to foist them on ratepayers in Canada, because that country has mandates that require consumers to buy more expensive renewable electricity.” In other words, relying on some other country’s government intervention to relieve him of his mistake.)

    So we see Pickens moving from one government-subsidized industry — wind power — to another: the subsidized market for natural gas-powered vehicles he hopes to create. The distinction between political entrepreneurs and market entrepreneurs couldn’t be clearer.