Voice For Liberty

Tag: Free markets

  • Goody Clancy: public subsidy required for Wichita downtown plan

    The recent presentation of the draft master plan for the revitalization of downtown Wichita gave Wichitans a preview of the forms of public assistance that Goody Clancy recommends the city use. The plan may be viewed at the Wichita Downtown Development Corporation website.

    It is a given, according to Goody Clancy, that downtown development will require public subsidy. Here’s an example as to why it is necessary: One of the issues with downtown development, especially in Wichita according to Goody Clancy, is “land acquisition & land lease issues.” It is contended that land ownership is fragmented, and assembling parcels for development is difficult. Therefore, public assistance is required.

    The shakiness of this argument can be seen by examining recent events in Wichita. Earlier this year, a developer wanted to build a hotel in the downtown WaterWalk area. There are no land acquisition issues there. The city assembled that property — using eminent domain as a tool — some years ago. There is one owner. Yet, the hotel still required massive subsidy to make it economically feasible, according to the developer and Wichita city staff.

    In a Wednesday morning workshop on the issue of public funding, a Goody Clancy consultant hinted at a legislative solution to the land acquisition problem. No more details were given, but solutions to problems like this usually involve the use of eminent domain.

    Public assistance is proposed to be used only for those items that have a public purpose. The primary use is likely to be public parking. According to the logic of Goody Clancy consultants, if public funds pay for a parking garage located between an apartment building and an office building, that really doesn’t benefit just those two properties. Instead, it benefits everyone. It’s a public amenity. It’s infrastructure.

    Nevermind that anywhere but downtown, people have to pay for their own parking. Homeowners build garages and driveways at their own expense. Developers build parking lots on their own.

    While “structured parking” — that’s planner-speak for multi-story parking garages — is more expensive to build per parking spot than surface lots, that’s no reason for the public to pay.

    The forms of public assistance mentioned as available for use include, at the state and national level: historic preservation tax credits, low income housing tax credits, new market tax credits, STAR bonds, brownfield grants, livable city grants, and transportation funds.

    At the local level, programs mentioned include capital investment, tax increment financing (TIF), community improvement districts (CID), facade loans/grants, low interest loan pools, and land.

    The last item refers to the fact that Goody Clancy considers it an advantage that the City of Wichita owns a lot of land downtown, as it can control the timing and features of development.

    Missing from this list is any mention of a direct tax to fund downtown redevelopment. But downtown leaders admire the city sales tax used to fund development in downtown Oklahoma City, and some have privately told me that a sales tax would be good for downtown Wichita. I expect to see a sales tax proposed in Wichita, as I don’t believe there is enough funding available through the sources mentioned above to do all that downtown boosters will want to do.

    Supporters of a sales tax for downtown subsidies will use the Intrust Bank Arena as an example of a successful project funded through a sales tax. They’ll say, as did Kansas Governor Mark Parkinson this year, that people didn’t even notice the one cent per dollar sales tax. It’s harmless, they will contend, despite evidence to the contrary. Not to mention that pronouncement of the arena as a sustainable success story is premature.

    Goody Clancy proposes that projects qualify for public assistance through a point system, which is reported on in a Wichita Business Journal article. By meeting established criteria, developers would earn — or not earn — points. Earning a certain level of points would be necessary for the city to consider the application for public assistance, and the number of points earned would help the city justify pouring public assistance into a project. Presumably the point system could help the city rank and prioritize projects that are competing for limited funds.

    Further considerations the city would use in deciding which projects to subsidize include, according to the presentation: team experience, financial qualifications, references, project economics, and public/private leverage ratio.

    The problem is that any point system the city would use would be a system that meets political criteria, not market criteria. We must realize that the incentives and motivations of politicians and city hall bureaucrats are very different from the incentives and constraints that control behavior in markets. As Gene Callahan explains:

    The Public Choice School has pointed out another force … Strong incentives exist for politicians to favor special-interest groups at the expense of the general public. Those upon whom benefits are concentrated are motivated to campaign hard for those benefits.

    Specifically, for downtown redevelopment to be successful, we need to have development that is profitable for the private sector, considering all costs. By subsidizing certain developers according to political criteria the city ignores and distorts the dictates of markets, and capital is misapplied. People make decisions for wrong reasons using incorrect information.

    While some city council members openly speak of the “free market” with disdain and other members pay it lip service only, we must remember that the free market consists of, in Wichita’s case, hundreds of thousands of consumers making decisions every day about where they want to live, work, and play. These decisions are made based on the individual preferences of each person, supplemented by the information the price system supplies.

    The price system is the best way we have to communicate the relative value of things. Hayek explains its importance:

    Fundamentally, in a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to coordinate the separate actions of different people in the same way as subjective values help the individual to coordinate the parts of his plan.

    The price system is a wonderful, almost miraculous system that, as Hayek writes, coordinates the actions of millions. It allows for the process of economic calculation which is at the heart of capitalism. The lack of economic calculation based on a price system is the reason why socialism fails everywhere it is tried. Callahan summarizes what Mises showed the world:

    Mises showed that socialism is incapable of achieving an efficient use of society’s resources, because its economic planners have no means by which to perform economic calculation.

    The point system that Goody Clancy proposes to dish out subsidy is a bypass of the price system and economic calculation. It substitutes the judgment of central planners for free people coordinating activities through the price system. Wichitans should reject this idea.

  • More Stossel video to be shown in Wichita

    This Tuesday the Kansas chapter of Americans for Prosperity is sponsoring an event titled “Stossel in the Classroom.” The event will feature a DVD video presentation by John Stossel, followed by group discussion. This is a follow-on to a similar event held last month.

    Stossel’s most recent book is Myths, Lies and Downright Stupidity: Get Out the Shovel — Why Everything You Know is Wrong. His appearance in Wichita last year was reported on by me in John Stossel urges reliance on freedom, not government, in Wichita.

    The event is from 7:00 pm to 8:30 pm on Tuesday, June 15, at the Central Branch Wichita Public Library at 223 S. Main. The event will be held in the patio meeting room.

    For more information, 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.

  • Amtrak passenger service shown in Wichita

    The possible expansion of Amtrak passenger rail service in Kansas was the topic of a meeting held last night in Wichita.

    Expansion of rail service in Kansas is controversial, at least to some people, in that any form of rail service requires taxpayer involvement to pay for the service. First, taxpayer funding is required to pay for the start-up costs for the service. There are four alternatives being presented for rail service expansion in Kansas, and the start-up costs range from $156 million up to $479 million.

    After this, taxpayer subsidies will be required every year to pay for the ongoing operational costs of providing passenger rail service. The four alternatives would require an annual operating subsidy ranging from $2.1 million up to $6.1 million. Taking the operating subsidy and dividing by the estimated number of passengers for each alternative, the per-passenger subsidy ranges from $35 up to $97 for every passenger who uses the service.

    For three of the alternatives, the operating subsidy required is greater than the revenue the service is expected to generate. For the other alternative, the subsidy and revenue are equal.

    It would be one thing if tickets sales and other revenue sources such as sale of food and beverage paid for most of the cost of providing passenger rail service, and taxpayers were being asked to provide a little boost to get the service started and keep it running until it can sustain itself. But that’s not the case. Taxpayers are being asked to fully fund the start-up costs. Then, they’re expected to pay the majority of ongoing expenses, apparently forever.

    At the meeting, I calculated these per-passenger subsidy figures and presented them to officials from the Kansas Department of Transportation and Amtrak. They seemed to think that this was a novel way of looking at the cost of providing the service. I asked the Amtrak representative why can’t we just increase the price of a ticket by the amount of the per-passenger subsidy? The reply was that if the tickets are too expensive, people will not purchase them.

    Much of the argument of rail supporters boils down to this: since other forms of transportation receive government subsidy, why shouldn’t rail transportation receive a subsidy too?

    The proper response to this argument is first, let’s not expand government intervention in transportation by increasing or adding new forms of subsidy, even if it is to correct a perceived imbalance. Second, let’s get rid of the subsidy for all forms of transportation, so that each form may be evaluated on its total cost by consumers when they decide how to travel.

    The Amtrak representative disputed subsidy figures that I referred to, saying that the study that I found them in has been discredited. These figures show that the federal subsidy for highway passenger travel is negative, meaning that highway drivers are paying their own costs plus more. The subsidy per passenger rail service is much higher than for either commercial or general aviation. The Amtrak representative promised to send me different figures, and I will report on those if I receive them. It may be that when state and local spending on highways is included, the subsidy landscape might look different.

    These subsidy figures are based on the passenger-mile, not total dollars. Supporters of rail subsidies often use total dollars spent instead of spending per passenger-mile because rail receives much less subsidy than other forms of transportation. That’s because so few people travel on passenger rail.

    This year legislation authorizing the Kansas Department of Transportation to establish and implement a passenger rail service program passed both houses nearly unanimously and was signed enthusiastically by the governor. That was an easy vote for legislators, however, as the legislation spends no money. The supplemental note for the bill states “… because the bill does not propose a revenue mechanism for financing any of the activities the bill would authorize, the Kansas Department of Transportation indicates it would not initiate any such activities nor incur any additional expenses.”

    When legislators have to commit taxpayer funds for start-up costs and ongoing funds for passenger subsidies, I suspect the voting will be quite different.

    Reporting on this meeting from KWCH is at Wichitans Give Input on Amtrak Passenger Train Proposals and from KAKE at State Gets Feedback On Passenger Rail Proposal. Related stories on this site are Amtrak, taxpayer burden, should not be expanded in Kansas and Kansas makes unwise bet on passenger rail.

    Kansas Amtrak passenger rail costs

  • Stossel video, discussion, to be in Wichita

    This Monday the Kansas chapter of Americans for Prosperity is sponsoring an event titled “Stossel in the Classroom.” The event will feature a DVD video presentation by John Stossel, followed by group discussion.

    Stossel’s most recent book is Myths, Lies and Downright Stupidity: Get Out the Shovel — Why Everything You Know is Wrong. His appearance in Wichita last year was reported on by me in John Stossel urges reliance on freedom, not government, in Wichita.

    The meeting is from 7:00 pm to 8:30 pm on Monday, May 24. The location is the Alford Branch Wichita Public Library (private meeting room), at 3447 S. Meridian.

    For more information, 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.

  • Kansas Governor, Wichita Eagle: why ‘pigs’ at the trough?

    When the Kansas Chamber of Commerce recently referred to the need to control Kansas government spending and taxes, a few politicians and newspaper editorial writers embellished what the Chamber actually said in order to make their own political points.

    Here’s what the Kansas Chamber said in its press release dated May 8:

    “As of today, the legislature has failed to address the needs and wishes of the business community. It has instead catered to the needs of those at the government trough. The Kansas legislature has turned a deaf ear to the hard-working businessmen and women who have made the decision to invest in Kansas and provide jobs for our citizens. Instead of responsibly funding state government without raising taxes, a coalition of liberal House and Senate members have instead chosen to slash crucial services and push for a historic tax hike on Kansas families,” said Kansas Chamber President Kent Beisner.

    Kansas Governor Mark Parkinson, an advocate for greater government spending and taxing, seized this opportunity for political gamesmanship. His press release on May 10 stated “It is heartbreaking to think that somebody would equate the disabled, the elderly, school children, veterans, law enforcement and the poor to pigs at a trough.”

    His message used the “pigs at a trough” symbolism several additional times.

    The Governor’s use of the word “pigs” — inflammatory imagry, to say the least — started making the rounds. It was picked up by editorialists and other writers, including the Wichita Eagle’s opinion editor Phillip Brownlee. In his editorial Kids, disabled aren’t pigs at a trough (Wichita Eagle, May 13) Brownlee wrote: “So schoolchildren and individuals with disabilities are akin to pigs at a trough?”

    Brownlee’s editorial starts by complaining that the Kansas Chamber used some “over-the-top rhetoric during the state budget debate.”

    Well, the Kansas Chamber didn’t use the word “pigs.” That was the governor’s language, then repeated by liberal editorial writers like Brownlee and the Winfield Daily Courier’s David Seaton when he editorialized: “Efforts by the president of the Kansas Chamber of Commerce to characterize educators, the elderly, the disabled and public safety employees as pigs at ‘the government trough’ did not succeed.”

    Since Governor Parkinson brought it up, we ought to think about it for a moment. Schoolchildren, of course, aren’t pigs at the trough, no matter what the governor and Wichita Eagle say. For one, children don’t make the decision to attend public (government) schools, as their parents make that decision for them. It is the schools themselves, specifically school spending advocates in the form of Kansas National Education Association (or KNEA, the teachers union) and the Kansas Association of School Boards (KASB) that are the pigs.

    If these school spending advocates were truly concerned about the education of Kansas schoolchildren, they would allow for government spending on education to be targeted at the child, to be spent wherever parents feel their children’s needs will best be met. But the school spending lobby in Kansas vigorously resists any challenge to their monopoly on public money for education, which reveals that they’re really more interested in spending on schools by any means, at any cost rather than on education.

    If we need any more evidence of the never-ending appetite of schools for money, consider a story told by Kansas House Speaker Pro Tem Arlen Siegfreid (R-Olathe) of a conversation he had with Mark Tallman, lobbyist for the Kansas Association of School Boards: “During our discussion I asked Mr. Tallman if we (the State) had the ability to give the schools everything he asked for would he still ask for even more money for schools. His answer was, ‘Of course, that’s my job.’”

    The Eagle editorial mentions a number of local chambers of commerce that have split away from the state chamber. We should recognize that in many cases, local chambers have become boosters for big government taxes and spending. An article titled Tax Chambers by the Wall Street Journal’s Stephen Moore explains the decline of local chambers of commerce: “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.”

    This was certainly the case with the Wichita Metro Chamber of Commerce. Under its president Brian Derreberry, it had been in favor of increased government interventionism instead of free markets. An example was its support of proven fiscal conservative Karl Peterjohn’s opponent in the campaign for Sedgwick County Commissioner in 2008. In that campaign, the Wichita Chamber spent some $19,000 — 44% of all it spent on campaigns that year — on Peterjohn’s opponent, a small town mayor who had just increased taxes.

    Last year the Wichita Chamber hired former Kansas House Member Jason Watkins to be its lobbyist. The hiring of Watkins, a fiscal conservative, seemed to signal a possible shift in the Wichita Chamber’s direction. The fact that the Wichita Chamber did not break away from the Kansas Chamber’s opposition to tax increases validates that perception.

    We should also note that many of the goals of the Kansas Chamber, such as efficient government, reducing taxes, encouraging business investment and growth, and promoting economic growth in Kansas, are good for all Kansans, not just business. Even government employees — and the governor himself — must realize that government does not create wealth. Instead, it is business that creates wealth that provides for our standard of living. It is business that creates the economic activity that generates the tax revenue that makes government spending possible.

    The Eagle’s repetition of the governor’s attack on the Kansas Chamber fits right in with its pro-government, anti-economic freedom agenda.

  • In Kansas, P.J. O’Rourke entertains, informs

    Last month Americans for Prosperity-Kansas hosted a summit in Topeka where 400 citizens gathered to learn more about free markets and Kansas politics. It wasn’t all instruction, however, as political satirist P.J. O’Rourke was on hand to entertain the audience while also providing insights into politics and economics.

    O’Rourke is the best-selling author of 12 books and contributor to many magazines. He is H.L. Mencken Research Fellow at the Cato Institute.

    An Easterner, he told the audience that people on the east coast are skeptical of the Midwest, saying it’s awful flat out there. “That’s so we can see you coming,” he said.

    The free market, he said, is the greatest repository of our freedoms. He told the audience that “economic freedom is the freedom that we exercise most often and to the greatest extent.” Freedom of speech is important — if you have anything to say.

    The free market is a measurement, he said. It tells us “what people are willing to pay for a given thing at a given moment.” While people may not always like the results the free market produce, it isn’t possible to legislate perfect results.

    He said that while we may not understand the causes of the recent economic crisis, we do understand business investment, “something the Obama Administration seems to be doing everything it can to prevent.” Business investment defines humanity and civilization.

    While O’Rourke heaped criticism on Democrats, he said that Republicans deserve criticism too. “Republicans are the party that says government doesn’t work, and then they get elected and prove it.”

    Bush policies such as No Child Left Behind, immigration reform, and social security reform are examples of failed programs or proposals that didn’t make it into law. “Bush said if illegal immigrants wanted citizenship, they’d have to do three things: pay taxes, learn English, and work at a meaningful job. Bush didn’t meet two out of those three qualifications.”

    While the Bush Administration disappointed, he said the Obama Administration has just began to disappoint.

    Speaking on the role of politics and government in society, O’Rourke said that we keep blaming political problem on politicians. People believe that only if we had better politicians, the world would be better. He countered: “The problem isn’t politicians. The problem is politics.”

    O’Rourke told the audience that all society’s ills can’t be cured through politics. “Politicians lie to us, but it’s not like they’ve got much choice. Think about what the truth would sound like on the campaign stump. Even a little, bitty bit of truth. Imagine the politician who said to the voters ‘No, I can’t fix public education. The problem isn’t funding, or overcrowding, or teachers unions, or lack of computer equipment in the classroom. The problem is your damn kids.‘”

    He said that after 40 years making fun of politicians, he realized he hates politics — all politics. We use the word “politics” in ways that reveal our true attitude, he said: “office politics,” “plays politics,” someone is a “real politician” — all these have negative connotations. True conservatism, he said, is a room deodorizer, trying to get the bad smell of politics out of our lives.

    While partisan political bickering is often viewed as a block to accomplishment, O’Rourke said “We want them to bicker. The two most frightening words in Washington — and right here in Topeka too — are ‘bipartisan consensus.’”

    There is a desire by many to stop worrying about politics, but that’s not possible, as we rely on politics for so much. Politicians of both parties want government to solve all our problems. But O’Rourke mentioned government’s poor record of accomplishment: “Government has trouble figuring out where mail goes, and mail has our address right on the front of it.”

    O’Rourke told the audience that corruption is ingrained in politics. “When buying and selling are controlled by voting, the first things that get bought and sold are votes.” Politicians understand this, he added.

    On the role of lawyers in politics, he quipped “Letting lawyers write laws is like letting pharmaceutical companies invent diseases.”

    On economics, O’Rourke said that “wealth is not a pizza, where if I have too many slices you have to eat the Domino’s box.” Wealth is not a zero-sum gain. In a free market there are no losers when someone gets rich, he added.

    The political quest for equality leads to fear and envy of the rich. The Biblical commandment to not covet your neighbor’s things needs to be applied to the nation: “don’t whine about what others have — go get your own.”

    In an interview after his talk, I was able to ask a few questions. Since much of his talk to the audience was on economic freedom, I asked why isn’t economic freedom more popular?

    He said that psychologically, freedom requires taking responsibility. The zero-sum idea — that when someone makes money, they’re somehow taking it from me — is hard to shake. It’s a relatively new idea in human history, and we have not adjusted, psychologically or politically. Also, he said that children today spend a long time in “socialist dependence” in the family setting. Although children are instinctively in favor of private property, they are brought up in a collectivist settings like families, churches, schools, scout groups, and universities.

    So have we as conservatives or libertarians not done a good job explaining wealth creation through voluntary transactions?

    He said no, this is not taught well at all. The moral aspect of economics is not taught. Economics doesn’t fit into the typical secondary school curriculum, he said, and so students usually don’t received much instruction. There is an element in the education establishment that either doesn’t understand the moral aspects of the free market, or they disagree.

    Responding about a question about the push for tax increases in Kansas, O’Rourke said that government spending advocates assume as a given that the spending needs to be done. He said that an adequate amount is being spent on education, but we’re not getting results.

    Since many of the people in the audience are activists, I asked what advice he had to start reducing the amount of government we have.

    He noted that the paradox is that political involvement is necessary to diminish the role of politics in people’s lives. Moving political power to the local or state level is one way. This requires people to become more politically active. More people need to be more engaged in the decisions that are now being made in Washington. But it’s easy to slough off problems to Washington, O’Rourke said, and this is one of the reasons why government has grown.

    I asked about the state sovereignty and tenth amendment movements: Do we risk replacing a tyrannical federal government with tyrannical state governments? He said the idea of sovereignty may apply to the health care issue, as all states are already involved in this area. But states can be just as oppressive as the federal government, referring to the new Arizona illegal alien law.

    On climate change and global warming alarmism, O’Rourke said this is a tool people use to increase political power. There is a desire to increase the scope of political power, and “any excuse will do,” he said. Using an observation made by Milton Friedman, he added that solving problems through increasing political power relies on the “absurd assumption that we can somehow find honest and unselfish men to put in control of dishonest and selfish men.” There is a qualitative division between the type of people who go into politics and everyone else, he added.

    I asked about those who work for greater government power at the expense of economic freedom: Have they never been exposed to the ideas of free markets, or have they been exposed to these ideas and don’t believe them, or are they simply venal?

    O’Rourke said that — putting the best possible face on it, he said — many politicians regard politics as a “counterweight to what they think of as market failures.”

    He said that the small “l” left believes that man is good, but that the systems of power in the world are inherently bad. And for most of history, the systems of power have been bad. If the power structures of the world can be changed, the “goodness of people will shine through.” O’Rourke said that this idea is wrong: People are not not good, but they’re not evil; they have a capacity for both. The free market is a method to move power away from the political elite and aristocracy and toward ordinary people.

    This represents two different views of the world and human nature. He said that his point of view requires less interference in people’s lives, making it better — or at least less annoying.

    He told of a conversation with Cato Institute’s David Boaz, telling him that he is as over-certain in his libertarianism as anyone on the left is in their beliefs. Boaz replied “Yes, but I’m not prescriptive in my over-certainness.”

  • AFP Kansas summit begins

    About 400 concerned citizens are gathered at the Maner Conference Center in Topeka for the Kansas Defending the American Dream Summit 2010. This event is produced by Americans for Prosperity-Kansas.

    The day of the event coincides with the return of Kansas legislators to Topeka to work on the Kansas budget. Both the Governor and Senate leadership are in favor of large tax increases. The House of Representatives leadership has a budget that is balanced without tax increases.

    “We stand for free market principles,” said AFP Kansas state director Derrick Sontag. “We’re a group of grassroots individuals who stand for limited government. This principle is under attack.”

    Sontag mentioned Wall Street bailouts and cap-and-trade energy legislation as areas of concern. He asked “How many of you went to a tea party because you’re angry about the government takeover of the health care system?” The audience roared with approval.

    He told the audience that many legislators and a large group of taxpayer-funded lobbyists are gathering at the statehouse getting ready to ask Kansans to bear the burden of years of state overspending. This is not acceptable, he added.

    The spending advocates don’t tell taxpayers that the Kansas budget grew by 40 percent during a five-year period. We’ll remind them later today at the rally at the Capitol, he said.

    Sontag said that we have fewer private sector jobs than we did ten years ago, saying that raising taxes now is not a good idea.

    He disagreed with Governor Mark Parkinson’s contention that there is no waste in Kansas government, that the budget is already “cut to the bone.” Sontag said that the Parkinson has demanded that the legislature send him a budget that includes tax increases. He said the best message we can send is “November is coming,” referring to upcoming elections.

    Tim Phillips, President of the Americans for Prosperity Foundation, told the audience that tea party opponents said the movement would die away. But Phillips said that our opponents and President Obama should realize that the November elections will be a turning point if conservative activists do their job. “It’s up to us to keep doing the hard work of freedom.”

    Phillips told the audience that Kansas was the first state chapter of Americans for Prosperity. “We wanted a grassroots organization that would stand up and fight for our economic freedom.” He said our opponents want more power, more government, more taxes, and more programs that benefit them and their friends. Those who love freedom want to be left alone, but Phillips said that unless we get involved, we won’t be left alone.

    Do we make a difference, Phillips asked? He said that polls showing 58 percent of Americans wanting to repeal the health care bill is evidence that yes, we are making a difference. The battle over cap-and-trade energy legislation is another example of a victory.

    Other coverage of this event from State of the State KS is at Americans For Prosperity Bring Tax Protest To Topeka.

  • Wichita mayor speaks on economic development

    At last week’s Wichita City Council meeting, Mayor Carl Brewer spoke in favor of the city’s economic development policy, specifically as it related to a downtown Wichita development partly financed with tax increment financing, or TIF.

    The mayor disagreed with those who have appeared at city council meetings to testify against the use of TIF. He told of how the city called mayors’ associations and the National League of Cities, and they said that most large cities use incentives. He learned that cities use some incentives that that Wichita has not yet heard of, which undoubtedly will give city staff some additional tools in the toolbox in the future.

    He said “Incentives are available, and we’re on the right track.”

    The mayor mentioned that Harvard and Yale experts said that Wichita had too much parking downtown. This is in agreement with the Goody Clancy proposal presented to the city last October. Wichita selected that firm to lead the planning process for the revitalization or redevelopment of downtown Wichita.

    He said that in a recent meeting of mayors he attended, he learned that the mayors of other cities are trying to figure out how to use incentives and recruit business. They’re not turning their backs on incentives, he said, adding that “What we’re doing is nothing new.”

    He told the audience that “We as a city are going to have to endure change, and we as a city are going to have to understand any time there’s change, there is going to be some pain.”

    He added that he appreciated input from those who oppose the various subsidies and incentives the city gives to developers, and the city did check to see if the information they provided to the city was correct.

    Commentary

    The National League of Cities, one of the organizations the mayor consulted with regarding the use of incentives for the purpose of economic development, promotes an expansion of the powers of cities to engage in taxpayer-funded economic development subsidies. Its mission statement sounds noble: “Its mission is to strengthen and promote cities as centers of opportunity, leadership, and governance.” But citizens should not be deceived. It promotes interventionist practices rather than economic freedom. An example is its celebration of the U.S. Supreme Court decision in Kelo v. City of New London, which the Wall Street Journal described as “one of the worst in recent years, handing local governments carte blanche to seize private property in the name of economic development.”

    The mayor’s refusal to embrace economic freedom — which he has described as a “philosophy” that is not viable in the real world — means that Wichita is likely to continue to engage in the same competitive practices as do almost all other cities. It means that deals like the subsidy granted to Real Development is a template for other taxpayers-funded giveaways. As Council Member Paul Gray has warned, the plans for the redevelopment of downtown Wichita are likely to require many millions — perhaps hundreds of millions of dollars — of public assistance or investment. Since there isn’t enough tax increment financing available to pay for this, we can expect to see proposals for tax increases, such as a new city sales tax of perhaps one cent on the dollar, to pay for downtown redevelopment.

    A sales tax is the model for economic development in Oklahoma City. This has been promoted to Wichita and Sedgwick County leaders as a good idea for Wichita to pursue.

    What Wichita is missing out on is a way to truly distinguish itself from all the other cities and counties that are all using the same economic development tools. Presently about all we can do is offer subsidies that are larger than what other cities offer. But if we decided to forgo the use of the usual economic development subsidies and incentives, that would be something very unusual. It could really put Wichita on the map as a place to locate to.

    Since these economic development incentives and subsidies require other taxpayers, both individuals and businesses, to pay for their cost, Wichita could reduce the cost of doing business in Wichita for everyone. A company considering locating to Wichita could be confident that it would be operating in a low-tax environment. It wouldn’t have to hope that it fits into the city’s economic development policy guidelines. It wouldn’t have to hope that politicians and bureaucrats view its application favorably.

    Further, once a company locates here, it wouldn’t have to worry that other companies will receive incentives and subsidies that it will have to pay for. It would not need to worry about the other costs that subsidies impose, such as subsidized companies having lower overhead and are therefore better able to compete for employees.

    Eliminating interventionist policies from city hall could have other benefits. Is there a “good ‘ol boy” network of insiders that use Wichita city hall as their personal piggy bank? By eliminating the practice of granting incentives and subsidies, we could reduce or eliminate the cynical attitude of many citizens towards city government.

    We wouldn’t have to worry whether the campaign contributions made by those seeking favor from city hall were made in the interest of good government, or made in the hopes of getting a TIF district or other subsidy passed through the council.

    These ideas, however, are not seriously considered by the mayor or any city council members, at least to my knowledge. Instead, we in Wichita are doomed to finance an escalating economic development arms race. The economic freedom of Wichitans will decline.

    This is noteworthy in light of the mayor’s curious assertion in his remarks that we will have to “endure pain” caused by change. We’ve changed nothing.

  • Libertarian thinking discussed in Winfield

    A recent column in the Winfield Daily Courier illustrates just how difficult it is for some to grasp the ideas and principles of libertarianism. The column, titled Libertarians and Libertarians, makes a factual error and is wrong when describing several important aspects of libertarian thinking.

    For example, he mentions Milton Friedman’s proposal that medical doctors should not be licensed by government. Instead, markets could function as regulators. Showing his disdain for this idea, he writes: “As for a cut-rate appendectomy, let the buyer beware!” The facts are that our current medical system, partly but not totally because of physician licensing, is dysfunctional. There are some clinics and hospitals that choose to operate outside the usual medical orthodoxy, and by doing so, they can offer outstanding bargains to their customers.

    As an example, the Surgery Center of Oklahoma, while not offering appendectomies (at least not on its website) does offer the type of cut-rate prices that the author of this column warns us of. Its prices are very inexpensive compared to what most people pay. And in Wichita, Galichia Medical Tourism publishes its prices for surgeries such as knee replacement for $14,000, when it says the typical cost in the U.S. is $50,000.

    The real problem with this column, however, lies in this passage:

    Do Michael Jordan or Bill Gates owe any debt to the society which rewarded them so extravagantly? Despite the intuitive appeal of the self-ownership idea, there are complexities. Jordan worked hard to develop his skills, but he was lucky to have natural abilities and a physique that most of us do not possess. He was also fortunate to live in a society that prizes his particular ability and has leisure time and money to pay to watch him perform. Some compensation to such a society would seem appropriate.

    Should we as a society extract compensation from Michael Jordan for making him rich? First of all, I imagine that Jordan has paid a lot in taxes, so various governments have already extracted something.

    Beyond that, Jordan doesn’t owe us a thing. All the transactions that people undertook with Jordan — attending a basketball game, watching one on television, buying a product that Jordan endorsed — these were all voluntary, market transactions. Neither party was coerced or forced. By definition, both parties — Jordan and each individual person — entered into the transaction voluntarily, believing that they would be better off if the transaction took place.

    In 1998, Fortune magazine estimated the “Jordan effect” at $10 billion. Jordan has created wealth for himself and an entire industry. He has given pleasure to his millions of fans. This is something to celebrate, not to be concerned about.

    For more about the economics of Michael Jordan, see columns by Thomas Sowell and Walter Williams.

    Sowell writes about the problems with trying to equalize the outcomes of human endeavor:

    The problem with trying to equalize is that you can usually only equalize downward. If the government were to spend some of its stimulus money trying to raise my basketball ability level to that of Michael Jordan, it would be an even bigger waste of money than most of the other things that Washington does. So the only way to try to equalize that has any chance at all would be to try to bring Michael Jordan down to my level, whether by drastic rule changes or by making him play with one hand tied behind his back, or whatever.

    The problem with this approach, as with many other attempts at equalization, is that it undermines the very activity involved.

    Williams writes about the sources of income: “The reader’s inference is that there’s something unfair about income differences of such magnitude. It also reflects ignorance about the sources of income in a free society; that’s music to the ears of political demagogues with an insatiable taste for command and control.”

    Another column by Williams writes about the discrepancy between teachers’ salaries and Jordan’s: “Schoolteachers are more important to society than professional basketball players. … The reason why professional basketball players earn more money is both a result of reality and decisions made by millions of decision-makers.”

    If we want to let government override the decisions made by people making free decisions in markets, we could equalize Michael Jordan’s pay with that of the local fourth-grade teacher. The cost of doing that, however, is very high.

    (The factual error in this Winfield Daily Courier column is the author’s statement that Ron Paul was the Libertarian Party’s 2008 Presidential Candidate. Ron Paul ran for the Republican Party nomination. Bob Barr was the Libertarian Party candidate.)