Free markets may yield odd results and certainly unequal outcomes, but the greater opportunities and prosperity have made the tradeoff worthwhile for American society.
From Our Economic Past ~ Equality, Markets, and Morality by Burton Folsom, Jr., posted at the Foundation for Economic Education.
Sheldon Richman of the Foundation for Economic Education contributes analysis of the current economic situation in the article Government Failure. A few quotes:
Laissez faire in Washington? On what planet? Governments at all levels have regulated the financial industry from the time of the founding. …
At the Division of Labour blog, economist Lawrence H. White asks: “What deregulation have we had in the last decade? Please tell me.” …
What about greed? Here White also has something important to say: “If an unusually large number of airplanes crash during a given week, do you blame gravity? No. Greed, like gravity, is a constant. It can’t explain why the number of crashes is higher than usual.” Likewise, greed (however you define this essentially useless concept) can’t explain the current economic troubles. Why didn’t these troubles occur earlier? Were people less greedy then? …
What about irresponsibility? Now we are getting to the crux of the matter. There was irresponsibility — but only because the government for decades has pursued a policy of relieving big companies of the responsibility that otherwise would have been imposed by market discipline and competition. …
Good intentions count for nothing in this context. The laws of human action (praxeology) can’t be repealed or got around.
Praxeology. Ludwig von Mises has an explanation for everything, it seems.
A letter in today’s Wichita Eagle makes the case for a free market in electricity. An excerpt:
I am among a growing number of Americans who are skeptical about the human impact on climate change. I do not believe there is sufficient evidence that our behavior is causing the changes many environmentalists tend to blame on humanity. So it seems wrong to force me to pay higher electric rates because of unproven theories about our impact on the environment.
I think those people who support such theories should pay the higher rates for electricity, since their beliefs are driving costs higher. Instead of charging all customers higher rates, only charge those customers who want to use alternative energy sources. This policy could easily be implemented by sending all ratepayers a ballot so they can decide which energy source they prefer to use.
A market-based solution to part of this rate increase makes perfect sense. People who believe humans are responsible for climate change can pay for it, and those of us who are skeptical can continue to enjoy lower energy bills.
Deregulation of electricity markets has been tried — sort of — recently, and it didn’t work out as well as it could have. The problem was that it was only partial deregulation, as explained in Short-Circuited, an article at the Cato Institute. California’s Troubles Not Caused by Deregulation explains the situation in California.
A commentary by AFP’s Alan Cobb (Yes, but it’s only $1.3 billion) reports that Kansas economic development efforts are not working.
Can the same be said about Wichita’s?
Today, September 4, 2008, marks the first day of the ban on smoking in Wichita. It’s not quite a total ban, and that has some smoking ban supporters upset. In a letter to the Wichita Eagle, anti-smoking activist Cindy Claycomb writes “If you are a supporter of clean indoor air, please do not spend your money in businesses that allow smoking indoors, including smoking rooms. If we continue to spend our money at places that allow smoking indoors, that tells the business owners that we do not care — that we will tolerate secondhand smoke even though we all know the harmful effects.”
Not everyone is upset, though. In the Wichita Eagle article Smoking ban takes effect; for smokers, end of an era, Wichita city council member Sharon Fearey is quoted as “I feel this is an exciting time for the city.” If, like council member Fearey, you appreciate increasing government and bureaucratic management of the lives of Wichitans, you might be excited, too. Those who value liberty and freedom, however, are saddened — even if they aren’t smokers.
Fortunately Ms. Fearey is precluded from running again for her seat on the city council by term limits. The two architects of this smoking ban — Lavonta Williams and Jeff Longwell — can run for election again. The position held by Ms. Williams is up for grabs in the March 2009 primary. Hopefully the citizens of Wichita city council district one will elect someone respectful of property rights, not to mention personal rights.
For more coverage of the smoking issue and why it’s important, these articles will be of interest: It’s Not the Same as Pee In the Swimming Pool, Haze Surrounds Wichita Smoking Ban, Property Rights Should Control Kansas Smoking Decisions, Let Property Rights Rule Wichita Smoking Decisions, Testimony Opposing Kansas Smoking Ban, and No More Smoking Laws, Please.
Wichita politicians, newspaper editorial writers, and sometimes just plain folks are fond of bashing those they call the “naysayers,” sometimes known as CAVE people. An example is from a recent Opinion Line Extra in the Wichita Eagle:
An acquaintance in another city refers to the anti-everything people as “CAVE” people (Citizens Against Virtually Everything). I fear the GOP voters of western Sedgwick County have selected the ultimate CAVE person in Karl Peterjohn.
Naysayers, too, can’t be happy, according to a recent statement by Wichita Mayor Carl Brewer: “And I know that there’s always going to be people who are naysayers, that they’re just not going to be happy.”
If you read all of Mayor Brewer’s remarks at Wichita Mayor Carl Brewer, August 12, 2008, you’ll learn that without government management of economic development in Wichita, we’d be back to the days of covered wagons. (I’m not kidding. He really said that, and I think he really believes it.)
Wichita’s news media, led by the Wichita Eagle, continually expresses a bias in favor of government. Even in news reporting this bias can be seen, as shown in the post The Wichita Eagle’s Preference For Government. On the Eagle’s editorial page, we rarely see an expansion of government interventionism opposed by the editorial writers. I can’t think of a single case.
But saying no to government doesn’t mean saying no to progress. It does mean saying “no” to the self-serving plans of politicians and bureaucrats. It means saying “no” to the dangers of collectivist thinking, as expressed in The Collectivism of Kansas Governor Kathleen Sebelius.
It means saying “no” to Wichita’s political entrepreneurs, who seek to earn profits through government coercion rather than meeting the needs of customers in the marketplace. It means saying “no” to the public-private partnership, where all too often it is the risk that is public and the profit that is private. It means saying “no” to a monopoly on the use of public money in the education of children, and “no” to an expansion of that monopoly through a new bond issue.
So yes, I guess I and Wichita’s other naysayers are saying “no” to a lot of things.
But what we’re saying “yes” to is liberty and freedom. We’re saying “yes” to the rich diversity of human individuality instead of government bureaucracy. We’re saying “yes” to free people cooperating voluntarily through free markets rather than forced government transfers from taxpayers to favored individuals and programs.
We’re saying “yes” to consumers choosing which businesses in Wichita thrive, rather than politicians on the city council choosing. We’re saying “yes” to people making their own choices, rather than government “incentivizing” the behavior it desires through TIF districts and tax abatements, those incentives being paid for by taxpayers.
So let me ask you: what do you say “yes” to?
From John Todd.
Mr. Mayor and members of the Wichita City Council, thank you for allowing me this opportunity to speak before you today. My name is John Todd. I stand before you today as a citizen in opposition to the Expansion of the City South Redevelopment District (Tax Increment Financing) (Districts I & VI).
I testified before you on July 1, 2008 in opposition to the Old Town Warren Theater Loan that you recently approved. The City Council at that time cited the need for taxpayer assistance to prop up an “under-performing” $9.5 million dollar Tax Increment Financing (TIF) subsidy program that a previous city council awarded to Old Town developers in 1998.
The size of the Old Town TIF project pales in comparison to the $61,772,000 projected in “parking and infrastructure improvements in the Arena Neighborhood Redevelopment Plan area, to be paid for by the TIF” that you are considering today. What vision for a successful TIF in 2008 does this city council have that the 1998 council lacked? What will another “under-performing” TIF cost future taxpayers? Is it the proper role of city government to speculate in real estate ventures using taxpayer money?
Sedgwick County voters approved the $184.5 (now $205) million dollar downtown arena and have been assured repeatedly by the three county commissioners who originally voted for the arena that adequate parking exists for the arena. I am a little more than suspect when I see the word “parking” in the TIF proposal you are considering today?
Voters of the arena were told that their approval of the new arena would provide the “economic boost” and the “synergy” needed for effective downtown redevelopment. No mention was made of the need for additional taxpayer subsidy. I believe our new downtown arena project should be given the chance to perform economically as promised before additional taxpayer money is committed to the project.
If you approve this TIF, please keep in mind that approximately 45% of the $61.8 million dollar proposal or roughly $28 million will be diverted away from The Wichita Public Schools over a 20-year period and another 27% or roughly $16 million from the Sedgwick County taxpayers.
If you approve this TIF, I believe an excerpt from the July 5, 2008 Wall Street Journal article entitled “Blame Taxes for Baltimore’s Rot” (written by Steve H. Hanke and Stephen J.K. Walters) is on target for Wichita, “True enough, the ability to hand out subsidies gives officials great power. But it also gives them a reason, and incentive, to dismiss the common sense that if tax breaks for the well-connected are a good idea, lower tax rates across the board would lead to broad-based redevelopment.”
We need to rely on privately funded redevelopment downtown and not on taxpayer-subsidized redevelopment that favors the politically well-connected developers to the exclusion of all other private developers.
Please vote against the proposed TIF.
Remarks to Wichita City Council, August 5, 2008.
When I’ve been talking to people in Wichita, I find there is great confusion about the way that TIF districts work. This confusion serves to obfuscate what really happens with TIF districts: the TIF developers get to use their own property taxes to pay for things that non-TIF developers have to pay for out-of-pocket, or through special tax assessments on top of their regular property taxes.
It is really this simple. To deny this is to deny simple arithmetic.
Then, do TIF districts perform as promised? One of the troubling things I learned from recent Wichita Eagle reporting is that in the past four years, assessed valuations in the downtown TIF areas have grown at 14.9 percent per year, just 1.4 times the rate of all commercial property. A few weeks ago I was assured by one council member that the taxes paid by property owners in TIF districts grows “exponentially.” But now we have evidence that the growth is quite modest.
I was going to say that I have no doubt that the members of this council have good and noble intentions in wanting downtown Wichita and the area around the arena to succeed. But establishing this TIF district is not good for the arena district or the city as a whole.
Entrepreneurs in Wichita, or anywhere for that matter, have a difficult enough job to do in predicting what consumers want. For government to step in and create special tax-favored districts adds another measure of uncertainty and risk. It distorts the market allocation of capital. Investment will be driven by government incentives rather than market considerations.
This is also a blow to those who have invested elsewhere. It is the city telling them they made a mistake, that they invested in the wrong part of town.
For the arena district to succeed, it needs to be because entrepreneurs, using their own capital, decide that it is a worthwhile place to invest.
Nancy Jackson of the Climate and Energy Project in Kansas has some tips for citizens and candidates to use when talking about global warming. The article Tips for citizens and candidates – talking about the Production Tax Credit contains warnings about what will happen if the Production Tax Credit (PTC) isn’t extended beyond its scheduled expiration date at the end of 2008. Thousands of jobs and billions in investment will be at risk, the post says.
Whether these tax credits are desirable is one issue. But what is not at issue is that these tax credits come with a cost. They aren’t free. Taxpayers have to pay for them, or, as is likely the case, the federal government borrows money to pay for them. Either way, the tax credits take money out of the pockets of people across the country to subsidize the production of wind power.
When people have less money to spend because of the PTC, economic activity is reduced. Jobs are lost. Investment is not made or is deferred. The problem is that if the PTC is eliminated, the loss of jobs and investment will be concentrated and noticeable. Wind farms will cease to operate, it seems the alarmists are saying, and all the workers will be laid off. Television news crews will be at the wind farms on the workers’ last day on the job, and their plight will be reported and editorialized upon.
But every day average people in America have a little less money in their pockets because of these tax credits. Their loss, on an individual basis, is small and not concentrated where it can be reported on. But it is real.
We’ve seen how government subsidies to ethanol producers and corn growers have distorted markets worldwide. The same applies to wind power. To be a viable long-term strategy, wind power must be profitable on its own without subsidy.