Voice For Liberty

Tag: Government spending

  • Wichita STAR bonds project not good for capitalism

    Tomorrow the Wichita City Council considers approval of the project plan for a STAR bonds project in Wichita.

    The formation of the district has already been approved. This action by the council will consider the development plan and the actual authorization to spend money.

    If approved, the city will proceed under the State of Kansas STAR bonds program. The city will sell bonds and turn over the proceeds to the developer. As bond payments become due, sales tax revenue will make the payments.

    It’s only the increment in sales tax that is eligible to be diverted to bond payments. This increment is calculated by first determining a base level of sales for the district. Then, as new development comes online — or as sales rise at existing merchants — the increased sales tax over the base is diverted to pay the STAR bonds. Estimates are that annual revenue available for the bonds will be over $5,000,000.

    For this district, the time period used to determine the base level of sales tax is February 2011 through January 2012. A new Cabela’s store opened in March 2012, and it’s located in the STAR bonds district. Since Cabela’s sales during the period used to calculate the base period was $0, the store’s entire sales tax collections will be used to benefit the STAR bonds developer.

    (There are a few minor exceptions, such as the special CID tax Cabela’s collects for its own benefit.)

    Which begs the question: Why is the Cabela’s store included in the boundaries of the STAR bonds district?

    With sales estimated at $35 million per year, the state has been receiving around $2 million per year in sales tax from this store. But after the STAR bonds are sold, that money won’t be flowing to the state. Instead, it will be used to pay off bonds that benefit the project’s developer.

    Some questions

    Curiously, the city doesn’t provide a cost-benefit study for this project. This is the usual mechanism the city relies on as justification for investments in economic development projects.

    Often developers ask government for incentives because they claim the project is not economically feasible without assistance. Is that the case with this development? If not, why the need for subsidies?

    And if taxpayer subsidy is required for this development, we need to ask what it is about Kansas that discourages this type of business investment.

    STAR bonds should be opposed as they turn over tax policy to the private sector. We should look at taxation as a way for government to raise funds to pay for services that all people benefit from. An example is police and fire protection. Even people who are opposed to taxation rationalize paying taxes that way.

    But STAR bonds turn tax policy over to the private sector for personal benefit. The money is collected under the pretense of government authority, but it is collected for the exclusive benefit of the owners of property in the STAR bonds district.

    Citizens should be asking this: Why do we need taxation, if we can simply excuse some from participating in the system?

    Another question: In the words of the Kansas Department of Commerce, the STAR bonds program offers “municipalities the opportunity to issue bonds to finance the development of major commercial, entertainment and tourism areas and use the sales tax revenue generated by the development to pay off the bonds.” This description, while generally true, is not accurate. This STAR bonds district includes much area beyond the borders of the proposed development, including a Super Target store, a new Cabela’s store, and much vacant ground that will probably be developed as retail. The increment in sales taxes from these stores — present and future — goes to the STAR bond developer. As we’ve seen, since the Cabela’s store did not exist during the time the base level of sales was determined, all of its sales count towards the increment.

    STAR bonds, or capitalism?

    In economic impact and effect, the STAR bonds program is a government spending program. Except: Like many spending programs implemented through the tax system, legislative appropriations are not required. No one has to vote to spend on a specific project. Can you imagine the legislature voting to grant $5 million per year to a proposed development in northeast Wichita? That doesn’t seem likely. Few members would want to withstand the scrutiny of having voted in favor of such blatant cronyism.

    But under tax expenditure programs like STAR bonds, that’s exactly what happens — except for the legislative voting part, and the accountability that sometimes follow.

    Government spending programs like STAR bonds are sold to legislators as jobs programs. Development, it is said, will not happen unless project developers receive incentives through these spending programs. Since no legislator wants to be seen voting against jobs, many are susceptible to the seductive promise of jobs.

    But often these same legislators are in favor of tax cuts to create jobs. This is the case in the Kansas House, where many Republican members are in favor of reducing the state’s income tax as a way of creating economic growth and jobs. On this issue, these members are correct.

    But many of the same members voted in favor of tax expenditure programs like the STAR bonds program. These two positions cannot be reconciled. If government taxing and spending is bad, it is especially bad when part of tax expenditure programs like STAR bonds. And there’s plenty of evidence that government spending and taxation is a drag on the economy.

    It’s not just legislators that are holding these incongruous views. Secretary of Commerce Pat George promoted the STAR bonds program to legislators. Governor Sam Brownback supported the program.

    When Brownback and a new, purportedly more conservative Kansas House took office, I wondered whether Kansas would pursue a business-friendly or capitalism-friendly path: “Plans for the Kansas Republican Party to make Kansas government more friendly to business run the risk of creating false, or crony capitalism instead of an environment of genuine growth opportunity for all business.” I quoted John Stossel:

    The word “capitalism” is used in two contradictory ways. Sometimes it’s used to mean the free market, or laissez faire. Other times it’s used to mean today’s government-guided economy. Logically, “capitalism” can’t be both things. Either markets are free or government controls them. We can’t have it both ways.

    The truth is that we don’t have a free market — government regulation and management are pervasive — so it’s misleading to say that “capitalism” caused today’s problems. The free market is innocent.

    But it’s fair to say that crony capitalism created the economic mess.

    But wait, you may say: Isn’t business and free-market capitalism the same thing? Not at all. Here’s what Milton Friedman had to say: “There’s a widespread belief and common conception that somehow or other business and economics are the same, that those people who are in favor of a free market are also in favor of everything that big business does. And those of us who have defended a free market have, over a long period of time, become accustomed to being called apologists for big business. But nothing could be farther from the truth. There’s a real distinction between being in favor of free markets and being in favor of whatever business does.” (emphasis added.)

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

    The danger of Kansas government having a friendly relationship with Kansas business is that the state will circumvent free markets and promote crony, or false, capitalism in Kansas. It’s something that we need to be on the watch for. The existence of the STAR bonds program lets us know that a majority of Kansas legislators — including many purported fiscal conservatives — prefer crony capitalism over free enterprise and genuine capitalism.

    The problem

    Government bureaucrats and politicians promote programs like STAR bonds as targeted investment in our economic future. They believe that they have the ability to select which companies are worthy of public investment, and which are not. It’s a form of centralized planning by the state that shapes the future direction of the Kansas economy.

    Arnold King has written about the ability of government experts to decide what investments should be made with public funds. There’s a problem with knowledge and power:

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

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

    Despite this knowledge problem, Kansas legislators are willing to give power to bureaucrats in the Department of Commerce who feel they have the necessary knowledge to direct the investment of public funds. One thing is for sure: the state and its bureaucrats have the power to make these investments. They just don’t have — they can’t have — the knowledge as to whether these are wise.

    What to do

    The STAR bonds program is an “active investor” approach to economic development. Its government spending on business leads to taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

    Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

    In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers that Kansas and many of its cities employ: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

    In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

    There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates is an example of such a policy. Government spending on specific companies through programs like STAR bonds is an example of precisely the wrong policy.

    We need to move away from economic development based on this active investor approach. We need to advocate for policies at all levels of government that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances.

    Public Hearing Considering the Adoption of a STAR Bond Project Plan for the K-96 Greenwich Star Bond Projec… by

  • A spending problem, or a revenue problem?

    Does the United States have a revenue problem or a spending problem? The interactive visualization below may help you decide.

    Spending and revenue are presented as a percentage of Gross Domestic Product (GDP). One observation is the tax revenue has risen on a fairly steady progression until the Bush II and Obama recessions. This is in spite of the top marginal tax rate varying wildly during this period.

    Were the budget surpluses of the late years of the Clinton presidency due to rising tax revenue, or declining spending?

    Data from U.S. Bureau of Economic Analysis (BEA). Use the visualization below, or click here to open in a new window.

  • Kansas budget solution overlooked

    As Kansas prepares for a legislative session that must find ways to balance a budget in the face of declining revenues, not all solutions are being considered.

    Generally, the choices are presented as either raising revenues or cutting services. An example comes from H. Edward Flentje of Wichita State University. In a recent op-ed, he presents two solutions: (a) raising more revenue, by canceling the recently-passed tax cuts and retaining the current sales tax rate hike instead of letting it expire, or (b) cutting services. (H. Edward Flentje : State facing fiscal cliff, December 16, 2012 Wichita Eagle)

    In the Kansas City Star, Steve Rose made a similar argument.

    I hope that “cutting services” means cutting spending on services, not the actual level of services the state provides, although that could probably use some trimming, too.

    How much spending does the state need to cut? Kansas Policy Institute has calculated that a one-time spending cut of 8.5 percent, followed by spending growth of four percent per year, would produce a balanced budget with ending balances.

    Does anyone think this goal can’t be met? If not, then perhaps cutting four percent in each of the next two years could be a goal.

    But either way, we can cut spending while maintaining services people have become accustomed to expect from government. Remaking government is a way to do this. We can make government more efficient, despite the claims that it is impossible to do so.

    As an example, in 2010 the Wichita school district saved $2.5 million per year by adjusting school starting times, thereby saving on transportation costs. This was after district officials claimed — repeatedly — there was nothing they could cut. Spending had already been “cut to the bone,” officials said.

    When we see incidents like this, the governing body trumpets the savings, and then, unfortunately, often stops looking for savings. But we need to keep looking. An example of a way to save money is school choice.

    School choice saves states money

    While proponents of public school spending argue that school choice programs drain away dollars from what they claim are underfunded public schools, this is not the case.

    In 2007 The Friedman Foundation for Educational Choice released the study School Choice by the Numbers: The Fiscal Effect of School Choice Programs, 1990-2006. According to the executive summary: “Every existing school choice program is at least fiscally neutral, and most produce a substantial savings.”

    How can this be? The public school spending lobby, which in Kansas is primarily the Kansas National Education Association (KNEA, the teachers union) and the Kansas Association of School Boards (KASB), would have us believe that educational freedom would kill public education. They say that school choice program drain scarce resources from the public school system.

    But when researchers looked at the actual effects, they found this: “In nearly every school choice program, the dollar value of the voucher or scholarship is less than or equal to the state’s formula spending per student. This means states are spending the same amount or less on students in school choice programs than they would have spent on the same students if they had attended public schools, producing a fiscal savings.”

    So at the state level, school choice programs save money. They don’t cost money to implement; they save money.

    Further research on school choice programs funded through tax credits confirms this.

    Other ways to save

    In 2011 the Kansas Legislature lost three opportunities to save money and improve the operations of state government. Three bills, each with this goal, were passed by the House of Representatives, but each failed to pass through the moderate-controlled Senate, or had its contents stripped and replaced with different legislation.

    Each of these bills represents a lost opportunity for state government services to be streamlined, delivered more efficiently, or measured and managed. These goals, while always important, are now essential for the success of Kansas government and the state’s economy.

    Kansas Streamlining Government Act

    HB 2120, according to its supplemental note, “would establish the Kansas Streamlining Government Act, which would have the purpose of improving the performance, efficiency, and operations of state government by reviewing certain state agencies, programs, boards, and commissions.” Fee-funded agencies — examples include Kansas dental board and Kansas real estate commission — would be exempt from this bill.

    In more detail, the text of the bill explains: “The purposes of the Kansas streamlining government act are to improve the performance, streamline the operations, improve the effectiveness and efficiency, and reduce the operating costs of the executive branch of state government by reviewing state programs, policies, processes, original positions, staffing levels, agencies, boards and commissions, identifying those that should be eliminated, combined, reorganized, downsized or otherwise altered, and recommending proposed executive reorganization orders, executive orders, legislation, rules and regulations, or other actions to accomplish such changes and achieve such results.”

    In testimony in support of this legislation, Dave Trabert, President of Kansas Policy Institute offered testimony that echoed findings of the public choice school of economics and politics: “Some people may view a particular expenditure as unnecessary to the fulfillment of a program’s or an agency’s primary mission while others may see it as essential. Absent an independent review, we are expecting government employees to put their own self-interests aside and make completely unbiased decisions on how best to spend taxpayer funds. It’s not that government employees are intentionally wasteful; it’s that they are human beings and setting self-interests aside is challenge we all face.”

    The bill passed the House of Representatives by a vote of 79 to 40. It was referred to the Senate Committee on Federal and State Affairs, where it did not advance. HB 2120 died in a senate committee chaired by Pete Brungardt, who was defeated in August.

    Privatization and public-private partnerships

    Another bill that did not advance was HB 2194, which in its original form would have created the Kansas Advisory Council on Privatization and Public-Private Partnerships.

    According to the supplemental note for the bill, “The purpose of the Council would be to ensure that certain state agencies, including the Board of Regents and postsecondary educational institutions, would: 1) focus on the core mission and provide goods and services efficiently and effectively; 2) develop a process to analyze opportunities to improve efficiency, cost-effectiveness and provide quality services, operations, functions, and activities; and 3) evaluate for feasibility, cost-effectiveness, and efficiency opportunities that could be outsourced. Excluded from the state agencies covered by the bill would be any entity not receiving State General Fund or federal funds appropriation.”

    This bill passed by a vote of 68 to 51 in the House of Representatives. It did not advance in the Senate, falling victim to a “gut-and-go” maneuver where its contents were replaced with legislation on an entirely different topic. Steve Morris, president of the Kansas Senate and a member of the moderate coalition, chaired the committee that killed this legislation. He won’t be in the Senate next year.

    Performance measures

    Another bill that didn’t pass the entire legislature was HB 2158, which would have created performance measures for state agencies and reported that information to the public. The supplemental note says that the bill “as amended, would institute a new process for modifying current performance measures and establishing new standardized performance measures to be used by all state agencies in support of the annual budget requests. State agencies would be required to consult with representatives of the Director of the Budget and the Legislative Research Department to modify each agency’s current performance measures, to standardize such performance measures, and to utilize best practices in all state agencies.” Results of the performance measures would be posted on a public website.

    This bill passed the House of Representatives by a nearly unanimous vote of 119 to 2, with Wichita’s Nile Dillmore and Geraldine Flaharty the two nay votes.

    Opposition to these bills from Democrats often included remarks on the irony of those who were recently elected on the promise of shrinking government now proposing to enlarge government through the creation of these commissions and councils. These bills, however, proposed to spend modest amounts increasing the manageability of government, not the actual range and scope of government itself. As it turns out, many in the legislature — this includes Senate Republicans who initiated or went along with the legislative maneuvers that killed these bills — are happy with the operations of state government remaining in the shadows.

    HB 2158 was victim of a “gut-and-go” maneuver in a committee chaired by Carolyn McGinn, another member of the moderate coalition. She will be returning to the senate next year, but probably won’t have the ability to stop legislation like this.

  • States that Spend Less, Tax Less — and Grow More

    Dave Trabert and Todd Davidson of Kansas Policy Institute contribute an editorial to the Wall Street Journal that explains the importance of controlling spending. By restraining spending, states can have low taxes, which in turn allows the private sector economy to grow.

    States that Spend Less, Tax Less — and Grow More

    States with an income tax spent 42% more per resident in 2011 than the nine states without an income tax.

    By Dave Trabert and Todd Davidson

    In the midst of a dismal recovery where every job counts, one fact stands out: States that tax less achieve better economic performance. Conventional thinking (at least within government) says that low state taxes are dependent upon having access to unusual revenue sources, but that’s not it. A state could be awash in oil and gas severance taxes and still have a high tax burden if the government will not exercise restraint.

    The secret to having low taxes is controlling spending, and that’s exactly what low-tax-burden states do.

    Continue reading at Wall Street Journal (subscription required) or at Kansas Policy Institute.

  • Economic development incentives questioned

    When the New York Times is concerned about the cost of government spending programs, it’s a safe bet that things are really out of control. Its recent feature As Companies Seek Tax Deals, Governments Pay High Price reports on economic development incentive programs that are costly and produce questionable benefits.

    Do we know the cost of economic development incentives? No, reports the Times: “A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.”

    Kansas Governor Sam Brownback appears in a video that accompanies the story.

    A concern of the newspaper is that the money spent on incentives could be spent on other government programs, primarily schools. My concern is that government spending on incentives is harmful to the economy. It redirects capital from productive to unproductive uses. Charles Koch recently explained:

    Today, many governments give special treatment to a favored few businesses that eagerly accept those favors. This is the essence of cronyism.

    Many businesses with unpopular products or inefficient production find it much easier to curry the favor of a few influential politicians or a government agency than to compete in the open market.

    After all, the government can literally guarantee customers and profitability by mandating the use of certain products, subsidizing production or providing protection from more efficient competitors.

    Cronyism enables favored companies to reap huge financial rewards, leaving the rest of us — customers and competitors alike — worse off.

    In another article Koch wrote: “Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.”

    We must distinguish between business and capitalism and hold business groups accountable when they fail to promote economic freedom and capitalism. An example is the Wichita Metro Chamber of Commerce. Its legislative platform reads “The Wichita Metro Chamber believes the State should practice fiscal discipline.”

    But the Chamber recommends retaining several business welfare programs that are harmful to capitalism and economic freedom.

    Next week the agenda for the meeting of the Wichita City Council contains six items that dish out business welfare and promote cronyism. Another item recommends approval of the city’s legislative agenda, which contains this:

    ISSUE: Existing economic development tools are essential for the continued growth and prosperity of our community.

    RECOMMEND: The Wichita City Council supports continuation of its 2012 legislative agenda item, calling for protection of existing economic development tools for local public-private partnerships. Among those are Tax Increment Financing (TIF) districts, Community Improvement Districts (CIDs), Industrial Revenue Bonds (IRBs) and Sales Tax Revenue (STAR) bonds.

    The premise is false twice: These economic development tools are not “essential,” and Wichita is not growing and prospering, compared to other cities: “The inflation-adjusted gross domestic product for the Wichita metro area declined 0.4 percent in 2010, according to initial estimates from the federal Bureau of Economic Analysis. The decline slowed from the year before, when this measure of economic growth plummeted by 7.7 percent. … Wichita’s decline came even as GDP grew by 2.5 percent nationwide in 2010. GDP increased in 304 of 366 metro areas nationwide.” (Wichita Business Journal, Wichita’s real GDP declined in 2010 amid national recovery, database shows.)

  • Kansas can improve its budget process

    This year Kansas made a leap forward in reducing income tax rates. The next step for Kansas is to reduce its spending, both to match the reduced revenue that is forecast, but also to improve the efficiency of Kansas government and leave more money in the hands of the private sector. Specifically, Kansas needs to improve its budgeting process and streamline state government.

    In Kansas, like in many states, the budgeting process starts with the previous year’s spending. That is then adjusted for factors like inflation, caseloads, and policy changes that necessitate more (or rarely, less) spending. The result is that debates are waged over the increment in spending. Rarely is the base looked at to see if the spending is efficient, effective, or needed.

    There are several approaches Kansas could take to improve this process. One is zero-based budgeting. In this approach, an agency’s budget set to zero. Then, every spending proposal must have a rational or justification for it to be added to the budget.

    Zero-based budgeting can be successful, but, according to the recent paper Zero-base Budgeting in the States from National Conference of State Legislatures, it requires a large commitment from the parties involved. It also can take a lot of time and resources. Kansas could start the process with just a few agencies, and each agency could go through the process periodically, say once every five or six years. Some states have abandoned the zero-based budgeting process.

    In its State Budget Reform Toolkit, American Legislative Exchange Council advocates a system called priority-based budgeting. This process starts with deciding on the core functions of state government. That, of course, can be a battle, as people have different ideas on what government should be doing.

    ALEC reports that “In 2003, Washington state actually implemented priority based budgeting to close a budget deficit of $2.4 billion without raising taxes.”

    The problem that Kansas will face in reducing state spending and streamlining its government is that there are those who are opposed. Streamlining often means eliminating programs that aren’t needed, aren’t performing as expected, or are very costly. These programs, however, all have constituencies that benefit from them — the concept of concentrated benefits and dispersed costs that public choice economics has taught us. These constituencies will be sure to let everyone know how harmful it will be to their self-interest if a program is scaled back or ended.

    Streamlining also means that there may be fewer state employees. Some will say that the loss of state employees means a loss for the economy, as the state workers will no longer be receiving a paycheck and spending it. This reasoning, however, ignores the source of state workers’ pay: the taxpayers of Kansas. With fewer state employees, taxpayers will have more money to spend or invest. The problem is that it is easier to focus on the employees that may lose their jobs, as they are highly visible and they have vocal advocacy groups to watch out for them. This is an example of the seen and unseen, as explained by Henry Hazlitt.

  • Ignore this Kansas school spending, please

    The reaction to a survey regarding Kansas school spending is useful for two reasons: It lets us gauge the level of knowledge of the public, and it also tells us the extent to which school spending advocates will go to justify and excuse spending.

    The latest example comes from Kansas Association of School Boards (KASB). It’s in response to a survey commissioned by Kansas Policy Institute which asked the public a series of questions on schools and spending. (See Citizens generally misinformed on Kansas school spending.)

    A key finding is that most people think that schools spend much less than actual spending, and by a large margin. Further, most people think spending has declined, when in fact it has risen. These finding are similar to other research commissioned by KPI, and additional surveys by other organizations at the national level.

    Not surprisingly, when citizens and taxpayers learn the true level of school spending, their attitude towards school spending changes. That’s dangerous to school spending advocates. It diminishes their most compelling arguments for more school spending — “it’s for the kids.”

    So the school spending lobby has to explain — rather, make excuses for — the high level of spending. In this case, the school board association would like you to ignore employee pension costs and the costs of buildings and equipment. Here’s what KASB explains as part of a document titled Questions about recent Kansas Policy Institute survey:

    Finally, districts received $690 per pupil in KPERS contributions for district employees, and districts spent $2,320 for capital costs such as buildings and equipment, payments on construction bonds for new schools, and other local revenues like student fees. None of these funds — almost 25 percent of total revenues — can be spent for regular education operating costs.

    That’s right. The Kansas Association of School Boards recommends that Kansas taxpayers discount school spending by 25 percent. Why? Because that spending is for pensions (KPERS) and buildings (and swimming pools, tennis courts, and artificial turf for athletic fields).

    This argument is disingenuous, to say the least. Pension costs are part of the cost of having employees, just as are salary, the employee portion of payroll taxes, and health insurance. That is, unless schools want to stop providing pensions for their employees, in which case they might have trouble recruiting employees, or they might have to pay more in salary so that employees could provide for their own retirement.

    These personnel costs are indeed “regular education operating costs,” despite the claim of KASB.

    Then, KASB wants you to ignore “payments on construction bonds for new schools,” as these are not “regular education operating costs.” KASB is correct. These costs are capital, not operating.

    But when campaigning for new bond issues, school districts tell voters that this spending is absolutely necessary. The kids must have new buildings and facilities, say the school spending advocates.

    But when it comes time to pay off the bonds — well, just sweep that spending under the rug, say school spending boosters.

  • The Obama tax hike, compared to deficits

    President Barack Obama is going to ask Congress for more tax revenue. But the president’s request, as large as it is, will do little to rein in our budgetary problem.

    According to the Wall Street Journal: “President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011.”

    The stage is being set for a showdown, one that both sides will surely cast as determining the future viability of America. But placing these numbers in context shows us that we’re really arguing over nothing — when compared to the size of the problems facing the budget.

    For context, the president’s most recent budget — which received zero votes when submitted to Congress — calls for cumulative deficits totaling an additional $6,684 billion from 2013 through 2022. Obama’s request for additional revenue of $1,600 billion over those years is 23.9 percent of that projected deficit. This is not what I’d call “solving the problem.”

    Further, the president’s budget may be based on unrealistically optimistic projections. One of the most important variables, the rate of growth of gross domestic product, was assumed to be 3.0 percent in 2012. But through the first three quarters, GDP growth has been at the rate of 2.0 percent, and the recent trend has been for that rate to decrease, not improve.

  • The rich don’t have enough money

    Even if President Barack Obama gets his way in upcoming tax negotiations, we’ll still be a long way from tackling the deficit.

    The document General Explanations of the
    Administration’s Fiscal Year 2013 Revenue Proposals, Table of Revenue Estimates     holds the details:

    Obama Administration projection of increased tax revenue

    If Obama is successful in his plan to increase taxes on upper-income taxpayers, it will bring in — according to this estimate by the Treasury Department — $56 billion in 2013. If additional tax expenditures are eliminated, revenue could increase by $83 billion. Both of these numbers are projected to rise in future years.

    To place these numbers in context: In fiscal year 2012, which ended just one month ago, the federal government spent an estimated $3,500 billion. The largest tax revenue increase Obama hopes for is 2.4 percent of this.

    Considering only the deficit from 2012, estimated at $1,100 billion, the $83 billion tax hike is 7.54 percent. But that’s only the deficit, which is the amount we borrow, not the amount we spend.

    These tax increases are not going to solve our problems with the federal budget. That’s assuming that the tax hikes will not cause economic harm.

    The federal budget is so out of balance compared to the size of the economy that even the wildest dreams of liberals won’t balance the budget. The Tax Foundation has calculated from IRS data that if government taxed 100 percent of the income earned by those who earn over $1 million, it would raise $709 billion. That’s not really close to last year’s deficit of $1,100 billion.

    And then, why would these people work?