Voice For Liberty

Tag: Government spending

  • Obama II, from New York Times

    The New York Times lays out the agenda for the second term of President Barack Obama. It could be “invigorated,” the newspaper writes.

    The Times editorialists write that now the president “can make real progress on issues neglected in the first.” I wonder: Why did he neglect these issues?

    Then: Obama intends to “build on and improve the significant accomplishments of the last four years.” The problem is that these accomplishments are harmful to our country. They harm our economy, they extinguish liberty and freedom, they will lead to less prosperity for everyone.

    Here’s what a second Obama term might attempt, according to the Times

    “Address climate change with more vigor, going beyond auto-mileage standards and renewable-energy jobs to possibly advocating tougher carbon emissions standards.” I’d like to think that the Obama Administration learned from debacles like Solyndra, but there’s no evidence it has.

    “Working with Republicans to fix the immigration system.” We’re long overdue for this, and I think I can support what the president is likely to propose. We’ll see.

    “He also hinted that combating poverty might move higher on his priority list.” But Obama’s vision of fighting poverty is likely more of the same: direct payments, government job training, more spending on public schools, etc. None of this supports what is really needed: a vibrant economy.

    “In coming months, after he persuades Congress to keep taxes from rising on the middle class, he should push to restore a fair estate tax and raise the low capital gains rate to the level of ordinary income.” A pro-growth policy, one that would create prosperity for everyone, would be to eliminate taxes on capital. Raising this tax means that there will be less investment in the United States as investors seek to find more attractive grounds for investment. This is so important. Ask yourself this: Who earns the higher wage — the man digging a ditch with a shovel, or the worker operating a power backhoe? The backhoe is capital. Someone had to defer current consumption in order to save to buy the backhoe. As taxes on capital rise, people have less incentive to save and invest.

    The Times says Obama’s victory was decisive. At least they didn’t say it was a mandate, as some have said. We’ve suffered through a campaign, won by a man who showed that he would do anything to hold on to power.

    We’ve heard President Obama tell Russia that he can be more “flexible” after the election. Some might interpret this — considering domestic policy — as meaning that Obama will govern more to the left, seeking to expand government spending even more than he did in his first term.

    But there’s a possibility — small, I’m sad to reckon — that flexibility might mean that the president disregards the radical left and embraces principles of economic freedom and personal liberty. This is the way Barack Obama could rescue our economy and build a legacy that he and the country could be proud of.

  • Citizens generally misinformed on Kansas school spending

    When asked about the level of spending on public schools in Kansas, citizens are generally uninformed or misinformed. They also incorrectly thought that spending has declined in recent years.

    These are some of the findings of a survey commissioned by Kansas Policy Institute and conducted by SurveyUSA, a national opinion research firm.

    In a press release, KPI president Dave Trabert said “As Kansans consider how to deal with the potential fallout from another school lawsuit, pressure to expand Medicaid, ballooning pension deficits and concerns about rising property taxes, we wanted to check again to see how perceptions of the facts influences opinions. Good information is essential to informed opinions and it is clear that when given the facts, Kansans offer much different responses than what is typically reported from overly-simplistic public surveys.”

    Here’s the first question of the survey, asking about Kansas state spending on schools: “How much state funding do you think Kansas school districts currently receive per pupil each year from JUST the state of Kansas? Less than $4,000 per pupil? Between $4,000 and $5,000? Between $5,000 and $6,000? Or more than $6,000 per pupil?”

    The correct answer is the last category, according to Kansas State Department of Education. State spending on Kansas schools, on a per-pupil basis, is $6,984 for the most recent school year. That’s total state-funded spending of $3,184,163,559 divided by 456,000.50 full time equivalent students. 13 percent of survey respondents chose the correct category. 44 percent thought the correct answer was less than $4,000.

    To get a reading about respondents’ level of knowledge regarding total school spending, the survey asked “How much funding per pupil do you think Kansas school districts currently receive from ALL taxpayer sources per year, including State, Federal and Local taxpayers? Less than $6,000 per pupil? Between $6,000 and $9,000? Between $9,000 and $12,000? Or more than $12,000 per pupil?”

    According to KSDE, the spending per pupil from all sources of funding is $12,656. On the survey, seven percent chose the correct category. 39 percent thought the answer was less than $6,000, which is less than half the actual spending.

    What the trend in school spending? The survey asked: “Over the last 5 years, do you think per-pupil school district funding from the State, Federal Government and local property taxes has gone down by more than 10%? Has remained about the same? Has gone up by less than 5%? Or has gone up by about 10%?”

    Here are the figures: For 2011-2012, spending per pupil was $12,656. Five years ago, the 2006-2007 school year, spending was $11,558. That’s 9.5 percent. Only 15 percent chose the correct answer, “up by about 10%.” Fully 61 percent thought spending had declined.

    The level of knowledge revealed in this survey is not a surprise. In 2010 KPI commissioned a survey that asked similar questions, with similar results.

    A national survey, Is the Price Right? Probing American’s knowledge of school spending, a 2007 project produced by EducationNext, a project of the Harvard Kennedy School of Government, produced similar results:

    How well informed is the public about these financial commitments? Not very. Among those asked without the prompt listing possible expenses, the median response was $2,000, or less than 20 percent of the true amount being spent in their districts. Over 90 percent of the public offered an amount less than the amount actually spent in their district, and more than 40 percent of the sample claimed that annual spending was $1,000 per pupil or less. The average estimate of $4,231 reflects the influence of a small percentage of individuals who offered extremely high figures. Even so, the average respondent’s estimate was just 42 percent of actual spending levels in their district.

    Why the low level of correct information?

    Given that citizens have a consistent record of underestimating the amount spend on schools, we might ask why. There are several answers.

    First, school officials lie to the public. That’s unfortunate, but there’s no other way to characterize comparisons between their statements and the facts.

    In July, a Wichita Eagle news story quoted John Allison, superintendent of USD 259, the Wichita public school district thusly: “We’re still at 2001 funding levels. If only our costs were at 2001.”

    In March, Wichita school board member Connie Dietz wrote in an Eagle op-ed: “But what neither I nor any of my fellow board members planned on was building a fiscal year 2012 budget based on 1999 funding levels.”

    Looking at the facts, these claims are demonstrably false. Considering Allison’s claim specifically: From the 2001-2002 school year to the 2011-2012 year, spending per pupil from state sources increased from $4,812 to $7,501, an increase of 55.8 percent. Spending per pupil from all sources grew from $8,393 to $12,734, an increase of 51.7 percent.

    During the same time, the Consumer Price Index, the primary measure of inflation, rose about 27 percent, about half the rate that Wichita school spending increased.

    I don’t know why these school leaders makes these claims that are so divergent from the facts. I do know, however, that our opinion leaders aren’t doing any better. A Lawrence Journal-World editorial that was repeated in the Wichita Eagle made several claims about Kansas schools that don’t hold up under scrutiny. The editorial made this claim: “In the last four years, per-pupil state funding for public schools has declined by about 14 percent, from $4,400 per student to $3,780. Districts have cut the fat in their budgets and then some. It’s time to correct this dangerous trend.”

    This statement about “base state aid per pupil” is true. But using only that figure to describe spending on schools in Kansas is disingenuous. It hides facts that are contrary.

    School spending advocates present base state aid per pupil as the primary benchmark or indicator of school spending, despite the fact that it is only part of the Kansas school spending formula and disguises the overall level of spending.

    Specifically, base state aid per pupil for the last school year was $3,780. But the state spent an average of $6,983 per pupil that year, which is an additional $3,203 or 84.7 percent more than base state aid. Overall spending from all sources was $12,656 per pupil. Both of the latter numbers are higher than the previous year.

    As can be seen in the chart, base state aid has declined, but total state spending has increased.

    Why do school spending supporters focus only on base state aid? Its decline provides the grain of truth for their larger and false argument about school spending. As explained in Kansas school spending: the deception this grain of truth enables school spending advocates like Mark Desetti (Director of Legislative and Political Advocacy at Kansas National Education Association (KNEA), our state’s teachers union) to be accurate and deceptive, all at the same time.

    Finally, people want schools and students to succeed. Our future depends on it. A good education is a valuable investment. So there’s a built-in bias in favor of schools, and school spending advocates use this to their advantage. Anyone who simply brings attention to the facts — not to mention criticism — is blasted as “anti-education” or “anti-child.”

    People are shocked when they learn the level of spending by schools. When they — either through their own observations or measures of student achievement — compare that spending to the product produced by public schools, citizens become truly alarmed — and they should be.

    Base state aid compared to Kansas state spending and total spending. State and total spending has risen even though base state aid is mostly flat.

  • More Kansas spending data online

    Kansas Policy Institute has added more data to KansasOpenGov, its government transparency portal.

    The newest data is from Kansas school districts, according to KPI’s press release.

    KPI highlighted some noteworthy expenses, such as $7,148.53 on retirement clocks by the Andover school district, $232,894.00 in early retirement incentives by the Haysville school district, $24,755.47 at a Holiday Inn in San Clemente by the Topeka school district, and $2,616.60 to a Hyatt Hotel in Boston by the Coffeyville school district.

    The data at KansasOpenGov is particularly welcome as it can be downloaded as csv or Excel files, which means it can be analyzed, sorted, printed, and archived in various ways. Some governmental agencies provide this data only in pdf files, which are difficult to convert to a format that can be analyzed.

    While it’s good that school districts are releasing their expenditure data, there are still some transparency roadblocks. For example, in August the Wichita school district made a payment to “Commerce Bank Visa Businesscard” in the amount of $903,725.68, described as being for “Supplies.” That’s a lot of money spent under a vague and generic description.

  • Balanced budget requires government redesign

    “If we were to eliminate the entirety of government with the exception of social programs and the interest on the debt, we still wouldn’t be able to balance the budget.”

    This is the diagnosis of Antony Davies as he examines the components of federal spending and revenue.

    “There are no specific cuts that will solve the problem,” he says. The problem is larger than any conceivable budget cuts can solve.

    What do we do? Davies says: “Nothing less than a redesign of government will solve this problem, and that redesign should begin with the question: What is the proper role of government?”

  • Koch articles draw critics, but few factual

    Two large articles in the Wichita Eagle regarding Charles and David Koch of Wichita-based Koch Industries have attracted many comments, and many are not based on facts.

    The two articles are The Kochs’ quest to save America and Charles Koch relentless in pursuing his goals.

    A curious irony is the claim by many comment writers that Charles and David Koch want to buy America, while at the same time they are running it into the ground: “The koch bros. are funding the conversion of OUR COUNTRY into another third world country.”

    Even if it was possible to buy America — whatever that means — why would someone destroy it first?

    Another common thread in the comments is that Charles and David Koch didn’t complain about government spending, subsidy, regulation, etc. before President Barack Obama was elected. In fact, they have been working to promote free markets and economic freedom for many decades. Charles Koch and two others founded what became the Cato Institute in 1974, nearly four decades ago. Even earlier: A recent issue of Koch Industries Discovery newsletter contains a story titled “Don’t subsidize me.” Here’s an excerpt:

    When Charles Koch was in his 20s, he attended a business function hosted by his father. At that event, Fred Koch introduced Charles to a local oilman.

    When the independent oilman politely asked about the young man’s interests, Charles began talking about all he was doing to promote economic freedom.

    “Wow!” said the oilman, who was so impressed he wanted to introduce the young bachelor to his eligible daughter.

    But when Charles mentioned he was in favor of eliminating the government’s oil import quota, which subsidized domestic producers, the oilman exploded in rage.

    “Your father ought to lock you in a cell!” he yelled, jabbing his finger into Charles’ chest. “You’re worse than a Communist!”

    It seems the oilman was all for the concept of free markets — unless it meant he had to compete on equal terms.

    Under oath

    For more than 50 years, Charles Koch has consistently promoted economic freedom, even when it was not in the company’s immediate financial interest.

    In the 1960s, Koch was willing to testify before a powerful Congressional committee that he was against the oil import quota — a very popular political measure at the time.

    “I think it’s fair to say my audience was less than receptive,” recalls Koch.

    Years later, Koch warned an independent energy association about the dangers of subsidies and mandates.

    “We avoid the short-run temptation to impose regulatory burdens on competitors. We don’t lobby for subsidies that penalize taxpayers for our benefit.

    “This is our philosophy because we believe this will produce the most favorable conditions in the long run,” Koch said.

    Many comments take the company to task for accepting oil and ethanol subsidies. Koch Industries, as a refiner of oil, blends ethanol with the gasoline it produces in order to meet federal mandates that require ethanol usage. Even though Koch opposed subsidies for ethanol — as it opposes all subsidies — Koch accepted the subsidies. A company newsletter explained “Once a law is enacted, we are not going to place our company and our employees at a competitive disadvantage by not participating in programs that are available to our competitors.” (The tax credit subsidy program for ethanol has ended, but there is still the mandate for its use in gasoline.)

    Regarding oil subsidies, the programs that are most commonly cited (percentage depletion and expensing of intangible drilling costs) apply to producers of oil — the companies that drill holes and pump up oil. Koch Industries doesn’t do that. The company doesn’t benefit from these programs.

    Other comments charge that Koch Industries wants to end regulation so that it can pollute as much as it wants. This is another ridiculous charge not based on facts.

    A statement on the KochFacts website states “recent critics have also claimed that Koch is one of the nation’s top 10 polluters. This study confuses pollution with permitted emissions, which are carefully regulated by the U.S. EPA and other agencies. The index labels as ‘polluters’ Ford Motor, General Motors, GE, Pfizer, Eastman Kodak, Sony, Honeywell, Berkshire Hathaway, Kimberly Clark, Anheuser Busch and Goodyear — corporations, like Koch companies, with significant manufacturing in the U.S. Emissions, a necessary by-product of manufacturing, are strictly monitored and legally permitted by federal, state and local governments.”

    Say: Didn’t the U.S. government take over General Motors, and continues to hold a large stake in the company? And GE and Berkshire Hathaway: Aren’t those run by personal friends of Barack Obama?

    The reality is that manufacturing has become much more efficient with regards to emissions, and Koch Industries companies have lead the way. One report from the company illustrates such progress: “Over the last three years, Koch Carbon has spent $10 million to enhance environmental performance, including $5 million for dust abatement at one of its petroleum coke handling facilities. These investments have paid off. In 2008, Koch Carbon’s reportable emissions were 6.5 percent less than in 2000, while throughput increased 10.4 percent.”

    Even when Koch Industries does not agree with the need for specific regulations, the company, nonetheless, complies. Writing about an increase in regulation in the 2007 book The Science of Success: How Market-Based Management Built the World’s Largest Private Company, Charles Koch explained the importance of regulatory compliance: “This reality required is to make a cultural change. We needed to be uncompromising, to expect 100 percent of our employees to comply 100 percent of the time with complex and ever-changing government mandates. Striving to comply with every law does not mean agreeing with every law. But, even when faced with laws we think are counter-productive, we must first comply. Only then, from a credible position, can we enter into a dialogue with regulatory agencies to determine alternatives that are more beneficial. If these efforts fail, we can then join with others in using education and/or political efforts to change the law.”

    Koch companies have taken leadership roles in environmental compliance, explains another KochFacts page: “In 2000, EPA recognized Koch Petroleum Group for being ‘the first petroleum company to step forward’ to reach a comprehensive Clean Air Act agreement involving EPA and state regulatory agencies in Minnesota and Texas. Despite fundamental policy disagreements, then-EPA Administrator Carol Browner acknowledged Koch’s cooperation. She characterized the agreement as ‘innovative and comprehensive’ and praised the ‘unprecedented cooperation’ of Koch in stepping forward ahead of its industry peers.” Browner was no friend of industry, and had a “record as a strict enforcer of environmental laws during the Clinton years,” according to the New York Times.

    What may really gall liberals and Koch critics is this: They believe that a powerful and expansive government is good for the country. But what we have is a complicated machine that a company like General Electric can exploit for huge profits, all without creating things that consumers value. Charles Koch calls for an end to this, as he wrote last year in the Wall Street Journal: “Government spending on business only aggravates the problem. Too many businesses have successfully lobbied for special favors and treatment by seeking mandates for their products, subsidies (in the form of cash payments from the government), and regulations or tariffs to keep more efficient competitors at bay. Crony capitalism is much easier than competing in an open market. But it erodes our overall standard of living and stifles entrepreneurs by rewarding the politically favored rather than those who provide what consumers want.”

    The political Left just can’t believe that anyone would write that and really mean it.

  • Kerr’s attacks on Pompeo’s energy policies fall short

    We often see criticism of politicians for sensing “which way the wind blows,” that is, shifting their policies to pander to the prevailing interests of important special interest groups. The associated negative connotation is that politicians do this without regard to whether these policies are wise and beneficial for everyone.

    So when a Member of Congress takes a position that is literally going against the wind in the home district and state, we ought to take notice. Someone has some strong convictions.

    This is the case with U.S. Representative Mike Pompeo, a Republican representing the Kansas fourth district (Wichita metropolitan area and surrounding counties.)

    The issue is the production tax credit (PTC) paid to wind power companies. For each kilowatt-hour of electricity produced, the United States government pays 2.2 cents. Wind power advocates contend the PTC is necessary for wind to compete with other forms of electricity generation. Without the PTC, it is said that no new wind farms would be built.

    The PTC is an important issue in Kansas not only because of the many wind farms located there, but also because of wind power equipment manufacturers that have located in Kansas. An example is Siemens. That company, lured by millions in local incentives, built a plant in Hutchinson. Employment was around 400. But now the PTC is set to expire on December 31, and it’s uncertain whether Congress will extend the program. As a result, Siemens has laid off employees. Soon only 152 will be at work in Hutchinson, and similar reductions in employment have happened at other Siemens wind power equipment plants.

    Rep. Pompeo is opposed to all tax credits for energy production, and has authored legislation to eliminate them. As the wind PTC is the largest energy tax credit program, Pompeo and others have written extensively of the market distortions and resultant economic harm caused by the PTC. A recent example is Puff, the Magic Drag on the Economy: Time to let the pernicious production tax credit for wind power blow away, which appeared in the Wall Street Journal.

    The special interests that benefit from the PTC are striking back. An example comes from Dave Kerr, who as former president of the Hutchinson/Reno County Chamber of Commerce played a role in luring Siemens to Hutchinson. Kerr’s recent op-ed in the Hutchinson News is notable not only for its several attempts to deflect attention away from the true nature of the PTC, but for its personal attacks on Pompeo.

    There’s no doubt that the Hutchinson economy was dealt a setback with the announcement of layoffs at the Siemens plant that manufactures wind power equipment. Considered in a vacuum, these jobs were good for Hutchinson. But we shouldn’t make our nation’s policy in a vacuum, that is, bowing to the needs of special interest groups — sensing “which way the wind blows.” When considering everything and everyone, the PTC paid to producers of power generated from wind is a bad policy. We ought to respect Pompeo for taking a principled stand on this issue, instead of pandering to the folks back home.

    Kerr is right about one claim made in his op-ed: The PTC for wind power is not quite like the Solyndra debacle. Solyndra received a loan from the Federal Financing Bank, part of the Treasury Department. Had Solyndra been successful as a company, it would likely have paid back the government loan. This is not to say that these loans are a good thing, but there was the possibility that the money would have been repaid.

    But with the PTC, taxpayers spend with nothing to show in return except for expensive electricity. And spend taxpayers do.

    Kerr, in an attempt to distinguish the PTC from wasteful government spending programs, writes the PTC is “actually an income tax credit.” The use of the adverb “actually” is supposed to alert readers that they’re about to be told the truth. But truth is not forthcoming from Kerr — there’s no difference. Tax credits are government spending. They have the same economic effect as “regular” government spending. To the company that receives them, they can be used — just like cash — to pay their tax bill. Or, the company can sell them to others for cash, although usually at a discounted value.

    From government’s perspective, tax credits reduce revenue by the amount of credits issued. Instead of receiving tax payments in cash, government receives payments in the form of tax credits — which are slips of paper it created at no cost and which have no value to government. Created, by the way, outside the usual appropriations process. That’s the beauty of tax credits for big-government spenders: Once the program is created, money is spent without the burden of passing legislation.

    If we needed any more evidence that PTC payments are just like cash grants: As part of Obama’s ARRA stimulus bill, for tax years 2009 and 2010, there was in effect a temporary option to take the federal PTC as a cash grant. The paper PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United States explains.

    Astonishingly, the wind PTC is so valuable that wind power companies actually pay customers to take their electricity. It’s called “negative pricing,” as explained in Negative Electricity Prices and the Production Tax Credit:

    As a matter of both economics and public policy, no government production tax subsidy should ever be so large that it creates an incentive for a business to actually pay customers to take its product. Yet, the federal Production Tax Credit (“PTC”) for wind generation is doing just that with increasing frequency in electricity markets across the United States. In some “wind-rich” regions of the country, wind producers are paying grid operators to take their generation during periods of surplus supply. But wind producers more than make up the cost of the “negative price” payment, because they receive a $22/MWH federal production tax credit for every MWH generated.

    In western Texas since 2008, wind power generators paid the electrical grid to take their electricity ten percent of the hours of each day.

    Once we recognize that tax credits are the same as government spending, we can see the error in Kerr’s argument that if the PTC is ended, it is the same as “a tax increase on utilities, which, because they are regulated, will pass on to consumers.” Well, government passes along the cost of the PTC to taxpayers, illustrating that there really is no free lunch.

    Kerr attacks Pompeo for failing to “crusade” against two subsidies that some oil companies receive: Intangible Drilling Costs and the Percentage Depletion Allowance. These programs are deductions, not credits. They do provide an economic benefit to the oil companies that can use them (“big oil” can’t use percentage depletion at all), but not to the extent that tax credits do.

    Regarding these deductions, last year Pompeo introduced H. Res 267, titled “Expressing the sense of the House of Representatives that the United States should end all subsidies aimed at specific energy technologies or fuels.”

    In the resolution, Pompeo recognized the difference between deductions and credits, the latter, as we’ve seen, being direct subsidies: “Whereas deductions and cost-recovery mechanisms available to all energy sectors are different than credits, loans and grants, and are therefore not taxpayer subsidies; [and] Whereas a deduction of costs and cost recovery with respect to timing is not a subsidy.”

    Part of what the resolution calls for is to “begin tax simplification and reform by eliminating energy tax credits and deductions and reducing income tax rates.”

    Kerr wants to deflect attention away from the cost and harm of the PTC. Haranguing Pompeo for failing to attack percentage depletion and IDC with the same fervor as tax credits is only an attempt to muddy the waters so we can’t see what’s happening right in front of us. It’s not, as Kerr alleges, “playing Clintonesque games of semantics with us.” As we’ve seen, Pompeo has called for the end of these two tax deductions.

    If we want to criticize anyone for inconsistency, try this: Kerr criticizes Pompeo for ignoring the oil and gas deductions, “which creates a glut in natural gas that drives down the price to the lowest levels in a decade.” These low energy prices should be a blessing to our economy. Kerr, however, demands taxpayers pay to subsidize expensive wind power so that it can compete with inexpensive gas. In the end, the benefit of inexpensive gas is canceled. Who benefits from that, except for the wind power industry? The oil and gas targeted deductions also create market distortions, and therefore should be eliminated. But at least they work to reduce prices, not increase them.

    By the way, Pompeo has been busy with legislation targeted at ending other harmful subsidies: H.R. 3090: EDA Elimination Act of 2011, H.R. 3994: Grant Return for Deficit Reduction Act, H.R. 3308: Energy Freedom and Economic Prosperity Act, and the above-mentioned resolution.

    I did notice, however, that Pompeo hasn’t called for the end to the mohair subsidy. Will Kerr attack him for this oversight?

    Finally, Kerr invokes the usual argument of government spenders: Cut the budget somewhere else. That’s what everyone says.

    Creating entire industries that exist only by being propped up by government subsidy means that we all pay more to support special interest groups. A prosperous future is best built by relying on free enterprise and free markets in energy, not on programs motivated by the wants of politicians and special interests. Kerr’s attacks on Pompeo illustrate how difficult it is to replace cronyism with economic freedom.

  • Kansas school efficiency task force

    Kansas Governor Sam Brownback has been criticized for the composition of a school efficiency task force that he recently created.

    Accountants dominate the membership. Critics wonder why there aren’t any educators as members. I would remind these critics that educators — those already running the Kansas public school system — are free to implement efficiency measures any time they want. They don’t need permission or a task force.

    We’ve seen, however, that efficiency and controlling spending are hardly the concerns of the school spending establishment. The standard argument — or complaint — is that more spending is needed. Everything is underfunded, according to them.

    The school spending establishment isn’t willing to have an honest discussion of school spending. They present base state aid per pupil as the primary benchmark or indicator of school spending, despite the fact that it is only a small part of the Kansas school spending formula and disguises the overall level of spending. Which is that in 2012, Kansas schools spent more money than ever before.

    There’s also been the controversy over school fund balances. An outside group brought this issue to the attention of Kansans, and the school spending establishment resisted at every step. Just recently it was discovered that there were errors in the tabulation of Kansas school test scores. An outside group discovered this error, too.

    Kansas school districts have also been reluctant to participate in school efficiency audits conducted by Kansas Legislative Division of Post Audit.

    We further find that citizens are generally uninformed about the level of school spending. Amazingly, legislators and school board members are sometimes uninformed or misinformed, too.

    Even worse, school administrators contribute to the confusion — or is it obfuscation — surrounding school spending. A KSN Television news story reported that Newton school superintendent John Morton thinks it is “a real concern” when citizens have access to data about government spending. This is a common reaction by government bureaucrats and officials. They prefer to operate without citizen scrutiny.

    Furthermore, according to the KSN story: “[Morton] says although numbers may say schools receive $12,000 per student, only about $4,000 makes its way to daily student learning.”

    It’s astonishing that of the roughly $12,000 that Kansas schools receive for each student, only $4,000 — according to Morton — makes its way to “daily student learning.”

    May I ask: Where does the other $8,000 go?

    These are the types of questions for which the school efficiency task force may seek answers. The school spending establishment has had its chance, and it has failed to even notice the problem.

  • The Lux in Wichita: Taxpayer funding of lifestyle choices

    This week the Wichita City Council approved the issuance of industrial revenue bonds to The Lux, a luxury real estate development in downtown Wichita. That action, along with historic preservation tax credits, results in taxpayers paying for the lifestyle choices of a relative few.

    IRBs are confusing. Many people criticize them on the basis that the city shouldn’t be lending money. That’s not what happens. Someone else buys the bonds, in effect making the loan. The city is not at risk if the bonds are not repaid.

    Instead, the sole purpose of these IRBs is to provide a sales tax exemption on the purchase of construction materials and perhaps other material. City documents didn’t provide an estimate of the tax savings, but it could be hundreds of thousands of dollars.

    By exempting this project from paying sales taxes, others have to make up the difference. While we may rationalize this tax forgiveness by saying “look at the nice new building we’re going to have,” the city’s actions will reduce spending and investment elsewhere.

    Furthermore, the sales tax exemption is not the only form of taxpayer subsidy this project will receive. The historic preservation tax credits approved for this the project are worth millions. These credits are equal to grants of cash. They are a cost to government that taxpayers must bear.

    When other taxpayers have to bear the cost of incentives, other spending and investment is reduced. While the spending on incentives is concentrated and easy to see — there will be groundbreaking and ribbon-cutting ceremonies to make sure we don’t miss it — the missing spending and investment is dispersed. The missing spending and investment is difficult to see. But it is every bit as real as this project.

    In fact, this missing spending and investment is more valuable than government spending on this project. That’s because when people spend and invest on their own, they choose what is most important to them, not what is important to politicians and bureaucrats. This is a special problem in Wichita, where the mayor and city council members have a history of awarding over-priced no-bid contracts to their campaign contributors.

    Sometimes these subsidies are justified by the claim that renovating historic buildings is more expensive than new construction. If that’s true, we have to recognize that investing in, or living in, a historic building is a choice. The people who make these choices should pay themselves, just like we expect others to pay for the characteristics of the housing they choose. Likewise, building a home with granite kitchen counter tops and marble floors in the bathrooms is more expensive than a plainer home. These premium features are chosen voluntarily by the homeowner, and it is right and just that they alone should pay for them.

    We should recognize historic buildings for what they are: a premium feature or amenity whose extra cost should be born solely by those who chose to own them or rent them. There’s no difference between these premium features and choosing to live in a historic building. Those who desire them choose them voluntarily, and should pay their full cost. Forcing everyone to subsidize this choice is wrong. It’s an example of a special interest gone wild.

    The nature of tax credits

    The confusing nature of tax credits leads citizens to believe that they have no cost to the state or federal government. Tax credits are equivalent to government spending.

    By mixing spending programs with taxation, some are lead to believe that tax credits are not cash handouts. But not everyone falls for this seductive trap. In an article in Cato Institute’s Regulation magazine, Edward D. Kleinbard explains:

    Specialists term these synthetic government spending programs “tax expenditures.” Tax expenditures are really spending programs, not tax rollbacks, because the missing tax revenues must be financed by more taxes on somebody else. … Tax expenditures dissolve the boundaries between government revenues and government spending. They reduce both the coherence of the tax law and our ability to conceptualize the very size and activities of our government. (The Hidden Hand of Government Spending, Fall 2010)

    The use of tax credits to pay for economic development incentives leads many to believe that what government is doing is not a direct subsidy or payment. In order to clear things up, maybe we should require that government write checks instead of issuing credits.

    Indeed, if government issued checks to real estate developers, citizens would look at things differently. They’d wonder why they’re subsidizing the construction of expensive apartments and condos. They’d be angry. Using a semi-mysterious mechanism like tax credits shrouds the true economic transaction taking place.

    These expenditures of tax money — being issued as credits rather than appropriations — go through a different process than most expenditures of taxpayer money. Recently some have started to use the word “tax appropriations” to describe tax credits. These expenditures don’t go through the normal legislative process as do most appropriations.

    It’s time to recognize these historic preservation tax credits as payments to a special interest group. Unfortunately, as with most special interest groups, the group receiving the payment — tax credits in this case — has an extreme interest in the matter. They benefit greatly. But to the rest of the populace — well, does it really matter to them? John Stossel explains the problem like this:

    The Public Choice school of economics calls this the problem of concentrated benefits and dispersed costs. Individual members of relatively small interest groups stand to gain huge rewards when they lobby for government favors, but each taxpayer will pay only a tiny portion of the cost of any particular program, making opposition pointless.

    That’s the situation we face with the historic preservation tax credits. A few real estate developers will enrich themselves at taxpayer expense. Well-to-do renters will get a better deal. To everyone else, it’s just another way that government nickels and dimes us to death.

  • Government interventionism ensnares us all

    Are those who call for an end to government subsidy programs hypocrites for accepting those same subsidies? This is a common criticism, said to undermine the argument for ending government subsidy programs.

    Rather, the existence of this debate is evidence of the growing pervasiveness of government involvement not only in business, but in our personal lives as well.

    Recently the Wichita Eagle printed an op-ed critical of Charles G. Koch, chairman of the board and CEO of Wichita-based Koch Industries. The target of the criticism was Koch’s recent article in the Wall Street Journal titled “Corporate Cronyism Harms America” with the subtitle “When businesses feed at the federal trough, they threaten public support for business and free markets.”

    Koch stated one of the problems as this: “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.”

    Even those who are opposed to government interventions in markets find themselves forced to participate in government subsidy programs. Referring to a recent Wichita incentive program for commercial real estate, Wichita developer Steve Clark said: “Once you condition the market to accept these incentives, there’s nothing someone else can do to remain competitive but accept them yourself. Like the things we’re working on with the city, now we have to accept incentives or we’re out of business.”

    Koch Industries, as a refiner of oil, blends ethanol with the gasoline it produces in order to meet federal mandates that require ethanol usage. Even though Koch opposes subsidies for ethanol — as it opposes all subsidies — Koch accepted the subsidies. A company newsletter explained “Once a law is enacted, we are not going to place our company and our employees at a competitive disadvantage by not participating in programs that are available to our competitors.” (The tax credit subsidy program for ethanol has ended, but there is still the mandate for its use.)

    Walter Williams, as he often does, recognizes the core of the problem: “Once legalized theft begins, it pays for everybody to participate.” The swelling ranks of bureaucrats preside over this.

    So should people who have built businesses — large or small — sit idle as government props up a competitor that could put them out of business?

    While Williams says not only does it pay to participate, the reality is that it is often necessary to participate in order to stay in business. This is part of the insidious nature of government interventionism: A business can be humming along, earning a profit by meeting the needs of its customers, when a government-backed competitor enters the market. What is the existing business to do? Consent to be driven out of business, just to prove a point?

    So existing firms are often compelled to participate in the government program, accepting not only subsidy but the strings that accompany. This creates an environment where government intervention spirals, feeding on itself. It’s what we have today.

    Not only does this happen in business, it also happens in personal life. I am opposed to the existence of the Social Security Administration and being forced to participate in a government retirement plan. Will I, then, forgo my social security payments when I become eligible to receive them?

    If the government hadn’t been taking a large share of my earnings for many years, I’d be in a better position to provide for my own retirement. So as a practical matter, many people need their benefits, and rightly are entitled to them as a way to get back at least some of what they paid. The harmful effect is that government, by taking away some of our capacity — and reducing the initiative — to save for ourselves, creates more dependents.

    (It might be a little different if our FICA contributions were in individual “lock boxes,” invested on our behalf. But that isn’t the case.)

    Often those who advocate for reduced government spending are criticized when they may be awarded government contracts. But if the contracts are awarded competitively and not based on cronyism, the winning company is saving taxpayer money by providing products or services inexpensively. This is true even when the government spending is ill-advised or wasteful: If government is going to waste money, it should waste it efficiently, I suppose.

    Contrast this behavior with that of some Wichita businesses and politicians. They make generous campaign contributions to city council members, and then receive millions in subsidy and overpriced no-bid contracts that bleed taxpayers. In Wichita this is called “economic development.”

    As Koch Industries’ Melissa Cohlmia notes in a letter to the Wichita Eagle, Charles Koch, along with David Koch, are examples of an unfortunately small group of businessmen and women who are willing to stand up and fight for capitalism and economic freedom. It’s an important fight. As Charles Koch wrote in his recent article: “This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.” The danger, he writes, is “Put simply, cronyism is remaking American business to be more like government. It is taking our most productive sectors and making them some of our least.”

    Koch favors ending all subsidies

    By Melissa Cohlmia, Corporate communication director, Koch Companies Public Sector

    Kevin Horrigan’s commentary was misleading and a disservice to readers (“GOP acts as bellhop for corporations, Kochs,” Sept. 21 Opinion).

    Yes, Koch Industries benefits from subsidies — a fact Charles Koch stated in his Wall Street Journal commentary. This is not hypocrisy, as Horrigan claimed. Rather, where subsidies exist, any company that opts out will be at a disadvantage and often driven out of business by competitors with the artificial advantage. This perverse incentive drives out companies that are in favor of sound fiscal policy and opposed to subsidies, and favors inefficient companies that are dependent on subsidies.

    Koch’s long-standing position is to end to all subsidies, which distort the market and ultimately cost taxpayers billions of dollars.

    Horrigan faulted Koch for not mentioning the company’s lawful contributions to “conservative politicians and causes.” Charles Koch has publicly advocated for and supported free-market causes for decades. This is a First Amendment right that people and groups across the political spectrum also exercise.

    The columnist falsely claimed that Koch has funded anti-labor organizations. About 15,000 of our 50,000 U.S employees are represented by labor unions. We have long-standing, mutually beneficial relationships with these unions.

    In this time when far too few speak up for economic freedom, Charles Koch challenges out-of-control government spending and rampant cronyism that undermines our economy, political system and culture. For this, he should be lauded, not vilified.