Voice For Liberty

Tag: Interventionism

  • Wichita economic development not being managed

    The Wichita Eagle has reported that Wichita has increased its granting of property tax exemptions in recent years. (Wichita doubles property tax exemptions for businesses, October 20, 2013) Buried in the story is the really important aspect of public policy. In his reporting, Bill Wilson wrote:

    The Eagle asked the city last week for an accounting of the jobs created over the past decade by the tax abatements, a research project that urban development staffers have yet to complete.

    “It will take us some time to pull together all the agenda reports on the five-year reviews going back to 2003. That same research will also reveal any abatements that were ‘retooled’ as a result of the five-year reviews,” city urban development director Allen Bell said. “I can tell you that none of the abatements were terminated.”

    wichita-economic-development

    One might have thought that the city was keeping records on the number of jobs created on at least an annual basis for management purposes, and would have these figures ready for immediate review. But apparently that isn’t the case.

    We need to recognize that because the city does not have at its immediate disposal the statistics about job creation, it is evident that the city is not managing this effort. Or, maybe it just doesn’t care.

    This is a management problem at the highest level. In January when the city council awarded city manager Robert Layton a large raise, the praise from council members was effusive. This means one of several things: (a) that the mayor and city council have not asked for these job creation numbers, or (b) city council members don’t care about the numbers, or (c) they’re not interested in knowing the numbers. There could be other explanations, but all point to a lack of bureaucratic management and political oversight.

    I wonder why the city officials didn’t explain that according to their analysis and way of thinking, these tax abatements don’t have a cost. When presented to the council, each abatement opportunity is generally accompanied by a benefit-cost analysis that purports to show that the city, county, school district, and state gain more in tax revenue than they forego from the abatement. Does this extra government revenue create jobs?

    In any case, the number of jobs stemming from our economic development efforts is small. In his State of the City Address for 2012, Mayor Carl Brewer said that the city’s efforts in economic development had created “almost 1000 jobs.” While that sounds like a lot of jobs, that number deserves context. According to estimates from the Kansas Department of Labor, the civilian labor force in the City of Wichita for December 2011 was 192,876, with 178,156 people at work. This means that the 1,000 jobs created accounted for from 0.52 percent to 0.56 percent of our city’s workforce, depending on the denominator used. This minuscule number is dwarfed by the normal ebb and flow of other economic activity. (The mayor didn’t mention job creation figures in his 2013 address.)

    The case of InfoNXX

    Here’s an example of property tax abatements granted for which the city received little in return. In 2005, with great fanfare, the city announced that its economic development recruitment efforts had landed InfoNXX, an operator of call centers. The council agenda report of November 15, 2005 recommended that the council approve a letter of intent for tax abatements. The report stated this:

    The Greater Wichita Economic Development Coalition has worked with a national site consultant to recruit a new company to Wichita. InfoNXX, Inc., major provider of telephone directory assistance and enhanced information services to leading communications companies, businesses and consumers located principally in the United States, United Kingdom, France, and Italy. As a result of the recruitment effort, InfoNXX will locate a large customer service center in the former MCI Building, near Rock Road and K-96 in northeast Wichita, and hire over 900 customer care representatives. As an economic development incentive, the City offered InfoNXX Industrial Revenue Bonds (IRBs) and property tax abatement on equipment and furnishings, subject to City Council approval.

    RECOMMENDED ACTION: Approve a Letter of Intent to InfoNXX Inc. for Industrial Revenue Bonds in an amount not-to-exceed $6 million, subject to the Letter of Intent conditions, for a term of six-months, approve a 100% tax abatement on all bond-financed property for an initial five-year period plus an additional five years following City Council review, and authorize the application for a sales tax exemption on bond-financed property.

    On December 13, 2005 the council approved the ordinance granting the tax abatements.

    Fast forward to the February 15, 2011 council agenda packet. The five year initial property tax abatement granted in 2005 was over, and the council could extend it for another five years if the committed goals had been met. The agenda report gave this summary for capital investment: “Purchase furniture, fixtures and equipment for a capital investment of $6 million.” Results, according to city documents, were “Invested $7,331,379 million [sic] in FF&E.”

    For job creation, the 2005 commitment was “Create 944 new jobs in five years.” Results, according to city documents, were “Created 870 new jobs; current job level is 185.”

    InfoNXX was short of its job creation commitments, but the city used a loophole to grant a one-year extension of the tax abatement. That one-year extension was never the subject of further consideration, as InfoNXX changed its name, and in January 2012 closed the Wichita facility that was the subject of these incentives.

    It’s unfortunate for Wichita and the InfoNXX employees that the facility closed. The important public policy consideration is that we learn from this. So, when Wichita counts the number of jobs created, does it adjust for short-lived jobs like these?

    The answer, I believe, is no. We don’t adjust our job creation statistics, and we don’t learn.

    gwedc-office-operations

    In fact, we don’t even keep current. GWEDC — that’s the Greater Wichita Economic Development Coalition credited with recruiting InfoNXX to Wichita — doesn’t update its website to reflect current conditions. InfoNXX closed its facility in Wichita in 2012, and as we saw above, city documents said that at its peak the company employed 870 in Wichita. As of today, here’s what GWEDC says on a page titled Office Operations:

    Wichita hosts over a dozen customer service and processing centers – including a USPS Remote Encoding Center (985 employees), InfoNXX (950), T-Mobile (900), Royal Caribbean (700), Convergys (600), Protection One (540), Bank of America (315) and Cox Communications (230.) (emphasis added)

    So the official Wichita-area economic development agency proclaims the existence of a company that no longer exists in Wichita, and claims a job count that the company never achieved. This is beyond careless negligence. This is malpractice.

    The USPS Remote Encoding Center mentioned? It’s being closed this year.

    Going forward

    In his State of the City address for 2013 the Wichita mayor lamented the fact that Wichita has no dedicated funding source for economic development. It’s likely that Wichitans will be asked to approve increased taxes for economic development, as well as for many other things we want like a new central library, new water and sewer pipes, improved public transit, and downtown development.

    But before Wichita officials ask for more taxes so there can be more spending, they need to convince us that they care about measuring and managing results. They haven’t shown this so far.

  • For Wichita, more districts, more taxes, more bureaucracy

    red-tape-person-upset

    Tomorrow the Wichita City Council will consider formation of a Tourism Business Improvement District. Actually, the council will formation of a planning committee to determine boundaries, parameters, budgets, and how to fund the budget.

    The impetus behind the TBID, according to city documents, is “Go Wichita has proposed that a TBID be created to enhance its marketing efforts.” Go Wichita is the Wichita Convention and Visitors Bureau. The source of its funds, again from city documents: “A fee is assessed to each of these properties based on room night sales. This fee is usually determined as a percentage of the room rate or as a flat dollar amount per night. The funds collected in the district are spent exclusively for the benefit of the hotels and are usually programmed by the local convention and visitor’s bureau.”

    What will be done with the money that is raised? “The funds generated from the district would be used to increase convention advertising in key meeting planner publications, convention sales initiatives in key markets and digital advertising. Additionally, a significant portion of the new funds would be earmarked for leisure marketing efforts.”

    Tomorrow’s action contemplated by the council is just the formation of a planning committee, not he actual TBID. So there’s still time to think this through. Here’s what I hope the city considers:

    First, is there any way to distinguish this “fee” from a tax? A tax that will probably be passed along to visitors to Wichita?

    Second: Is there any way to characterize this as anything other than an expansion of bureaucracy in Wichita? I really wonder if the hotel operators know what they’re getting themselves mixed up in. If the hotels feel they need more marketing firepower to attract business to Wichita, I’m sure they’d do better to form a voluntary association to undertake this task. This would be nimble and flexible in way that a government bureaucracy can never be. But who will stand up to this expansion of our tourism bureaucracy? A hotel owner that wishes to receive referrals? Like most government bureaucrats, those who will run this new program “profit” from increasing their power and influence, and by expansion of their budgets, perks, and staffs. They won’t look favorably on those who don’t go along with the program.

    Then: The members of the committee are appointed by the mayor. Hotel owners: Do you want Carl Brewer to be in charge of appointing people to oversee something important to your business?

    Finally, the people of Wichita need to realize that pursuit of convention and tourism business is not the wisest path to follow. Wall Street Journal reporting from last year concluded with:

    “Mr. Sanders, the University of Texas professor, predicts the glut of convention space will only get worse, because a number of cities continue to push expansions. He blames cities’ hired consultants, who he said predict “all these people are going to come and do wonderful things to your economy.”

    “But the problem is they aren’t coming anymore, because there are lots of other convention centers … that desperately want that business,” he said. “So Atlanta steals from Boston, Orlando steals from Chicago and Las Vegas steals from everywhere.”

    The “Mr. Sanders” referred to in the Journal reporting is Heywood T. Sanders, who is professor in the Department of Public Administration at the University of Texas at San Antonio. He is a noted critic of public efforts to chase convention business for economic development. His 2005 report report Space Available: The Realities of Convention Centers as Economic Development Strategy was published by the left-leaning think tank The Brookings Institution. It provides a look at the realities of the convention trade.

    Sanders writes that convention center business has been on the decline, and it started well before the terrorist attacks in 2001. In a section titled “Trends: Portrait of a Faltering Industry” we can read that attendance is down, exhibit space demand is down, and hotel room demand in cities has fallen too.

    The author notes that the decline in convention business is a structural decline: “[Reasons for decline] are the product of industry consolidation, particularly in the hardware and home improvement industry, reductions in business travel in the face of increasing cost and difficulty, and alternative means of conveying and gathering information.” These are not cyclical trends that are likely to reverse in the future.

    Despite shrinking demand, cities are building more convention space: “Despite diminishing demand, the last few years have seen a remarkable boom in the volume of exhibit space in U. S. convention centers.” The building of larger convention centers in many cities means that more cities are able to host the larger events, or, cities can now host several smaller events simultaneously. The result, says the author, is fierce competition for both large and small events.

    What about the costs? The author introduces a section on costs with: “The studies that justify both the new center space and the publicly-owned hotels paint a picture of tens of thousands of new out-of-town visitors and millions of dollars in economic impact. Despite that rhetoric, these projects carry real risks and larger potential costs, particularly in an uncertain and highly competitive environment.”

    The convention center is just the start of costs: “A new [convention] center is thus often followed by a subsidized or fully publicly-owned hotel.” Wichita, of course, has a fully publicly-owned hotel, the large 303-room Hyatt. Now Wichita has been providing, and will probably continue, subsidy programs to other downtown hotels. None of the hotels alone provide as many rooms as Wichita convention planners say the city needs, so we are likely to see proposals for a subsidies to hotels continue.

    In fact, until Wichita has as many hotel rooms as our nation’s largest convention cities have, there is always a larger goal — a next step on the ladder. Can you imagine our city leaders ever proclaiming that we have enough hotel rooms in downtown Wichita?

    Other things Sanders says that are likely to be proposed are a sports arena. Wichita, of course, recently opened a taxpayer-financed and government-owned facility, the Intrust Bank Arena. After a brief honeymoon fling with good financial performance, the arena has settled down to a less-acceptable level of revenue production. Residents of Sedgwick County, which owns the arena, should be cautioned that the financial results hailed by the county don’t include depreciation costs, so the true financial picture is not anywhere near complete.

    Entertainment, retail, and cultural attractions are often proposed, Sanders writes, and Wichita downtown planners have indicated their desire for these.

    The conclusion to this paper describes Wichita’s current situation and foreshadows what is likely for the future of Wichita:

    But if taxing, spending, and building have been successful, the performance and results of that investment have been decidedly less so. Existing convention centers have seen their business evaporate, while new centers and expansions are delivering remarkably little in terms of attendance and activity.

    What is even more striking, in city after city, is that the new private investment and development that these centers were supposed to spur — and the associated thousands of new visitors — has simply not occurred. Rather, city and convention bureau officials now argue that cities need more space, and more convenience, to lure those promised conventions. And so underperforming convention centers now must be redeemed by public investment and ownership of big new hotels. When those hotels fail to deliver the promises, then the excuse is that more attractions, or more retail shops, or even more convention center space will be needed to achieve the goal of thousands of new visitors.

    We already see some of this excuse-making taking place: Private investment in downtown Wichita has been weak, it is said, because there’s not yet a critical mass of development. It is promised by downtown boosters that given enough public money, critical mass will be achieved, and private investment will rush in. But since there is no definition of what constitutes critical mass, this excuse is always available to justify failure.

  • WichitaLiberty.TV September 1, 2013

    WichitaLiberty.TV logo

    In this episode of WichitaLiberty.TV, host Bob Weeks presents an analysis of the delinquent real estate tax list and wonders why our institutions don’t provide this simple enhancement. Then, a review of the first two chapters of “Economics in One Lesson” with application to situations in Wichita. Finally, Amanda BillyRock illustrates Chapter 3: Blessings Of Destruction, and examples in Wichita are noted. Episode 11, broadcast September 1, 2013. View below, or click here to view on YouTube.

  • Wichita City Council makes an economic decision

    Last year the Wichita City Council was faced with a decision regarding a program designed to stimulate the sales of new homes. Analysis revealed that even though the city had an opportunity to make an investment with a purportedly high return on investment, it would be better off, dollar-wise, if it did not make the investment. What did the city council do? The following video explains the decision the council faced. View below, or click here to view in high definition on YouTube. More information is at Wichita new home tax rebate program: The analysis and Wichita HOME program has negative consequences.

  • Seen and unseen on display

    clouds-164757_1280

    The lesson of the book “Economics in One Lesson” by Henry Hazlitt is this: “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

    (The Ludwig von Mises Institute has published an edition of this book which is available at no cost at its website; click here. Amanda BillyRock has illustrated most of the chapters in video. Click here for the playlist.)

    Looking beyond what we see at first glance, that’s important. And considering everyone, not just some small group, is important too. You may be familiar with the term “special interest group.” A local example might be the Wichita Area Builders Association, which represents homebuilders. The purpose of groups like this — and I’m sorry to have to single out this group — is to represent their members, and them alone. So last year the Builders Association was able to persuade the Wichita City Council to pass a program that rebates Wichita property taxes on new homes for a few years. This makes it easier to sell these new homes. Homes which are built, of course, by members of the Wichita Area Builders Association.

    Did the city council consider the long term effects of this policy, such as the effect on tax revenue in future years? Did the council consider the “Cash for Clunkers” effect, in which incentive programs induce people to buy now, only to depress sales in later years after the program ends? The answer is either a) No, the council did not consider these effects, or b) The council decided to ignore these effects.

    Then, what about the effect on other groups besides the builders? Did the council consider that by offering savings when buying these select new homes, it likely reduced the appeal and value of all other homes across the city? Did the council consider that these new homes will require services like police and fire protection, but since they don’t contribute property tax, other taxpayers have to pay to provide these services?

    And what about setting another precedent, that when business is not doing well, a special interest group appeals to government for special favors?

    This is an example of the city council considering only the immediate effects of a policy, and also the effects on only a single group — the self-interested homebuilders. Things like this happen all the time.

    Remember how Hazllitt said these groups will argue “plausibly and persistently?” That happened. As an example, Wichita State University economists prepared an analysis showing that this rebate program benefited the city. Did that analysis consider the long-term effects or only the immediate effects of the policy? Did that analysis consider the effects on all groups? I’m afraid that if we could look under the hood of these models, we’d find that they suffer from the problems Hazlitt warns about.

    And the president of the Builders Association argued persuasively before the council. That’s an example of when Hazlitt wrote about a special interest group: “It will hire the best buyable minds to devote their whole time to presenting its case.”

    Hazlitt told us what we need to do in these cases, writing: “In these cases the answer consists in showing that the proposed policy would also have longer and less desirable effects, or that it could benefit one group only at the expense of all other groups.”

    broken-window-glassSpecial interest groups expend lot of effort to get government to look at the seen and skip the unseen. That’s a reference to the famous parable of the broken window from chapter two of “Economics in One Lesson.” Ahe child who threw a rock through the window of the bakery. The crowd that gathered around the broken window: Someone suggested that the damage is actually a good thing, because the windowmaker now has work to do and earns money. And the windowmaker in turn will spend his new income somewhere else, and so forth. Economic development professionals who make arguments for subsidies to business call this the multiplier effect. It creates what they call indirect impacts.

    A few years ago in an effort to drum up taxpayer subsidies for arts, a national organization — a special interest group — made this argument:

    paint-bucket

    A theater company purchases a gallon of paint from the local hardware store for $20, generating the direct economic impact of the expenditure. The hardware store then uses a portion of the aforementioned $20 to pay the sales clerk’s salary; the sales clerk respends some of the money for groceries; the grocery store uses some of the money to pay its cashier; the cashier then spends some for the utility bill; and so on. The subsequent rounds of spending are the indirect economic impacts.

    Thus, the initial expenditure by the theater company was followed by four additional rounds of spending (by the hardware store, sales clerk, grocery store, and the cashier). The effect of the theater company’s initial expenditure is the direct economic impact. The subsequent rounds of spending are all of the indirect impacts. The total impact is the sum of the direct and indirect impacts.

    That is the same argument made to excuse the destruction of the broken window in the bakery. Doesn’t this sound plausible? But Hazlitt, echoing Bastiat before him, notes this: The baker was going to buy a suit of clothes, and buying that suit would set off its own chain of economic activity.

    But now he must spend that money on fixing the broken window. The new window is what is seen. The unbought suit of clothes is more difficult to see. It is the unseen.

    If the window was not broken, the baker has a functional window and a new suit of clothes. After the window is broken, however, all the baker has is a replacement window. No new suit of clothes is purchased.

    As Hazlitt summarized: “The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new ’employment’ has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.”

    In the case I cited above, it’s easy to see the benefit granted to the homebuilders. But the economic activity that does not take place because of the diversion of resources to the homebuilders? Where is that? It is unseen.

    When the theater company spends $20 of taxpayer-provided money to buy paint: Where did that $20 come from? Isn’t it possible that a homeowner might have bought the same gallon of paint, but now is not able to because he must pay taxes to support the theater company? It’s easy to see the theater production with its taxpayer-funded painted set. It’s not easy to see the house that sits unpainted for a year to pay for the theater company’s paint. That is the seen and unseen.

  • Incentive program ignores ‘One Lesson’

    City of Wichita logo

    Recording an episode of WichitaLiberty.TV on the topic of “Economics in One Lesson” reminded me of a story I reported last year. The lesson is “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” A program implemented last year in Wichita provides examples of how governments ignore this lesson.

    A document released by the City of Wichita casts strong doubt on the wisdom of a new home property tax rebate program. The document also lets us know that city staff are not being entirely honest with the citizens of Wichita.

    The new home tax rebate program, according to city documents prepared for the February 14, 2012 city council meeting, provides free Wichita city property taxes to buyers of qualifying new homes: “To promote additional new home construction and new home ownership, the City of Wichita, after extensive coordination and discussion with WABA, is proposing a New HOME (New Home Ownership Made Easy) Program. The program will provide a 5 year rebate of City property taxes for eligible property. To be eligible, property must be in a participating development, with all taxes through 2010 (general and special assessment) current in the development. In addition, to be eligible, the special assessment and general taxes must be paid current at the date of sale and closing of a property.”

    WABA is The Wichita Area Builders Association , a trade association for home builders. The document recently released is a study or analysis of the program dated February 1 from Wichita State University Center for Economic Development and Business Research.

    During the period of the tax rebate program, the study estimates that 787 homes would be built and sold even if there was no rebate program. It is assumed that 1,000 homes would be sold during that period with the rebate program, but that is not certain.

    Following is an excerpt from a table that presents the results of analysis. The benefits and costs are to the City of Wichita General Fund. Benefits are, according to the study, “sales tax revenues, from construction worker spending and construction material purchases, and property tax revenues.” The costs are the lost revenue due to the tax rebates.

                       No Incentives    Incentives
Public Benefits       $2,364,429    $3,004,315
Public Costs                  $0    $2,032,312
Net Public Benefits   $2,364,429      $730,457
Return on Investment      N/A           1.48

    Some, undoubtedly, will focus on the return on investment (ROI) ratio of 1.48 if the tax rebate incentive is used. (There is no such ratio if there are no incentives, as there is no investment.) The study explains the ratio this way: “for every dollar invested, the city will receive the initial dollar plus an additional 48 cents in return.”

    That sounds like a good deal, and the ratios like this that are calculated by CEDBR are often used by the city to justify incentives.

    But there is another way to look at this deal: the net value to the city. In this case, if the city doesn’t offer the incentives, the benefits to the city are $2,364,429. If incentives are used, the benefits are $730,457. This means that if the city does nothing, it is $1,633,972 to the better.

    That’s right: Even though the city has an opportunity to make an investment with a purportedly high ROI, it would be better off, dollar-wise, if it did not make the investment.

    The analysis concludes that with the tax rebate program, there will be more construction jobs. But, caution the study authors: “Please note, the jobs supported in 2012 and 2013 are not net new jobs — they are jobs that already exist. The analysis simply identifies a funding stream for these jobs.”

    In a separate but similar analysis dated March 22, 2012 prepared for Sedgwick County, some limitations of the analysis were itemized, as follows:

    It was beyond the scope of this analysis to account for:

    • Changes in household consumption due to a change in homeownership.
    • The impact of renters who become owners. The program would likely encourage renters to become homebuyers. As these individuals leave the rental market, there may be adverse effects, including falling rental rates.
    • An increase in demand. Although an increase in new home purchases, above existing demand, is likely if incentives are offered, the actual increase in demand has not been quantified.
    • Any increase in demand that offsets future home purchases. It is likely that any increase in new home purchases will simply offset future home purchases as seen in the national Cash for Clunkers program.
    • A change in the price of new homes due to additional supply or higher demand.
    • A fall in home prices, or the associated tax collections, from existing homes. There is a strong likelihood that the increased demand in new homes could lower the value of existing homes.
    • Sunk costs. All costs associated with the creation of a new development, including specials, are viewed as sunk costs. Because they have already occurred, these sunk costs are not included in the analysis.
    • Increased cost of public services. Incentives provided to rural areas could increase public costs as new services are required, including roads, sewer, fire and the like. These increased costs are location specific and not included in the analysis.
    • Cost associated with not providing incentives. The costs associated with a poor new home market have not been analyzed. Without incentives, new home purchases are expected to be lower. This could have negative consequences to builders, developers and taxing entities.

    Some of these problems I presented to the city council in my testimony delivered at the February 14th council meeting. Specifically, I warned council members of the devaluing of existing homes, the “cash for clunkers” effect, the costs of providing city services to homes that aren’t contributing property tax to pay for them, and the question of how much new activity will be induced: “Related to this is the question as to how much new activity this program will induce. Often government takes credit for all economic activity that takes place. This ignores the economic activity that was going to take place naturally — in this case, new homes that are going to be built even without this subsidy program … But, the city has to give up collecting property tax on all these homes — even the ones that would be built anyway.”

    In the case of a new home property tax rebate program for Sedgwick County, the study concludes that the benefit of the program to the county is negative $1,832,294 — a huge cost.

    Missing candor

    Now that the CEDBR study is released, we can see how city staff failed to present the entire economic impact of the tax rebate program to citizens. Here’s what city staff presented to council members, and by extension, all Wichitans:

    “The Center for Economic Development and Business Research at Wichita State University analyzed the fiscal impact of the proposed New HOME incentive program on the City’s General Fund. The analysis compares the present value cost of incentives to the present value benefits of direct and indirect jobs created and construction expenditures. In this case, a 1.48 to one ratio of benefits-to costs is reported.”

    Every word in this statement is true. But what’s missing is that if the city does nothing, it is $1,633,972 better off.

    City staff had this information. Sources tell me, however, that staff did not present it to council members or the public before the council voted on the program. We are left with this conclusion: City staff presented only the information from the study that promoted the result the city wanted. This is lying by omission.

    This is not the first time city staff has misled the council and the public. Regarding the economic impact of subsidies to the Ambassador Hotel, the city touted a positive cost-benefit ratio to one fund, while ignoring a negative impact to a much larger fund. The difference was a factor of 23 times. Later the city backpedaled, saying that it didn’t intend for downtown projects to be evaluated on the cost-benefit ratio to the debt service fund. See In Wichita, economic development policies are questioned.

    At some time council members and citizens need to demand that someone be held accountable for this behavior. Demands for accountability are not likely to come from the city council, as many members have shown themselves willing to overlook all facts and reason in order to promote their goals. The editorial board of the Wichita Eagle does the same. It remains important for citizens to perform this watchdog function.

    Wichita Eagle reporting on this matter is at Sedgwick County won’t join property tax rebate for new-home buyers.

  • WichitaLiberty.TV August 25, 2013

    WichitaLiberty.TV logo

    In this episode of WichitaLiberty.TV, host Bob Weeks leads viewers through the first two chapters of Henry Hazlitt’s book “Economics in One Lesson,” using cartoons created by Amanda BillyRock. It’s about looking at not only the immediate effects but at the longer effects of any act or policy; and tracing the consequences of that policy not merely for one group but for all groups. Amanda uses the parable of the broken window to illustrate. Then, Bob wonders about an evaluation committee formed by the City of Wichita to vet downtown development partners: Did the committee overlook important information, and why didn’t the city council object as its members had previously? Episode 10, broadcast August 25, 2013. View below, or click here to view on YouTube.

  • Do economic development incentives work?

    Government takes and gives

    Judging the effectiveness of economic development incentives requires looking for the unseen effects as well as what is easily seen. It’s easy to see the groundbreaking and ribbon cutting ceremonies that commemorate government intervention — politicians and bureaucrats are drawn to them, and will spend taxpayer funds to make sure you’re aware. It’s more difficult to see that the harm that government intervention causes.

    That’s assuming that the incentives even work as advertised in the first place. Alan Peters and Peter Fisher, in their paper titled The Failures of Economic Development Incentives published in Journal of the American Planning Association, wrote on the effects of incentives. A few quotes from the study, with emphasis added:

    Given the weak effects of incentives on the location choices of businesses at the interstate level, state governments and their local governments in the aggregate probably lose far more revenue, by cutting taxes to firms that would have located in that state anyway than they gain from the few firms induced to change location.

    On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.

    The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or 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 their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government — providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.

    Following is the full paper, or click here.

  • WichitaLiberty.TV August 18, 2013

    WichitaLiberty.TV logo

    In this episode of WichitaLiberty.TV, host Bob Weeks shows his “Prezi” that illustrates the disregard for the law shown by Wichita’s mayor. Then, Bob walks viewers through a visualization that illustrates the unintended consequences of government intervention at the Wichita Airport. Finally, Bob introduces Henry Hazlitt’s book “Economics in One Lesson,” which will be the topic of future episodes of WichitaLiberty.TV. Episode 9, broadcast August 18, 2013. View below, or click here to view on YouTube.