AFP chief to deliver legislative update. This Friday’s meeting (April 1) of the Wichita Pachyderm club features Derrick Sontag of Americans for Prosperity, Kansas chapter. Sontag will speak about the current session of the Kansas Legislature. This is the last week of the session before a nearly month-long break. For more information click on Wichita Pachyderm Club. … Upcoming speakers include Deputy Public Defender Jama Mitchell on April 8, Kansas Senator Chris Steineger on April 15, Friends University Associate Professor of Political Science Russell Arben Fox on April 22, and Wichita State University Political Scientist Ken Ciboski on April 29.
Tag: Kansas legislature
Articles about the Kansas legislature, both the House of Representatives and the Senate.
Kansas and Wichita quick takes: Tuesday March 29, 2011
Follow-up to Koch profile. A few pieces have provided amplification and commentary on the Weekly Standard profile of Charles and David Koch, notably Politico and Jennifer Rubin in The Washington Post. … Has a secret conspiracy been uncovered by Politico? Groups identified as lined up against the Kochs include a non-profit group titled Brave New Films, Greenpeace, Public Citizen, Common Cause, Ruckus Society, AFSCME (an arm of AFL-CIO), Service Employees International Union, and Center for American Progress with its attack blog ThinkProgress. Asks Post’s Rubin: “[a conspiracy] not of the Kochs but of the left-leaning groups that have mounted a campaign against them. … In other words, groups that purport to be nonpartisan are actually involved in a coordinated effort to smear the Kochs.” … Rubin notes the commonality shared between many of these groups: they receive millions from “foundations controlled by or linked to Soros,” referring to left-wing cause financier and anti-capitalist George Soros. … And are the Koch donations overly generous? Writes Rubin: “Left unsaid in all of this is the degree to which the Kochs’ political giving has been exaggerated. How much do they give? Over the last 20 years, about $11 million. Not chump change for you and me, but kind of stingy actually for billionaires whom the left would have us believe are taking over the American political system. By way of comparison, Duke Energy — the third-largest nuclear power plant operator — has been a major donor to Democrats, including the president. That would be the same Duke Energy that just forked over a $10 million line of credit for a single purpose — the 2101 Democratic Convention. Just the sort of thing Common Cause would be concerned about. After the next conference call with the other members of the Soros gang, I’m sure it’ll get right on it.” … Both articles are worth reading.
The decline of Detroit: a lesson for Wichita? William McGurn in The Wall Street Journal: “Most Americans did not need to be told that Detroit is in a bad way, and has been for some time. Americans know all about white flight, greedy unions and arrogant auto executives. The recent census numbers, however, put an exclamation mark on a cold fact: A once-great American city today repels people of talent and ambition.” How did this happen? McGurn quotes Rev. Robert A. Sirico: “Detroit is a classic example of how a culture that was legendary for enterprise and innovation was slowly eroded by toxic politicization from the 1960s on.” … Later McGurn asks “What happened to this Detroit? In many ways the answer is liberal politics and expanding government.” … Could this happen to Wichita? Our population is not declining. But Wichita has been said to be more dependent on one industry (aircraft manufacturing) than Detroit was on automobile manufacturing. And Wichita government is becoming more liberal — notwithstanding the protests of several self-styled conservative city council members who will soon be leaving office. Increasingly business looks to city hall rather than markets for inspiration and financing. Our mayor, city council members, and bureaucrats want more “tools in the toolbox” for intervening in the economy. … Yes, the devastation seen in Detroit could happen here.
Moran to vote “no” on debt ceiling. United States Senator Jerry Moran, a newly-elected Kansas Republican, has informed President Obama that he won’t vote for an increase in the national debt ceiling. Wrote Moran: “Americans are looking for leadership in Washington to confront the problems of today, not push them off on future generations. To date, you have provided little or no leadership on what I believe to be the most important issue facing our nation — our national debt. With no indication that your willingness to lead will change, I want to inform you I will vote “no” on your request to raise the debt ceiling.” The entire letter from Moran is at I will vote “No.”
Golden geese on the move. Thomas Sowell: “The latest published data from the 2010 census show how people are moving from place to place within the United States. In general, people are voting with their feet against places where the liberal, welfare-state policies favored by the intelligentsia are most deeply entrenched.” Sowell notes that blacks, especially those young and educated, are moving to the South and suburbs. “Among blacks who moved, the proportions who were in their prime — from 20 to 40 years of age — were greater than in the black population at large, and college degrees were more common among them than in the black population at large. In short, with blacks, as with other racial or ethnic groups, those with better prospects are leaving the states that are repelling their most productive citizens in general with liberal policies.” Detroit, he writes is “the most striking example of a once-thriving city ruined by years of liberal social policies.” Finally, a lesson for all states, including Kansas: “Treating businesses and affluent people as prey, rather than assets, often pays off politically in the short run — and elections are held in the short run. Killing the goose that lays the golden egg is a viable political strategy.” (Mass Migration Of America’s Golden Geese.) The migration statistics concerning Kansas are not favorable, although some are trending in a better direction.
Legislators will have more access to SRS case files. Kansas Health Institute News Service reports” “Parents whose children have become state wards now have the option of signing a one-page form that gives state legislators unrestricted access to information in their family’s case file.” Previously legislators had access to the information, but “social workers decided what information from the file would be shared. And legislators were not given documents or copies from the files but verbal briefings.” Some are concerned that information harmful to children will be made public.
Wichita unemployment rate improving. Writes Friends University finance professor and Mammon Among Friends blogger, Malcolm Harris, as saying, “‘We’re seeing a trend, and that trend is in the right direction’…But, he cautioned, ‘we’ve got a long way to go.’” More at Wichita’s Unemployment Rate Falls Compared to Last Year.
Government planners vs. individuals. Another reading from Economics for Real People: An Introduction to the Austrian School by Gene Callahan. The topic is individuals acting in markets vs. government planning: Economics does not hold that the desires of the consumers are pure or virtuous. It does illustrate that the market process is the only way to approximately gauge those desires. All other systems must attempt to impose the rulers’ values on the ruled. Those who plan on doing the imposing have a very high regard for their own judgment, and a very low regard for that of the rest of us. To paraphrase the economist G.L.S. Shackle, the man who would plan for others is something more than human; the planned man, something less. … [Ludwig von] Mises describes those who would coercively replace the value judgments of their fellow men by their own value judgments: [They] are driven by the dictatorial complex. They want to deal with their fellow men in the way an engineer deals with the materials out of which he builds houses, bridges, and machines. They want to substitute “social engineering” for the actions of their fellow citizens and their own unique all-comprehensive plan for the plans of all other people. They see themselves in the role of the dictator — the duce, the Führer, the production tsar — in whose hands all other specimens of mankind are merely pawns. If they refer to society as an acting agent, they mean themselves. If they say that conscious action of society is to be substituted for the prevailing anarchy of individualism, they mean their own consciousness alone and not that of anybody else. (The Ultimate Foundation of Economic Science)
KPERS problems must be confronted
This week the Kansas Legislature may work on the problems facing the Kansas Public Employee Retirement System, or KPERS. Past legislatures have failed to enact reforms necessary to put this system on a sound financial footing, and the legislature has shown itself incapable of managing a system where it’s easy to pass on the problem to future generations. Now Kansas faces an unfunded liability of some $9.3 billion in KPERS. The most important thing the state can do is to stop enrolling new employees in this failing system.
When confronted with the realities of the finances of KPERS, the response of state government employee representatives is first, attack the messenger. This is taking place now in response to a report released by the Kansas Policy Institute (A Comprehensive Reform of Kansas Public Employees Retirement System). It also happened in 2009 when Art Hall and Barry Poulson released their research in The Funding Crisis in the Kansas Public Employee Retirement System.
The second response of state government employee representatives is to attack the only solution (short of massive tax increases) to providing for workers’ retirements: the defined-contribution plan. These plans, often called 401(k)-style plans, allow workers to contribute into a special type of tax-advantaged retirement account. Usually employers, in this case the State of Kansas, make additional contributions on employees’ behalf. Employees generally have a variety of investments to choose from. Employees also own their retirement accounts and their assets. The value of the account — and therefore the benefits available to retirees — depends on the performance of the investments.
KPERS is a defined-benefit plan, sometimes called a traditional pension plan. When employees retire, they are paid a benefit based on their final average salary, number of years of service, and a multiplier. KPERS funding relies on employee contributions, employer contributions (these are the state’s taxpayers), and investment returns.
The main problem is that the legislature has not provided enough funding to KPERS to keep it in balance. That’s easy to do, as retirement systems like KPERS operate on time horizons of decades, and it’s easy to say let’s deal with the problem next year. It’s also easy for legislators to promise and write into law a higher level of benefits than they’re willing to fund. Problems with lack of funding may not show up until long after the legislators who voted for them are out of office. With defined-contribution plans this isn’t possible. Each party — worker and employer — funds the plan each pay period, and that is the extent of the obligation of each party.
Misinformation spread
In its message to its followers, Kansas National Education Association (KNEA, the teachers union) wrote this about the problem with defined-contribution plans: “First, they claim that a DC plan gives the employee control over their own retirement. And if you have lots to invest and have the time and knowledge to do so effectively, that might be true. Of course, even if you do, you can end up like the folks who found Enron to be a great investment or trusted Mr. Madoff. The fact is most of us are not prepared to do our own analysis and investment.”
There’s quite a bit of misinformation here. But before that, a huge irony is that this information is aimed at Kansas schoolteachers, and their union assumes they are not intelligent enough to plan for their own retirement.
In fact, planning for retirement is quite easy and simple. All one needs to do is select low-cost index stock and bond mutual funds, of which there are many. These funds, over the long time horizon appropriate for retirement investing, beat the performance of all managed funds, meaning funds managed by professionals who attempt to analyze markets and earn greater than average returns through an active trading strategy. This is not disputed by anyone except by those who sell actively-managed mutual funds.
“The evidence is clear. Low-cost index funds regularly outperform two-thirds of actively managed funds, and the one-third of actively managed funds that outperform changes from period to period. Even the very few professional investors who have beaten the market over long periods of time — Berkshire Hathaway’s Warren Buffett and Yale University’s David Swensen, for instance — are quick to advise that investors are likely to be much better off with simple low-cost index funds than with expensive actively managed funds.” (Burton G. Malkiel, ‘Buy and Hold’ Is Still a Winner. Also, see the author’s book The random walk guide to investing: ten rules for financial success.)
Generally, most investors would select just one or two funds in which to place their contributions. Over time, investors may want to change the balance or characteristics of the funds they invest in. This again is easy to do. In fact, large mutual fund companies like Vanguard have index funds that automatically shift the balance between stocks and bonds as investors move along towards retirement.
The idea that the teachers union believes that professionals like schoolteachers are not capable of becoming informed and making these decisions is laughable if it weren’t the actual belief of the union. Suggestion: An actually useful and productive role for the teachers unions would be to help their members learn to invest for their retirement.
The problem cited about Enron and Madoff is that some people placed all or nearly all their investments with these two firms. That’s a bad strategy for anyone to follow with their retirement investments. Using index funds will not expose investors to the risk of losing all their money.
The claim by the KNEA that “lots to invest” is required is false. The companies that manage defined-contribution retirement plans accept new employees into the plan no matter how little they have to invest, and they accept their periodic contributions each pay period no matter how small. Scale — the amount available to invest — is not an issue, contrary to the assertions of the teachers union.
One claim made by KNEA is true: defined contribution plans give workers control over their retirement savings. This is a benefit. If a worker has a low tolerance for risk, they can keep their contributions in cash (actually treasury bonds would be the choice for these people). Others who wish to take an active role in the retirement investing can do so, as most plans offer funds that have targeted goals such as real estate, growth stocks, short-term bonds, long-term bonds, etc.
But in KPERS, all members are invested in the mix of investments that the KPERS trustees decide on. (When Jane Carter of Kansas Organization of State Employees asks “Do you really want to take your retirement security and gamble it on the stock market?” she may not be aware that KPERS is invested in the stock market, and those returns are essential to funding KPERS benefits.) The investments that the trustees choose may not be suitable for each individual member. But KPERS members have no choice.
By the way, the KPERS investment fund has proven irresistible to politicians seeking to invest in Kansas for various reasons. In the 1980s a series of bad investments were made in Kansas companies. As reported in the Wichita Eagle on October 16, 1989: “For many Kansas legislators, the lure of using KPERS money for economic development was tempting. So KPERS, under considerable legislative pressure, agreed to target nearly 10 percent of its fund for business expansions in Kansas.” Many of these investments lost money, and lawsuits went on for years.
The point is that the worker is in control, not the KPERS trustees or the legislature. That’s important, as the legislature, over the years, has not made sufficient contributions to KPERS. They keep pushing the decision down the road to future legislatures, and the burden on future taxpayers who will need to make the necessary contributions. But in a defined benefit plan, employees, through their employers, make contributions each pay period. If for some reason the employer fails to make the contribution, it’s easy to notice it before years go by.
New members needed to prop up existing
Reading the material put out by KPERS defined-benefit supporters, it becomes clear that KPERS depends on the contributions of new members to pay for the benefits of those already in the system. Here’s a claim made by KNEA, the teachers union: “If all new employees came in under a defined contribution or 401(k) plan, their investments would be essentially personal investments and not used to contribute to benefit payments to current or future defined benefit members. This means that each person who retires will be replaced by someone who is not paying into the defined benefit system.” (emphasis added)
The KNEA has also written to its members: “The state would have the obligation to continue funding the defined benefit (DB) plan since it depends on new employees contributing to fund at least a portion of the benefits to retirees. (emphasis added)
This claim was echoed in testimony given by Coalition for Keeping the Kansas Promise, which states: “In fact, the creation of a defined contribution plan for KPERS, which will remove revenues used to reduce the unfunded actuarial liability, will only accelerate the insolvency of the KPERS fund for current KPERS members and retirees from FY 2033 to an uncertain, though more immediate, date in the future, and place the entire KPERS funding obligation upon Kansas taxpayers.”
There could be no clearer admission that the KPERS contributions of young workers are used to fund the benefits of retirees. Instead of the new members’ contributions being invested and growing to provide for their own retirement, their contributions are needed to pay for current retirees. This is a system that guarantees being perpetually under-funded.
Who is the employer?
The Kansas Policy Institute report states: “Employers in the state/school plan currently contribute 9.37 percent of payroll. To fully fund that part of the plan at the market value of assets employers would have to contribute 15.26 percent of payroll. Employer contributions into the state/school plan would have to increase from $393 million to $640 million annually, a 63 percent increase.”
Now when most people read this and other information about KPERS they probably don’t associate “employer contributions” with what this term means. Since KPERS covers government employees, the employer is the state’s taxpayers.
That’s right. It is the taxpayers who will be called upon to correct the unfunded KPERS liability. The KPI report is accurate but understates the political reality when it concludes: “Kansas legislators are not likely to find an additional $247 million in the current budget to fully fund the KPERS pension plan; and they are even less likely to find the money to fully fund the plan in future years as unfunded liabilities accumulate, especially if the plan fails to generate the projected 8 percent rate of return on assets.”
Most Kansans realize that KPERS is part of the cost of having state employees. Citizens pay taxes so that these employees can be paid, and KPERS is part of their package of pay. The problem is that citizens expect that the cost of paying employees be paid each year. But now we learn that the legislature has not been doing this. The legislature has not been paying all that is required into the KPERS system. Essentially, taxpayers will be asked to pay now for payments not made in years past for work that was performed years ago.
Investors or combatants
The current system of retirement for state employees creates a situation where there is conflict. We see it right now, where state employees and their lobbying groups insist that the state make good on its promise to its workers. The pushback comes from those who realize that taxpayers are tired of ever-increasing spending. This is especially true when taxpayers are being asked to make up for the deficits of legislatures past. So there’s conflict. One class is trying to extract payment from another. It isn’t pretty, and it’s not productive. It’s the political system at its worst.
Advocates for state employees say there’s nothing wrong with KPERS that can’t be fixed by funding it properly. In other words, more taxes and more spending: more conflict. We need to find a way out of this trap, and enrolling new state employees in defined-contribution retirement plans is the way.
The benefit of defined-contribution plans is that people, including state employees, become investors. They own something. They have a rooting interest in the success of the economies of Kansas, America, and the world.
Kansas state employees have a choice to make. Do they want to become investors in America and own their retirement funds, or do they want to continue to rely on the political system for their retirement?
Kansas loses chance to improve tax climate
Legislation that would have improved the tax climate in Kansas over time appears dead this year. It’s something that we need in Kansas, but Kansas Senate leadership is not in favor of the bill.
The bill, named the March to Economic Growth, would have used increases in Kansas revenue to reduce state personal and corporate income tax rates. This is something that is needed, as new rankings published by the Tax Foundation indicate that the business tax climate in Kansas is poor. Kansas ranks 35th among the 50 states, just 15 spots from the bottom. In last year’s ranking, Kansas placed 32nd, so our state is slipping relative to other states.
The economic development strategy of Kansas and Wichita has been to offer tax abatements as an inventive to lure or retain industry. The study authors note the problem with this: “State lawmakers are always mindful of their states’ business tax climates but they are often tempted to lure business with lucrative tax incentives and subsidies instead of broad-based tax reform. … Lawmakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a woeful business tax climate. A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state’s competitiveness.”
New Kansas Governor Sam Brownback has an economic development plan that includes parts of Dr. Art Hall’s “embracing dynamism” strategy. This strategy recognizes the futility of bureaucrats attempting to dish out economic development incentives, and recommends a strategy of creating an environment favorable to all businesses of all sizes. In particular, research has shown that it is new, young firms that are the dynamic driver of growth and innovation, but economic development policies are slanted towards old, established firms.
While it is refreshing to see the governor’s plan recognize the need for an environment that promotes dynamism, the plan still contains mechanisms for targeted economic development, including incentives to retain companies that threaten to leave Kansas. As for Wichita, city council members and bureaucrats yearn for “more tools in the toolbox.” The governor’s message hasn’t quite reached them.
Are taxes and tax policy important? After a review of the literature, the Tax Foundation report concludes: “… the general consensus of the literature has progressed to the view that taxes are a substantial factor in the decision-making process for businesses.” But there are some authors who disagree.
The state business climate index considers these factors: corporate taxes, individual income taxes, sales tax, unemployment tax, and property taxes. Kansas performs best on unemployment taxes, ranking 7th among the states. Our worst raking is 41st in property taxes. In sales tax, Kansas ranks 32nd, and this does take into account the statewide sales tax increase of one cent per dollar that started July 1.
The report recognizes that taxes are only one of many factors that companies use when deciding where to locate facilities. Kansas’ low ranking means we can make large improvements in this area. If we don’t, we are likely to have to keep up our ad hoc approach to economic development, were we craft special deals under the conceited belief that we know which deals to make.
The full report is available at the Tax Foundation by clicking on 2011 State Business Tax Climate Index. An introductory article is at Background paper: 2011 State Business Tax Climate Index (Eighth Edition).
Kansas and Wichita quick takes: Friday March 25, 2011
Elections coming up. On Tuesday April 5 voters across Kansas will vote in city and school board elections. Voting has been underway for about a week through the advance voting process. For those who haven’t yet decided, here’s the Wichita Eagle voter guide. You can get a list of the candidates, along with their responses to questions, customized for your address.
Campaign signs. The placement of political campaign signs can be an issue. Here is a City of Wichita letter describing placement rules, and a diagram. … If you live in a neighborhood with covenants prohibiting campaign signs, the covenants don’t apply at election time. See In Kansas, political signs are okay, despite covenants.
In Kansas, cutting unnecessary spending can avoid service cuts. Following up on Kansas state agency spending, Kansas Policy Institute finds examples of spending on overtime, advertising, cell phones, and dues, memberships and subscriptions totaling $50 million. KPI president Dave Trabert remarked: “Hardly a day goes by that we don’t see some group or state agency saying they will have to cut necessary services if their funding is reduced, but it’s pretty clear that there are lots of other ways to reduce spending. Some degree of spending in these categories is understandable, but the data clearly show that large amounts of taxpayer money are being spent unnecessarily.” Other examples uncovered by KPI: “The Legislature spent $144,408 to join the National Council of State Legislators and also spent $107,022 to join the Council of State Governments. The Governor’s office bought memberships in three governors’ associations: the National Governor’s Association ($83,800), the Western Governors’ Association ($36,000) and the Midwestern Governors’ Association ($10,000).” More is in the KPI press release K-State #1 in Cell Phone Spending: Cutting unnecessary spending can avoid service cuts.
March to Economic Growth stalled. The Kansas House of Representatives has passed a bill that would gradually reduce Kansas personal and corporate income tax rates. The so-called MEGA bill wold create a mechanism where if revenue flowing to the state increases, income tax rates would be reduced proportionally, after adjusting for inflation. Besides lowering these tax rates, which would make Kansas more attractive to business and jobs, the bill would also decrease the rate of growth of spending. But Senate leadership, namely its president, doesn’t care for the bill, so it appears it is dead this year. Last year Senate President Stephen Morris was strongly in favor of the statewide sales tax increase. Despite being a member of the Republican Party, he is part of the Senate’s liberal wing, according to the Kansas Economic Freedom Index and other legislative ratings.
Open records under attack. CommonSense with Paul Jacob reports on efforts underway in Utah to reduce citizens’ ability to learn about their government: “House Bill 477 changes the core of the GRAMA law, mandating that citizens must prove they deserve access to records, rather than the previous rule requiring government officials to show cause for why a document should not be released. The legislation also exempts text messages, emails and voicemails from being disclosed, the better to keep lobbyists and special interests out of the limelight.” The Daily Herald wrote: “The principle of open government now would apply only when ‘the public interest favoring access to the record outweighs the interest favoring restriction of access to the record,’ in the opinion of the government.” … This bill actually became law, but so much public opinion was roused that it is likely the Utah legislature will overturn the act, according to reports. … Jacob’s email on this matter was subtitled “Paul Jacob notices nearly absolute power corrupting GOP legislators in Utah.”
Ignorant or just ill-informed? L. Brent Bozell in Investor’s Business Daily: “Anyone who’s ever seen Jay Leno do one of his ‘Jaywalking’ segments on NBC, locating average Americans and asking them factual questions on street corners, knows there are far too many Americans who know next to nothing about just about everything. They can’t name our first president or don’t know what the phrase ‘Founding Fathers’ means. Ask them to name our current vice president and watch the brain waves flat line. Newsweek magazine recently announced its disgust after it offered the government’s official citizenship test (the one we require immigrants to pass before being naturalized) to 1,000 Americans. Thirty-eight percent of the sample failed. Newsweek worried in its headline: ‘The country’s future is imperiled by our ignorance.’” Locally, I am reminded of the Kansas Policy Institute and its survey of Kansans and their knowledge of school spending. Regarding that, I reported: “When talking about Kansas school spending, few Kansans have accurate information. Those with children in the public school system are even more likely to be uninformed regarding accurate figures.”
Government spending overrides privates spending. The last two days have featured readings from Robert P. Murphy’s book Lessons for the Young Economist on the importance of profits and loses in guiding investment, and how government is unable to calculate its profit or loss. Today, Murphy explains government spending and the political process: For example, suppose the government decides to build a public library in order to make books and internet access free to the community. Because the government only has a limited budget, it won’t do something ridiculously wasteful such as coating the library with gold, or stocking the shelves with extremely rare first editions of Steinbeck and Hemingway novels. Suppose the government tries to be conscientious, puts out bids to several reputable contractors, and has a modest library constructed for $400,000. Yet even if outside auditors or investigative journalists could find nothing corrupt or shocking about the process, the question would still remain: Was it worth it to spend $400,000 on building this particular library, in this particular location? The crucial point is that we know one thing for certain: No entrepreneur thought that he could earn enough revenues from charging for book borrowing to make such an enterprise worthwhile. We know this because the library didn’t exist until the government used its own funds to build it! One way to think about government expenditures is that they necessarily call forth the creation of goods and services that people in the private sector did not deem worth producing. When the government spends money, it directs resources away from where private spending decisions would have steered them, and into projects that would not be profitable if private entrepreneurs had produced them relying on voluntary funding. Thus the political authorities in an interventionist economy face one-half of the socialist calculation problem. … The government in essence is a giant distributor of charitable donations. Even those citizens who welcome the concept should ask themselves: Why do we need to route our donations through the political process? Why not decentralize the decisions and allow each person to donate his or her funds to the various charities that seem most worthy? … Regardless of its possible benefits, government spending suffers from the calculation problem afflicting socialism. The system allows a select group of political authorities to override the input of private individuals in how (some of) their property should be used to steer resources into various projects. This is a very serious drawback for anyone who favors interventionism as a way to increase the “general welfare,” however defined.
Kansas income is growing. While still lower than its peak in 2008, wage and salary income in Kansas is on the way up, and has been throughout 2010.
Kansas and Wichita quick takes: Thursday March 23, 2011
Owens still blocks judicial selection reform. Kansas Reporter writes that one man, Senator Tim Owens, an attorney and Republican from Overland Park, is still blocking judicial selection reform. But a move by the House gives Senate President Stephen Morris a chance to let Senators vote to concur with the reform measure passed by the House. Or, Morris could refer the measure to Owens’ Judiciary committee, where it will die. See New way of picking appeals judges gets second shot.
Greed is killing Detroit. Greed is often portrayed as a negative quality of the rich. But Investor’s Business Daily tells what happens when union greed — yes, everyone can be greedy — runs wild in a city: “Census data released Tuesday show Detroit’s population has plunged 25% since 2000 to just 713,777 souls — the same as 100 years ago, before the auto industry’s heyday. As recently as the 1970s, Detroit had 1.8 million people. What’s happening is no secret: Detroiters are fleeing an economic disaster, the irreversible decline of the Big Three automakers. … Sure, a lot of the blame goes to a generation of bad management. But the main reason for Detroit’s decline is the greed of the industry’s main union, the UAW, which priced the Big Three out of the market.” … Having killed the goose with the golden egg once, union leadership seeks seek to do it again: “Even as Detroit collapses, new UAW chief Bob King promises to ‘pound’ the transplants into submission and force them to drink his union’s poison, too. Given what we know, every town that is now home to a foreign automaker should be very afraid. If King has his way, they’ll soon suffer Detroit’s fate.”
Liberal Bias at NPR? Stephen Inskeep, co-host of the National Public Radio program Morning Edition, defends his network against charges of liberal bias. In The Wall Street Journal Inskeep writes that NPR draws an audience with diverse political views, including conservatives: “Millions of conservatives choose NPR, even with powerful conservative alternatives on the radio.” Which, I would say, is all the more reason why the network should stand on its own without government funding. … Inskeep also writes about the recent undercover video by James O’Keefe, who NPR claims, through a spokesperson, to have “inappropriately edited the videos with an intent to discredit” NPR. If true, shame on O’Keefe. The NPR spokesperson concedes that then-NPR chief fundraiser Ron Schiller made some “egregious statements.”
Electric cars questioned. Margo Thorning writing in The Wall Street Journal, explains that the new crop of all-electric or near-all-electric cars not worthy of government support. She notes the Consumer Report opinion of the Chevrolet Volt: “isn’t particularly efficient as an electric vehicle and it’s not particularly good as a gas vehicle either in terms of fuel economy.” … Batteries remain a problem: “A battery for a small vehicle like the Nissan Leaf can cost about $20,000 and still only put out a range of 80 miles on a good day (range is affected by hot and cold weather) before requiring a recharge that takes eight to 10 hours. Even then, those batteries may only last six to eight years, leaving consumers with a vehicle that has little resale value. Home installation of a recharging unit costs between $900 and $2,100.” … Thorning notes that half of the electricity that powers America is generated by coal, so all-electric cars are still not free of greenhouse gas emissions. Also, “a substantial increase in the numbers of them on the road will require upgrading the nation’s electricity infrastructure.” … While electric cars are not ready to save the earth, the U.S. government insists on intervention: “Despite these significant flaws, the government is determined to jump-start sales for plug-ins by putting taxpayers on the hook. The $7,500 federal tax credit per PEV is nothing more than a federal subsidy that will add to the deficit. There are also federal tax credits for installing charging stations in homes and businesses and for building battery factories and upgrading the electric grid. The administration’s goal — one million PEVs on the road by 2015 — could cost taxpayers $7.5 billion.” And saddle Americans with expensive automobiles that do little to address the problem they’re designed to solve. Reading the Journal article requires a subscription, but it is also available at The American Council for Capital Formation, where Thorning is Senior Vice President and Chief Economist.
Government as business. Yesterday’s reading from Robert P. Murphy’s book Lessons for the Young Economist explained the value of the profit-and-loss system in guiding resources to where they are most valued. For those who wan to “run government like a business” I offer today’s excerpt from the same book, which explains how lack of the ability to calculate profit means this can’t happen: [Regarding a capital investment made by Disney as compared to government:] The crucial difference is that the owners of Disneyland are operating in the voluntary market economy and so are subject to the profit and loss test. If they spend $100 million not on personal consumption (such as fancy houses and fast cars) but in an effort to make Disneyland more enjoyable to their customers, they get objective feedback. Their accountants can tell them soon enough whether they are getting more visitors (and hence more revenue) after the installation of a new ride or other investment projects. Remember it is the profit and loss test, relying on market prices, that guides entrepreneurs into careful stewardship of society’s scarce resources. In contrast, the government cannot rely on objective feedback from market prices, because the government operates (at least partially) outside of the market. Interventionism is admittedly a mixture of capitalism and socialism, and it therefore (partially) suffers from the defects of socialism. To the extent that the government buys its resources from private owner — rather than simply passing mandates requiring workers to spend time building bridges for no pay, or confiscating concrete and steel for the government’s purposes — the government’s budget provides a limit to how many resources it siphons out of the private sector. (Under pure socialism, all resources in the entire economy are subject to the political rulers’ directions.) However, because the government is not a business, it doesn’t raise its funds voluntarily from the “consumers” of its services. Therefore, even though the political authorities in an interventionist economy understand the relative importance of the resources they are using up in their program — because of the market prices attached to each unit they must purchase — they still don’t have any objective measure of how much their citizens benefit from these expenditures. Without such feedback, even if the authorities only want to help their people as much as possible, they are “flying blind” or at best, flying with only one eye.
Kansas Office of the Repealer now open
Shortly after taking office, Kansas Governor Sam Brownback announced the “Office of the Repealer” which would look for unnecessary laws and regulations that should be repealed. Now the office has a website and is ready for business.
In the press release announcing the availability of the website that citizens can use to make suggestions, Brownback said: “The top priorities of my administration are to grow the state’s economy and get the more than 110,000 unemployed Kansans back to work. With the help of Kansans, the Office of the Repealer is working to identify laws and regulations that are out of date, unreasonable, and burdensome. State laws and regulations shouldn’t hinder opportunities for Kansans and Kansas businesses.”
Kansas Department of Administration Secretary Dennis Taylor is the Repealer. He said “My staff and I will run a cost-benefit analysis on each law or regulation that is submitted for review. The focus of the review will be on consumer protection. Laws picked for repeal will be sent to the originating body.”
It is promised that Taylor and his staff will send a status update within 30 days of receiving a recommendation.
The website for making suggestions is at Office of the Repealer. I’ve already made a suggestion, based on my article Kansas auto dealers have anti-competitive law on their side.
Because arts are important, government funding should be avoided
Yesterday’s forum of Wichita City Council and mayoral candidates that focused on the arts found broad agreement among candidates and incumbents for continued funding of the arts by Wichita city government, according to Wichita Eagle reporting.
The city has a dedicated one mill property tax levy dedicated to arts funding, and it generates about $3 million per year. Then a commission decides how to distribute the funds. This taxation and spending is said to be good for Wichita’s economy. But every special interest group produces economic impact studies that show that government spending on their projects has a magical “multiplier” effect that produces great amounts of wealth and prosperity. These are so commonly produced that they are meaningless. Every group that seeks public funds produces them.
But besides this factor, there are very important reasons to keep government away from art. Lawrence W. Reed wrote in What’s Wrong with Government Funding of the Arts? of the harm of turning over responsibility to the government for things we value and find worthwhile:
I can think of an endless list of desirable, enriching things in life, of which very few carry an automatic tag that says, “Must be provided by taxes and politicians.” Such things include good books, nice lawns, nutritious food, and smiling faces. A rich culture consists, as you know, of so many good things that have nothing to do with government, and thank God they don’t. We should seek to nurture those things privately and voluntarily because “private” and “voluntary” are key indicators that people are awake to them and believe in them. The surest way I know to sap the vitality of almost any worthwhile endeavor is to send a message that says, “You can slack off of that; the government will now do it.” That sort of “flight from responsibility,” frankly, is at the source of many societal ills today: many people don’t take care of their parents in their old age because a federal program will do it; others have abandoned their children because until recent welfare reforms, they’d get a bigger check if they did.
The boosters of government arts funding in Kansas make the case that arts are important. Therefore, they say, government must be involved.
But actually, the opposite is true. The more important to our culture we believe the arts to be, the stronger the case for getting government out of its funding. Here’s why. In a statement opposing the elimination of the Kansas Arts Commission, executive director Llewellyn Crain explained that “The Kansas Arts Commission provides valuable seed money that leverages private funds …”
This “seed money” effect is precisely why government should not be funding arts. David Boaz explains:
Defenders of arts funding seem blithely unaware of this danger when they praise the role of the national endowments as an imprimatur or seal of approval on artists and arts groups. Jane Alexander says, “The Federal role is small but very vital. We are a stimulus for leveraging state, local and private money. We are a linchpin for the puzzle of arts funding, a remarkably efficient way of stimulating private money.” Drama critic Robert Brustein asks, “How could the [National Endowment for the Arts] be ‘privatized’ and still retain its purpose as a funding agency functioning as a stamp of approval for deserving art?” … I suggest that that is just the kind of power no government in a free society should have.
We give up a lot when we turn over this power to government bureaucrats and arts commission cronies.
Facing an intense lobbying effort by those seeking taxpayer funds for their special interests, the Kansas Senate last week overturned Governor Sam Brownback‘s order eliminating the Kansas Arts Commission. The KAC must still be appropriated funds if it is to survive, and if appropriated, it faces a potential line item veto by the governor.
Kansas Arts Commission survives
Yesterday the Kansas Senate voted to overturn an order by Governor Sam Brownback to eliminate the Kansas Arts Commission.
The governor had issued an Executive Reorganization Order to implement his goal. Either chamber of the legislature may then vote on a resolution objecting to the ERO. If such a resolution passes either chamber, the ERO is canceled, and that’s what happened. No action by the House of Representatives is needed.
The vote in the Senate was 24 to 13, with three not voting. Wichita-area legislators voting to override the governor and save the KAC include Carolyn McGinn and Jean Schodorf. Voting against the KAC were Steve Abrams, Dick Kelsey, Ty Masterson, and Susan Wagle. Les Donovan did not vote.
Going forward, the KAC has to be funded through appropriations each year just like any other agency or program. While it appears the Senate would be able to pass an appropriations bill with funding for the KAC — it received about $800,000 this year — the House is less likely to pass such an appropriation. In either case, the governor in Kansas has a line-item veto, which he could use on KAC funding.
Politically, the passage of this resolution against the wishes of the governor is a reminder that there was an election in Kansas last year, but not for senators. (There are a handful of new senators due to resignations, but the new members seem largely aligned with the views of the senators they replaced, so the character of the body has not changed in a significant way.) It is commonly thought that voters sent a message last November that they want less government spending, not more. To that end, voters elected a governor that ran on a platform of fiscal conservatism, and many conservative members were elected to the House.
The defeat of the governor’s plan is also a lesson in how entrenched special interest groups can become. Even in this case, where the amount of money is relatively small — some $800,000 from the state that generated another $1,200,000 from other sources — an intense lobbying effort was undertaken to save the KAC. This effort included the use of taxpayer-funded or state-owned resources such as the KAC website and KAC staff time to lobby the legislature for money.
