Voice For Liberty

Tag: Politics

  • KDHE, Sunflower Electric, Earthjustice, Center for Climate Strategies: different peas in the same pod

    Evidence that a business seeking regulatory approval of its project enjoyed an apparently close relationship with the Kansas Department of Health and Environment should not be surprising.

    Reporting in the Kansas City Star leads with “Hundreds of emails document that officials of a Kansas power plant enjoyed a cozy relationship with the Kansas regulators who issued them a building permit in December.” (Kansas agency, utility worked closely on permit for plant)

    A press release from Earthjustice, the legal advocacy arm of the Sierra Club, proclaimed “A new report reveals Sunflower Electric (Sunflower) enjoyed a cozy relationship with Kansas regulators during the permitting process for the highly controversial coal-fired power plant Sunflower seeks to build in Holcomb.”

    This incident — the details are not important for understanding the broad lesson — may be looked on as an example of regulatory capture. As defined in Wikipedia, “regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating.”

    In more detail, the Wikipedia article explains: “For public choice theorists, regulatory capture occurs because groups or individuals with a high-stakes interest in the outcome of policy or regulatory decisions can be expected to focus their resources and energies in attempting to gain the policy outcomes they prefer, while members of the public, each with only a tiny individual stake in the outcome, will ignore it altogether. Regulatory capture refers to when this imbalance of focused resources devoted to a particular policy outcome is successful at ‘capturing’ influence with the staff or commission members of the regulatory agency, so that the preferred policy outcomes of the special interest are implemented.”

    Regulatory capture — or at least the heavy-handed attempt by special interest groups to influence public policy to fit their interests — is a non-partisan sport. We shouldn’t be surprised to see this form of government failure taking place at all times, no matter which party or politicians are in power.

    As an example on point, the same type of activity happened during the administration of former Kansas Governor Kathleen Sebelius regarding the same electric plant that is the focus of controversy today. Her regulator, former KDHE Secretary Rod Bremby, denied the permit for the plant based on its carbon dioxide emissions, the first time that had been done in the United States.

    Radical environmentalists rejoiced. Sebelius was invited to speak at an Earthjustice conference held in Denver in June, 2008. Here are a portion of her written remarks, as supplied to me at that time by her press office, thanking Earthjustice for all it had done in Kansas to help Sebelius and mold her regulatory regime:

    When Big Coal pumped their money and politics into Kansas, EarthJustice was there to fight back:

    • Provided litigation and public support
    • Helped shape the media messaging and outreach
    • Rallied supporters and engaged the public to get involved

    It was a victory for all of us and I appreciate their help.

    About that time Sebelius established the Kansas Energy and Environmental Policy Advisory Group, or KEEP. The activities of this group were managed — at no cost to the state — by the Center for Climate Strategies, a group that expressly advocates for energy policies and regulations based on an extremist view of climate science.

    The invasion of Kansas — at least the Sebelius administration — by Earthjustice and Center for Climate Studies proves the point: Regulatory capture is a non-partisan opportunity.

  • Kansas and Wichita quick takes: Monday July 11, 2011

    TIF in Louisiana. Randal O’Toole recently examined the use of tax increment financing in Louisiana. He finds this: “Property tax TIFs are limited to that portion of property taxes that are not already obligated to some specific purpose — and most property taxes are so obligated, so most if not all Louisiana TIFs rely on sales and hotel taxes instead.” This is different from Kansas, where all the property tax, except for the usually small base, benefits the TIF district exclusively. … He describes sales-tax TIFs, which we in Kansas call community improvement districts or CID. While describing them as the least objectionable form of TIF, he notes problems: Why don’t stores just raise their prices? Stores that charge extra sales tax don’t have warning signage. And: “In the end, TIF is still just a way for elected officials to hand out favors to selected developers and other special interests. There is no reason to think that cities in Louisiana that use TIF grow any faster than ones that do not. Instead, all the TIFs do is shuffle new developments around, favoring certain property owners in the TIF districts over owners outside of the TIF districts. TIF may even reduce growth as developers who don’t get TIF subsidies may decide to build elsewhere where they won’t have to compete against subsidized developments.” … All these warnings have been raised before the Wichita City Council. … California has new legislation designed to kill redevelopment districts there, which are like TID districts in Kansas. … The full article is A Different Kind of TIF.

    Overland Park may see tax hike. Ben Hodge reports that Overland Park, the second largest city in Kansas and the largest in Johnson County, may increase its property tax rates. Hodge quotes a Kansas City Star editorial: “One plan from [Overland Park City Manager Bill] Ebel would boost the city’s mill levy by 46 percent and bring in more than $10 million a year in new revenue. The other option, a 41 percent increase, would create an extra $9 million annually.” To which Hodge replies: “So, those are the innovative ideas of today’s Overland Park Council: either a 41% increase, or else a 46% tax increase.” … The Overland Park Chamber of Commerce supports the proposal, which is simply more evidence of the decline of local chambers of commerce. … Hodge’s article is Between a Rock and a Tax Hike.

    Medicinal cannibis to be topic. This Friday’s (July 15th) meeting of the Wichita Pachyderm Club features Dr. Jon Hauxwell, a physician from Hays, speaking on “Medicinal Cannabis.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. Upcoming speakers: On July 22, Steve Anderson, Director of the Budget for Kansas. On July 29, Dennis Taylor, Secretary, Kansas Department of Administration and “The Repealer” on “An Overview of the Office of the Repealer.”

    Employment on a long slow, slide. Wichita’s Malcolm Harris takes a look at the dismal employment numbers from last week. But, there is some better news for Wichita regarding airplane orders.

    We already know it’s hot in Wichita. But now here’s proof. The Weather Channel ranks Wichita as fourth hottest city in the nation — and that’s based on weather, not economic growth or something really desirable. Wichita is also ranked as “Midwest” hottest city.

    Pursuing happiness, not politics. That’s the title of the prologue to the recently-published book The Declaration of Independents: How Libertarian Politics Can Fix What’s Wrong with America by Nick Gillespie and Matt Welch, both of Reason, the libertarian magazine of “Free Minds and Free Markets.” So far, the prologue is all I’ve read, but I can tell — okay, I already knew — that these guys get it. Here’s what I mean: “In 2011, we do not equate happiness with politics; the mere juxtaposition of the words feels obscene. And for good reason: Politics, John Adams’s great-grandson Henry famously observed, ‘has always been the systematic organization of hatreds.’ Every election cycle — and we are always in an election cycle — we are urged to remember that deep down inside we really despise the opposing gang of crooks. We hate their elite (or Podunk) ways, their socialist (or fascist) economics, their reliance on shadowy billionaires with suspect agendas. In a world where mutual gains from trade have lifted a half billion people out of poverty in just the past half decade, politics is one of the last remaining zero-sum games of I win, you lose, where the victor gets to spend everyone else’s money in ways that appall the vanquished, until they switch places again after the next election. We instinctively know that our tax dollars aren’t being spent efficiently; the proof is in the post office, or the permitting offices at city hall, or the neighborhood school. We roll our eyes when President Barack Obama announces a new national competitiveness initiative in his State of the Union address just five years after George W. Bush announced a new American Competitiveness Initiative in his, or when each and every president since Richard Milhous Nixon swears chat this time we’re gonna kick that foreign-oil habit once and for all. And yet, the political status quo keeps steering the Winnebago of state further and further into the ditch.”

    More ‘Economics in One Lesson.’ Tonight (Monday July 11th) Americans For Prosperity Foundation is sponsoring a continuation of the DVD presentation of videos based on Henry Hazlitt’s classic work Economics in One Lesson. The event is Monday from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. The event’s sponsor is Americans for Prosperity, Kansas. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

  • Regulation supports business, not capitalism and free markets

    There are many examples of how the conventional wisdom regarding regulation is wrong: Republicans and conservatives are in bed with government, seeking to unshackle business from the burden of government regulation. Democrats and liberals, on the other hand, are busy crafting regulations to protect the common man from the evils of big business. As it turns out, both Democrats and Republicans love creating regulations, and big business loves these regulations.

    For example, in 2005 Walmart came out in favor of raising the national minimum wage. The company’s CEO said that he was concerned for the plight of working families, and that he thought the minimum wage level of $5.15 per hour was too low. If Walmart — a company the political left loves to hate as much as any other — can be in favor of increased regulation of the workplace, can regulation be a good thing? Had Walmart discovered the joys of big government?

    The answer is yes. Walmart discovered a way of using government regulation as a competitive weapon. This is often the motivation for business support of regulation. In the case of Walmart, it was already paying its employees well over the current minimum wage. At the time, some sources thought that the minimum wage could be raised as much as 50 percent and not cause Walmart any additional cost — its employees already made that much.

    But its competitors didn’t pay wages that high. If the minimum wage rose very much, these competitors to Walmart would be forced to increase their wages. Their costs would rise. Their ability to compete with Walmart would be harmed.

    In short, Walmart supported government regulation as a way to impose higher costs on its competitors. It found a way to compete outside the marketplace. It abandoned principles of free markets and capitalism, and provided a lesson as to the difference between capitalism and business. Many, particularly liberals, make no distinction between business and capitalism. But we need to learn to recognize the difference if we are to have a thriving economy based on free-wheeling, competitive markets that foster innovation, or continue our decline into unproductive crony capitalism.

    In the following excerpt from his book The Big Ripoff: How Big Business and Big Government Steal Your Money, author Timothy P. Carney explains that big business is able to use regulation as a blunt and powerful tool against competitors, and also as a way to improve its image.

    How does regulation help big business?

    Excerpt from The Big Ripoff: How Big Business and Big Government Steal Your Money, by Timothy P. Carney

    If regulation is costly, why would big business favor it? Precisely because it is costly.

    Regulation adds to the basic cost of doing business, thus heightening barriers to entry and reducing the number of competitors. Thinning out the competition allows surviving firms to charge higher prices to customers and demand lower prices from suppliers. Overall regulation adds to overhead and is a net boon to those who can afford it — big business.

    Put another way, regulation can stultify the market. If you’re already at the top, stultification is better than the robust dynamism of the free market. And according to Nobel Laureate economist Milton Friedman:

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

    There is an additional systemic reason why regulation will help big business. Congress passes the laws that order new regulations, and executive branch agencies actually construct the regulations. The politicians and government lawyers who write these rules rarely do so without input. Often the rule makers ask for advice and information from labor unions, consumer groups, environmental groups, and industry itself. Among industry the stakeholders (beltway parlance to describe affected parties) who have the most input are those who can hire the most effective and most connective lobbyists. You can guess this isn’t Mom and Pop.

    As a result, the details of the regulation are often carefully crafted to benefit, or at least not hurt, big business. If something does not hurt you, or hurts you a little while seriously hindering your competition, it is a boon, on balance.

    Another reason big business often cries “regulate me!” is the goodwill factor. If a politician or bureaucrat wants to play a role in some industry, and some executive says, “get lost,” he runs the risk of offending this powerful person. That’s bad diplomacy. Bureaucrats, by their nature, do not like to be told to mind their own business. Supporting the idea of regulation but lobbying for particular details is usually better politics.

  • Social Security Trust Fund: Why no truth?

    Regardless of one’s attitude towards the Social Security system, the refusal by liberals to admit the fraud of the system’s trust fund remains an obstacle to honest discussion of the system’s future.

    Here’s an example from a prominent defender of the myth of the Social Security Trust Fund, Sen. Bernie Sanders of Vermont. In an editorial from earlier this year, Sanders said those who tell the truth about the Social Security Trust Fund are a “barrage of misinformation.” He went on to describe the trust fund: “Social Security invests its surpluses, as it should, in U.S Treasury bonds, the safest interest-bearing securities in the world. These are the same bonds that wealthy investors and China and other foreign countries have purchased. The bonds are backed by the full faith and credit of the U.S. government, which in our long history has never defaulted on its debt obligations. In other words, Social Security investments are safe.”

    Closer to home, and typical of many hometown newspapers, a recent letter in the Wichita Eagle read: “There is $2.5 trillion in the trust fund as U.S. Treasury bonds. These bonds are just as real as those held by mutual funds and foreign banks.”

    The debate over the nature of the trust fund is important. It strikes at the trust we should have — or not have — in government.

    So: Is there $2.6 trillion in treasury bonds in the trust fund, and will the bonds be repaid?

    Yes, I believe it is true. These bonds, all $2.6 trillion, will be repaid.

    That simple belief, however, is an example of what economist Thomas Sowell calls “stage one” thinking. This mode of thinking looks at only the immediate effects or implications of something. It doesn’t ask the question: “And then what will happen?”

    Simple as this seems — “What happens next?” — we find this to be an afterthought in politics. Writes Sowell: “Most thinking stops at stage one. In recent years, former economic advisers to presidents of the United States — from both political parties — have commented publicly on how little thinking ahead about economic consequences went into decisions made at the highest level. This is not to say that there was no thinking ahead about political consequences. Each of the presidents they served (Nixon and Clinton) was so successful politically that he was re-elected by a wider margin than the vote that first put him in office.”

    In the case of the Social Security Trust Fund, the bonds it holds will be repaid. But we need to ask the “stage two” question: “What must the government do to pay back the bonds in the trust fund?” First, we must recognize that the federal agencies that received the proceeds of these bonds promptly spent the money. They didn’t spend it on income-producing assets that might generate a stream of cash flows that could be used to pay off the bonds. Instead, the money was spent on the day-to-day-operations of the federal government. This represents money that Congress and the president spent without specifically raising taxes or borrowing through the normal process.

    At some time when the Social Security Administration wants to redeem the bonds, there are three choices: Raise taxes, reduce services, or create new money through the Federal Reserve System. Each robs us of wealth — either by paying more taxes, paying the same taxes for fewer services, or having the value of our money stolen through inflation.

    It’s not just me who says this. Here’s a cautionary note from the Social Security Administration Performance and Accountability Report (PAR), fiscal year 2010, page 111: (OASI and DI trust funds are the two major components of Social Security that are financed by the payroll tax deduction.)

    The U.S. Treasury does not set aside financial assets to cover its liabilities associated with the OASI and DI Trust Funds. The cash received from the OASI and DI Trust Funds for investment in these securities is used by the U.S. Treasury for general Government purposes. Treasury special securities provide the OASI and DI Trust Funds with authority to draw upon the U.S. Treasury to make future benefit payments or other expenditures. When the OASI and DI Trust Funds require redemption of these securities to make expenditures, the Government finances those expenditures out of accumulated cash balances, by raising taxes or other receipts, by borrowing from the public or repaying less debt, or by curtailing other expenditures. This is the same way that the Government finances all other expenditures.

    There it is: “This is the same way that the Government finances all other expenditures.” There are no economically valuable assets in the trust fund. There is simply the realization that the U.S. government will tax more, provide less, or inflate the currency in order to make good on its promises. If you need any other proof, here’s another passage from the same report:

    Treasury special securities are an asset to the OASI and DI Trust Funds and a liability to the U.S. Treasury. Because the OASI and DI Trust Funds and the U.S. Treasury are both part of the Government, these assets and liabilities offset each other for consolidation purposes in the U.S. Govemmentwide financial statements. For this reason, they do not represent a net asset or a net liability in the U.S. Govemmentwide financial statements.

    It is as if I lend my wife $20 and accept her promise to repay. The financial position of my family has not changed.

    The question is: Why do so many not want to face the facts about the Social Security Trust Fund?

    The reason is that we’ve been lied to by politicians of both parties, and by politicians both conservative and liberal. Politicians like Sanders are still lying to us. The sham of the trust fund is an indication of the failure of government, and politicians of all parties do not want to admit this.

    We must realize that no matter how bad the behavior of past politicians, the reality of the Social Security Trust Fund is the hand we’ve been dealt, and the basis on which decisions about the future must be made. The continuing refusal by most liberal politicians, starting with President Barack Obama, to accept this reality is harmful and is an obstacle to forging a solution.

  • Kansas and Wichita quick takes: Wednesday June 29, 2011

    We have tried that before. Burt Folsom, who has written a book on Franklin Roosevelt’s economic policies and spoke in Wichita on that topic, warns us of the folly of government spending as a means to economic recovery. Henry Morgenthau, Secretary of the Treasury to FDR, said this seven years into the New Deal: “Now, gentlemen, we have tried spending money. We are spending more than we have ever spent before and it does not work.” … Some have charged that this quotation is a fabrication, but Folsom has the proof in his article We Have Tried Spending Money. … The quotation by Morganthau continues with: “And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started. … And an enormous debt to boot.”

    How can the Fed be so clueless? Investor’s Business Daily: “Federal Reserve Chairman Ben Bernanke says he’s puzzled by the failure of the economy to respond to our government’s many ministrations. Which explains much of why our economy is such a mess. … Not to be rude, but can the nation’s top banker really be so clueless? Anyone with half a lick of common sense looking at our economy knows what’s wrong: We’ve spent the better part of three years with government making the most extraordinary interventions in the economy in our nation’s history. Government spending, as a share of the economy, has soared 25%. Regulations, many of them arbitrary and foolish, such as the ban on incandescent light bulbs, have never been more numerous.” … The piece goes on to list many of the unwise policies the government has followed: ARRA stimulus, TARP, GM and Chrysler, Dodd-Frank, etc. In conclusion: “A handful of bureaucrats can never set prices or allocate goods or decide what should be made as efficiently as millions of people acting in their own interest through a free and open market. Our policymakers seem to have forgotten this. They make statements that indicate they don’t know the damage their policies are doing or they are willfully oblivious to them.”

    Deficit is probably worse than thought. “We should be prepared for upward revisions in official deficit projections in the years ahead — even if a deal is struck,” writes Lawrence B. Lindsey in The Wall Street Journal. The reasons why projects of deficits are too optimistic are three: The interest rates being contemplated for Treasury borrowing are probably too low, the growth rates for the economy are too large, and the long-run costs of ObamaCare are way too low. Writes Lindsey: “There is no way to raise taxes enough to cover these problems. The tax-the-rich proposals of the Obama administration raise about $700 billion, less than a fifth of the budgetary consequences of the excess economic growth projected in their forecast. The whole $700 billion collected over 10 years would not even cover the difference in interest costs in any one year at the end of the decade between current rates and the average cost of Treasury borrowing over the last 20 years.” He recommends long-term reduction in entitlement spending as the only cure. See The deficit is worse than we think: Normal interest rates would raise debt-service costs by $4.9 trillion over 10 years, dwarfing the savings from any currently contemplated budget deal..

    Blue pill or red pill? “Great expectations” are placed on the hope of Comparative Effectiveness Research (CER) as a way to save money on health care costs, both in the private and public sector. Now a report published by Manhattan Institute finds that this technique, despite its appealing name and promise, may not be the magic pill that President Obama is relying on: “This result seems counterintuitive: How can it be that, when a CER study shows no difference between two drugs, limiting coverage for the more expensive drug could actually increase costs?” The report explains that individuals are different, and what applies to the “average” patient may not be right for a large number of other patients. A second reason is “variance in dependence in patient responses across therapies.” The report provides illustrations of where CER-based policies cost more. … Concluding, the executive summary states: “Our results suggest that CER will not fulfill its promise unless it is implemented differently by researchers and understood differently by policymakers. Simply put, seeking the treatment that is most effective on average will not improve health or save money. However, CER can be conducted in a way that takes difference and dependence into account and measures their effect. If CER is applied in this way — as a tool for matching individual patients to the best treatments for those individuals — it will realize its potential to reduce costs without inhibiting freedom of choice for doctors and patients.” … The report is Blue Pill or Red Pill: The Limits of Comparative Effectiveness Research

    Even quicker. “For the roughly four million homeowners who have fallen behind on their mortgage payments, the federal government is offering yet another remedy: free money to catch up on their loans.” See SmartMoney: More Money for Struggling Homeowners. … The Kansas Department of Health and Environment (KDHE) has issued a boil water advisory for the city of Waterville, which is located in Marshall County. I guess there’s no water in Waterville today. … Strong public support found for “Cut, cap, and balance,” a program to bring the federal budget under control. See National Taxpayer Union: New Poll Highlights Public Support for Cut, Cap and Balance. … Rasmussen: “Most voters continue to feel America needs to do more to develop domestic gas and oil resources. They also still give the edge to finding new sources of oil over reducing gas and oil consumption.” … Becker on Speculators: “Put differently, speculation tends to be stabilizing when speculators are making money because they have correct expectations about price movements, and destabilizing when they are losing money because their expectations turn out to be wrong. Given that the fundamentals imply large price movements from rather small shocks to supply and demand, and that successful speculation tends to moderate price movements, it is hard to believe that speculation has played a major role in causing the large swings in oil prices.” Do you hear that, Bill O’Reilly?

  • Tweets from RightOnline 2011

    Some of my favorite tweets I sent during the RightOnline 2011 (#ro11) conference in Minneapolis, a project of Americans for Prosperity Foundation:

    It’s great to have 52 Kansans here at RightOnline 2011. #ro11

    Michelle Malkin: They stifle us through the criminalization of conservative thought. #ro11

    Erick Ericson: The bad economist, like the liberal, sees only the immediate effects, not the unseen. #ro11

    S.E. Cupp: New York is all Weiner, all the time. It’s too much Weiner. #ro11

    Tim Huelskamp, first member of Congress to bring an Ipad to the speaker’s podium. #ro11

    Huelskamp: It is a spending problem, a power problem. It is Washington telling us what to do with our own money. #ro11

    Michele Bachmann: At the debate, I was worried they might ask “boxers or briefs?” #ro11

    Michele Bachmann: Barack Obama will be a one-term president! (The audience chants along) Her tagline, it seems. #ro11

    Michele Bachmann: Barack Obama, as a senator, voted against raising the debt ceiling, calling the need a failure of leadership. #ro11

    Michele Bachmann: I introduced the Light Bulb Freedom of Choice Act. #ro11

    Whew! Finished with my two presentations at RightOnline! #ro11

    Ken Cucinelli is suing my state’s former governor. #ro11

    Minnesota is not a right to work state. I’m sorry I’m here now. #ro11

    Obama should reject reject teleprompters so as to employ cue card holders. #ro11

  • Kansas and Wichita quick takes: Wednesday June 22, 2011

    RightOnline, Netroots Nation. The past weekend featured two conferences for online activists: Americans for Prosperity Foundation’s RightOnline and Netroots Nation, sponsored by labor unions. I attended and made two presentations at RightOnline, the conference for those in favor of liberty and economic freedom. 1,655 people attended, according to AFP. I saw some events of the Netroots conference on C-SPAN, including a session with President Barack Obama’s White House Communications Director Dan Pfeiffer. In the session, Obama was criticized many times, and at one point the audience booed. More coverage is at A tale of two political conferences, PICKET: Right Online and Netroots conferences wrap up with few run-ins, Digital Conferences, Blue and Red, in Minneapolis

    The Atlantic Magazine’s Lies: Of Breitbarts, Kochs, and RightOnLine. Warner Todd Huston of Publius’ Forum examines a piece in The Atlantic that covered the recent RightOnline conference in Minneapolis and found it to be lacking. He found: “Unfortunately, the whole thing was filled with opinions stated as fact, misconstructions of facts, and outright lies. Sadly, along with the rest of the Old Media, it seems as if the veracity of The Atlantic has taken a hit in this bad Obama economy. … Now, what would have made Dupuy’s piece actually informative would have been a discussion of the real differences between the Nutrooters and RightOnLine. And there are quite a few. Netroots Nation is chock full of some very wonky programs. The lefties drill down to the deepest Internet facts, figures, and capabilities. On the other hand, RightOnLine has since day one sufficed with Twitter 101, blogging 101, and other beginner’s programs meant to help their local activists learn how to use the Internet to further conservative ideas. RightOnLine has not made arcane wonkiness a part of its programs like Netroots Nation has. The fact is the two conferences are very different in character in this respect.” More at The Atlantic Magazine’s Lies: Of Breitbarts, Kochs, and RightOnLine.

    Fed downgrades economic outlook. Wall Street Journal: “Federal Reserve officials downgraded their assessment of the U.S. economy’s performance Wednesday, but gave no indication they intend to take new steps to boost growth and jobs. … The recovery is continuing at a moderate pace, though ‘somewhat more slowly’ than previously expected, officials said in a statement following the Federal Open Market Committee meeting, echoing remarks made by Fed Chairman Ben Bernanke in a speech earlier this month.” Further: “Though the Fed is less comfortable with the economic outlook, it has less leeway to take new steps to fix it. That’s because underlying inflation also has crept up, making the central bank leery of injecting more money into the financial system.”

    Tax the rich. Burton Folsom: “Economist Alan Reynolds has recently called attention to the latest pronouncement from Robert Reich, the former Secretary of Labor. ‘A 70 percent marginal tax rate on the rich’ is Reich’s solution for the cash crunch in the federal government today. Let the rich pick up the tab. That assumes, of course, that the rich will continue to work hard if they have to send almost three-fourths of their earnings to Uncle Sam. They won’t. They never have. And you wouldn’t either.” … Reynolds’ article in the Wall Street Journal is Why 70% Tax Rates Won’t Work. In it, Reynolds writes: “All this nostalgia about the good old days of 70% tax rates makes it sound as though only the highest incomes would face higher tax rates. In reality, there were a dozen tax rates between 48% and 70% during the 1970s. Moreover — and this is what Mr. Reich and his friends always fail to mention — the individual income tax actually brought in less revenue when the highest tax rate was 70% to 91% than it did when the highest tax rate was 28%.”

    Wichita speaker list announced. The Wichita Pachyderm Club has announced its lineup of speakers for July. The club, which is a Republican club, seeks to provide programs that are informative and that provide members with a variety of viewpoints on important contemporary issues, and historical issues, too. Sometimes this leads to controversy, as there are those who believe that only Republicans and those who parrot the “official” party line should speak at Pachyderm. Although I am not a Pachyderm officer or board member, this month features a speaker, Dr. Jon Hauxwell, who is speaking based on my recommendation and invitation, and whose topic is likely to generate controversy again. The speakers for July: On July 8, Dave Trabert, President, Kansas Policy Institute, on “Stabilizing the Kansas Budget.” On July 15, Jon Hauxwell, MD, speaking on “Medicinal Cannabis.” On July 22, U.S. Representative Mike Pompeo of Wichita on “An update from Washington.” On July 29, Dennis Taylor, Secretary, Kansas Department of Administration and “The Repealer” on “An Overview of the Office of the Repealer.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club.

    FairTax meeting in Wichita. This Thursday (June 23) supporters of FairTax will meet in Wichita. According to event organizers, attendees will hear “new information about the status of the FairTax movement at the national level and how it might affect the Presidential race in 2012.” More from organizers: “The FairTax is a unique solution to the urgent need to create jobs and grow the economy. America now has 35 million Americans under employed or unemployed. The economic disaster was unnecessary and can be reversed by completely repealing our horrible and destructive tax system and replace it with the FairTax.” … While I am sympathetic with their cause, I am not enthusiastic about the FairTax — a national sales tax — for one important reason: it doesn’t address the real problem of a government that is too large and collects too much tax revenue. One of the main platforms of Fairtax is that it would collect the same revenue as the existing tax regime: “dollar-for-dollar federal revenue neutrality.” I quote Murray N. Rothbard on this: “But the libertarian must never support any new tax or tax increase. For example, he must not, while advocating a large cut in income taxes, also call for its replacement by a sales or other form of tax. The reduction or, better, the abolition of a tax is always a noncontradictory reduction of State power and a significant step toward liberty; but its replacement by a new or increased tax elsewhere does just the opposite, for it signifies a new and additional imposition of the State on some other front. The imposition of a new or higher tax flatly contradicts and undercuts the libertarian goal itself.” … The meeting is at 7:00 pm Thursday at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. The event’s sponsor is FairTaxKC.org.

    Obama: Technology seen as job killer. “The story goes that Milton Friedman was once taken to see a massive government project somewhere in Asia. Thousands of workers using shovels were building a canal. Friedman was puzzled. Why weren’t there any excavators or any mechanized earth-moving equipment? A government official explained that using shovels created more jobs. Friedman’s response: ‘Then why not use spoons instead of shovels?’ That story came to mind last week when President Obama linked technology to job losses. ‘There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers,’ he said. ‘You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.’ The president calls this a structural issue — we usually call it progress.” … Russell Roberts goes on to explain that productivity — doing more with less, including less labor — leads to lower costs to business. The Left, of course, says this simply means more profits for business. But in competitive markets, businesses will find they must lower their costs, and that means a higher standard of living for consumers. New jobs get created as people now have more money to spend on new products and services that didn’t exist before, or were so expensive that only the rich could afford them. More at Obama vs. ATMs: Why Technology Doesn’t Destroy Jobs.

    Even quicker. Rasmussen: Just 8% Approve of Job Congress Is Doing: “Voter approval of Congress’ job performance has now fallen to a near five-year low.” … How to Run Public Schools in the 21st Century: Our current models are bad for taxpayers — and calamitous for kids. … The dignity of personal choice: Choosing lifesaving care — or not — shouldn’t be left to bureaucrats. … The Fiscal Pledge We Need: Cut, Cap, Balance: Congress has never failed to increase the debt limit. This makes having a debt limit functionally useless. … Initiative and Referendum under attack, says John Fund: “Politicians always claim to support democracy, but they often come up with creative ways to limit the influence of pesky voters. Now members of the political class in several states are going after voters’ most powerful tool.” See Fund: Power to the People? How Déclassé. … A Shovel-Ready Punch Line: “This is a staggering indictment of the president, the team he assembled, and the journalists who accepted this administration’s arrogant assertions that they knew exactly what to do, how to do it, and what would happen as a result.”

  • Wichita forgivable loan action raises and illustrates issues

    Today the Wichita City Council decided to grant a forgivable loan of $48,000 to The Golf Warehouse. This subsidy was promoted by the city as necessary to properly incentivize the applicant company to expand its operations in Wichita rather than Indiana, where the company has other operations and had also received an offer of subsidy. For more information, see Forgivable loan a test for new Wichita City Council members.

    In presenting the item to the council, Allen Bell, Wichita’s Director of Urban Development said the forgivable loan was a “deal-closing” device intended to “win a competition with other locations.”

    Further discussion brought out the fact that companies often “test the waters,” asking for incentives from cities like Wichita as a location they might consider moving to, only to us that as leverage for getting more incentives back home. (Wichita has suffered at the hands of this ruse, most recently granting a large forgivable loan to a company when the city used as leverage says they did not have discussions with the company.)

    Council Member Michael O’Donnell asked if there was another form of economic development that The Golf Warehouse could have received. Bell said that in this case there wasn’t, that IRB financing with accompanying tax abatements wasn’t available for this project. As he has in the past, Bell pointed to the lack of tools in the toolbox, or “arrows in our quiver” he said today.

    When the CEO of the applicant company spoke to the council, it was easy to get the impression that this company — like the many other companies that plead for incentives and subsidy — feel that because of their past and pending investment in Wichita, they are entitled some form of incentive. When the company’s outside site selection consultant spoke, this sense of entitlement became explicit. She told how the company has made “significant investment and has employed a lot of people and kept a lot of families employed.” She said that instead of forgivable loan, this should be called an “act of goodwill.” She said the company has made a huge investment, never asking for incentives, and that the loan allows the company to continue making investment into the community.

    She also said that the offer made by Indiana amounted to twice Wichita’s offer, on a per-job basis.

    Citizens spoke against the forgivable loan. John Todd asked if this is the economic formula that has blessed our city and county with the wealth and prosperity we enjoy today.

    Clinton Coen told the council that these incentives are a bargaining tool, allowing cities to blackmail each other.

    Susan Estes asked a question that built on O’Donnell’s earlier remarks: Why would we see this forgivable loan as egregious? On the surface, we see jobs, which is good, she said. But the money to pay for this loan comes from other taxpayers, she said, and there are many companies that need help, citing the number of companies filing for bankruptcy and having tax liens filed against them. “Why I find it egregious is that we’re doing something that helps one company at a time. We really need to take an overall look at our tax policy and address the tax issue. We have one of the highest tax rates on the Plains, and that’s why we get in these situations where we have to compete. If we had a better competitive tax rate we could spare all of this.”

    Of interest for the political theater was the vote of three new council members, based on statements they made regarding forgivable loans on the campaign trail (see Forgivable loan a test for new Wichita City Council members). In making the motion to accept staff recommendation of the forgivable loan, council member Pete Meitzner said of the loan: “It is an investment, incentive, whatever you want to call it. It is not a give-away.”

    Meitzner and James Clendenin voted with all the veteran council members to approve the forgivable loan. Only O’Donnell voted consistent with how he campaigned.

    Analysis

    This item before the Wichita City Council today requires analysis from two levels.

    First, the economics and public policy aspects of granting the forgivable loan are this: It is impossible to tell whether The Golf Warehouse would not expand in Wichita if the forgivable loan was not granted. The companies that apply for these subsidies and that cite competitive offers from other states and cities have, in some cases, multi-million dollar motives to make Wichita think they will move away, or not invest any more in Wichita. Most politicians are scared to death of being labeled “anti-job,” and therefore will vote for any measure that has the appearance of creating or saving jobs.

    Particularly inappropriate is the attitude of many of these companies in that they deserve some sort of reward for investing in Wichita and creating jobs. First, companies that make investments do, in fact, deserve a reward. That reward is called profit, but it has to be earned in the marketplace, not granted by government fiat. When a company earns profits in free markets, we have convincing evidence that wealth is being created and capital has been wisely invested. Everyone — the investors certainly but also the customers and employees — is better off when companies profit through competition in free markets.

    But when government steps in with free capital, as was the case today, markets are no longer free. The benefits of capitalism are no longer available and working for us. The distortion that government introduces interferes with market processes, and we can’t be sure if the profit and loss system that is so important is working. Companies, as we saw today, increasingly revert to what economists call rent seeking — profiting through government rather than by pleasing customers in market competition.

    Entrepreneurship, of which Wichita has a proud tradition, is replaced by a check from city hall.

    Wichita’s own Charles Koch explained the harm of government interventionism in his recent recent Wall Street Journal op-ed: “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.”

    A forgivable loan — despite Council Member Meitzner’s claim to the contrary — is a cash payment to business, which Mr. Koch warns against.

    The focus on job creation is also a confounding factor that obscures the path to true wealth and prosperity for Wichita. When companies ask the city, county, and state for subsidy and incentive, they tout the number of jobs and the payroll that will be created. But jobs are a cost, not a benefit, to business and most firms do all they can to minimize their labor costs just as they seek to minimize all costs. For Wichita to prosper, we need to focus on productivity and wealth creation, not merely employment.

    The actions of the city council today keep Wichita on its path of piecemeal economic development and growth. Movement to a system that embraces economic dynamism, as advocated by Dr. Art Hall and as part of Governor Sam Brownback’s economic development plan for Kansas, is delayed. Economic development in Wichita keeps its present status as a sort of public utility, subject to policy review from time to time, as was mentioned today by the city manager.

    Politically, Wichitans learned today the value of promises or statements made by most candidates while campaigning. Most candidates’ promises along with $3.75 will get you a small cappuccino at Starbucks — if you don’t ask for whipped cream.

    Particularly interesting is the inability of politicians to admit they were wrong, or that they made a mistake, or that they were simply uninformed or misinformed when they made a campaign promise or statement. It was refreshing to hear Republican presidential candidate Tim Pawlenty, when he was in Wichita a few weeks ago, forthrightly admit that he was wrong about his initial position on cap-and-trade energy policies. City council members Clendenin and Meitzner could not bring themselves to admit that their votes today were at odds with their statements made while campaigning. This lack of honesty is one of the reasons that citizens tune out politics, why they have such a cynical attitude towards politicians, and perhaps why voter turnout in city elections is so low.

    As one young Wichitan said on her Facebook page after sharing video of the three new council members today, obviously referring to city council district 2’s Pete Meitzner: “How to use your mouth: 1. Campaign under the guise that you are a fiscal conservative. 2. Insert foot.”

  • Kansas and Wichita quick takes: Monday May 2, 2011

    Shale gas to be topic in Wichita. This Friday (May 6) the Wichita Pachyderm Club features Malcolm C. Harris, Sr., Ph.D., Professor of Finance, Division of Business and Information Technology, Friends University, speaking on the topic: “Shale gas: Our energy future?” Harris also blogs at Mammon Among Friends. … “Shale gas” refers to a relatively new method of extracting natural gas, as reported in the Wall Street Journal: “We’ve always known the potential of shale; we just didn’t have the technology to get to it at a low enough cost. Now new techniques have driven down the price tag — and set the stage for shale gas to become what will be the game-changing resource of the decade. I have been studying the energy markets for 30 years, and I am convinced that shale gas will revolutionize the industry — and change the world — in the coming decades. It will prevent the rise of any new cartels. It will alter geopolitics. And it will slow the transition to renewable energy.” … Critics like the Center for American Progress warn of the dangers: “The process, which involves injecting huge volumes of water mixed with sand and chemicals deep underground to fracture rock formations and release trapped gas, is becoming increasingly controversial, with concerns about possible contamination of underground drinking water supplies alongside revelations of surface water contamination by the wastewater that is a byproduct of drilling.” … Upcoming speakers: On May 13, Craig Burns and Glenn Edwards of Security 1st Title Co. on the topic “Real Estate Transactions, Ownership, Title, and Tales From the Trenches.” On May 20, Rob Siedleckie, Secretary, Kansas Social Rehabilitation Services (SRS) on the topic “The SRS and Initiatives.” On May 27, Todd Tiahrt, Former 4th District Congressman on the topic “Outsourcing our National Security — How the Pentagon is Working Against Us”.

    Wichita City Council this week. On Tuesday the Wichita City Council will decide whether to spend $316,000 on capital improvements to the Wichita Ice Center. Improvements will include “HVAC system upgrades, new flooring, signage, interior and exterior painting, upgrades to the locker room facilities, ice skates, and a new point of sale system that will track program revenues and attendance.” This spending was already agreed to in a contract with the new managers of the facility, so approval seems certain. … On the consent agendas one item proposes to spend $36,087 on study, design and bid services to replace the passenger loading bridges at the Wichita airport. In 2003 the city budgeted $4 million for this project, but it was put on hold due to plans for a new terminal building. Now the city wants to go ahead and replace the existing bridges. Being on a consent agenda, this item will receive no discussion unless a council members wants to “pull” it for individual discussion.

    Williams on the role of race in economics. Thomas Sowell reviewing a new book by Walter E. Williams, Race and Economics: How Much Can Be Blamed on Discrimination?: “Walter Williams fans are in for a treat — and people who are not Walter Williams fans are in for a shock – when they read his latest book, Race and Economics. It is a demolition derby on paper, as Professor Williams destroys one after another of the popular fallacies about the role of race in the American economy. … In recent times, we have gotten so used to young blacks having sky-high unemployment rates that it will be a shock to many readers of Walter Williams’ Race and Economics to discover that the unemployment rate of young blacks was once only a fraction of what it has been in recent decades. And, in earlier times, it was not very different from the unemployment rate of young whites. The factors that cause the most noise in the media are not the ones that have the most impact on minorities. This book will be eye-opening for those who want their eyes opened. But those with the liberal vision of the world are unlikely to read it at all.” … An interview with the author is available at Lew Rockwell interviews Walter Williams on his two new books.

    Spending cuts preferred to taxes. A survey of Kansas voters conducted on behalf of the Kansas Chamber of Commerce found widespread support for cutting spending rather than raising taxes as the way to balance the Kansas budget. Support was also found for cutting state worker salaries, or reducing the number of state employees. See Kansas Chamber finds voters favor cuts, not tax increases to balance budget.

    Except some prefer taxes. A coalition of groups is advocating for more revenue so that Kansas government can spend more. Some of the groups in the coalition advocate for those who truly can’t help themselves. But it’s no coincidence that the spokesman for the group is Mark Desetti, who is the lobbyist for Kansas National Education Association (KNEA), the state’s teachers union. Other school spending advocacy groups are prominent members of this coalition. Fortunately, many are starting to realize that the aims of school spending advocates like the teachers unions are not in the best interest of students, as shown below.

    Teacher evaluation systems. Brookings Institution: “Of all the things that are under the control of policymakers and schools, teacher quality is at the top of the list in terms of impact on student achievement, and so there is a great interest in evaluating teacher performance.” Says Russ Whitehurst, director of the Brown Center on Education Policy: “If you’re unlucky enough to get a bad teacher three years in a row, you’re basically ruined — that’s 30 percentile points, it’s hard to recover from that. So we know that teachers are important, and we know that for the first time for reasons other than intuition.” Brookings is working on systems to evaluate the systems that school districts use to evaluate teachers, so that state and federal money can be distributed fairly, as a way to incentivize good teacher evaluation systems. … According to National Council on Teacher Quality, Kansas ranks very low among the states in policies relating to teacher effectiveness. For example, the report states: “Fails to make evidence of student learning the preponderant criterion in teacher evaluations.” … The prospects for reform in teacher evaluation and quality in Kansas are not good. Proposals that would improve Kansas in this regard have not been discussed — at least meaningfully — in this year’s session of the Kansas legislature. For example, this year the Legislature spent quite a bit of time on a policy where the period before teachers are awarded tenure could be increased from three to five years in certain circumstances. This is what qualifies as “school reform” in Kansas. Remember, Kansas ranks very low in policies that promote teacher quality. Tinkering with the policy on teacher tenure is not going to improve our teacher quality, as tenure is a system that ought to be eliminated. In Kansas the teachers union is Kansas National Education Association (KNEA), and it works overtime to block meaningful reform of our state’s schools.

    Misguided efforts to improve capitalism. From Eamonn Butler: Ludwig von Mises — A Primer on how efforts by government to intervene in markets fail: Indeed, our efforts to manipulate the market economy, and make it conform to a particular vision, are invariably damaging. Capitalism is superbly good at boosting the general standard of living by encouraging people to specialise and build up the capital goods that raise the productivity of human effort. But when we tax or regulate this system, and make it less worthwhile to invest in and own capital goods, then capitalism can falter. But that is not a “crisis of capitalism,” explains Mises. It is a crisis of interventionism: a failure of policies that are intended to “improve” capitalism but in fact strangle it. One common political ideal, for example, is “economic democracy” — the idea that everyone should count in the production and allocation of economic goods, not just a few capitalist producers. But according to Mises, we already have economic democracy. In competitive markets, producers are necessarily ruled by the wishes of consumers. Unless they satisfy the demands of consumers, they will lose trade and go out of business. If we interfere in this popular choice, we will end up satisfying only the agenda of some particular political group. A more modest notion is that producers’ profits should be taxed so that they can be distributed more widely throughout the population. But while this shares out the rewards of success, says Mises, it leaves business burdened with the whole cost of failure. That is an imbalance that can only depress people’s willingness to take business risks and must thereby depress economic life itself.