In Kansas, lower income tax rates are needed to ensure that Kansas has a bright economic future. Failing to reform income tax rates will mean that Kansas will continue to under-perform other states.

Why should we care about reducing tax rates? We must remember that taxation is not a voluntary activity. Although it is not fashionable to say this in public, ultimately taxes are collected by coercion or its threat. While those who are (supposedly) enlightened will argue that taxes are like dues paid to belong to a club, or maybe the price we pay to have a civilized society, these arguments are easily dispatched. What, for example, if I don’t want to belong the the “club”? Big government — supported by high taxes — destroys civil society, if by that we mean a society based on liberty and voluntary participation and cooperation. The choice is stark, as explained in the mission statement of the Cato Institute: “In civil society individuals make choices about their lives while in a political society someone else makes or attempts to greatly influence those choices.”

We also need to recognized the relative productivity of the public and private sectors of the economy. We find over and over that the private sector is more efficient at delivering goods and services than is the government, or public, sector. There are a number of reasons for this.

First, government spending is filtered through the lens of special interest groups that fight to obtain every dollar they can. This “mining for dollars” is the prime reason why so much effort is spent lobbying government, both at the national, state, and local level. Almost every spending program exhibits the qualities of concentrated benefits and dispersed costs. There is a group, usually relatively small, that will benefit mightily from a spending program. The costs, however, are spread across the entire state, so the cost to each person is small. Sometimes this argument is made explicit, as when advocates for Kansas arts spending said the cost was only $0.29 per person, per year.

This leads to an imbalance of interest and effort. The small group receiving the concentrated benefit of the spending is highly motivated to press its case and seek victory, while the average citizen sees the 29 cents — if he sees anything at all — and comes to the rational conclusion that it’s easier to pay than fight.

Repeat this scenario many times, however, and soon the cost to the individual is substantial. This cost, remember, is to pay for spending that benefits special interest groups, and often provides little benefit to society at large. See the video Public Choice: Why Politicians Don’t Cut Spending for more. In the video, Benjamin Powell concludes: “This is the logic of politics, and this is why we end up with more spending than the average voter wants.”

Second: Government doesn’t have the same profit motive that the private sector has. While most people want government to do some things that the private sector might not do on its own, such as caring for the sick and disabled, there a difference between government paying for a service and government providing the service. In government, spending programs are usually looked on as jobs programs. Politicians crow over how many jobs the program creates, and the more jobs, the better. In the private sector, however, different motivations come into play. There, efficiency is valued and rewarded by profit.

Some do not recognize the beneficial effect of the profit motive, using arguments that say private for-profit companies can’t provide adequate care for disabled people. They argue that these companies will short-change patients on their care so that they can earn more profit. This, however, misunderstands how profits are earned, which is by providing a good or service which is valued by the customer, and doing that efficiently enough that something is left over after costs are paid. In competitive markets — and we must see that these exist — customers can switch to other suppliers if they don’t get what they want or contracted for. This benefits customers, which in this case, is the state in purchasing services for its citizens.

There’s also no reason to think that government bureaucrats are immune from the profit motive. Bureaucrats benefit through expansion of the budgets and power spheres. Most seek to expand both.

Results from other states

While we can’t perform controlled experiments regarding states and income tax rates, we can look at what has happened in the states. There, the results are striking. Analysis in the current edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index shows that low taxes are conducive to economic growth: “When it comes to growing gross state product (GSP), the [states with no personal income tax] have, on average, outperformed those states with the highest rates by 39.2 percent over the past decade. They have also outperformed the U.S. average by 25.6 percent. Additionally, not even one state in the high tax rate group performed as well as the average no personal income tax state.”

Besides this, low tax rates are good for government budgets, too, finds the authors of Rich States, Poor States: “You may be surprised to learn that the growth premium of the no personal income tax states also benefits the public treasury. The average growth of all state and local tax revenues over the past decade was 51 percent. Interestingly enough, the no personal income tax states saw their state revenue grow 81.7 percent faster than that of the nine highest personal income tax states. Clearly, private sector growth matters a great deal for government revenues. Leaders of states with the highest rates ought to reconsider: If the rates don’t result in more money (relative to the no personal income tax states), then why are they so high?”

Kansas compared to other states

In the Rich States, Poor States analysis, Kansas does not perform well. Rich States, Poor States evaluates state economies two ways. The “Economic Outlook Ranking” is a forecast looking forward. It is based on factors that are under control of the states. The “Economic Performance Ranking” is a backward-looking rating that measures state performance, again using variables under control of each state.

For Economic Performance Ranking, Kansas is ranked 39 among the states, near the bottom in terms of positive performance. In the 2010 edition, Kansas was ranked 40th, and in 2010, 34th. Kansas is not making progress in this ranking of state performance.

In the forward-looking Economic Outlook Ranking, Kansas ranks 26th. Again, Kansas is not making progress, compared to other states. In annual rankings since 2008 Kansas has been ranked 29, 24, 25, 27, and now 26.

Recently the Tax Foundation released a report that examines the tax costs on business in the states and in selected cities in each state. The news for Kansas is worse than merely bad, as our state couldn’t have performed much worse: Kansas ranks 47th among the states for tax costs for mature business firms, and 48th for new firms. The report is Location Matters: A Comparative Analysis of State Tax Costs on Business.

The most startling fact, and one that should be a wake-up call to anyone who cares about the future of Kansas, is the uncovering by Kansas Policy Institute that not long ago, Kansas was the only state to have a loss in private sector jobs over a year-long period.

All the spending on schools, highways, and other government programs that are supposed to spur our economy to greatness lead to this: last place. The only state with private-sector job loss. We couldn’t have done worse.

Kansas will do better by leaving more of its citizens’ resources in the private sector, under their own control. Cutting taxes — and then government spending — is the way to generate prosperity in Kansas for all of its citizens.

“As it turns out, if we tax corporations, we’re not just taxing the rich. We’re taxing everybody.” That’s the conclusion of Steven Horwitz in the following video. He explains that a tax on corporations is not the equivalent of a tax on the wealthy; instead individual people will pay these taxes, regardless of wealth. Working people bear the costs of the corporate income tax.

In summarizing the findings of economists, Horwitz says: “So yes, corporations are indeed comprised of people in the sense that it is individuals who ultimately bear the burden of increased corporate taxation. There is an ongoing debate about who bears that burden and how much. But anyone who thinks that taxing corporations means taxing the rich is fooling themselves. It’s us, actual people, who bear the burden of corporate taxation, not the abstract entity called the corporation.”

As Kansas prepares to reduce its income tax rates, there are those such as Wichita Eagle editorial board who urge caution before proceeding with reducing taxes. Others will claim that government taxation and spending are the driving forces behind growing the Kansas economy. An example is the motto of the Kansas Economic Progress Council, which is “… because a tax cut never filled a pothole, put out a fire or taught a child to read.”

Two research papers illustrate the need to reduce taxes in Kansas, finding that high taxes are associated with reduced income and low economic growth. Research such as this rebuts the presumption of government spending advocates that reducing taxes will kill jobs in Kansas.

One paper is The Robust Relationship between Taxes and U.S. State Income Growth by W. Robert Reed, published in the National Tax Journal in March 2008. The abstract to this paper states:

I estimate the relationship between taxes and income growth using data from 1970 – 1999 and the forty-eight continental U.S. states. I find that taxes used to fund general expenditures are associated with significant, negative effects on income growth. This finding is generally robust across alternative variable specifications, alternative estimation procedures, alternative ways of dividing the data into “five-year” periods, and across different time periods and Bureau of Economic Analysis (BEA) regions, though state-specific estimates vary widely. I also provide an explanation for why previous research has had difficulty identifying this “robust” relationship. (emphasis added)

In his introduction, Reed writes that previous studies had found: “To the extent a consensus exists, it is that taxes used to fund transfer payments have small, negative effects on economic activity.” His paper found a stronger relationship.

Reed issues a caution on the use of his conclusions: “It needs to be emphasized that my claim for robustness should be understood as applying only within the context of U.S. state income growth. It should not be interpreted as being more widely applicable to other contexts, such as employment growth, manufacturing activity, plant locations, etc., or to the relationship between taxes and income growth outside the U.S.”

This illustrates one of the ways we focus on the wrong measure of growth. Politicians focus on jobs. But to business, jobs are a cost. One of the better goals to seek, as Art Hall specifies in his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, is income growth, along with population density and population migration, productivity growth, capital investment, gross business starts and expansions, and customer service and throughput measures of state economic development agencies. Hall writes: “If Kansas performs well in the measures provided, it will also perform well in terms of job count.”

Another example of research finding a negative impact of taxation is State Taxes and Economic Growth by Barry W. Poulson and Jules Gordon Kaplan, published in the Winter 2008 Cato Journal. In the introduction to the paper, the authors write: “The analysis reveals a significant negative impact of higher marginal tax rates on economic growth. The analysis underscores the importance of controlling for regressivity, convergence, and regional influences in isolating the effect of taxes on economic growth in the states.” (emphasis added)

In its conclusion, the paper states:

The analysis reveals that higher marginal tax rates had a negative impact on economic growth in the states. The analysis also shows that greater regressivity had a positive impact on economic growth. States that held the rate of growth in revenue below the rate of growth in income achieved higher rates of economic growth.

The analysis underscores the negative impact of income taxes on economic growth in the states. Most states introduced an income tax and came to rely on the income tax as the primary source of revenue. Jurisdictions that imposed an income tax to generate a given level of revenue experienced lower rates of economic growth relative to jurisdictions that relied on alternative taxes to generate the same revenue. (emphasis added)

When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer, who is Vice President for International Programs at the Atlas Economic Research Foundation, General Director of the Atlas Global Initiative for Free Trade, Peace, and Prosperity, a Senior Fellow at the Cato Institute, and Director of Cato University, has written an important paper that confronts these myths about markets. The twentieth myth — Markets Can Solve All Problems without Government at All — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: Markets Can Solve All Problems without Government at All

Myth: Government is so incompetent that it can’t do anything right. The main lesson of the market is that we should always weaken government, because government is simply the opposite of the market. The less government you have, the more market you have.

Tom G. Palmer: Those who recognize the benefits of markets should recognize that in much of the world, perhaps all of it, the basic problem is not only that governments do too much, but also that they do too little. The former category — things that governments should not do, includes A) activities that should not be done by anyone at all, such as “ethnic cleansing,” theft of land, and creating special legal privileges for elites, and B) things that could and should be done through the voluntary interaction of firms and entrepreneurs in markets, such as manufacturing automobiles, publishing newspapers, and running restaurants. Governments should stop doing all of those things. But as they cease doing what they ought not to do, governments should start doing some of the things that would in fact increase justice and create the foundation for voluntary interaction to solve problems. In fact, there is a relation between the two: governments that spend their resources running car factories or publishing newspapers, or worse — confiscating property and creating legal privileges for the few — both undercut and diminish their abilities to provide truly valuable services that governments are able to provide. For example, governments in poorer nations rarely do a good job of providing clear legal title, not to mention securing property from takings. Legal systems are frequently inefficient, cumbersome, and lack the independence and impartiality that are necessary to facilitate voluntary transactions.

For markets to be able to provide the framework for social coordination, property and contract must be well established in law. Governments that fail to provide those public benefits keep markets from emerging. Government can serve the public interest by exercising authority to create law and justice, not by being weak, but by being legally authoritative and at the same time limited in its powers. A weak government is not the same as a limited government. Weak unlimited governments can be tremendously dangerous because they do things that ought not to be done but do not have the authority to enforce the rules of just conduct and provide the security of life, liberty, and estate that are necessary for freedom and free market exchanges. Free markets are not the same as the sheer absence of government. Not all anarchies are attractive, after all. Free markets are made possible by efficiently administered limited governments that clearly define and impartially enforce rules of just conduct.

It is also important to remember that there are plenty of problems that have to be solved through conscious action; it’s not enough to insist that impersonal market processes will solve all problems. In fact, as Nobel Prize winning economist Ronald Coase explained in his important work on the market and the firm, firms typically rely on conscious planning and coordination to achieve common aims, rather than on constant recourse to market exchanges, because going to the market is costly. Each contract arranged is costly to negotiate, for example, so long-term contracts are used instead to reduce contracting costs. In firms, long-term contracts substitute for spot-exchanges and include labor relations involving teamwork and conscious direction, rather than constant bidding for particular services. Firms — little islands of teamwork and planning — are able to succeed because they navigate within a wider ocean of spontaneous order through market exchanges. (The great error of the socialists was to try to manage the entire economy like one great firm; it would be a similar error not to recognize the limited role of conscious direction and teamwork within the wider spontaneous order of the market.) To the extent that markets can provide the framework of creation and enforcement of rules of just conduct, advocates of free markets should promote just that. Private security firms are often better than state police (and less violent, if for no other reason than that the cost of violence are not easily shifted to third parties, except by the state); voluntary arbitration often works far better than state courts. But recognizing that entails recognizing the central role of rules in creating markets and, thus, favoring efficient and just rules, whether provided by government or by the market, rather than merely being “anti-government.”

Finally, it should be remembered that property and market exchange may not, by themselves, solve all problems. For example, if global warming is in fact a threat to the entire planet’s ability to sustain life, or if the ozone layer is being degraded in ways that will be harmful to life, coordinated government solutions may be the best, or perhaps the only, way to avoid disaster. Naturally, that does not mean that markets would play no role at all; markets for rights to carbon dioxide emissions might, for example, help to smooth adjustments, but those markets would first have to be established by coordination among governments. What is important to remember, however, is that deciding that a tool is not adequate and appropriate for all conceivable problems does not entail that it is not adequate and appropriate for any problems. The tool many work very well for some or even most problems. Property and markets solve many problems and should be relied on to do so; if they do not solve all, that is no reason to reject them for problems for which they do offer efficient and just solutions.

Free markets may not solve every conceivable problem humanity might face, but they can and do produce freedom and prosperity, and there is something to be said for that.

Tomorrow the Wichita City Council will consider new taxicab regulations that, city hall hopes, will improve tax service in Wichita. But the regulations create high barriers to entry that stifle entrepreneurship and market competition, likely dooming the program to fail.

The problem is that some feel that Wichita’s taxicab companies are not delivering good service. There have been complaints about both the drivers and the conditions of cabs. Wichita Mayor Carl Brewer said he was tired of hearing complaints about the taxicabs. He has tired slowly, however, as it’s taken eleven years of Brewer as either city council member or mayor for a solution to be proposed.

In some cities, the permit or medallion to operate a cab costs many thousands of dollars, even hundreds of thousands in New York City and other large cities. Wichita’s proposed fees are not exorbitant: Just $200 annually for a taxicab company and $100 annually per taxicab. (In Wichita there are three taxicab companies, but two have the same ownership.)

Further, Wichita does not restrict the number of taxicab companies, the number of cabs, or prohibit cruising for fares, as do some cities. This sounds like light-handed regulation, which if so, should induce new entrants to the market for providing taxi service. The market competition thereby created would normally be expected to drive down fares and improve service.

But Wichita’s regulations create substantial barriers to entering the taxicab market. Some of the most restrictive include these: A central office, staffed at least 40 hours per week; a dispatch system operating 24 hours per day, seven days per week; enough cabs to operate city-wide service, which the city has determined is ten cabs; and a supervisor on duty at all times cabs are operating.

These requirements, in effect, eliminate the small-time entrepreneur and the solo operator from entering the market. Things like dispatch systems, a central office, a fleet of ten taxicabs, and supervisors sound good. But these are costly, and they aren’t all necessary to get started in the business, or even perhaps to thrive. Since some of the complaints are the lack of available cabs at the airport, we need more cabs, not fewer.

If a person wanted to simply concentrate on picking up fares from the airport or cruising downtown looking for street hails, a dispatch system is not necessary. Neither is a supervisor or an office.

Yes, a cab without a dispatch system will miss out on fares that other cabs will be able to service. But the decision as to whether to use a dispatch system should be made by taxicab drivers or owners, not the city. Certainly, for some drivers and companies the economic benefit of such systems will become apparent, and they will invest in them. Others won’t.

The regulations in Wichita make it difficult for new taxicab operators to enter the market, leaving the city’s citizens and visitors served by a near-monopoly of two companies. That hasn’t worked out well, at least according to city officials. A new government regulator with a new set of regulations to enforce isn’t likely to help create a thriving market for taxicabs in Wichita.

But these market-based considerations and potential solutions, evidently, are not considered by the city. At a workshop on the topic, Council Member Michael O’Donnell (district 4, south and southwest Wichita) noted the near-monopoly of taxicabs companies and asked if the city had looked at ways of creating more competition in the market?

The presenter of the proposed regulations, a public management fellow in the city manager’s office, said, simply, “we have not, no.” (We’re left to wonder if this proposed regulatory expansion is just an exercise, or make-work, for a recent graduate of the school of public administration at Wichita State University.) City Manager Robert Layton interjected, adding “we are believers in the free market system,” saying that he hoped that the new regulations and fare structure would make it easier to enter the market. I don’t think anyone at the meeting picked up on the irony.

In a news conference last week, U.S. Representative Mike Pompeo of Wichita and two others criticized President Barack Obama for misunderstanding of the meaning of a taxpayer protection pledge that Pompeo has signed.

The pledge is the famous pledge advanced by Grover Norquist of Americans for Tax Reform, where signers pledge not to increase taxes. The “tax increase” the president refers to are various tax credits that benefit some forms of energy production, particularly wind and solar power. Norquist, along with Senator Jim DeMint of South Carolina, participated in the conference.

Pompeo said the president “called out” those who signed the ATR pledge, specifically arguing that allowing the wind production tax credit (PTC) to expire would be a violation of the pledge. The ATR taxpayer protection pledge is to “One, oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and two, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.”

Pompeo has introduced legislation in the House of Representatives that would end tax credits on all forms of energy production. By itself, that might be a violation of the pledge. The bill, however, specifies that the savings from the elimination of the spending on tax credits would be used to lower the corporate income tax rate. The use of the savings to reduce tax rates is in agreement with the second plank of the ATR pledge.

Pompeo’s bill is H.R. 3308: Energy Freedom and Economic Prosperity Act. This bill is currently in committee. Sen. DeMint introduced an amendment to a Senate bill that would have accomplished the same, but the amendment received only 26 votes. Pompeo characterized this as an advance, as just a few years ago, he said such a bill or amendment would have received only a few votes. But this received the votes of a majority of Republican members of the Senate, including that of minority leader Mitch McConnell.

In his remarks, DeMint said that while the president talks about eliminating corporate loopholes, he is hypocritical in his criticism of this legislation. If Congress could eliminate the tax credits — loopholes — for big oil and all energy and lower tax rates for all, it would be “a model for what we could do across our whole tax code.”

Norquist emphasized the temporary nature of many loopholes or tax advantaged treatment added to the tax code. These are usually pitched as temporary measures, needed because the policy goal is good, the industry is in its infancy, and it needs temporary help. But as in the case of the wind PTC, these special advantages are often extended or made permanent.

The issue of special tax treatment for the oil and gas industry arose. Norquist said that these tax considerations almost always fall into the categories of depreciation and expensing, which are available to all industries. He said if these are available to General Electric and Wal-Mart, they should also be available to all industries, including oil and gas.

Not everyone, including all conservatives, agree that tax credits are a form of spending implemented through the tax code. Recently Kansas Governor Sam Brownback and U.S. Senator Jerry Moran of Kansas made the case for extending the production tax credit for the production of electrical power by wind. See Wind tax credits are government spending in disguise.

In their op-ed, the Kansans argued the PTC is necessary to let the wind power industry “complete its transformation from being a high tech startup to becoming cost competitive in the energy marketplace.” As the PTC has been in effect is 1992, a period of 20 years, Norquist’s warning about the temporary nature of these programs is relevant.

The proper way to view the PTC is as a government spending program, recognizing the true economic effect of tax credits. Only recently are Americans coming to realize this, and as a result, the term “tax expenditures” is coming into use to accurately characterize the mechanism of tax credits. Canceling this spending is what would let tax rates be reduced, according to Pompeo’s proposed legislation.

Amazingly, Brownback and Moran do not realize this, at least if we take them at their written word when they write: “But the wind PTC is a winning solution because it allows companies to keep more of their own dollars in exchange for the production of energy. These are not cash handouts; they are reductions in taxes that help cover the cost of doing business.” (Emphasis added.)

When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer, who is Vice President for International Programs at the Atlas Economic Research Foundation, General Director of the Atlas Global Initiative for Free Trade, Peace, and Prosperity, a Senior Fellow at the Cato Institute, and Director of Cato University, has written an important paper that confronts these myths about markets. The nineteenth myth — All Relations Among Humans Can Be Reduced to Market Relations — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: All Relations Among Humans Can Be Reduced to Market Relations

Myth: All actions are taken because the actors are maximizing their own utility. Even helping other people is getting a benefit for yourself, or you wouldn’t do it. Friendship and love represent exchanges of services for mutual benefit, no less than exchanges involving sacks of potatoes. Moreover, all forms of human interaction can be understood in terms of markets, including politics, in which votes are exchanged for promises of benefits, and even crime, in which criminals and victims exchange, in the well known example, “your money or your life.”

Tom G. Palmer: Attempting to reduce all actions to a single motivation falsifies human experience. Parents don’t think about the benefits to themselves when they sacrifice for their children or rush to their rescue when they’re in danger. When people pray for salvation or spiritual enlightenment, their motivations are not quite the same as when they are shopping for clothes. What they do have in common is that their actions are purposeful, that they are undertaken to achieve their purposes. But it does not follow logically from that that the purposes they are striving to achieve are all reducible to commensurable units of the same substance. Our purposes and motivations may be varied; when we go to the market to buy a hammer, when we enter an art museum, and when we cradle a newborn baby, we are realizing very different purposes, not all of which are well expressed in terms of buying and selling in markets.

It is true that intellectual constructs and tools can be used to understand and illuminate a variety of different kinds of interaction. The concepts of economics, for example, which are used to understand exchanges on markets, can also be used to understand political science and even religion. Political choices may have calculable costs and benefits, just like business choices; political parties or mafia cartels may be compared to firms in the market. But it does not follow from such applications of concepts that the two choice situations are morally or legally equivalent. A criminal who offers you a choice between keeping your money and keeping your life is not relevantly like an entrepreneur who offers you a choice between keeping your money and using it to buy a commodity, for the simple reason that the criminal forces you to choose between two things to both of which you have a moral and legal entitlement, whereas the entrepreneur offers you a choice between two things, to one of which he has an entitlement and to one of which you have an entitlement. In both cases you make a choice and act purposively, but in the former case the criminal has forced you to choose, whereas in the latter case the entrepreneur has offered you a choice; the former lessens your entitlements and the latter offers to increase them, by offering you something you don’t have but may value more for something you do have but may value less. Not all human relationships are reducible to the same terms as markets; at the very least, those that involve involuntary “exchanges” are radically different, because they represent losses of opportunity and value, rather than opportunities to gain value.

I’d like to call your attention to, and invite you to attend, a lecture next week in Wichita. The speaker is Tom G. Palmer, and he will be speaking on topics from his recent book The Morality of Capitalism.

I met Tom last year when I spent my summer vacation attending Cato University, which Tom is director of. He is a fascinating speaker. His background includes feats such as smuggling books, photocopiers, and faxes into the Soviet Union. Currently he is Vice President for International Programs at the Atlas Economic Research Foundation, General Director of the Atlas Global Initiative for Free Trade, Peace, and Prosperity, a Senior Fellow at the Cato Institute, and Director of Cato University. He travels across the world speaking on political science, public choice, civil society, and the moral, legal, and historical foundations of individual rights. His appearance in Wichita is presented by the Kansas Policy Institute.

The Wichita event is on Wednesday May 16th, at the Hyatt Regency Hotel. A reception begins at 5:30 pm, with the presentation at 6:30 pm. He’s also appearing in Overland Park the day before.

RSVP is requested by e-mailing James Franko at james.franko@kansaspolicy.org or by calling 316-634-0218. Or, click here to RSVP online.

For more information and to register for these events see The Morality of Capitalism.

Kansas tax reform. A message from Americans for Prosperity, Kansas: “‘Today’s vote on a much-needed tax reform bill will provide an immediate boost to Kansas families and businesses,’ said AFP-Kansas state director Derrick Sontag. ‘The approved tax bill cuts the income tax for Kansas families and small businesses, which is certainly good news for taxpayers. The current leadership of the state Senate helped lead Kansas down a path of economic destruction as indicated by the past decade being one of lost private sector jobs, stagnant population growth, and taxpayers fleeing to other states. Yet in spite of all the evidence pointing to the failure of the tax and spend approach, the actions of Senate leadership today indicated that they wanted more of the same. Today’s action by a majority of the House led by leadership was a step in the right direction to reverse the failed economic policies of the past. We applaud the leaders of the Kansas House for this bold move toward tax relief.’”

School funding. Two Wichita legislators on Kansas school funding. First, Representative Jim Ward: “The question is do we spend money on tax cuts for rich people and out-of-state corporations or do we spend money restoring the cuts to education.” … Then Senator Jean Schodorf: “Schodorf said business as usual is not funding schools. ‘That has become kind of the status quo in the legislature, and this year we desperately need to get a funding increase for schools.’” I wonder if either of these two legislators, both of whom hold leadership positions on education committees, know that this will likely be a record-setting year for school spending in Kansas, when all sources are considered? Fighting for school funding is a distraction from the reforms that Kansas schools really need.

Separation of art and state. David Boaz, writing at “Room for Debate” at the New York Times: “What do art, music, and religion have in common? They all have the power to touch us in the depths of our souls. As one theater director said, ‘Art has power. It has the power to sustain, to heal, to humanize … to change something in you. It’s a frightening power, and also a beautiful power. … And it’s essential to a civilized society.’ Which is precisely why art, music, and religion should be kept separate from the state. Government involves the organization of coercion. In a free society coercion should be reserved only for such essential functions of government as protecting rights and punishing criminals. People should not be forced to contribute money to artistic endeavors that they may not approve, nor should artists be forced to trim their sails to meet government standards.” Read more at Separation of Art and State. We failed this important test in Kansas, as funding for arts is now a concern for the state.

Stimulus spending. Robert J. Barro in the Wall Street Journal, available at the Hoover Institution: “The weak economic recovery in the U.S. and the even weaker performance in much of Europe have renewed calls for ending budget austerity and returning to larger fiscal deficits. … This viewpoint is dangerously unstable. Every time heightened fiscal deficits fail to produce desirable outcomes, the policy advice is to choose still larger deficits. If, as I believe to be true, fiscal deficits have only a short-run expansionary impact on growth and then become negative, the results from following this policy advice are persistently low economic growth and an exploding ratio of public debt to GDP. The last conclusion is not just academic, because it fits with the behavior of Japan over the past two decades.” On the idea of Keynesian solutions to economic problems: “Despite the lack of evidence, it is remarkable how much allegiance the Keynesian approach receives from policy makers and economists. I think it’s because the Keynesian model addresses important macroeconomic policy issues and is pedagogically beautiful, no doubt reflecting the genius of Keynes. The basic model — government steps in to spend when others won’t — can be presented readily to one’s mother, who is then likely to buy the conclusions. … Keynes worshipers’ faith in this model has actually been strengthened by the Great Recession and the associated financial crisis. Yet the empirical support for all this is astonishingly thin. The Keynesian model asks one to turn economic common sense on its head in many ways. For instance, more saving is bad because of the resultant drop in consumer demand, and higher productivity is bad because the increased supply of goods tends to lower the price level, thereby raising the real value of debt. Meanwhile, transfer payments that subsidize unemployment are supposed to lower unemployment, and more government spending is good even if it goes to wasteful projects.” See Stimulus Spending Keeps Failing.

Drug court to be Pachyderm topic. This Friday (May 11th) the Wichita Pachyderm Club Judge Joe Kisner of the Sedgwick County Drug Court speaking on “A new approach to an old problem.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … The club has an exceptional lineup of future speakers as follows: On May 18th: Paul Soutar, Reporter for Kansas Watchdog, speaking on “The evolution of journalism and how the new media empowers citizens.” … On May 25th: Ron Estes, State Treasurer of Kansas, speaking on “A report from the Kansas Treasurer.” … On June 1st: Gary Oborny, Chairman/CEO Occidental Management and Real Estate Development, CCIM Designated member of the Storm Water Advisory Board to the City of Wichita, speaking on “What is the economic impact of EPA mandates on storm water quality in Wichita?”

Elizabeth Warren. Writes Ann Coulter: “For liberals, it should be a mortal sin: Elizabeth Warren cheated on affirmative action.” A funny — and sad, because it tells us a lot about our country — column on how Elizabeth Warren, the Massachusetts Senatorial Candidate, apparently lied about being a member of a minority group (being 1/32 Cherokee) and how universities lapped it up.

Failure of socialism to be shown. The Wichita Chapter Meeting of Americans for Prosperity Foundation continues its video presentation of Milton Friedman’s “Free to Choose” series. The next episode to be shown is “The Failure of Socialism,” followed by a group discussion on Monday, May 14, 2012 at the Alford Branch Wichita Public Library, from 7:00 pm to 8:30 pm. There is no admission charge. RSVP not required. The Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. 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.

Yes we can! No they can’t! “It’s a fatal conceit. The politicians in there think they can run our economy, run our lives. But no — they can’t.” That’s John Stossel standing in front of the U.S. Capitol at the start of a television program featuring his new book No, They Can’t: Why Government Fails-But Individuals Succeed. The complete show is available on the free hulu service at Stossel – Thursday, Apr 12, 2012.

When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer, who is Vice President for International Programs at the Atlas Economic Research Foundation, General Director of the Atlas Global Initiative for Free Trade, Peace, and Prosperity, a Senior Fellow at the Cato Institute, and Director of Cato University, has written an important paper that confronts these myths about markets. The eighteenth myth — Privatizaton and Marketization in Post-Communist Societies Were Corrupt, Which Shows that Markets Are Corrupting — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: Privatizaton and Marketization in Post-Communist Societies Were Corrupt, Which Shows that Markets Are Corrupting

Myth: Privatization campaigns are almost always rigged. It’s a game that just awards the best state assets to the most ruthless and corrupt opportunists. The whole game of privatization and marketization is dirty and represents nothing more than theft from the people.

Tom G. Palmer: A variety of formerly socialist states that have created privatization campaigns have had quite varied outcomes. Some have generated very successful market orders. Others have slipped back toward authoritarianism and have seen the “privatization” processes result in new elites gaining control of both the state and private businesses, as in the emerging “Siloviki” system of Russia. The dirtiness of the dirty hands that profited from rigged privatization schemes was a result of the preexisting lack of market institutions, notably the rule of law that is the foundation for the market. Creating those institutions is no easy task and there is no well known generally applicable technique that works in all cases. But the failure in some cases to fully realize the institutions of the rule of law is no reason not to try; even in the case of Russia, the deeply flawed privatization schemes that were instituted were an improvement over the one-party tyranny that preceded them and that collapsed from its own injustice and inefficiency.

Mere “privatization” in the absence of a functioning legal system is not the same as creating a market. Markets rest on a foundation of law; failed privatizations are not failures of the market, but failures of the state to create the legal foundations for markets.