Interventionism

It’s worse than President Obama saying “You didn’t build that.” Wichita Mayor Carl Brewer tells us you can’t build that — not without government guidance and intervention, anyway.

City of Wichita logoWhen President Barack Obama told business owners “You didn’t build that,” it set off a bit of a revolt. Those who worked hard to build businesses didn’t like to hear the president dismiss their efforts.

Underlying this episode is a serious question: What should be the role of government in the economy? Should government’s role be strictly limited, according to the Constitution? Or should government take an activist role in managing, regulating, subsidizing, and penalizing in order to get the results politicians and bureaucrats desire?

Historian Burton W. Folsom has concluded that it is the private sector — free people, not government — that drives innovation: “Time and again, experience has shown that while private enterprise, carried on in an environment of open competition, delivers the best products and services at the best price, government intervention stifles initiative, subsidizes inefficiency, and raises costs.”

But some don’t agree. They promote government management and intervention into the economy. Whatever their motivation might be, however it was they formed their belief, they believe that without government oversight of the economy, things won’t happen.

But in Wichita, it’s even worse. Without government, it is claimed that not only would we stop growing, economic progress would revert to a previous century.

Mayor Carl Brewer made these claims in a 2008 meeting of the Wichita City Council.

In his remarks (transcript and video below), Brewer said “if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.”

When I heard him say that, I thought he’s just using rhetorical flair to emphasize a point. But later on he said this about those who advocate for economic freedom instead of government planning and control: “… then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.”

Brewer’s remarks are worse than “You didn’t build that.” The mayor of Wichita is telling us you can’t build that — not without government guidance and intervention, anyway.

Many people in Wichita, including the mayor and most on the city council and county commission, believe that the public-private partnership is the way to drive innovation and get things done. It’s really a shame that this attitude is taking hold in Wichita, a city which has such a proud tradition of entrepreneurship. The names that Wichitans are rightly proud of — Lloyd Stearman, Walter Beech, Clyde Cessna, W.C. Coleman, Albert Alexander Hyde, Dan and Frank Carney, and Fred C. Koch — these people worked and built businesses without the benefit of public-private partnerships and government subsidy.

This tradition of entrepreneurship is disappearing, replaced by the public-private partnership and programs like Visioneering Wichita, sustainable communities, Greater Wichita Economic Development Coalition, Regional Economic Area Partnership (REAP), and rampant cronyism. Although when given a chance, voters are rejecting cronyism.

We don’t have long before the entrepreneurial spirit in Wichita is totally subservient to government. What can we do to return power to the people instead of surrendering it to government?

Wichita Mayor Carl Brewer, August 12, 2008:

“You know, I think that a lot of individuals have a lot of views and opinions about philosophy as to, whether or not, what role the city government should play inside of a community or city. But it’s always interesting to hear various different individuals’ philosophy or their view as to what that role is, and whether or not government or policy makers should have any type of input whatsoever.

“I would be afraid, because I’ve had an opportunity to hear some of the views, and under the models of what individuals’ logic and thinking is, if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.

“Because the stance is let’s not do anything. Just don’t do anything. Hands off. Just let it happen. So if society, if technology, and everything just goes off and leaves you behind, that’s okay. Just don’t do anything. I just thank God we have individuals that have enough gumption to step forward and say I’m willing to make a change, I’m willing to make a difference, I’m willing to improve the community. Because they don’t want to acknowledge the fact that improving the quality of life, improving the various different things, improving bringing in businesses, cleaning up street, cleaning up neighborhoods, doing those things, helping individuals feel good about themselves: they don’t want to acknowledge that those types of things are important, and those types of things, there’s no way you can assess or put a a dollar amount to it.

“Not everyone has the luxury to live around a lake, or be able to walk out in their backyard or have someone come over and manicure their yard for them, not everyone has that opportunity. Most have to do that themselves.

“But they want an environment, sometimes you have to have individuals to come in and to help you, and I think that this is one of those things that going to provide that.

“This community was a healthy thriving community when I was a kid in high school. I used to go in and eat pizza after football games, and all the high school students would go and celebrate.

“But, just like anything else, things become old, individuals move on, they’re forgotten in time, maybe the city didn’t make the investments that they should have back then, and they walk off and leave it.

“But new we have someone whose interested in trying to revive it. In trying to do something a little different. In trying to instill pride in the neighborhood, trying to create an environment where it’s enticing for individuals to want to come back there, or enticing for individuals to want to live there.

“So I must commend those individuals for doing that. But if we say we start today and say that we don’t want to start taking care of communities, then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.

“So I think this is something that’s a good venture, it’s a good thing for the community, we’ve heard from the community, we’ve seen the actions of the community, we saw it on the news what these communities are doing because they know there’s that light at the end of the tunnel. We’ve seen it on the news. They’ve been reporting it in the media, what this particular community has been doing, and what others around it.

“And you know what? The city partnered with them, to help them generate this kind of energy and this type of excitement and this type of pride.

“So I think this is something that’s good. And I know that there’s always going to be people who are naysayers, that they’re just not going to be happy. And I don’t want you to let let this to discourage you, and I don’t want the comments that have been heard today to discourage the citizens of those neighborhoods. And to continue to doing the great work that they’re doing, and to continue to have faith, and to continue that there is light at the end of the tunnel, and that there is a value that just can’t be measured of having pride in your community and pride in your neighborhood, and yes we do have a role to be able to help those individuals trying to help themselves.”

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Entrepreneurship, Entrepreneur

Entrepreneurship is important for a growing and dynamic economy. The performance of Kansas in entrepreneurial activity is not high, compared to other states.

The Ewing Marion Kauffman Foundation prepares the Kauffman Index of Entrepreneurial Activity. According to the Foundation, “The Kauffman Index of Entrepreneurial Activity improves over other possible measures of entrepreneurship because of its timeliness, dynamic nature, inclusion of all types of business activity, exclusion of ‘casual’ businesses, and information on owner demographics.”

The following interactive visualization presents KIEA data. You may use the visualization below, or click here to open it in a new window, which may work better, as this is a large visualization. Use Ctrl+Click to add or remove states for comparison. Data is from Kauffman Index of Entrepreneurial Activity. Visualization created by myself using Tableau Public.

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Airplane

Wichita officials are proud that Southwest Airlines is starting service in Wichita soon. Great economic benefit is anticipated. But at the same time Southwest arrives, AirTran Airways leaves.

It’s true that Southwest is adding five new flights, as Wichita officials are quick to remind. (City officials are equally diligent at overlooking the end of the AirTran flights.) But it’s unknown what impact the loss of the Atlanta AirTran flights will have on Wichita travelers.

In 2012, 73,980 passengers enplaned AirTran jets in Wichita. In total, there were 147,101 AirTran passengers in Wichita, out of 1,509,206 total passengers in Wichita. This means that the routes that 9.7 percent of Wichita passengers used will no longer be available after June 2.

Whatever the impact, it’s difficult to see Southwest producing the touted economic benefits. The city has a report prepared by Wichita State University Center for Economic Development and Business Research that forecasts traffic increases of around 35 percent and the creation of 7,000 jobs.

That’s a lot, and it would be great if it happened. But we have to remember that at the same time Southwest arrives, AirTran leaves. It’s difficult to see how merely a different discount carrier could make such a difference.

We have to be very careful when evaluating job creation projections such as the one prepared by CEDBR for the arrival of Southwest. Consider the 2003 study prepared by CEDBR (Wichita Mid-Continent Airport Economic Impact) on the economic impact of the Wichita airport, which concluded that the airport had an impact on employment of 41,634 jobs, with payroll of $1,630,079,797.

In its calculations, the report included all the employees of Cessna and Bombardier — 12,134 in total — in determining the economic impact of the airport. Why? To quote the study: “While it might appear that manufacturing businesses could be based anywhere in the area, both Cessna and Bombardier require a location with runways and instrumentation structures that allow for flights and flight testing of business jet airplanes.” This is true, but it is quite a stretch to attribute all the economic impact of these employees solely to the airport.

For one thing, if we count the economic impact of the income of these employees as belonging to the airport, what then do we say about the economic impact of Cessna and Bombardier? We would have to count it as very little, because the impact of their employees’ earnings has been assigned to the airport. This is, of course, assuming that we count the impact of these employees only once.

This double-counting of the economic impact is a problem. Since this report was released, both Cessna and Bombardier have asked the state, city, and county for incentives and subsidies. Companies use the economic impact of their employee payroll as justification for the subsidies. But these dollars will have already been used, as they were attributed to the airport.

Does anyone at city hall track this, that the purported economic impact of employees has already been claimed by the airport?

Further: Suppose that Cessna tires of being on the west side of town, so it moves east and starts using Jabara Airport. Would Cessna’s economic impact on the City of Wichita, Sedgwick County, or State of Kansas be any different? I think it wouldn’t. But its impact on the Wichita airport would now be zero, or very nearly so.

The CEDBR study does provide some figures with the manufacturing employees excluded. The impact without the manufacturing employees included is estimated at $183 million, or about 11 percent of the $1.6 billion claimed earlier.

It is a convenient circumstance that these two manufacturers happen to be located near the airport. To credit the airport with the economic impact of these companies — as though the airport was involved in the actual manufacture of airplanes instead of providing an incidental (but important) service — is to grossly overstate the airport’s role and its economic importance.

Of course the airport is important to Wichita. We should seek to measure its impact sensibly instead of stretching to attribute every dollar possible to it. When advocates of any cause manufacture figures like the $1.6 billion economic impact, it casts doubt on other arguments they advance.

Similarly, we need to be realistic about the economic impact of Southwest Airlines in Wichita.

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In Wichita, community needn’t be government

by Guest Author on April 29, 2013

Wichita, Kansas logo

Kansas Policy Institute offers commentary on the Wichita/Sedgwick County Community Investment Plan.

In The Righteous Mind: Why Good People Differ on Politics and Religion, renowned psychologist Jonathan Haidt describes how the human mind is dual in nature: “We live most of our lives in the ordinary world, but we achieve our greatest joys in those brief moments of transit to the sacred world, in which we become ‘simply a part of a whole.’”

A recent survey by the City of Wichita capitalized on this innate human tendency by equating community with government. Our natural desire to become “simply a part of a whole” manifests itself in our jobs, churches, softball leagues, clubs, dinner parties and recently pride in WSU’s success in the NCAA tournament. Our citizenship in Wichita is one of many communities that define us as individuals, one of many communities we make sacrifices for, one of many communities we call upon to solve problems.

Wichita/Sedgwick County Community Investment Plan

The survey respondents provide a list of wishes, all with the goal of improving our lives, many of which can and should be provided by city and county governments. Allowing businesses to openly compete to build water and street infrastructure, with competitive bidding for contracts, would strengthen the community by precluding any unfairness that weakens trust in the city.

Survey respondents showed a plea for business formation and young talent. The city could promote a sense of community by creating a welcoming culture for all businesses, one that does not pick favorites. 71.8 percent of respondents do not have faith that most people are willing to put community interests above personal interest — perhaps because so often city hall is called upon to hand out special tax treatment.

The survey also tries to identify challenges to the community; respondents were asked one question about Boeing and two questions about political divisions. Overwhelmingly respondents believe political divisions are negatively impacting our community’s ability to respond to global challenges.

We live in the biggest city in the state which brings with it many challenges; solutions to those challenges come in many forms, giving rise to the vast diversity of opinion borne out in the survey. That diversity may be trying but we should not allow the aspiration for political unity to squelch debate. Ultimately it is our ability to engage and debate these issues that unites us as a community.

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Wichita survey questions based on false premises

by Bob Weeks on April 24, 2013

The recently-released Wichita/Sedgwick County Community Investment Plan survey results provide another opportunity to look at the survey process to see if the results will be useful as our city looks to the future.

(Good luck trying to find this document on the newly-redesigned City of Wichita website. I’ve placed it here for your convenience.)

Here are two examples of questions that have such severe problems that the results are not likely to be a reliable indicator of what citizens believe and what they want government to do.

One problematic question survey participants answered is this: “Local government should … continue to use public resources to encourage airlines to increase the number and reduce the cost of flights through Wichita Mid-Continent Airport.”

Reading this question, you would assume that public resources have increased the number of flights, wouldn’t you?

Another related question: “Recommended Change in Investment [to] Increase the number of flights and decrease the cost to fly into and out of the Wichita Mid-Continent Airport.”

Again, it would be natural for survey respondents to assume that investment has been successful in increasing the number of flights.

Here’s the problem: If we consider the number of monthly departing flights, Wichita isn’t doing well compared to the nation. The chart at the end of this article illustrates.

(Since this data is highly seasonal, I present a 12-month moving average, so that each point plotted is the average of the previous 12 months data. Also, I index January 2000 to 100.)

Of particular note is that over the past two or three years, the trend of flights nationally is level, while the trend of flights available in Wichita is declining.

This trend is an example of unintended consequences of government intervention and regulation. The Affordable Airfares program imposes a rough form of price control on airfares in Wichita. If the program didn’t do that — and it appears it succeeds at this goal — then there would be no point in having the program. The inevitable effect of price controls is that less is supplied, compared to what would have been supplied. This economic phenomenon is reliable and predictable.

While travelers prefer low air fares to high, this is not the only consideration. For those who need to travel on short notice, the availability of flights is very important.

The problem we have regarding the survey is that the questions would lead survey participants to assume that the city has been successful in increasing the number of flights available in Wichita. But the data doesn’t support the premises to these two questions. The questions are based on inaccurate facts. This, in turn, casts doubt over the reliability and usefulness of these questions.

(For more about flights in Wichita, see In Wichita, confusion over air traffic statistics.)

(For a critique of the survey instrument by Sedgwick County Commissioner Karl Peterjohn, click here.)

Monthly flights, Wichita Airport and nationally.

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Kansas wind turbines

A report submitted to the Kansas House Standing Committee on Energy and Environment claims the Kansas economy benefits from the state’s Renewables Portfolio Standard, but an economist presented testimony rebutting the key points in the report.

RPS is a law that requires the state’s electricity utilities to generate or purchase a certain portion of their electricity from renewable sources, which in Kansas is almost all wind. An argument in favor of wind energy requirementy from the Polsinelli Shugart law firm is at The Economic Benefits of Kansas Wind Energy.

Michael Head, a Research Economist at Beacon Hill Institute presented a paper that examined each of Polsinell’s key findings. The paper may be read at The Economic Impact of the Kansas Renewable Portfolio Standard and Review of “The Economic Benefits of Kansas Wind Energy” or at the end of this article. An audio recording of Head speaking on this topic is nearby.

Michael Head, Beacon Hill Institute

Here are the five key findings claimed to be economic benefits to the Kansas economy, and portions of Head’s responses.

Key Finding #1: “New Kansas wind generation is cost-effective when compared to other sources of new intermittent or peaking electricity generation.”

The first observation to make from this key finding is that if it were true the state RPS policy is not necessary. If wind power is truly cost-effective compared to other sources of energy, state mandates that wind power be used should be repealed, allowing wind power to compete with other technologies to provide low cost electricity in Kansas.

This point is obvious. The actions of the wind power industry — insisting on mandates and subsidies — lets us know that they don’t believe their own claim.

Key Finding #2: “Wind generation is an important part of a well-designed electricity generation portfolio, and provides a hedge against future cost volatility of fossil fuels.”

Hedging has been, and will continue to be, a useful tool for utilities, and benefits the consumer. But the Kansas state government should not engage in this level of industrial policy by regulating just how much utilities can hedge, all for the sake of requiring wind power production. This is not a benefit in itself. Utilities will attempt to maximize profits by consistently analyzing the energy market and making the best decisions, often through long term purchasing agreements. … In short, hedging is a valuable tool when left to the discretion of the utility, but by utilizing a heavy-handed mandate, state lawmakers are actually constraining the ability of the utilities to make sound business decisions.

Key Finding #3: “Wind generation has created a substantial number of jobs for Kansas citizens.”

This key finding fails to take into consideration opportunity costs, a concept that Bastiat explained in his 1850 essay, and is a prime example of the reviewed paper only considering benefits. If a shopkeeper has a window broken, this creates work for a glazer to replace the window. However, this classic “broken window” fallacy mistakes breaking windows as job creation policy. At this point “The Economic Benefits of Kansas Wind Energy” is correct, wind generation does create jobs, just as a broken window creates jobs. But the report stops at this point and fails to provide a complete analysis of the effect of wind generation on total employment in Kansas.

As Bastiat showed, a consideration must be made to the opportunity cost. How would the shopkeeper have spent his money if he did not need to replace his window? He could use the money on capital investment, further growing his business, hire another worker or make various other purchases. Regardless of what it was, they would have all brought him more benefit, than replacing his window. If not, he would have broken the window himself.

This is one of the most important points: By forcing Kansans to pay for more expensive electricity, we lose the opportunity to use money elsewhere.

Key Finding #4: “Wind generation has created significant positive impact for Kansas landowners and local economics.”

This key finding makes a common mistake by assuming transfer payments are a benefit, a fallacy. The transfers of money via lease payments or property tax payments are not benefits. This transfer of money is a cost to one party and a benefit on the other, and can be illustrated easily.

What if Kansas wind farms vastly overpaid for their land and lease payments were valued at $1 billion a year. This report would place the benefit of wind power leasing this land at $1 billion a year. But the project has not changed, where did these new benefits come from?

In fact, there would not be any change to the net benefit of the project. Landowners would amass benefits equal to $1 billion minus the land value and utilities would amass costs equal to $1 billion minus the land value. These costs would in turn be passed along to rate payers in the form of higher utility costs. This illustrates the point that this policy is industrial policy. By dispersing the costs of a project to all citizens in the state, small, but powerful, groups with strong lobbying efforts are able to gather the rewards.

Key Finding #5 “The Kansas Renewable Portfolio Standard is an important economic development tool for attracting new business to the state.”

This key finding is related closely with the analysis of the job benefits that wind power purportedly conveys. Of course, legally requiring that utilities use specific sources of electricity will attract new business in that sector to the state. But we need to see the whole picture. This policy has costs, which will be borne by state residents and businesses via higher utility prices.

In conclusion, Head asked the obvious question: “With all of these supposed benefits of wind power, why does it require a government mandate and taxpayer funding?”

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Downtown Wichita issues not appreciated

by Bob Weeks on February 5, 2013

Once again, the Wichita Eagle editorial board misses the point regarding downtown Wichita development.

There may be some that are opposed to downtown simply because it’s downtown, or for other silly reasons. That seems to be the focus of Rhonda Holman’s editorial today.

But speaking from a perspective of economic freedom and individual liberty, it’s government interventionism in downtown that I object to. This is what harms Wichita, not the fact that people are living and working downtown or anywhere else, for that matter.

The political cronyism involved in many projects in downtown Wichita is what harms our city. When government takes from one and gives to another, everyone is worse off — other than the recipients. I understand that it’s easy to look at a subsidized project — be it downtown or elsewhere — and see people working at jobs. It’s much more difficult, however, to see the harm that the government intervention causes: Prosperity and jobs are lost due to inefficient government allocation of capital through political, not market, mechanisms. In the whole, we are worse off, not better.

If you don’t believe this — if you insist that the city government can create jobs and prosperity through its interventions, and that these have no net cost — then you have to ask why the city is not involved in more development.

It is the principled objection to government involvement that many do not understand, including, I think, the Wichita Eagle editorial board. An example: In September 2011, after I and others started a campaign to overturn a city council decision to award a tax subsidy to the Ambassador Hotel, the hotel’s lead developer asked to meet with me. In the meeting I explained that I would oppose the city’s action if applied to any hotel, located anywhere in Wichita, owned by anyone. He said that he sensed my opposition was based on principle, and I agreed.

The curious thing is that this seemed to puzzle him — that people would actually apply principles to politics.

The political allocation of investment capital in Wichita leads to problems of the appearance of impropriety, if not actual impropriety. There is a small group of people that repeatedly receive large amounts of taxpayer subsidy. These people and others associated with their companies regularly contribute to the campaign funds of city council members and candidates. These council members then vote to grant these people taxpayer-funded subsidy, year after year.

City council members also vote to award them with no-bid contracts. That’s terrible government policy. Especially when one recent contract was later put to competitive bid, and turned out to cost much less than the no-bid price. City council members, all except one, were willing to award their significant campaign contributors with an overpriced no-bid contract at taxpayer expense.

The company that won the no-bid contract was Key Construction. Its owners and executives were the sole contributors to the campaign fund of Lavonta Williams (district 1, northeast Wichita) in 2012 as she prepared to run for reelection this spring.

James Clendenin (district 3, southeast and south Wichita), also running for reelection this spring, and also having voted for the no-bid contract for Key, also received many contributions from Key and its executives in 2012. That company, along with person associated with one other company, were the sole source of Clendenin’s campaign funding that year.

Doesn’t the Wichita Eagle editorial board see a problem here? Doesn’t the newsroom?

There was a time when newspaper opinion editors crusaded against this type of behavior.

Newspaper editorial writers ought also to be concerned about how taxpayer funds are spent. The City of Wichita, however, has established non-profit organizations to spend taxpayer funds. The Wichita Downtown Development Corporation, for example, is funded almost exclusively through taxes. Yet, it claims that it is not a public agency as defined in the Kansas Open Records Act, and therefore need not fulfill records requests seeking to bring transparency as to how the agency spends its taxpayer funds. The city, inexplicably, backs WDDC in this interpretation of law that is contrary to the interests of citizens.

Secrecy of this type regarding taxpayer funds is not good public policy. There was a time when newspaper editors railed against government secrecy like this.

We need a newspaper editorial board that understands principle vs. political expediency. As a first step, let’s ask for an editorial board that recognizes these abuses of citizens and is willing to talk about them.

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Today as the Wichita City Council approved another round of cronyism and business welfare in the name of economic development, Mayor Carl Brewer spoke approvingly of the city’s efforts in this regard.

As quoted by the Wichita Eagle, Brewer said this of his critics:

“We recognize you can make any argument you choose,” Mayor Carl Brewer said. “Cities that prosper, the things they have to do … is make investments to do things. As long as we’re putting people to work and creating an environment … where new businesses come to our community, it provides the opportunity to grow new business.”

If the mayor and council believe what we’ve been doing has created prosperity and jobs, I wish he would take a look at numbers. When we compare the Wichita MSA to other areas and the country as a whole, we realize we’re not doing well at all.

Wichita MSA GDP growth

This illustration shows GDP growth for the Wichita MSA (purple line) as compared to U.S. metropolitan areas (blue line) and all other MSAs (dimmed lines). I use data for MSAs because that is what is made available. Also, the city and county like to talk about a regional approach.

The top two charts show the growth in GDP for government, and then for the private sector. The bottom chart shows growth in GDP per capita (per person).

What can we observe from these charts? First, when considering output generated by government, Wichita tracks right along with the average U.S. MSA.

But when looking at GDP generated by private industry, Wichita does worse than the average of U.S. MSAs. There are not many MSAs that perform worse than Wichita.

Considering GDP Per Capita, we see the same story: Wichita underperforms.

If you would rather measure jobs instead of gross domestic product, see here for charts that tell the same story in different words: Wichita economic development solution, postponed.

Even if we believe that an active role for government in economic development is best (and I don’t believe that), we have to conclude that our efforts aren’t working. Carl Brewer has been on the city council or served as mayor since 2001, which is the time period illustrated in these charts.

Brewer, most city council members, and the city’s bureaucratic staff believe in taking an active role in economic development. Their vote to approve such action today is another in a long line of efforts to improve the economic performance of Wichita.

But I would ask Mayor Brewer and the council: How can you argue that this record reflects success?

(Dollar amounts are in chained 2005 dollars to eliminate the effects of inflation. Each metropolitan area is indexed to start at 100% so we can see the relative rates of growth. Data from U.S. Bureau of Economic Analysis (BEA). The interactive version of this visualization is at Growth in Gross Domestic Product by metropolitan area.)

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Wichita’s Lux applies for more business welfare

by Bob Weeks on January 7, 2013

Tomorrow the Wichita City Council considers yet another layer of business welfare for The Lux, a luxury real estate development in downtown Wichita. This project, despite having already received millions in assistance from taxpayers, is not economically viable, according to city documents.

The Lux has already received the benefit of Industrial Revenue Bonds, the purpose of which, despite their name, is to relieve the Lux from paying property taxes and sales taxes.

If approved for historic preservation tax credits, the Lux could receive several millions in tax credits, which are equivalent to a cash grant. It’s likely to be approved.

These programs and actions result in taxpayers paying for the lifestyle choices of a relative few.

The assistance program the council will consider tomorrow is relatively benign. The city will allow the Lux to tap up to $1.7 million in special assessment financing. The amount owed becomes a lien in the property, and the risk of the city not being paid back is small. But this action puts our city deeper in debt, and that’s a problem.

Additionally, Wichita is taking on risk that the project’s bankers are not willing to take, even though they would also have a claim on the building if it fails. Even if the bank would loan, its interest rate would be higher than what the city charges on special assessment financing. This lower interest rate is likely the real reason for the developers claiming the need for this program.

What’s the matter with Wichita?

We have to wonder why so many projects in downtown Wichita require massive doses of taxpayer subsidy. Here’s what city documents tell us:

“The Office of Urban Development has reviewed the economic (gap) analysis of the project and determined a financial need for incentives exists based on the current market. The project lender, Intrust Bank, has advised that the bank cannot increase the loan amount, leaving a gap in funding sources that is filled by the City’s facade program.”

When the city is willing to fill in financing gaps, you can be sure that gaps will be created.

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

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

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

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

I wonder: After the Lux receives its millions in grants in the form of tax credits — which it is quite likely to receive — will it still have a gap at that time?

Fortunately for taxpayers the Lux does not qualify for the facade improvement grant program.

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Americans for Prosperity-Kansas applauds Sedgwick County Commission for rejecting public financing for Bowllagio

December 13, 2012

Americans for Prosperity-Kansas applauds Sedgwick County Commission for rejecting public financing for Bowllagio

Read the full article →

Eliminate mortgage interest deduction

November 30, 2012

The home mortgage interest deduction doesn’t accomplish much, and it should be eliminated.

Read the full article →

Flight options from Wichita decline, compared to nation

November 28, 2012

A program designed to bring low air fares to Wichita appears to meet that goal, but the unintended and inevitable consequences of the program are not being recognized.

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In Wichita, confusion over air traffic statistics

November 27, 2012

The Kansas Affordable Airfares program is promoted by Wichita and Sedgwick County government despite problems with the data and statistics used to evaluate the program.

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Wichita licenses the striping of parking lots

November 15, 2012

Next week the Wichita City Council will consider licensing and regulating the painting of stripes in parking lots. How, may I ask, has civilization advanced without the benefit of such regulation?

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Wichita’s $60 million gift to Spirit Aerosystems — not

October 22, 2012

Industrial Revenue Bonds is a confusing economic development program misunderstood by citizens, journalists, and even city council members.

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Government interventionism ensnares us all

September 25, 2012

Are those who call for an end to government subsidy programs hypocrites for accepting those same subsidies?

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Surveillance state arrives in Wichita

September 24, 2012

In an effort to control crime in Old Town, Wichita is importing the police surveillance state. Once camera use has started, it is likely to spread.

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Pompeo: Wind production tax credit should expire

September 20, 2012

If wind power cannot compete on its own after 20 years without costly special privileges, it never will, writes Lamar Alexander And Mike Pompeo.

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Special interests will capture south-central Kansas planning

September 18, 2012

Special interest groups are likely to co-opt the government planning process started in south-central Kansas as these groups see ways to benefit from the plan. The public choice school of economics and political science has taught us how special interest groups seek favors from government at enormous costs to society, and we will see this at play over the next few years.

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Wichita Mayor Carl Brewer on role of government

September 6, 2012

It’s worse than “You didn’t build that.” Wichita Mayor Carl Brewer tells us you can’t build that — not without government guidance and intervention, anyway.

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Crony Chronicles: I Want To Be A Crony

August 30, 2012

Cronyism? “It’s like having a best friend who gives you other peoples’ stuff.”

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Wichita fluoridation debate reveals attitudes of government

August 24, 2012

Is community water fluoridation like iodized salt? According to Wichita City Council Member and Vice Mayor Janet Miller, we didn’t vote on whether to put iodine in table salt, so Wichitans don’t need to vote on whether to add fluoride to drinking water.

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Wichita flight options decrease, despite subsidies

July 17, 2012

Despite a subsidy program, the number of flights available in Wichita is decreasing.

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Pickens’ NATGAS act sponsor defeated

June 27, 2012

A congressional primary election served as a barometer of public sentiment on energy policy and government interventionism into free markets, specifically the NATGAS act pushed by T. Boone Pickens.

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Farm bill contains energy spending

June 14, 2012

The farm bill contains wasteful spending on energy.

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Tax costs block progress in Kansas

April 28, 2012

If we in Kansas and Wichita wonder why our economic growth is slow and our economic development programs don’t seem to be producing results, there is now data to answer the question why: Our tax costs are high — way too high.

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In Kansas, STAR bonds vote uplifted cronyism over capitalism

April 24, 2012

In Kansas, many purportedly fiscally conservative members of the House and Senate voted to uplift cronyism over capitalism by extending the STAR bonds program.

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Raising minimum wage not the solution

April 19, 2012

As calls mount to raise the federal minimum wage, we need to remember that this law — as well-intentioned as it may be — is not the solution to unemployment or raising the standard of living of workers.

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Wichita may choose more centralized planning

April 16, 2012

This Tuesday the Wichita City Council will consider its participation in the REAP sustainable communities planning process. Wichita ought to reject this expansion of centralized planning, as the outcome will likely serve special interests at the expense of economic growth and jobs for everyone else.

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Kansas should improve economic climate, rely less on incentives

April 12, 2012

Kansas has a history of giving incentives to attract business. Despite this, businesses are leaving, and taking jobs and revenue with them, writes Maurice McTigue of the Mercatus Center.

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Thinking beyond stage one in economic development for Wichita

April 9, 2012

It’s hard to think beyond stage one. It requires considering not only the seen, but also the unseen, as Frederic Bastiat taught us in his famous parable of the broken window. But over and over we see how politicians at all levels of government stop thinking at stage one. This is one of the many reasons why we need to return as much decision-making as possible to the private sector, and drastically limit the powers of politicians and governments.

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Southfork TIF should, again, be rejected

April 9, 2012

The Wichita City Council should reject the formation of a new tax increment financing district in Wichita.

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In Kansas, planning will be captured by special interests

April 6, 2012

The government planning process started in south-central Kansas will likely be captured by special interest groups that see ways to benefit from the plan. The public choice school of economics and political science has taught us how special interest groups seek favors from government at enormous costs to society, and we will see this at play again over the next few years.

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Federal, United Nations planning imported to Wichita

April 5, 2012

The Sedgwick County Commission has decided to give a consortium of South Central Kansas governments and organizations broad control over community planning funded by a federal grant and based on a United Nations agenda.

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Kansas and Wichita quick takes: Friday March 30, 2012

March 30, 2012

Today: Lee Fang: wrong again; Action on sustainability; Economic fascism; Immigration.

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Wichita new home tax rebate program: The analysis

March 28, 2012

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

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If government ordered your lunch, would you get what you want?

March 23, 2012

Speaking on government making decisions for us, Antony Davies concludes “Even if it’s benevolent, it fails because it lacks the necessary information to make those decision correctly.”

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The role of speculators

March 21, 2012

As gasoline prices rise, we hear the call for regulation of speculators, with Fox News populist Bill O’Reilly a leading voice. Part of the complaint is true: Speculators are selfish people, acting only to make as much profit as possible for themselves. But by doing so, they provide a valuable public service.

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Does government spending create economic growth?

March 16, 2012

Does government have the ability to create jobs? The only relationship that emerges is that as government spending grows, the economy contracts. Meaning: government spending is a negative factor for economic growth.

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Kansas and Wichita lag the nation in tax costs

March 1, 2012

If we in Kansas and Wichita wonder why our economic growth is slow and our economic development programs don’t seem to be producing results, there is now data to answer the question why: Our tax rates are high — way too high.

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Mike Pompeo: We need capitalism, not cronyism

March 1, 2012

A big obstacle on the path to restoring limited government in America is cronyism, writes U.S. Representative Mike Pompeo.

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