Tag Archives: Stimulus bill

Kerr’s attacks on Pompeo’s energy policies fall short

We often see criticism of politicians for sensing “which way the wind blows,” that is, shifting their policies to pander to the prevailing interests of important special interest groups. The associated negative connotation is that politicians do this without regard to whether these policies are wise and beneficial for everyone.

So when a Member of Congress takes a position that is literally going against the wind in the home district and state, we ought to take notice. Someone has some strong convictions.

This is the case with U.S. Representative Mike Pompeo, a Republican representing the Kansas fourth district (Wichita metropolitan area and surrounding counties.)

The issue is the production tax credit (PTC) paid to wind power companies. For each kilowatt-hour of electricity produced, the United States government pays 2.2 cents. Wind power advocates contend the PTC is necessary for wind to compete with other forms of electricity generation. Without the PTC, it is said that no new wind farms would be built.

The PTC is an important issue in Kansas not only because of the many wind farms located there, but also because of wind power equipment manufacturers that have located in Kansas. An example is Siemens. That company, lured by millions in local incentives, built a plant in Hutchinson. Employment was around 400. But now the PTC is set to expire on December 31, and it’s uncertain whether Congress will extend the program. As a result, Siemens has laid off employees. Soon only 152 will be at work in Hutchinson, and similar reductions in employment have happened at other Siemens wind power equipment plants.

Rep. Pompeo is opposed to all tax credits for energy production, and has authored legislation to eliminate them. As the wind PTC is the largest energy tax credit program, Pompeo and others have written extensively of the market distortions and resultant economic harm caused by the PTC. A recent example is Puff, the Magic Drag on the Economy: Time to let the pernicious production tax credit for wind power blow away, which appeared in the Wall Street Journal.

The special interests that benefit from the PTC are striking back. An example comes from Dave Kerr, who as former president of the Hutchinson/Reno County Chamber of Commerce played a role in luring Siemens to Hutchinson. Kerr’s recent op-ed in the Hutchinson News is notable not only for its several attempts to deflect attention away from the true nature of the PTC, but for its personal attacks on Pompeo.

There’s no doubt that the Hutchinson economy was dealt a setback with the announcement of layoffs at the Siemens plant that manufactures wind power equipment. Considered in a vacuum, these jobs were good for Hutchinson. But we shouldn’t make our nation’s policy in a vacuum, that is, bowing to the needs of special interest groups — sensing “which way the wind blows.” When considering everything and everyone, the PTC paid to producers of power generated from wind is a bad policy. We ought to respect Pompeo for taking a principled stand on this issue, instead of pandering to the folks back home.

Kerr is right about one claim made in his op-ed: The PTC for wind power is not quite like the Solyndra debacle. Solyndra received a loan from the Federal Financing Bank, part of the Treasury Department. Had Solyndra been successful as a company, it would likely have paid back the government loan. This is not to say that these loans are a good thing, but there was the possibility that the money would have been repaid.

But with the PTC, taxpayers spend with nothing to show in return except for expensive electricity. And spend taxpayers do.

Kerr, in an attempt to distinguish the PTC from wasteful government spending programs, writes the PTC is “actually an income tax credit.” The use of the adverb “actually” is supposed to alert readers that they’re about to be told the truth. But truth is not forthcoming from Kerr — there’s no difference. Tax credits are government spending. They have the same economic effect as “regular” government spending. To the company that receives them, they can be used — just like cash — to pay their tax bill. Or, the company can sell them to others for cash, although usually at a discounted value.

From government’s perspective, tax credits reduce revenue by the amount of credits issued. Instead of receiving tax payments in cash, government receives payments in the form of tax credits — which are slips of paper it created at no cost and which have no value to government. Created, by the way, outside the usual appropriations process. That’s the beauty of tax credits for big-government spenders: Once the program is created, money is spent without the burden of passing legislation.

If we needed any more evidence that PTC payments are just like cash grants: As part of Obama’s ARRA stimulus bill, for tax years 2009 and 2010, there was in effect a temporary option to take the federal PTC as a cash grant. The paper PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United States explains.

Astonishingly, the wind PTC is so valuable that wind power companies actually pay customers to take their electricity. It’s called “negative pricing,” as explained in Negative Electricity Prices and the Production Tax Credit:

As a matter of both economics and public policy, no government production tax subsidy should ever be so large that it creates an incentive for a business to actually pay customers to take its product. Yet, the federal Production Tax Credit (“PTC”) for wind generation is doing just that with increasing frequency in electricity markets across the United States. In some “wind-rich” regions of the country, wind producers are paying grid operators to take their generation during periods of surplus supply. But wind producers more than make up the cost of the “negative price” payment, because they receive a $22/MWH federal production tax credit for every MWH generated.

In western Texas since 2008, wind power generators paid the electrical grid to take their electricity ten percent of the hours of each day.

Once we recognize that tax credits are the same as government spending, we can see the error in Kerr’s argument that if the PTC is ended, it is the same as “a tax increase on utilities, which, because they are regulated, will pass on to consumers.” Well, government passes along the cost of the PTC to taxpayers, illustrating that there really is no free lunch.

Kerr attacks Pompeo for failing to “crusade” against two subsidies that some oil companies receive: Intangible Drilling Costs and the Percentage Depletion Allowance. These programs are deductions, not credits. They do provide an economic benefit to the oil companies that can use them (“big oil” can’t use percentage depletion at all), but not to the extent that tax credits do.

Regarding these deductions, last year Pompeo introduced H. Res 267, titled “Expressing the sense of the House of Representatives that the United States should end all subsidies aimed at specific energy technologies or fuels.”

In the resolution, Pompeo recognized the difference between deductions and credits, the latter, as we’ve seen, being direct subsidies: “Whereas deductions and cost-recovery mechanisms available to all energy sectors are different than credits, loans and grants, and are therefore not taxpayer subsidies; [and] Whereas a deduction of costs and cost recovery with respect to timing is not a subsidy.”

Part of what the resolution calls for is to “begin tax simplification and reform by eliminating energy tax credits and deductions and reducing income tax rates.”

Kerr wants to deflect attention away from the cost and harm of the PTC. Haranguing Pompeo for failing to attack percentage depletion and IDC with the same fervor as tax credits is only an attempt to muddy the waters so we can’t see what’s happening right in front of us. It’s not, as Kerr alleges, “playing Clintonesque games of semantics with us.” As we’ve seen, Pompeo has called for the end of these two tax deductions.

If we want to criticize anyone for inconsistency, try this: Kerr criticizes Pompeo for ignoring the oil and gas deductions, “which creates a glut in natural gas that drives down the price to the lowest levels in a decade.” These low energy prices should be a blessing to our economy. Kerr, however, demands taxpayers pay to subsidize expensive wind power so that it can compete with inexpensive gas. In the end, the benefit of inexpensive gas is canceled. Who benefits from that, except for the wind power industry? The oil and gas targeted deductions also create market distortions, and therefore should be eliminated. But at least they work to reduce prices, not increase them.

By the way, Pompeo has been busy with legislation targeted at ending other harmful subsidies: H.R. 3090: EDA Elimination Act of 2011, H.R. 3994: Grant Return for Deficit Reduction Act, H.R. 3308: Energy Freedom and Economic Prosperity Act, and the above-mentioned resolution.

I did notice, however, that Pompeo hasn’t called for the end to the mohair subsidy. Will Kerr attack him for this oversight?

Finally, Kerr invokes the usual argument of government spenders: Cut the budget somewhere else. That’s what everyone says.

Creating entire industries that exist only by being propped up by government subsidy means that we all pay more to support special interest groups. A prosperous future is best built by relying on free enterprise and free markets in energy, not on programs motivated by the wants of politicians and special interests. Kerr’s attacks on Pompeo illustrate how difficult it is to replace cronyism with economic freedom.

The Obama tax cuts

In the presidential debate last week, President Barack Obama spoke of his tax cuts: “So at the same time that my tax plan has already lowered taxes for 98 percent of families, I also lowered taxes for small businesses 18 times. And what I want to do is continue the tax rate — the tax cuts that we put into place for small businesses and families.”

Are these Obama tax cuts “real” cuts that will lead to economic growth, or just government spending programs in disguise? For tax cuts to be productive in growing the economy, they have to be associated with something positive, namely with work, saving, or investment. What many people positively respond to is a reduction in marginal tax rates, that is, the tax that must be paid on the next dollar earned.

Many of the Obama tax cuts were part of the stimulus bill passed in February 2009. Polls show that very people know of these tax cuts. Many were temporary.

The largest item that benefited most people was the Making Work Pay Tax Credit, a two-year program that rebates $400 per year to individual taxpayers, or $800 per year for married couples. The program was effective for tax years 2009 and 2010 only. This is not a reduction in marginal tax rates, although the program will reduce the average tax rate that people pay. It is simply a reduction in the overall amount of tax someone must pay.

This tax credit is not associated with any positive effort or activity by the recipients other than doing what they already do. The same criticism applies to the Bush tax rebate in 2008, too.

Besides the Making Work Pay Tax Credit, the Obama tax cuts consisted of other tax credits that apply not to everyone, but only to people who qualify.

For example, a child care tax credit pays up to $1,200 per year in child care expenses. Obviously, the only people who can claim this credit are working people with children who chose to place them in daycare. Beyond that, it is not a “tax cut” by any stretch of the imagination. Properly, it is a spending program implemented through the tax system. Sometimes called tax expenditures, these measures often escape the usual scrutiny and appropriations process that spending receives. Since they’re billed as a “tax cut,” they sound like a good thing to most people, as few like paying taxes.

If we need any more evidence that these programs are really spending disguised as tax cuts, consider the description of the child care tax credit as provided by the Internal Revenue Service: “It is a refundable credit, which means taxpayers may receive refunds even when they do not owe any tax.” That’s right. Even if you have no income tax liability, you can still get a tax credit — that is, a payment from the government.

As to the claim of 18 business tax cuts, a CNN analysis finds “If extensions or expansions aren’t double counted, the list comes out to 14 tax breaks — and only five are still around.”

In its analysis of the business tax cuts, a New York Times article concluded “As you can see, some of these aren’t tax cuts in the way many people would define them. Rather, they’re tax incentives — you’ve got to spend money (on health insurance, a new employee or new equipment) to save money.”

An example of one of the temporary business tax measures that were part of the ARRA stimulus bill was bonus depreciation. This measure allowed businesses to capture depreciation of assets more quickly than usual. This reduces taxable income, and therefore would act as an incentive for businesses to make capital investments.

Ironically, when business jets received a similar accelerated depreciation benefit, President Obama denounces this as a harmful tax break.

These measures, while reducing the amount of tax a business might pay, don’t change the marginal tax rate. Reducing marginal tax rates is what contributes to growth.

There has been the temporary payroll tax cut, which is a reduction in tax rates that pay for Social Security and Medicare. This tax, however, applies only to income up to $110,100, so after that level, the reduction no longer applies. Further, this is an example of reducing taxes, but not making corresponding reductions in spending. This means that government has to borrow more, which is a negative factor for economic growth.

Programs that reduce the average tax rate like Obama’s Making Work Pay Tax Credit and the Bush tax rebates of 2008 aren’t effective because they don’t affect the marginal rate — the rate paid on the next dollar earned. While anything that reduces the burden of taxes is welcome, we ought to implement the type of tax cuts that spur economic growth.

Who responds most positively to reductions in marginal tax rates? As Jeffrey A. Miron explains, it is the most economically productive members of society:

The Bush cuts provided lower taxes on ordinary income, especially for taxpayers at the high end of the income distribution. These are some of the most energetic and productive people in society; raising tax rates would discourage their effort and entrepreneurship. High-income taxpayers also have multiple ways of avoiding high tax rates, so any revenue gain from raising rates would be modest. The Bush cuts also lowered taxes on dividend and capital gains income; maintaining these lower rates is even more important for economic performance. Capital is mobile: when it is taxed heavily here, it flees somewhere else, meaning lower investment and employment in the United States. And because capital income taxes discourage investment or drive it overseas, they generate little if any tax revenue. (Jeffrey A. Miron, “Why the Bush Tax Cuts Worked”)

It is these “energetic and productive” people that are responsible for a great deal of business activity and job creation. When these people take steps to avoid taxes it means less productive economic activity and more unproductive tax shelters.

In Slaying Leviathan: The Moral Case for Tax Reform, author Leslie Carbone explains the harm of high marginal taxes, especially progressive taxes, where rates become higher as more income is earned:

The discouragement of earning money by working, saving, or investing inherent in any income tax is exacerbated by progressivity. While any high tax rates are economically destructive, high marginal rates are even worse, because high marginal rates particularly discourage productivity and inhibit economic growth. … By lowering potential pay off, high investment taxes especially discourage risky investment. Discouragement of risky investment squelches technological advancement, because new technologies are the most risky. This means our progressive tax system actually reduces progress and inhibits improve quality of life.

If the goal of the Obama Administration is to create private sector economic growth instead of growth in government, it needs to keep the Bush tax cuts in place and avoid increases in marginal tax rates for everyone, especially the most productive members of society. A better strategy would be to reduce these tax rates farther to create even more economic growth.

The true size of the Obama stimulus

When we think of the “Obama stimulus,” most people are referring to the American Recovery and Reinvestment Act of 2009. This legislation called for a variety of fiscal stimulus measures estimated to cost $787 billion at the time the law was passed.

The reasoning behind the stimulus comes from a school of thinking known as Keynesian economics, which holds that government should actively and aggressively manage the economy, most importantly by stepping up spending when demand is low. Through this deficit spending, it is said that government action can increase employment. This government spending purportedly accomplishes this through a multiplier effect, as dollars are spent again and again.

What’s often lost in the discussion is that all deficit spending ought to be included in the amount of stimulus the economy has received. When President Obama took office, the national debt — the accumulation of all deficits — was $10.626 trillion, according to CBS News.

Just recently this figure passed $15 trillion, meaning that there has been over $4 trillion dollars of deficit spending under President Obama. That’s $4,000 billion in deficit stimulus spending, or about five times the “official stimulus” amount.

Now, we’re starting to understand why Keynesian economics doesn’t work. Writing in the Wall Street Journal, Stanford economist Michael J. Boskin summarizes recent research that finds that the spending multiplier that Keynesian economists rely on is small, and actually turns negative by the start of the second year. Furthermore, the government spending crowds out private sector spending. The effect of Obama’s 2009 stimulus bill is estimated at 0.2 percent of GDP, an amount described as “puny.”

Tax cuts, however, are estimated to have a multiplier of 3.0, with “substantial tax cuts” having a multiplier of up to 5.0.

In context, Obama’s economic advisers, at the time he took office, estimated that the spending multiplier for government purchases was 1.57, while the multiplier for tax cuts was 0.99.

Of the new studies finding a small spending multiplier, Boskin writes: “These empirical studies leave many leading economists dubious about the ability of government spending to boost the economy in the short run. Worse, the large long-term costs of debt-financed spending are ignored in most studies of short-run fiscal stimulus and even more so in the political debate.”

In conclusion, he writes: “The complexity of a dynamic market economy is not easily captured even by sophisticated modeling (an idea stressed by Friedrich Hayek and Robert Solow). But based on the best economic evidence, we should reject increased spending and increased taxes.” He calls for reductions in personal and corporate marginal tax rates and an “enforceable gradual phase-down of the spending explosion of recent years.”

We should note that Obama and many of those in government are easily seduced by the allure of Keynesian deficit spending. It’s government, after all, that gets to spend the money. Republicans, even those who consider themselves conservative, have been seduced in this way, too.

Tax cuts, on the other hand, leave money and spending decisions in the private sector.

Why the Spending Stimulus Failed

New economic research shows why lower tax rates do far more to spur growth.

By Michael J. Boskin

President Obama and congressional leaders meeting yesterday confronted calls for four key fiscal decisions: short-run fiscal stimulus, medium-term fiscal consolidation, and long-run tax and entitlement reform. Mr. Obama wants more spending, especially on infrastructure, and higher tax rates on income, capital gains and dividends (by allowing the lower Bush rates to expire). The intellectual and political left argues that the failed $814 billion stimulus in 2009 wasn’t big enough, and that spending control any time soon will derail the economy.

But economic theory, history and statistical studies reveal that more taxes and spending are more likely to harm than help the economy. Those who demand spending control and oppose tax hikes hold the intellectual high ground.

Continue reading at the Wall Street Journal (subscription not required)

Kansas and Wichita quick takes: Friday September 9, 2011

A citizen call to action. This month’s meeting of Americans for Prosperity, Kansas focuses on the Douglas Place project in downtown Wichita. Event organizers write: “On September 13, 2011 the Wichita City Council will be holding a public hearing to consider approval of millions of dollars of public incentives being offered to the downtown Douglas Place project developers. Monday’s meeting will have these topics: Learn about the incentive programs being offered. … Learn and consider getting involved in this issue as a citizen. … Consider testifying before the City Council. … Attend the council meeting to show your support for other speakers. … Please attend and participate in a group discussion to share ideas on how you can make a positive difference in local city government. … Presenters include Bob Weeks, Susan Estes, and John Todd.” This free event is Monday September 12th 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.

Troubles with Kansas City tax increment financing. I think the problems in Kansas City are larger than what we have in Wichita. But then, Wichita hasn’t relied on TIF as much as Kansas City has. But plans for the revitalization of downtown Wichita call for its expanded use. We need to be cautious, as Jon N. Hall explains in Creative Destruction in Kansas City?

Effects of stimulus on hiring. A new paper from the Mercatus Center sheds light on the effects of American Recovery and Reinvestment Act of 2009, also known as ARRA, also known as the stimulus bill, and one of the first legislative initiatives by President Obama. “In an effort to boost hiring and job creation and to invest in a variety of domestic infrastructure programs, Congress passed and the president signed the American Recovery and Reinvestment Act (ARRA), commonly known as the economic stimulus package, in 2009. ARRA represented one of the largest peacetime fiscal stimulus packages in American history. But little is known about the ways in which organizations and workers responded to the incentives created by the bill.” Among the report’s findings: “Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2). Thus, there was an almost even split between “job creating” and “job switching.” This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy: even in a weak economy, organizations hired the employed about as often as the unemployed.” See Did Stimulus Dollars Hire the Unemployed? for the full report.

Kansas education summit. On Thursday September 15th, Kansas Policy Institute is holding a summit on education in Kansas. In its announcement, KPI writes: “Kansas can expand educational opportunities for students in need — even in our current economic climate. Join a “Who’s Who” of the nation’s education reformers in a discussion on how Kansas can give every student an effective education. … Invited participants include Gov. Sam Brownback, the Kansas Department of Education, Kansas National Education Association, Kansas Association of School Boards, state legislators, and other public education stakeholders.” … KPI notes that we increased total aid to Kansas public schools by $1.2 billion between 2005 and 2011, that 25 percent of Kansas students are unable to read at grade level. The event will be held at the Holiday Inn & Suites, Overland Park West. The cost is $35, which includes breakfast and lunch for the all-day event. … RSVPs are requested. For more information, click on Kansas Policy Institute Education Summit.

Why should conservatives like libertarian ideas? From LearnLiberty.org, a project of Institute for Humane Studies: “Are you a conservative? If so, Dr. Stephen Davies provides a few compelling reasons to consider libertarianism. For instance, conservatives tend to prefer institutions that have been tried and trusted, and want to maintain and uphold a traditionally established way of life. They also typically believe in an established or correct moral code. However, it does not logically follow that government should enforce all of these things. In fact, government enforcement of morals and traditions is often detrimental to both.”

Obama job plan not likely to help

In order to help the economy President Barack Obama promises to soon reveal a plan to create jobs. Today’s preview before a union audience in Detroit didn’t provide many details, but based on the president’s past actions and guesses as to what the plan is likely to contain, it’s unlikely the plan will work.

Various news reports and commentary have mentioned these as possible elements of an Obama jobs plan:

A tax credit for hiring new workers. Some sources have suggested the plan might use tax credits to pay companies as much as $5,000 per new worker hired. Another estimate said Obama will have another tax credit plan that creates 900,000 additional jobs at a cost of $30 billion. That’s $33,333 per job. There’s evidence that these programs don’t work very well, as many of the jobs the government pays for are ones that companies were going to create anyway. This is also not a cut in marginal tax rates. Instead, it is more properly classified as a government spending program.

Job training. This is a common response by government. Government, however, has a history of training the wrong people for the wrong jobs. The private sector is much better positioned to train its employees. But job training sounds like education, something that’s it’s difficult to be opposed to, no matter how poor a job the government does.

Spending on infrastructure, especially school repairs.

Extending the one-year cut in the payroll (Social Security and Medicare) tax. Less tax money flowing to government is always a good idea. Balanced against this is the need to pay for Social Security and Medicare.

Extending unemployment insurance benefits. There’s some sense in doing this. Obama didn’t start the recession, but his policies are prolonging it and preventing recovery. So it’s not necessarily workers’ fault they were laid off and can’t find a job. But there’s a lot of evidence that extending unemployment insurance benefits extends the time many people will be out of work.

Signing trade agreements. This is a good idea, as allowing free trade increases the wealth of everyone. But, you don’t need a treaty in order to have free trade.

Help for homeowners. The housing crisis, caused by government, is a major problem. The value of houses must be allowed to fall to their natural level. Any programs that prevent this, or delays this market-clearing from happening, only prolongs the problem. It’s likely that any program coming from the Obama administration will do this.

In his speech today, Obama’s speech today mentioned spending on “roads and bridges.” he also called for an extension of the payroll tax cut, which he said placed an extra $1,000 in the pocket of the average family, and he alluded to the trade agreements.

He challenged Republicans to support tax cuts for working class companies, instead of for oil companies and the rich, and said “The time for Washington games is over. The time for action is now.”

The problem with the president’s proposals is that they do not provide an environment for the growth of business. Some of his plans, like repairing schools, simply grow government at the expense of the private sector and leave future taxpayers a bill.

The tax cuts for hiring workers is simply a spending program. The president — if he does propose these tax credits — will likely present them as a tax cut. That’s true in one sense, as it leaves more money in the private sector rather than government, which is good. But these tax credits aren’t what we need to really grow the economy, even through the program will leave more money in the private sector.

For tax cuts to be productive in growing the economy, they have to be associated with something positive, namely with work, saving, or investment. What people positively respond to is a reduction in marginal tax rates, that is, the tax that must be paid on the next dollar earned.

Programs that reduce the average tax rate like Obama’s Making Work Pay Tax Credit and the Bush tax rebates of 2008 aren’t effective because they don’t affect the marginal rate — the rate paid on the next dollar earned. This is not to say that I am not in favor of these programs. Anything that reduces the burden of taxes is welcome. But they are not the type of tax cuts that spur economic growth.

Why are low marginal tax rates important to economic growth? First, high marginal tax rates discourage people from producing. As people get to keep less and less of what they produce after they pay higher tax rates, most decide to produce less. Some stop producing anything.

Second, high marginal tax rates encourage people to invest in economically unproductive investments — like tax shelters — simply to avoid paying tax, without regard to the underlying wisdom of the investment. Or, people decide that since government takes so much of the money they earn, they might as well spend it on tax-deductible expenses that they might not buy otherwise. A company might hold an engineering conference at an expensive luxury resort instead of a modestly-priced facility — or instead of holding it electronically.

Who responds most positively to reductions in marginal tax rates? First, with about half of American households paying no federal income tax at all — although they do pay payroll taxes — the idea of marginal tax rates doesn’t apply to them. That leaves high-income workers, or as Jeffrey A. Miron explains, the most economically productive members of society that are positively affected by marginal income tax rates:

The Bush cuts provided lower taxes on ordinary income, especially for taxpayers at the high end of the income distribution. These are some of the most energetic and productive people in society; raising tax rates would discourage their effort and entrepreneurship. High-income taxpayers also have multiple ways of avoiding high tax rates, so any revenue gain from raising rates would be modest. The Bush cuts also lowered taxes on dividend and capital gains income; maintaining these lower rates is even more important for economic performance. Capital is mobile: when it is taxed heavily here, it flees somewhere else, meaning lower investment and employment in the United States. And because capital income taxes discourage investment or drive it overseas, they generate little if any tax revenue. (Jeffrey A. Miron, “Why the Bush Tax Cuts Worked”)

It is these “energetic and productive” people that are responsible for a great deal of economic activity and job creation. When these people take steps to avoid taxes it means less productive economic activity and more unproductive tax shelters.

In Slaying Leviathan: The Moral Case for Tax Reform, author Leslie Carbone explains the harm of high marginal taxes, especially progressive taxes, where rates become higher as more income is earned:

The discouragement of earning money by working, saving, or investing inherent in any income tax is exacerbated by progressivity. While any high tax rates are economically destructive, high marginal rates are even worse, because high marginal rates particularly discourage productivity and inhibit economic growth. … By lowering potential pay off, high investment taxes especially discourage risky investment. Discouragement of risky investment squelches technological advancement, because new technologies are the most risky. This means our progressive tax system actually reduces progress and inhibits improve quality of life.”

This is one of the things the president needs to do to grow jobs: reduce marginal tax rates. Then, reduce spending. This, along with sound monetary policies, has the best track record of producing private sector economic growth, and with that, jobs. But both of these, since they reduce rather than grow government, are not within Barack Obama’s realm of thinking, and so are not likely to be proposed.

Obama’s tax hikes must be resisted

As our nation’s leaders consider the possibility of raising income tax rates, we need to be aware of the negative impact of higher marginal tax rates on the economy and make sure we resist the lure of higher taxes. This is especially important even if the new higher tax rates are confined to to the rich.

The concept of marginal tax rates is important to understand, as it holds the key to understanding how we can drive economic growth, and how we can kill it, too. President Barack Obama believes he has already cut taxes in the name of economic growth. These tax “cuts” — I use quotes deliberately — are part of the stimulus bill passed in February 2009.

So what are the Obama tax cuts? There was one program that qualified — sort of — as a “cut,” and several tax credit programs. The largest item that benefited most people is the Making Work Pay Tax Credit, a two-year program that rebates $400 per year to individual taxpayers, or $800 per year for married couples.

It’s important to note that this is not a reduction in marginal tax rates, which is the tax rate that people pay on the next dollar they earn. That’s what people focus on. The program will, however, reduce the average tax rate that people pay.

This bears repeating: People can’t control the tax on income they’ve already earned. But they can decide whether to submit themselves to the marginal tax rate: The tax rate the government charges on the next dollar they may — or may not — earn.

So why isn’t Obama’s Making Work Pay Tax Credit a stimulus boon to the economy? It’s not associated with any positive effort or activity by the recipients other than doing what they already do. (This applies to the Bush tax rebate in 2008, too.)

For tax cuts to be productive in growing the economy, they have to be associated with something positive, namely with work, saving, or investment. What many people positively respond to is a reduction in marginal tax rates, that is, the tax that must be paid on the next dollar earned.

Programs that reduce the average tax rate like Obama’s Making Work Pay Tax Credit and the Bush tax rebates of 2008 aren’t effective because they don’t affect the marginal rate — the rate paid on the next dollar earned. This is not to say that I am not in favor of these programs. Anything that reduces the burden of taxes is welcome. But they are not the type of tax cuts that spur economic growth.

Why are low marginal tax rates important to economic growth? First, high marginal tax rates discourage people from producing. As people get to keep less and less of what they produce after they pay higher tax rates, many decide to produce less. Some stop producing anything.

Second, high marginal tax rates encourage people to invest in economically unproductive investments like tax shelters simply to avoid tax, without regard to the underlying wisdom of the investment. Or, people decide that since government takes so much of the money they earn, they might as well spend it on tax-deductible expenses that they might not buy otherwise. A company might hold an engineering conference at an expensive luxury resort instead of a modestly-priced facility — or instead of holding it electronically.

Who responds most positively to reductions in marginal tax rates? First, with about half of American households paying no federal income tax at all — although they do pay payroll taxes — the idea of marginal tax rates doesn’t apply to them. That leaves high-income workers, or as Jeffrey A. Miron explains, the most economically productive members of society that are positively affected by marginal income tax rates:

The Bush cuts provided lower taxes on ordinary income, especially for taxpayers at the high end of the income distribution. These are some of the most energetic and productive people in society; raising tax rates would discourage their effort and entrepreneurship. High-income taxpayers also have multiple ways of avoiding high tax rates, so any revenue gain from raising rates would be modest. The Bush cuts also lowered taxes on dividend and capital gains income; maintaining these lower rates is even more important for economic performance. Capital is mobile: when it is taxed heavily here, it flees somewhere else, meaning lower investment and employment in the United States. And because capital income taxes discourage investment or drive it overseas, they generate little if any tax revenue. (Jeffrey A. Miron, “Why the Bush Tax Cuts Worked”)

It is these “energetic and productive” people that are responsible for a great deal of economic activity and job creation. When these people take steps to avoid taxes it means less productive economic activity and more unproductive tax shelters.

In Slaying Leviathan: The Moral Case for Tax Reform, author Leslie Carbone explains the harm of high marginal taxes, especially progressive taxes, where rates become higher as more income is earned:

The discouragement of earning money by working, saving, or investing inherent in any income tax is exacerbated by progressivity. While any high tax rates are economically destructive, high marginal rates are even worse, because high marginal rates particularly discourage productivity and inhibit economic growth. … By lowering potential pay off, high investment taxes especially discourage risky investment. Discouragement of risky investment squelches technological advancement, because new technologies are the most risky. This means our progressive tax system actually reduces progress and inhibits improve quality of life.”

If the goal of the Obama Administration is to create private sector economic growth instead of growth in government, it needs to keep the Bush tax cuts in place and avoid increases in marginal tax rates for everyone, especially the most productive members of society. A better strategy would be to reduce these tax rates farther to create even more economic growth.

Corporate jet incentive, or tax dodge, or kids’ safety?

Yesterday President Barack Obama denounced the tax breaks given to owners of corporate jets. Described by MSNBC Television program host Rachel Maddow as a “corporate tax loophole” that allows “giant corporations to dodge their taxes,” Obama cast the issue as corporate fats cat vs. kids: “You go talk to your constituents — the Republican constituents — and ask them, are they willing to compromise their kids’ safety so that some corporate jet owner continues to get a tax break?

(Yes, I sometimes watch the leftist television news programs — so that you don’t have to.)

Maddow, if you’ve ever watched her show, is given to snarky exaggeration as her style. The use of the term “dodge” is an example. Most people would think that “to dodge” means to avoid completely, and that’s what Maddow would like her viewers to believe: that these giant corporations are paying no taxes at all when they buy these planes.

The reality, however, is different and much less sensational. Since the tax in question is an income tax, we must first calculate income. That means accounting for the expenses incurred in running the business. For assets with a long lifespan, depreciation is used, whereby a portion of an asset’s cost is deducted each year from income. With the U.S. corporate income marginal tax rate at 35 percent, being able to deduct one dollar in depreciation saves 35 cents in taxes.

The issue in question, as identified by Lachlan Markay is an economic incentive implemented in the form of accelerated depreciation for purchasers of corporate jets. This provision allows companies to deduct depreciation costs from their income sooner, so they save on taxes now rather than later.

Accelerated depreciation doesn’t increase the total amount of depreciation that can be deducted from income. Of course, taking a deduction this year rather than in a later year is valuable.

So it’s not a “dodge,” as Maddow told her viewers. But it is a benefit to the companies that take advantage of it.

The real question is whether these manipulations of the tax code are harmful or beneficial. Certainly Congress did not believe they were harmful when it passed the legislation that created this special accelerated depreciation, available for only a short time for purchasers of specific assets. It was designed to provide a stimulus to a specific industry. And if that term “stimulus” seems familiar, the legislation that created this accelerated depreciation incentive was part of H.R. 1: American Recovery and Reinvestment Act of 2009, also known as ARRA, also known as the stimulus bill, and one of the first legislative initiatives by President Obama.

Now the president, evidently, feels this wasn’t such a good idea. Or he has decided that purportedly rich corporations are a convenient and politically expedient opponent. Attacking them fires up his base, as evidenced by Maddow’s over-playing of this matter.

This is also an example of using the tax code in order to achieve an economic or social policy goal. In this case, one industry benefits, but others don’t. The remaining taxpayers have to make up the difference in lost tax revenue. Or, the country simply goes deeper in debt, and the cost is passed on to future generations.

A further effect is that by making corporate jets cheaper (because of the accelerated depreciation), companies are induced to spend in this area when — absent the incentive — they might make alternative investments. So the question is: Are discounted corporate jets a wise investment for companies who otherwise might not buy them, at least not this year? Are Congress and the president smart enough to know that investment should be directed to this area? Todd Tiahrt, who represented Wichita at the time, thought so. That city, of course, is home to several companies that manufacture the types of airplanes targeted by Congress.

But what benefits one city or one industry is not necessarily good for the rest of the country. A better course is to simply cut tax rates and let each company decide how to direct its capital investment.

Kansas and Wichita quick takes: Tuesday May 31, 2011

Pachyderm to feature DA Foulston. This Friday (June 3) the Wichita Pachyderm Club features Nola Tedesco Foulston, District Attorney for the Eighteenth Judicial District of Kansas, whose boundaries are coincident with Sedgwick County. Foulston’s topic will be “An office overview and current events at the Eighteenth Judicial District of Kansas District Attorney’s office.” Foulston, a Democrat, was elected to her office in 1988 and has served continuously since then. … Appearances by speakers other than Republicans at Pachyderm often generate controversy, and this week is no exception. Pachyderm is a Republican club, and the mission statement of the national organization reads: “Promote active citizen involvement and education in government and politics through the formation and support of grassroots, Republican clubs across America.” Some feel that an appearance at Pachyderm will bolster Foulston’s re-election prospects, should she decide to run again next year. Others believe that no Democrat should be be a speaker — ever. In my opinion, the sentiment of the Pachyderm board and of many of the club’s regular attendees is that while Pachyderm is indeed Republican and conservative, the club’s mission of political education and civic engagement allows — in fact, encourages — appearances by prominent officeholders of any political party. In any county, the District Attorney is a powerful force in local government, with broad discretion as to the prosecution of criminal cases. This is a speaker that the members of Pachyderm should be encouraged to hear, even though members may not agree with her politics. …. Foulston will likely face several tough questions from the usually spirited Pachyderm audience. … Upcoming speakers: On June 10, John Allison, Superintendent of USD 259, the Wichita public school district, on “An update from USD 259.” On June 17, The Honorable Lawton R. Nuss, Kansas Supreme Court Chief Justice on “The State of the Kansas Courts.” On June 24, Jim Mason, Naturalist at the Great Plains Nature Center will have a presentation and book signing. Mason is author of Wichita’s Riverside Parks, published in April 2011. On July 1, Jay M. Price, Director of the Public History Program at Wichita State University, speaking on “Classes of Values in Kansas History.” On July 8, Dave Trabert, President, Kansas Policy Institute, on “Stabilizing the Kansas Budget.”

Sedgwick County Commission. In its Wednesday meeting, the Sedgwick County Commission will consider making two forgivable loans for the purposes of economic development. These loans have become popular with economic development officials, and often the City of Wichita and Sedgwick County make loans of equal amount to the same company. … The program works by loaning the company an amount of money, with the entire amount paid out at once. Then, if performance goals are met over a period of time, the loan (and interest) is forgiven. Otherwise, portions of it, with interest, may become due. Often the term of the loan is four or five years, with a portion of the loan forgiven each year if goals are met. The performance goals are usually the number of full-time or equivalent employees. … The Golf Warehouse in northeast Wichita is asking for a $48,000 forgivable loan. It recently received a loan of that amount from the City of Wichita. Mid-Continent Instrument, Inc. is asking for $10,000. … Usually economic development incentives are accompanied by a cost-benefit study performed by Wichita State University Center for Economic Development and Business Research. The county hasn’t supplied such analysis for these two items.

Kansas budget signed. On Saturday — a holiday weekend day — Kansas Governor Sam Brownback signed the budget bill. He used his line-item veto authority to strike an across-the-board reduction in spending, preferring to make targeted cuts instead. Although the governor had proposed ending funding for public broadcasting, the legislature included funding, and the governor did not veto it. … Most controversial of the governor’s handful of changes to the bill will be his veto of funding for the Kansas Arts Commission. This action was not a surprise, as recently the administration laid off all the commission’s employees. Associated Press reports that the chairman of the commission isn’t ruling out a lawsuit.

KPERS suit threatened. Changes made by the Kansas Legislature to Kansas Public Employees Retirement System, or KPERS have caused state employee organizations to consider a lawsuit, according to Associated Press reporting. The changes made this year are mild compared to the changes that must be made if KPERS is ever to become self-sustaining. The threat of a lawsuit over these minor changes doesn’t foretell a future of cooperation from state employees in making the much larger reforms that must be made.

Stimulus jobs — or not. Malcolm Harris calls attention to an analysis of the job-creation performance of the 2009 stimulus bill. The working paper is titled The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled. Its goal, according to authors Timothy Conley and Bill Dupor, is to “understand the causal effect on employment of the government spending component of the ARRA.” The key finding is this: “Our benchmark point estimates suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs.” That’s a net loss of jobs. … The authors note there is “appreciable estimation uncertainty” in the estimates. Still, they are able to conclude: “However, our estimates are precise enough to state that we find no evidence of large positive private-sector job effects.” … The report includes a section summarizing other researchers’ findings, which usually find that the stimulus program created or save many jobs. The studies that find large job creation usually rely on “fiscal policy multipliers,” a Keynesian economics concept.

Government doesn’t create jobs. Investor’s Business Daily relies partly on the Conley and Dupor paper in its editorial Government Doesn’t Create Jobs. IBD asks “In a joint op-ed with the British prime minister, President Obama admits that jobs are created by an innovative private sector. So why is he strangling ours with regulations, rules and taxes? We would hope it was a candid admission of the truth rather than just boilerplate rhetoric in an op-ed in the Times of London by President Obama and British Prime Minister David Cameron. But there it was: ‘Governments do not create jobs; bold people and innovative businesses do.'” Continuing: “For once, the president is spot on. Businesses create jobs to fill a need, and their incentive is profit. Businesses invest; governments can only spend. Businesses create wealth, as do their employees. Government consumes wealth and sucks the economic oxygen out of the room. Its employees create paperwork and regulations that restrict economic growth.”

Obama’s spending stimulus failed

The school of thinking known as Keynesian economics holds that government should actively and aggressively manage the economy, most importantly by stepping up spending when demand is low. Through this deficit spending, it is said that government action can increase employment. This government spending purportedly accomplishes this through a multiplier effect, as dollars are spent again and again.

The value of the spending multiplier — is it big or small? — is an important question. Also, the multiplier effect may be different for government spending versus private spending.

Now, we’re starting to understand why Keynesian economics doesn’t work. Writing in the Wall Street Journal, Stanford economist Michael J. Boskin summarizes recent research that finds that the spending multiplier is small, and actually turns negative by the start of the second year. Furthermore, the government spending crowds out private sector spending. The effect of Obama’s 2009 stimulus bill is estimated at 0.2 percent of GDP, an amount described as “puny.”

Tax cuts, however, are estimated to have a multiplier of 3.0, with “substantial tax cuts” having a multiplier of up to 5.0.

In context, Obama’s economic advisers, at the time he took office, estimated that the spending multiplier for government purchases was 1.57, while the multiplier for tax cuts was 0.99.

Of the new studies finding a small spending multiplier, Boskin writes: “These empirical studies leave many leading economists dubious about the ability of government spending to boost the economy in the short run. Worse, the large long-term costs of debt-financed spending are ignored in most studies of short-run fiscal stimulus and even more so in the political debate.”

In conclusion, he writes: “The complexity of a dynamic market economy is not easily captured even by sophisticated modeling (an idea stressed by Friedrich Hayek and Robert Solow). But based on the best economic evidence, we should reject increased spending and increased taxes.” He calls for reductions in personal and corporate marginal tax rates and an “enforceable gradual phase-down of the spending explosion of recent years.”

We should note that Obama and many of those in government are easily seduced by the allure of Keynesian deficit spending. It’s government, after all, that gets to spend the money. Republicans, even those who consider themselves conservative, have been seduced in this way, too.

Tax cuts, on the other hand, leave money and spending decisions in the private sector.

Why the Spending Stimulus Failed

New economic research shows why lower tax rates do far more to spur growth.

By Michael J. Boskin

President Obama and congressional leaders meeting yesterday confronted calls for four key fiscal decisions: short-run fiscal stimulus, medium-term fiscal consolidation, and long-run tax and entitlement reform. Mr. Obama wants more spending, especially on infrastructure, and higher tax rates on income, capital gains and dividends (by allowing the lower Bush rates to expire). The intellectual and political left argues that the failed $814 billion stimulus in 2009 wasn’t big enough, and that spending control any time soon will derail the economy.

But economic theory, history and statistical studies reveal that more taxes and spending are more likely to harm than help the economy. Those who demand spending control and oppose tax hikes hold the intellectual high ground.

Continue reading at the Wall Street Journal (subscription not required)

Myth of Obama tax cuts

As the nation’s attention is focused on whether Congress will extend the Bush tax cuts of 2001 and 2003, some are calling attention to the Obama tax cuts and calling for their extension.

These tax “cuts” — and I use quotes deliberately — are part of the stimulus bill passed in February 2009. Polls show that very people know of these tax cuts.

So what are the Obama tax cuts? There was one program that qualified — sort of — as a “cut,” and several tax credit programs. More information about these programs from the Obama Administration is at Recovery.gov,

The largest item that benefited most people is the Making Work Pay Tax Credit, a two-year program that rebates $400 per year to individual taxpayers, or $800 per year for married couples. This is not a reduction in marginal tax rates, although the program will reduce the average tax rate that people pay. At its core, it is simply a reduction in the overall amount of tax someone must pay.

This tax credit is not associated with any positive effort or activity by the recipients other than doing what they already do. The same criticism applies to the Bush tax rebate in 2008, too.

Besides the Making Work Pay Tax Credit, the Obama tax cuts consist of other tax credits that apply not to everyone, but only to people who qualify.

For example, a child care tax credit pays up to $1,200 per year in child care expenses. Obviously, the only people who can claim this credit are working people with children who chose to place them in daycare. Beyond that, it is not a “tax cut” by any stretch of the imagination. Properly, it is a spending program implemented through the tax system. Sometimes called tax expenditures, these measures often escape the usual scrutiny that spending receives. Since they’re billed as a “tax cut,” they sound like a good thing to most people, as few like paying taxes.

If we need any more evidence that these programs are really spending disguised as tax cuts, consider the description of the child care tax credit as provided by the Internal Revenue Service: “It is a refundable credit, which means taxpayers may receive refunds even when they do not owe any tax.”

That’s right. Even if you have no income tax liability, you can still get a tax credit — that is, a payment from the government.

For tax cuts to be productive in growing the economy, they have to be associated with something positive, namely with work, saving, or investment. What many people positively respond to is a reduction in marginal tax rates, that is, the tax that must be paid on the next dollar earned.

Programs that reduce the average tax rate like Obama’s Making Work Pay Tax Credit and the Bush tax rebates of 2008 aren’t effective because they don’t affect the marginal rate — the rate paid on the next dollar earned. This is not to say that I am not in favor of these programs. Anything that reduces the burden of taxes is welcome. But they are not the type of tax cuts that spur economic growth.

Who responds most positively to reductions in marginal tax rates? As Jeffrey A. Miron explains, it is the most economically productive members of society:

The Bush cuts provided lower taxes on ordinary income, especially for taxpayers at the high end of the income distribution. These are some of the most energetic and productive people in society; raising tax rates would discourage their effort and entrepreneurship. High-income taxpayers also have multiple ways of avoiding high tax rates, so any revenue gain from raising rates would be modest. The Bush cuts also lowered taxes on dividend and capital gains income; maintaining these lower rates is even more important for economic performance. Capital is mobile: when it is taxed heavily here, it flees somewhere else, meaning lower investment and employment in the United States. And because capital income taxes discourage investment or drive it overseas, they generate little if any tax revenue. (Jeffrey A. Miron, “Why the Bush Tax Cuts Worked”)

It is these “energetic and productive” people that are responsible for a great deal of business activity and job creation. When these people take steps to avoid taxes it means less productive economic activity and more unproductive tax shelters.

In Slaying Leviathan: The Moral Case for Tax Reform, author Leslie Carbone explains the harm of high marginal taxes, especially progressive taxes, where rates become higher as more income is earned:

The discouragement of earning money by working, saving, or investing inherent in any income tax is exacerbated by progressivity. While any high tax rates are economically destructive, high marginal rates are even worse, because high marginal rates particularly discourage productivity and inhibit economic growth. … By lowering potential pay off, high investment taxes especially discourage risky investment. Discouragement of risky investment squelches technological advancement, because new technologies are the most risky. This means our progressive tax system actually reduces progress and inhibits improve quality of life.”

If the goal of the Obama Administration is to create private sector economic growth instead of growth in government, it needs to keep the Bush tax cuts in place and avoid increases in marginal tax rates for everyone, especially the most productive members of society. A better strategy would be to reduce these tax rates farther to create even more economic growth.

There is a lesson to be learned locally, too. Kansas needs to cut its marginal tax rates, both for personal income and for corporations. Miron spoke of capital leaving the United States because of high taxes. It’s even easier for capital — and its accompanying jobs — to move from one U.S. state to another. States with low tax burdens are experiencing growth in jobs and population, while high tax states have losses in both areas. Kansas is in the middle of the pack, but moving in the wrong direction.

The current economic development strategy of Kansas and many of its cities and counties is to offer targeted incentives to attract new industry and keep current companies from leaving. A better strategy in the long run is to join the ranks of low tax burden states.

Kansas and Wichita quick takes: Wednesday November 17, 2010

Kansas Senator Lee to tax court. State of the State KS reports that Kansas Senator Janis Lee has been appointed by Governor Mark Parkinson to the Kansas State Court of Tax Appeals. Lee is a Democrat from Kensington in northwest Kansas. This action opens another position in the senate — another three pending vacancies need to be filled due to senators who won election to other offices — and others are likely to follow as incoming governor Sam Brownback fills his cabinet. Lee scored 13 percent on the Kansas Economic Freedom Index for this year, which is a voting record more in favor of economic freedom than some other Senate Democrats — and some Republicans such as Senate President Steve Morris, for that matter. Lee’s replacement will be selected by the Democratic Party precinct committeemen and committeewomen in that senate district.

Saving is good. A letter in today’s Wichita Eagle holds this observation: “Rich people don’t spend money in hard times. Give them a tax break, and they will stash it away. That’s why they are rich.” This letter contains a misconception that news media mistakenly repeats over and over: that consumer spending is good and saving is bad. What happens to savings — the “stash it away” the letter writer refers to? Few people stuff cash in the mattress or in a safe. Instead, they do several things with they money they decide not to spend on immediate consumption, which is the definition of savings. If put it in a bank, the bank lends it to others who will spend it. If used to pay down debt, that frees up funds for others to spend. If used to buy stocks and bonds, that provides funds for business to invest. Importantly, these funds usually go into increasing the nation’s stock of capital. This capital spending is especially desirable, as it supports current economic activity — that is, the people and companies that work today to produce capital goods — but it sets up the country to produce even more wealth in the future.

Voters express pessimism. Consistent with other recent Rasmussen polls, voters are not optimistic that Congress will be able to accomplish very much in the next two years. See Voters Hold Little Hope for What New Congress Is Likely To Achieve.

KDOT seeks public comment on public involvement policy. This seems almost like circular reasoning, but the Kansas Department of Transportation seeks public comment on a document titled “Sharing the Future — Public Involvement in the Kansas Transportation System.” The document — all 113 pages — may be found on this page. Comments should be directed to Kansas Department of Transportation, Bureau of Public Involvement, 700 S.W. Harrison, Topeka, 66603-3754, (785) 296-3526, fax (785) 368-6664, or maggiet@ksdot.org.

Texas stimulus spending — not. Texas Watchdog takes a look at federal stimulus spending in Texas and finds some disturbing results. An example: “A closer look at spending by each agency shows wild differences in the amount of money spent and the number of jobs created. At least eight agencies have reported spending $500,000 or more for every job claimed. In the case of the Texas State Library and Archives Commission, its $883,993 per job is an estimate because more than a year after it was awarded nearly $8 million for a statewide library broadband upgrade project, nothing has been spent and none of its projected nine employees have been hired.”

Who stole Election Day? A candidate for Maine governor wonders whether the rise of advance voting — “convenience voting,” he calls it — is good for the country. Besides meeting a voter who expressed regret in having already voted for his opponent, Eliot Cutler writes this of convenience voting: “At a time when sea changes are roiling our democracy, political parties are in decline, and public confidence in the political system is plummeting, convenience voting is having all the wrong effects. In Maine, at least, it appears to be discouraging voter engagement, providing life support to withering political parties, and undermining one of our most enduring and important institutions.” More in the Wall Street Journal at Who Stole Election Day? Too many voters are making decisions when horse-race coverage dominates the news, attention to issues is limited, and key debates haven’t taken place.

Adapt, don’t overreact to climate change. Bjorn Lomborg — The Skeptical Environmentalist — of the Copenhagen Consensus Center argues in the pages of the Washington Post that mankind has shown that it can adapt to climate change. This record, he argues, means we should not panic about climate change. We can afford a long-term perspective: “… when it comes to dealing with the impact of climate change, we’ve compiled a pretty impressive track record. While this doesn’t mean we can afford to ignore climate change, it provides a powerful reason not to panic about it either.” He cites the example of the Netherlands: “Keeping Holland protected from any future sea-level rises for the next century will cost only about one-tenth of 1 percent of the country’s gross domestic product.” Concluding, he writes: “[adaption] will enable us to get by while we figure out the best way to address the root causes of man-made climate change. This may not seem like much, but at a time when fears of a supposedly imminent apocalypse threaten to swamp rational debate about climate policy, it’s worth noting that coping with climate change is something we know how to do. ”

Wasteful government spending must stop

As part of its campaign against wasteful government spending, Americans for Prosperity Foundation has started a television advertising campaign and companion website to help Americans learn more about the harmful effects of the stimulus plan promoted by President Barack Obama, Speaker of the House Nancy Pelosi, and Senate Majority Leader Harry Reid.

In just a handful of years, AFPF has grown to become “America’s leading conservative grassroots organization,” according to a recent article penned by Richard Viguerie. The recent attacks on AFPF by President Obama are evidence of this.

According to AFPF President Tim Phillips, “This first ad called ‘Hollywood’ details how the failed $862 billion Obama/Pelosi/Reid ‘Stimulus’ bill was wasted on pet political projects, how it cost every American family an average of $10,000 and how it in reality killed genuine private sector jobs.”

The companion website at SpendingCrisis.org has useful information that citizens can tap to learn more about the stimulus spending, as well as government spending in general. The site carries the headline “Washington, we’ve got a problem.”

In particular, an issues page gives some reasons as to why high government spending is bad for America.

As an example, under the heading “Government Spending is Inherently Wasteful,” we find “It’s regarded as a virtual truism that no one spends someone else’s money as well as they spend their own. The only people who seem to disagree are politicians.”

Other facts highlighted include:

  • This year, the federal government will borrow about $12,500 per household to pay for its spending.

  • Despite claiming that the $862 billion stimulus package would keep unemployment below 8 percent, it is hovering around 9.5 percent with few signs of improving.
  • Public employees earned more than $120,000 per year in salary and benefits on average, compared to about $60,000 in the private sector.
  • From anti-poverty spending programs to defense and education, the federal government now spends a record $30,543 per household.

Stimulus Pushers

If we needed more evidence of President Barack Obama‘s inclination to shower public treasure on public sector unions, here it is. The Wall Street Journal details some of the ways that last week’s mini-stimulus bill is a gift to public sector unions at the cost of everyone else.

For example, the portion of the spending dedicated to public schools comes with the requirement that the funds be used to increase school spending. The funds can’t be used by states to replace their own spending.

The claim that teacher jobs will be lost is false, too. The editorial notes the rapid growth of teacher employment, far more than the growth in student enrollment: “While Mr. Obama quotes the union figure of 160,000 potential lost teacher jobs, those don’t have to come out of the classroom. According to research by Eric Hanushek of Stanford University, student enrollment grew by 22% from 1990 to 2007, but teacher employment grew by 41%. Since 2000, enrollment has grown by 5% but teacher employment by 10%.”

The editorial also notes that teacher layoffs in Milwaukee could have been avoided if teachers had accepted a less expensive health care plan. The district proposed cutting per-teacher health plan costs from $23,000 per year (!) to $17,000. What happened? “The unions chose the layoffs, betting (correctly) that Democrats in Washington would come to their rescue.”

Finally, the article estimates that teachers unions and other unions will receive an estimated $100 million in additional union dues because of this bill, and much of that will be used for political purposes.

Any guesses as to what type of candidates this money will be used to support?

Stimulus Pushers

The latest bailout for public unions and spendthrift states.

To treat Washington’s spending addiction, the November elections are the taxpayer’s best chance to stage an intervention. But until then, President Obama and the Democratic Congress are determined to keep pushing strung-out state governments to take one more fix.

Witness yesterday’s 247-161 largely party-line House vote to approve a Senate bill shovelling another $26.1 billion out to state education and Medicaid programs. The White House has promoted the bill as emergency assistance for strained state budgets. But this unique brand of therapy drives states to spend more, not less. The “assistance” is so expensive that several governors were begging for relief even before Mr. Obama signed it into law.

Continue reading at the Wall Street Journal

The stimulus evidence one year on

Last week the Wall Street Journal reported a piece that analyzes whether the Obama stimulus plan, after one year’s time, can be judged a success. (See The Stimulus Evidence One Year On)

Robert J. Barro, who is professor of economics at Harvard University and a senior fellow at Stanford University’s Hoover Institution, writes that the stimulus may be a good deal in the short run — if the government spends on things that are truly worthwhile. As we’ve seen, that is not always the case.

But Barro says, correctly, that this spending, paid for with borrowed money as it is, generates debt that must be repaid at some time. This is something that government spending advocates seem to conveniently forget.

Barro comes to this conclusion:

We can now put the elements together to form a “five-year plan” from 2009 to 2013. The path of incremental government outlays over the five years in billions of dollars is +300, +300, 0, 0, 0, which adds up to +600. The path for GDP is +120, +180, +60, minus 330, minus 330, adding up to minus 300. GDP falls overall because the famous “balanced-budget multiplier” — the response of GDP when government spending and taxes rise together — is negative. This result accords with the familiar pattern whereby countries with larger public sectors tend to grow slower over the long term.

The projected effect on other parts of GDP (consumer expenditure, private investment, net exports) is minus 180, minus 120, +60, minus 330, minus 330, which adds up to minus 900. Thus, viewed over five years, the fiscal stimulus package is a way to get an extra $600 billion of public spending at the cost of $900 billion in private expenditure. This is a bad deal.

The fiscal stimulus package of 2009 was a mistake. It follows that an additional stimulus package in 2010 would be another mistake.

Articles of interest

Education, health care, Kansas school funding, unintended consequences.

Charter schools: Two studies, two conclusions

This Washington Post article looks at two recent studies of charter schools to try and determine whether they perform better or worse than regular public schools. Kansas, in effect, has no charter schools. They’re allowed by state law, but local boards of education must approve them. Few are approved, as the education establishment, including the teachers union, is firmly opposed to charter schools. Most charter schools operate on a much lower budget than regular public schools. As Kansas tries to work its way out of a tight budget, charter schools could provide a way to create diverse educational opportunities at lower cost.

Health Care is Not a Right

(Competitive Enterprise Institute) A discussion of why there is no right to health care, at least not in a country that understands the true meanings of rights. “Whereas genuine rights protect citizens from state coercion, the ‘right to health care’ serves to justify state coercion against a particular part of the population: those who pay taxes. Moreover, by their very nature, such positive demands cannot be clearly defined and hence are capable of infinite expansions. As one need is satisfied, others arise.”

School Districts: Extra Funds Cannot Replace Legislative Budget Cuts

A story from KAKE Television about Kansas State Board of Education member Walt Chappell and the huge fund balances that Kansas schools are holding. Chappell says that some of the money in these funds could provide a way to get through a year of reduced funding from the state. The Kansas Association of School Boards, a group that advocates for more school spending and tax increases to support it, disagrees.

Bush Was a Big-Government Disaster

A Reason Magazine editorial took a look backwards at the George W. Bush presidency: “Bush’s legacy is thus a bizarro version of Ronald Reagan’s. Reagan entered office declaring that government was not the solution to our problems, it was the problem. Ironically, he demonstrated that government could do some important things right—he helped tame inflation and masterfully drew the Cold War to a nonviolent triumph for the Free World. By contrast, Bush has massively expanded the government along with the sense that government is incompetent.”

The Henry Ford of Heart Surgery

The Wall Street Journal article The Henry Ford of Heart Surgery: In India, a Factory Model for Hospitals Is Cutting Costs and Yielding Profits reports on a new model for reducing health care costs: economies of scale. “By driving huge volumes, even of procedures as sophisticated, delicate and dangerous as heart surgery, Dr. Shetty has managed to drive down the cost of health care in his nation of one billion. His model offers insights for countries worldwide that are struggling with soaring medical costs, including the U.S. as it debates major health-care overhaul.”

Cash for Clubbers

An example of unintended consequences at work: The Wall Street Journal found that the cash for clunkers program worked for something else, too: “We thought cash for clunkers was the ultimate waste of taxpayer money, but as usual we were too optimistic. Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama’s stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart. … This golf-cart fiasco perfectly illustrates tax policy in the age of Obama, when politicians dole out credits and loopholes for everything from plug-in cars to fuel efficient appliances, home insulation and vitamins. Democrats then insist that to pay for these absurdities they have no choice but to raise tax rates on other things — like work and investment — that aren’t politically in vogue. If this keeps up, it’ll soon make more sense to retire and play golf than work for living.”

Fake stimulus exposed by Watchdog group

There’s a new dog in town, and doing a great job already.

In New Mexico, the New Mexico Watchdog reported the story More Than 4,800 New Jobs Created in New Mexico in Less than a Month from Stimulus, According to Obama Administration Data, which is apparently the first news story to notice the glaring errors — some say fraud — in stimulus data provided by the government website Recovery.gov.

The national Watchdog site then reported $6.4 Billion Stimulus Goes to Phantom Districts.

Watchdog.org is a project of the Franklin Center for Government & Public Integrity. There are state-level watchdogs in a growing number of states, including Kansas at Kansas Watchdog. The Kansas group has done some great work already, to the annoyance of some Kansas politicians and bureaucrats who prefer to operate under less scrutiny. It’s worthwhile to bookmark the Kansas Watchdog web site, and to subscribe to their various other contact methods such as their rss feed, Facebook presence, email updates, and Twitter stream.

Stop spending our future

It’s hard to comprehend the spending by the federal government over the last year. The numbers are so large, the spending programs announced so quickly, one after another, that sometimes we need to step back and take a look at the big picture. When we do, it’s quite terrifying, especially when we realize that the Obama administration and Congress have several more large programs to pass.

A video that places these programs and spending in context is available from StopSpendingOurFuture.org. It’s short and to the point. The companion website, a joint effort of The Heritage Foundation and Americans for Prosperity Foundation, provides additional information and background.

Wichita school district’s cost-shifting burdens federal coffers

When USD 259, the Wichita public school district, recently sold some bonds, they took advantage of a new program called Build America Bonds. This program was passed as part of the federal stimulus program earlier this year.

The benefit to the Wichita school district is that the federal government will pay 35% of the interest on the bonds. Reading the news release from the school district, it’s just like free money. Pennies from heaven, as it were.

The problem is that the Build America Bonds are a tremendous burden to federal taxpayers, and will likely be so for some time. As a recent Wall Street Journal article reported: “With every new Build America sale, which applies to only taxable debt, interest payments as long as 30 years in the future are added to the government’s obligations. By even conservative estimates, the program is racking up ‘staggering’ costs, according to Municipal Market Advisors.”

Cost-shifting to other taxpayers is a favorite tactic of the Wichita school district. Campaign buttons worn during the bond issue boldly proclaimed 25%, that being the percentage of the Wichita bond issue costs that taxpayers living in other Kansas school districts would pay. Not wanting to miss out on a good thing, many other Kansas school districts have passed bond issues that we in Wichita have to pay for.

Now, through the Obama administration’s Build America Bonds program, the Wichita school district is able to spread its costs across the entire county.

Wichita school bond sale claims mislead

In a news release, USD 259, the Wichita public school district, is claiming a huge victory in the first sale of bonds authorized by last year’s election. But if you place the facts in context, with proper background, it turns out the conditions of the sale are quite different from what USD 259 claims.

Here’s the biggest discrepancy in the Wichita school district’s telling of the story: During last year’s campaign for the bond issue, the district used 4.75% as an estimate for the interest rate for the bonds. The news release is correct in stating that the rate the district faced when they sold the bonds was 6.22%. That’s a rate 147 basis points higher than the estimate — a huge difference.

Another way to look at what happened is to examine the repayment costs of the bonds. Selling $132.5 million in bonds at 4.75% interest (the estimated rate) means the district would pay $6,293,750 in interest each year. The same amount at 6.22% interest (the actual rate) means paying $8,241,500 in interest. That’s an increase of $1,947,750 per year, or 30.9% more than what the district estimated residents of the district would pay. This looks like a big problem for the taxpayers living in the Wichita school district.

But wait: USD 259 is claiming the bond sale saved money. How so? Enter the United States government in the form of the Obama stimulus plan. Specifically, the “Buy America Bonds” program, which pays 35% of the interest for bond issuers. Subtract 35% from 6.22%, and you get 4.043%. That’s the effective interest rate the district is paying on these bonds.

This is the basis on which USD 259 claims victory. But consider a few questions:

Last year, did the school district know there would be a recession, and that a stimulus bill providing a subsidy would be passed? Of course not.

Then, consider who pays the 35% subsidy? The answer, of course, is you and I, as federal taxpayers. But the Wichita school district treats the subsidy as free money. These bonds are being issued all over the country, and Wichitans have to pay for them in order for others to help us with our bonds.

Cost-shifting to other taxpayers is a favorite tactic of the Wichita school district. Campaign buttons worn during the bond issue boldly proclaimed 25%, that being the percentage of the Wichita bond issue costs that taxpayers living in other Kansas school districts would pay. Not wanting to miss out on a good thing, many other Kansas school districts have passed bond issues that we in Wichita have to pay for.

There’s also the district’s contention that they sold the bonds in May to “take advantage of favorable interest rates.” There are a few problems with this statement, the first being that at any given moment in time, we really don’t know if interest rates are favorable. We can compare today’s rate to last month’s or last year’s, but that’s all. No one knows what rates will be in the future.

In any case, if USD 259 received advice that interest rates were going up, it was bad advice. That’s because the yield of these bonds on the market today is 5.475%. This implies that if the bonds were sold today, the district could issue them at that rate instead of the higher 6.22% rate they were sold at. Then, of course, we’d subtract the 35% Build America Bonds subsidy from that, for a net rate of 3.56%. That’s what we’re missing out on due to selling the bonds when the district thought rates were “favorable.”

So here we have the Wichita school district snatching apparent victory from the jaws of defeat. Discerning taxpayers will realize, however, that the circumstances surrounding this victory — such that it is — are only serendipity. For the district to claim otherwise is shameful.

Here’s the news release from USD 259, dated May 11, 2009:

First set of bonds sold — low interest rates save millions

The Wichita Board of Education approved the sale of $188 million of bonds from the $370 million bond issue approved by voters on November 4, 2008. The Board made the decision to sell to take advantage of favorable interest rates. The BOE approved bonds at rates below pre-election estimates, saving taxpayers more than $19.9 million in reduced interest costs.

The district marketed $132.5 million of the bonds as Build America Bonds. These bonds are a new option created by the federal Stimulus Plan of 2009. The bonds are issued as taxable securities with the district receiving a subsidy of 35% of the interest direct from the federal Treasury. This portion of the financing was sold at a rate of 6.22%; however, with the 35% subsidy, the net cost to the Wichita Public Schools is 4.043% interest.

The remaining Phase I bonds were issued as traditional tax-exempt bonds totaling $58.76 million. A portion of these bonds refunded previously issued bonds of the district, reducing the interest rate and saving approximately $368,000 in future debt service payments.

The combination of the Build America Bonds and traditional tax-exempt bonds resulted in an all inclusive cost of less than 4% for the district. Compared to the pre-election estimated of 4.75% for the financing, the reduced interest cost is $19,944,807.

USD 259 plans on the marketing of additional bonds in 2010 and 2011.

During the 2000 bond issue, the district was able to take advantage of lower interest rates which will save taxpayers approximately $49 million. The district has refinanced a portion of all three series of 2000 bond issue bonds to take advantage of lower interest rates, which saves taxpayers an additional $4 million.

Maybe props are stimulus, too

The Kansas Meadowlark wonders about construction equipment moved into place apparently just for effect: Tax dollars for props for Biden’s visit to Overland Park? Wasteful spending for Biden to avoid?

By the way, why was it necessary for our former governor Kathleen Sebelius, now Secretary of the Department of Health and Human Services, to travel to Kansas for this event? Doesn’t she have national health care to plan for, or at least swine flu to stomp out?

Stimulus is theft

In Theft In Name Of Stimulus Is Still Theft, economist Walter E. Williams makes a powerful argument for something that those who love liberty know: self-ownership is the foundation.

“If we accept the idea of self-ownership, then certain acts are readily revealed as moral or immoral. Acts such as rape and murder are immoral because they violate one’s private property rights. Theft of the physical things that we own, such as cars, jewelry and money, also violates our ownership rights.”

Why aren’t some people able to accept this?

The reason why your college professor, politician or minister cannot give a simple yes or no answer to the question of whether one person should be used to serve the purposes of another is because they are sly enough to know that either answer would be troublesome for their agenda.

A yes answer would put them firmly in the position of supporting some of mankind’s most horrible injustices such as slavery. After all, what is slavery but the forcible use of one person to serve the purposes of another?

A no answer would put them on the spot as well because that would mean they would have to come out against taking the earnings of one American to give to another in the forms of farm and business handouts, Medicare, Medicaid, food stamps and thousands of similar programs that account for more than two-thirds of the federal budget. There is neither moral justification nor constitutional authority for what amounts to legalized theft.

That’s it right there. It’s really very simple.

I recently experienced how even some religious leaders don’t understand this when I wrote about Kansas Interfaith Power and Light. This organization has a plan, outlined in a Wichita Eagle op-ed written by Moti Rieber and Connie Pace-Adair, to provide programmable thermostats and weatherization rebates to people. How will these things be paid for?

The op-ed doesn’t say so, but how can government give something to one person if it does not take something away from another?

For making this argument, I was told by Rieber that my “philosophy is bankrupt, literally and figuratively.”

(On Williams’ page at George Mason University, the article is titled Our Problem Is Immorality.)

Myths of Roosevelt and the New Deal presented in Wichita

Yesterday Burton W. Folsom, professor of history at Hillsdale College spoke to a capacity crowd at a luncheon sponsored by Americans for Prosperity-Kansas and the Flint Hills Center for Public Policy.

His topic was three myths of the New Deal, based on his recent book
New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America.

The first myth is that the New Deal got us out of the Great Depression, or at least made good headway. Massive spending and a doubling of the public debt, however, didn’t do much to cure unemployment, as admitted by Roosevelt’s treasury secretary Henry Morgenthau, Jr.

Besides unemployment, other measures were bad. The arrest and murder rate was high throughout the 1930s. Life expectancy, which had increased rapidly in the decades before Roosevelt’s presidency, declined slightly during his first two terms.

Why didn’t spending solve the problem and lift us out of the Great Depression? The money to support government spending has to come from somewhere. Even if the money is well spent — and there’s ample evidence it isn’t — it would have been spent in the private sector when it was in the hands of taxpayers. Government spending only shifts jobs from the private sector to the public sector.

The second myth is that if the New Deal didn’t get us out of the Great Depression, it was at least a step in the right direction, a view commonly held today. A look at specific programs tells a different story.

The Agricultural Adjustment Act (AAA) paid farmers to leave some of their land vacant, thereby reducing their production. Prices for crops, then, should go up. Some farmers, however, took the money, and then planted on the land that was to remain vacant. So Roosevelt sent inspectors. Farmers bribed the inspectors, so Roosevelt had inspectors inspect the inspectors. Then aerial surveillance started.

Then, in 1935 there were shortages of farm products. We imported 11 million bushels of wheat, 34 million bushels of corn, and 36 million pounds of cotton — at the same time we were paying farmers to not produce these products.

The National Recovery Act (NRA), another of Roosevelt’s programs, lasted for 2.5 years before it was unanimously ruled unconstitutional by the Supreme Court.

Folsom told how Massachusetts — back then a conservative state with a free-market orientation — took care of their own hungry people. But after seeing what other states (Illinois in particular) did to get federal funds, Massachusetts decided to take federal money.

The third myth is that Roosevelt had good intentions. His actual goal was to put together a political coalition so he could remain in office. The WPA, in particular, served to reward loyal Democrats with jobs, and to do actual campaigning for Roosevelt. He was also the first to use the IRS as a weapon against his political opponents.

Concluding, Folsom gave his recommendation for today: “We need to remember that massive spending did not work well back then. It carries with it a host of unintended consequences. Cutting taxes can often liberate people, produce more freedom, and turning the American economy loose with lower tax rates and more individual liberty would provide more of an opportunity to get us out of the current recession.”

AIG hysteria tramples liberty

From Dave Trabert, president of the Flint Hills Center for Public Policy.

The Founding Fathers, who took such deliberate care to preserve personal liberty in our Constitution, would be ashamed by the hysteria and pandering that have consumed Washington, D.C., over bonuses paid to employees of American International Group.

There is no justification for rewarding people for failure, but the conduct of elected officials calling for legislative retribution is far more egregious.

Members of both parties are tripping over one another in a rush to endorse legislation that would tax bonuses paid to employees of companies receiving bailout money at rates as high as 90 percent.

Not that Congress should be giving away taxpayer money for handouts to failed companies, but it easily could have prevented this mess by putting some restrictions on the money.

Taxpayers are justifiably angered by the lack of fiduciary responsibility, and Congress is predictably responding with diversionary tactics.

House Minority Leader John Boehner, R-Ohio, hit the nail on the head, saying, “This bill is nothing more than an attempt for everyone to cover their butt.”

As unseemly as that is, it pales in comparison with the assault on the Constitution and our personal freedom. Rep. Ron Paul, R-Texas, called the legislation “an ex post facto bill as well as a bill of attainder, which is unconstitutional, so they’re using the tax code to punish people.”

“Ex post facto” is a legal term referring to an attempt to go back in time and apply new circumstances to something that already has occurred. A bill of attainder is a legislative act that singles out an individual or group for punishment. Both are prohibited by the Constitution.

Some members of Congress may be acting like children, but this isn’t a game in which the rules can be changed to alter the outcome. It is of paramount importance that Congress act responsibly to preserve the principles of liberty and freedom. Today the issue is bonuses paid to AIG employees, but there are endless opportunities to use the tax code punitively.

For example, House and Senate leaders are pursuing the elimination of secret balloting in order to make it easier for unions to form. Imagine if they decided to encourage the behavior they wanted by imposing special taxes on nonunion workers.

Using the tax code to punish people who raise the ire of Congress is wrong under any circumstance.

If Congress really wants to show leadership in going after those responsible for this latest abuse of taxpayer money, it should pass the hat at the next joint session.

In the meanwhile, we must send a very strong message to Washington:

Knock off the grandstanding, start acting like the leaders you promised to be, and keep your hands off our constitutionally guaranteed freedoms and liberties.

Wichita Tea Party on Tax Day Flyer

Wichita Tea Party Protest: Flush Twice

Susan Estes has created a printable flyer to promote the Wichita tea party protest on tax day, April 15. Click on Wichita Tea Party Planned for Tax Day, April 15 to learn more about the event.

Thanks to Susan Estes for creating the flyer, and for the great imagery. It hints of one of the themes of the protest, which is “Flush twice, it’s a long way to Washington!”

Click on Wichita Tea Party Tax Day Flyer to download the printable flyer. It’s a pdf file.

Articles of Interest

Stimulus, invisible hand, Kansas wind.

Stimulus Delusions (T. Norman Van Cott at the Foundation for Economic Education) More argument that the economic stimulus is harmful to the future of our economy. “Does it matter whether the dollars come from taxes, government borrowing, or the government’s printing press?” No, of course it doesn’t.

Stinson Morrison forms stimulus practice (Wichita Business Journal) A law firm with a Wichita office (Stinson Morrison Hecker LLP) establishes a “Stimulus Strike Force.” No, it’s not an effort to save the taxpayers from having to pay for a harmful, pork-laden spending program that will permanently expand the size of government and is unlikely to solve the problem it’s meant to fix. Instead, this group will “help businesses analyze, understand and access federal stimulus funds and programs. Specifically, team will focus on legislative and executive branch lobbying, government procurement and compliance advice related to the stimulus.”

Adam Smith and the invisible hand (Helen Joyce in Plus Magazine) This is a very nice explanation of Adam Smith’s invisible hand concept, with explanations of how the Prisoner’s Dilemma applies to subsidy-seeking. Also, Arrow’s Theorem — “there is no consistent way to aggregate the preferences of individuals to give a single preference which can be regarded as the preference of society” — is explained.

Topeka media outlets cutting employee pay (Lawrence Journal-World) More bad news for newspapers, and in this case, radio too. Hopefully journalism will find a way to survive.

Kansas wind industry booming (Lawrence Journal-World) “Kansas has tripled its wind generating capacity in the last 15 months, and wind power supporters are hoping that is just the beginning.” One of the comments left to the story reads “Hey hows business going? Its booming!!! Sounds great. Yeah but I don’t make any money and it cost taxpayers a fortune.”

Wichita Tea Party Citizen Report

A citizen report submitted by John Todd. Photos are available by clicking here. More coverage and video can be viewed by clicking here.

An estimated 100-plus citizen activists assembled today near Second and Waco Streets to participate in a protest of the federal stimulus package and bailouts. The event was billed as The Wichita Tea Party. Two men drove 200 miles from Garden City to attend. Other Kansans were here from Abilene, Hutchinson, Andover, and Augusta.

A gentleman from the Kansas City area came dressed in a pink pig suit with a sign denouncing “pork spending.” He delighted the crowd.

In addition to children, one lady brought her dog with a protest sign around his neck, reading “I didn’t read it either.”

A couple of middle-aged women from Wichita arrived early at the event indicating that this was their first involvement in citizen activism, and that they were hot about the stimulus spending that was emanating from Washington.

Staffers from Congressman Todd Tiahrt’s office participated along with dozens of like-minded citizens and several activist coalitions complaining about the stimulus.

The crowd carried signs, waved at passing cars whose drivers honked and gave thumbs-up signs marking their approval of the tax protest movement.

The event was a tremendous success and shows just what grassroots citizen activists can do to express their feelings of frustration towards a government that appear to have lost sight of the people who actually pay the bills. A general feeling among the crowd was that many of our leaders in Washington are moving our country towards an involuntary redistribution of wealth known as socialism.

They also appreciate the members of the Kansas congressional delegation who voted against the stimulus package.

Wichita Tea Party Photos

Wichita Tea Party, February 27, 2009

In Wichita, it was a cold day with a freezing wind, but quite a few protesters –human, canine, and porcine — came out to show their displeasure with the direction of our country. Appreciation was also expressed for the members of the Kansas Congressional delegation who voted against stimulus pork and bailouts.

Wichita Tea Party, February 27, 2009

Click here for more photos from this event. Or, click here for an automatic slideshow.

See more coverage by clicking on Wichita Tea Party.

Articles of Interest

Subsidizing Bad Ideas What are some of the things wrong with the president’s plan to solve the mortgage crisis? Howie Rich of Americans For Limited Government explains: “First, the plan is emblematic of America’s new “dependence mentality,” which is advanced by politicians like Obama who rhetorically extol the virtues that once made this country great while they systematically remove brick-by-brick the incentives needed to make it great once again. Second, it’s more of the same smoke-and-mirrors Washington politicians employ to hide the true coming-and-goings of your tax dollars in our nation’s capital. Third, it rewards many of the same financial institutions whose mistakes have helped bring this nation to the brink of fiscal ruin – and incentivizes them to make those same mistakes all over again.”

Judging Obama John Stossel explains some of the problems in judging the success of failure of President Obama’s economic interventions, and who should get the credit or blame.

Obama Gives Failing Schools a Pass: The day of reckoning has arrived — except for teachers’ unions (Chester E. Finn Jr. & Michael J. Petrilli in National Review). “This is classic Obama, straddling the Democratic divide on education, just as he did so deftly during the campaign, striving to placate both the reformers within the party and the union bosses. … It’s no accident that our schools aren’t producing enough well-educated graduates; that’s because the system has been designed to place the needs of adults over the needs of kids. But saying any of that would put him at odds with the education establishment, which he doesn’t appear to want to cross.” More indication that President Obama will not implement any meaningful education reform.

Zoomdweebie’s builds success on Twitter (Wichita Eagle). A Wichita business uses social media like Twitter to boost business.

The Government’s War on Recession. Lew Rockwell explains some of the problems and dangers with the way the Obama administration is attacking the problems with the economy: “The economics of stimulus are not as complicated. They amount to taking from some and giving to others. There is no wealth creation at all. There is no magic ‘multiplier’ to turn stones into bread. The economics of stimulus is value-destroying, because property is pried loose from owners who are putting it to socially useful purposes, and given to government so it can pass it out to friends. This process is costly to overall wealth production — and most of those costs are unseen. We will never know what kind of real stimulus could have taken place had the property been left in private hands. What jobs might have been created, what investments might have been made, what kind of business expansions might have taken place? We will never know.”

Wichita Tea Party, from AFP

Here’s a message from Americans For Prosperity’s Kansas state director Derrick Sontag about the Wichita Tea Party this Friday.

It started with people like you, logging on and signing our petition at NoStimulus.com, and now we have a full-blown grassroots movement on our hands.

One such activist, Nancy Armstrong, supported Hillary Clinton in the 2008 primary and even went on the road, campaigning for the former New York Senator. But while on the campaign trail, Nancy learned more than she anticipated about the Obama campaign. Now she’s joining the fight against the massive deficit spending bill by organizing the Wichita Tea Party, part of the nationwide grassroots movement that’s spreading like wildfire from coast to coast.

Join Nancy at a rally this Friday outside Senator Sam Brownback’s Wichita office:

Wichita Tea Party
11:30 a.m., Friday, Feb. 27
Senator Sam Brownback’s Office ( Farm Credit Bank Building, 245 N. Waco, Wichita)

Let’s help support this cause tomorrow — bring your homemade signs and show your appreciation to Sen. Brownback for opposing this federal bailout bill, and your frustration for this bloated spending bill.

This stimulus package is not only detrimental to our national economy, but it has immediate implications right here in Kansas. Our state faces a $1 billion budget shortfall, and we need budget reform — now. This federal bailout bill for the states will be too much of a temptation for our legislators, who may see this as a way to avoid making those tough budget decisions that come with real and meaningful budget reform.

Area Residents Plan Wichita Tea Party

Grassroots movement sweeps into Wichita with anti-stimulus rally

WICHITA — Grassroots activists in Wichita will rally outside Sen. Sam Brownback’s office on Friday, to show their appreciation to the senator for opposing the federal stimulus bill, and to demonstrate their frustration with big government spending.

Nancy Armstrong, Garden Plain, organized the rally at 11:30 a.m. Friday, Feb. 27 outside Sen. Sam Brownback’s office (245 N. Waco, Wichita).

Sen. Brownback voted against the federal bailout bill. Armstrong said Friday’s rally is intended to thank the Senator for standing in opposition to this bill, but also to let everyday Kansans vent their frustration with the current spending in Congress.

Armstrong previously worked for the 2008 presidential campaign for Hillary Clinton, but has since devoted her efforts to opposing the big-government, liberal schemes put forth by Congress and the Obama Administration.

“The powers in Washington are out of touch with the American people,” said Armstrong. “But Americans taxpayers are not going to take all of this spending lying down.

“We’ll keep reminding our elected officials that we’re not happy with this ‘porkulus’ bill, and we’ll certainly remember this in the 2010 elections.”

The Wichita Tea Party will be held simultaneously with local tea parties nationwide as part of a growing nationwide movement allowing everyday citizens to voice their opposition to the federal stimulus package.

For more information, contact Nancy Armstrong at 316-990-6009 or renaissancelady46@yahoo.com.