On May 6, 2008, Kansas State Senator Anthony Hensley, Democrat from Topeka and Senate Minority Leader, introduced a resolution commemorating the 75th anniversary of President Franklin Delano Roosevelt’s new deal.

Besides being misinformed about the true impact of Roosevelt and the new deal, Senator Hensley wastes the time and resources of the people of the State of Kansas with resolutions such as this. Sadly, not even one Kansas senator voted against this resolution.

For a true look at Franklin D. Roosevelt and his presidency, I recommend reading Ralph Raico's introduction to John T. Flynn's book The Roosevelt Myth here: John T. Flynn and the Myth of FDR.

Here's the text of the resolution:

SENATE RESOLUTION No. 1868
A RESOLUTION commemorating the 75th anniversary of President Franklin Delano Roosevelt’s New Deal.

WHEREAS, In the summer of 1932, Franklin Delano Roosevelt, Governor of New York, was nominated as the presidential candidate of the Democratic Party at a time the country was suffering from the Great Depression. In his acceptance speech, he told the American people, ‘‘I pledge you, I pledge myself, to a new deal for the American people.’’ And, Roosevelt won the presidency by a landslide; and

WHEREAS, The New Deal was the title President Roosevelt gave to a sequence of programs he initiated between 1933 and 1938 with the goal of giving relief to the needy, reform of the country’s financial system, and recovery of the economy during the Great Depression; and

WHEREAS, The New Deal Roosevelt had promised began to take shape immediately after his inauguration in March of 1933. The first days of Roosevelt’s administration was the ‘‘First New Deal’’ aimed at short-term recovery programs and saw the quick enactment by Congress of the Emergency Banking Act, Federal Deposit Insurance Corporation (FDIC), National Industrial Recovery Act (NIRA), Agricultural Adjustment Administration (AAA), Civilian Conservation Corps (CCC), Rural Electrification Administration (REA) and Tennessee Valley Authority (TVA); and

WHEREAS, Later the ‘‘Second New Deal’’ led to the enactment of the National Labor Relations Act (NLRA), also known as the Wagner Act, which established stronger collective bargaining rights for labor unions and the Works Progress Administration (WPA), which created hundreds of thousands of low-skilled blue collar jobs for unemployed men and women; and

WHEREAS, The most important program of Roosevelt’s New Deal was the Social Security Act, which established a system of universal retirement pensions, unemployment insurance and welfare benefits for low income families; and WHEREAS, Several New Deal programs still exist under their original names, including the Federal Deposit Insurance Corporation (FDIC), Federal Housing Administration (FHA), and Tennessee Valley Authority (TVA), while the largest programs still in existence today are the Social Security System and the Securities and Exchange Commission (SEC); and

WHEREAS, The New Deal programs were a reflection of Franklin Roosevelt’s personal and political philosophy that government has an important role in helping people make ends meet and in earning money for the work performed which raises the morale of the working man and woman: Now, therefore,

Be it resolved by the Senate of the State of Kansas: That we commemorate the 75th anniversary of President Franklin Delano Roosevelt’s New Deal; and

Be it further resolved: That the Secretary of the Senate provide an enrolled copy of the resolution to the Franklin D. Roosevelt Presidential Library and Museum, c/o Cynthia M. Koch, Director, 4079 Albany Post Road, Hyde Park, New York 12538.

On emergency motion of Senator Hensley SR 1868 was adopted unanimously.

From Karl Peterjohn of the Kansas Taxpayers Network.

How Much More Will Electricity Cost In Your Future?
Karl Peterjohn, Kansas Taxpayers Network

Governor Sebelius and her bankrupt Secretary of Health and Environment Rod Bremby (Bremby filed for personal bankruptcy over a year ago) now appear to have stopped the Kansas house from joining the Kansas senate in overriding her veto of the coal power plant expansion in western Kansas. The legislature’s final attempt at legislating a solution that would expand electrical power generation in the western half of Kansas is headed for another gubernatorial veto. The Kansas House of Representatives appears to be well short of the 84 votes needed to override her veto.

A number of legislators from northeast Kansas as well as mainly Wichita Democrats have mustered up enough house votes to kill this $3.6 billion power plant project. The May 13th death of Rep. Ted Powers, R-Mulvane, who voted to override this veto, makes a sine die override even more unlikely.

Eastern Kansans who seldom venture into western Kansas unless they are driving on I-70 to Colorado felt little direct concern on this 2008 legislative issue. That allowed the well-organized urban-based environmentalists to convince enough big city legislators from both parties to sustain Sebelius’ veto in the house.

Eastern Kansans’ power generation was not at immediate risk. Neither were their utility rates. That will change and this unpleasant and very expensive change is coming soon.

If you want details on the national plan and how this is becoming Kansas’ environmental policy the Capital Research Center (CRC) has provided the details. There is a national plan established by ultra-left wing environmental groups and CRC’s April, 20008 report (see www.capitalresearch.org/pubs/pdf/v1207000450.pdf) details this effort. The liberal environmental foundations are funding this state level plan to impose Kyoto Treaty like cuts in carbon energy emissions.

This will result in a huge rise in electricity costs as well as making other power sources more expensive. It will help push gasoline and other petroleum prices higher. This will be accomplished through entities like the Pennsylvania based Center for Climate Strategies that is helping establish new carbon controls by administrative edict over Kansas state policy.

Soaring utility costs will limit economic growth in a way that will restrict the economy while dramatically raising prices across the board. Here’s how it will happen.

What Governor Sebelius is trying to do at the state level in the 21st century with new restrictions on carbon based energy will soon lead to new carbon taxes. It is possible that new carbon taxes will appear at both the state and federal levels. Along with the tax hikes will be emission restrictions. Don’t forget that whenever you exhale or burn a log in the fireplace, you are emitting carbon.

Bremby’s edict is similar in impact to what former President Clinton achieved when he vetoed oil drilling in Alaska in 1995. It took roughly a decade for the lack of oil drilling to impact the U.S. oil prices. In contrast, today the demand for electrical power is growing. There is pressure on prices but major increases have not occurred. You can expect the rising demand for electricity to hit much more quickly than oil prices did a decade ago. Don’t forget that oil fell to record lows in the late 1990’s a couple of years after Clinton’s anti-energy veto.

The demise of the Holcomb power plant expansion when combined with new “carbon emissions” edicts from regulators like Bremby will negatively impact the Kansas economy in the future. This is a continuation of Democratic Party energy policies. At the beginning of the Clinton presidency, the Congress narrowly rejected the Clinton administration’s new carbon tax. This is likely to reappear in Washington next year.

The Holcomb power plant battle was not an aberration or isolated event. It is the energy tip of the “man made global warming” hoax (ironically occurring while parts of Kansas have been at or near freeze warnings well into May) that is centralizing all economic power and authority with state or federal levels of government in our state. The governor’s new energy council will include industry leaders who need to be worried about their carbon emissions.

Several established Kansas businesses are already expanding elsewhere like Bombardier and Spirit AeroSystems going to North Carolina. Cessna, whose President Jack Pelton will head up the governor’s new energy panel from the private sector, will now expand in Kansas after the state agreed to subsidize this expansion. So now, the state will be picking “winners and losers” in our economy.

Westar Energy, the electrical power company that owns a number of Kansas coal fired power plants, is now seeking higher electrical rates to pay for new pollution equipment costs from the KCC. They need to do this since their existing coal fired power plants are not nearly as low pollution as the Holcomb expansion would have been. Westar now needs Bremby to renew their existing permits to continue operations. Bureaucratic coercion is now codified in Kansas under Queen Sebelius.

House Speaker Rep. Melvin Neufeld, R-Ingalls, has campaigned for the Holcomb plant expansion and against this arbitrary power grab by Bremby and his boss. This is a problem in Neufeld’s southwest Kansas district where the nearby Hugoton gas field slowly declines in production. Neufeld has warned that Bremby’s bureaucratic edict against Holcomb has pushed a possible oil refinery, a $10 billion project with 1,500 new full time jobs, out of state too. Neufeld has copies of documents concerning the permitting process from Bremby’s office concerning this project. Naturally, liberal newspapers like the Wichita Eagle criticized Neufeld for pointing out this loss.

Another irony about power generation and carbon emissions was the fact that both houses of the legislature overwhelmingly passed state legislation to try and locate a new agricultural-terror research facility in Manhattan this year. This new federal facility would need a special electrical power plant to be allowed to operate. Since this was a government facility, unlike the private co-op, the carbon dioxide being generated from this proposed new back-up electrical power plant was not a problem. The carbon it emits comes from natural gas and not the politically incorrect coal too.

Governor Sebelius quickly signed this authorizing legislation into law. If it is government, it is good. If it is private, let’s stop it. Here is another example of government economic hypocrisy.

Kansas has started a new era. The price of living in Kansas is going to soar while you will be facing stagnant incomes as politicians in Topeka and their out-of-state environmental foundations control economic activity by regulatory edict.

While the rest of the world grows, China alone has built or is building hundreds of new power plants, many of which will be coal fired. Jobs will continue to flow out of the U.S. Kansas and the other 49 states will increasingly find themselves and our economy in green handcuffs. That will result in a lot of Kansans eventually finding themselves in the same bankruptcy line behind the already bankrupt Rod Bremby while Governor Sebelius makes plans for her next job in Washington.

Denis Boyles dissects the 2007 Kansas Economic Report and discovers something growing quickly in Kansas under its governor Kathleen Sebelius: poor children. He quotes the report as follows:

The number of Kansans estimated to be living below the poverty threshold in 2004 totaled 297,733, or more than 11.0 percent of the total population. From 2000 to 2004, Kansas poverty increased 26.6 percent while poverty in the U.S. went up 17.3 percent. From 2000 to 2004, the number of people in Kansas living below the poverty level increased more rapidly than the state’s population as a whole, with a 26.6 percent increase in poverty and a 1.7 percent increase in population.

Since a low in 2000, the number of people under the age of 18 in poverty in Kansas has increased by nearly 20.0 percent, reaching more than 98,000 people in 2004. This rate was higher than the national rate which increased at 12.5 percent. Additionally, the number of people under age five in poverty in Kansas has increased 27.5 percent in the past five years compared to 15.1 percent for the nation.

Read the entire analysis as published on Kansas Liberty here: Into poverty, with difficulty.

Part of the Wichita Eagle opinion watch series. An audio broadcast of this article may be heard by clicking here.

A letter writer in the April 27, 2008 Wichita Eagle makes the case that investment in USD 259 (the Wichita, Kansas public school district) has a good return.

By way of comparison, the writer argues that the Wichita airport, having been built with public funds, represents "an investment return." Whether it represents a good return on investment the writer doesn't say, but I believe he means that the airport was a good investment of public funds.

The mere fact that the airport exists, however, doesn't prove a good return on investment. Since the airport is owned by government and doesn't calculate its profit or loss in a competitive market, we can never know how wise is the "investment" made in the Wichita airport.

Then the writer really gets off track. He speaks of "my own school bond issue within my family," that being day care, preschool, K through 12, then a degree at the University of Kansas and a master's degree. These activities are all voluntary choices that the writer and his family made. Taxation by the government, however, is not voluntary. The writer might also be reminded that it may be a voluntary choice to attend the University of Kansas, but the people of the State of Kansas have no choice but to fund its operations.

Finally, the writer states "Some opponents of the school bond issue have even said the kids in USD 259 don't need tornado shelters. That is ridiculous." It is true that 60 schools in the Wichita school district don't have safe rooms, and this situation is the result of decisions made by the school district and its board. They had an opportunity to build more safe rooms as part of the bond issue in 2000, but they decided to spend the money on other things. Similarly, each year the district has a large capital budget to spend, and each year they decide to spend it on things other than safe rooms. Blame for the lack of storm shelters, therefore, rests solely with the Wichita school district. They have decided that other things are more important.

Part of the Wichita Eagle Opinion Watch series. Audio is available here.

The school bond issue in Wichita and those occurring in surrounding districts overlook one crucial necessity: a fair wage for teachers. They are critically underpaid for all levels of education, service and abilities. (From The Wichita Eagle Opinion Line, April 27, 2008)

This writer is misinformed on several levels.

First, bond issues such as the one proposed by USD 259, the Wichita, Kansas public school district, are usually reserved for capital expenditures, such as constructing buildings. Ongoing expenses such as salaries are not considered as part of a bond issue. The writer might also remember that in August 2007, the Wichita school district raised property tax rates to pay for an increase in teacher salaries.

Then, who can determine what constitutes a "fair" wage? I know of no teachers who were forced to accept the jobs they filled. We can only presume that both the teacher and the school voluntarily entered into an agreement, with the wage to be paid as part of that agreement.

But the issue might be a little more complex. For one thing, most public school teachers work under a collective bargaining agreement which specifies the wages to be paid for teachers, based on their length of experience and educational credentials. There is little or nothing that most teachers can do to escape that pay scale. It works both ways: there are excellent teachers who are underpaid compared to the value they generate through their efforts and skill. At the same time there are poor teachers who are overpaid when compared to good or average teachers.

Related is the fact that public school teacher wages are not set in a free market by willing participants on both sides. Whenever teachers get a raise, it is inevitable that letter writers and opinion line callers will express outrage at having to pay for a raise in teacher pay. That's characteristic of coerced transactions: many taxpayers don't like to see their taxes go up. But that's usually the only way that public school teacher pay can be raised.

The public schools, also, have the same problem as does any public agency: they are not able to perform economic calculation to properly evaluate their use of resources. They are not able to calculate profit or loss, so we really don't know if they use inputs -- such as the taxpayer funds used for teacher salaries -- wisely.

Besides, the myth that teachers are underpaid relative to other jobs has been exposed for just that. Jay Greene, in the book Education Myths, reports that based on U.S. Department of Labor data for 2002, accounting for the number of hours worked, school teachers earned about $31 per hour. That is more than architects, economists, biologists, civil engineers, mechanical engineers, and chemists.

Paul Jacob, in a Common Sense commentary writes about David Boaz's article in the Wall Street Journal (available at the Cato Institute) which describes the effort to obtain a customized Starbucks card with the phrase "laissez-faire" printed on it.

The request was rejected. But the socialist slogan "people not profits" was accepted by Starbucks, as was the United Farm Workers slogan "Si Se Puede." ("Yes we can," adopted by Barack Obama's presidential campaign.)

Here's what you find if you read Starbuck's mission statement: "Embrace diversity as an essential component in the way we do business."

It seems that some political ideas are more "diverse" than others.

Remarks delivered at a public hearing for the Sedgwick County solid waste management plan, April 24, 2008. Sedgwick County, Kansas, home to the City of Wichita, is considering a mandatory household recycling program. Or, perhaps people won't be forced to recycle, but they will be required to pay for the cost burden that recycling places on communities.

You may listen to this article in audio form by clicking here.

The economist Frederich Hayek tells us that the price system communicates all the information we need to know about the relative value of things. The price system allows people who don't know each other to coordinate their activities in the most effective and efficient way possible. The price system is truly a miracle.

If you want to see what happens when the price system is not allowed to work, usually because a government attempts to manage prices, just look at the former Soviet Union and other planned economies. The economist Thomas Sowell relates this story:

The last premiere of the Soviet Union, Mikhail Gorbachev, is said to have asked British Prime Minister Margaret Thatcher: How do you see to it that people get food? The answer was that she didn't. Prices did that. And the British people were better fed than those in the Soviet Union, even though the British have never grown enough food to feed themselves in more than a century. Prices bring them food from other countries.

The price system can do its work only when free people trade with each other freely under a system where property rights are respected. Any attempt by governments to manage prices leads to inefficiencies that manifest themselves as shortages, waiting lines, surpluses, and black markets. The emergence of these problems lead to calls for even more government interventionism to fix the very problem the government caused by interfering with the price system. It can be a never-ending cycle.

How does this apply to recycling in Sedgwick County?

In some cases the price system tells us that recycling is a beneficial use of resources. About 75% of automobiles are recycled, and used cardboard is often recycled in commercial settings. That's because the price paid for these recycled items is high enough that, in these contexts, recycling can be profitable. That's the price system at work. It tells us that the best use of an old car is to recycle it, and the same goes for cardboard boxes at the grocery store.

A household setting is different. Households usually have to pay to engage in recycling. The prices that recyclers can get for these recycled goods doesn't cover the cost of collecting them from households, as evidenced by the fact that in Wichita households must pay someone to pick up recyclables. That's the price system at work again. Its sober assessment is that in the context of households, recycling is a waste of resources. That waste can be tremendous. Orange County, Florida, for example, spends roughly $3 million per year to collect recyclable goods from households, but sells them for only $56,000.

What about running out of landfill space? If landfill space were truly scarce, the price system would tell us so, because landfill operators -- if there is a free market for landfills -- could charge high prices for accepting trash. But evidently, they can't.

So the price system tells us sometimes recycling is a good use of resources, and sometimes it isn't.

A mandatory recycling program or one where people have to pay fees even if they don't actually recycle their household goods amounts to the government attempting to override the price system. It is attempting to manage the price system through government interventionism. These policies, should Sedgwick County implement them, will cause citizens to suffer the same inefficiencies that all planned economies have demonstrated, if on a smaller scale.

An argument opponents of the proposed Holcomb Station coal-fired electricity generation plant make is that its water usage is excessive and will lead to, depending on who is speaking, little water left for other uses. Even drinking water, according to some critics, could be threatened.

Together, the proposed plants will use 16,000 acre-feet of water -- about 5.2 billion gallons – annually. While that seems like a tremendous amount of water, especially in dry western Kansas, we should put that water usage in context before making judgments.

According to the Kansas Water Office, in 2006, 3,496,586 acre-feet of water was used to irrigate 3,066,602 acres, a rate of 1.14 acre-feet of water per acre. In Finney county, where the Holcomb plant is located, water use for irrigation is a little higher. The average usage for 2002 to 2006 was 1.31 acre-feet per acre.

Using the Finney county rates, we find that the 16,000 acre-feet of water usage by the proposed power plants is enough to irrigate 12,215 acres of crops.

While 12,215 acres of crops may seem like a lot, Finney county alone had 227,297 acres under irrigation in 2006. So the water usage by the proposed plants amounts to 5.4% of just Finney county's water use for irrigation. For the entire state of Kansas, it's less than one-half of one percent of the water used for irrigation.

So while 5.2 billion gallons of water seems like a lot, it's not much more than a few drops in the bucket, figuratively speaking, of water use for irrigation in Kansas. The economic value of the electricity the Holcomb plant expansion will generate, however, is large.

This is an excerpt of a speech given by Walter E. Williams on February 6, 2005 at Hillsdale College. The complete speech, titled "The Entrepreneur As American Hero," can be read here: http://www.hillsdale.edu/imprimis/2005/03/.

At this juncture let me say a few words about the modern push for corporate social responsibility. Do corporations have a social responsibility? Yes, and Nobel Laureate Professor Milton Friedman put it best in 1970 when he said that in a free society “there is one and only one social responsibility of business -- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

It is only people, not businesses, who have responsibilities. A CEO is an employee, an employee of shareholders and customers. The failure of the corporate executive community to recognize this, and its willingness to engage in activities unrelated to the pursuit of profits, means national wealth will be lower, product prices will be higher and the return on investment lower.

If we care about people’s wants, rather than beating up on profit-making enterprises, we should pay more attention to government-owned non-profit organizations. A good example are government schools. Many squander resources and produce a shoddy product while administrators, teachers and staff earn higher pay and perks, and customers (taxpayers) are increasingly burdened. Unlike other producers, educationists don’t face the rigors of the profit discipline, and hence they’re not as accountable. Ditto the U.S. Postal Service. It often provides shoddy and surly services, but its managers and workers receive increasingly higher wages while customers pay higher and higher prices. Again, wishes of customers can be safely ignored because there’s no bottom line discipline of profits.

Here’s Williams’ law: Whenever the profit incentive is missing, the probability that people’s wants can be safely ignored is the greatest. If a poll were taken asking people which services they are most satisfied with and which they are most dissatisfied with, for-profit organizations (supermarkets, computer companies and video stores) would dominate the first list while non-profit organizations (schools, offices of motor vehicle registration) would dominate the latter. In a free economy, the pursuit of profits and serving people are one and the same. No one argues that the free enterprise system is perfect, but it’s the closest we’ll come here on Earth.

Wichita Area Chapter Americans for Prosperity Dinner Meeting

Monday, April 28, 2008
6:30 p.m. – 8:30 p.m.

Program:

Does trade create wealth and prosperity?

How a private citizen can get involved in local grassroots politics?

Location: Spangles Restaurant, 612 S. Broadway, Wichita, Kansas
(On the northeast corner of Kellogg and Broadway in downtown Wichita)

There is no cost for this program. Dinner and refreshments are optional from the Spangles menu on an individual ticket basis in Spangles private meeting room. (No food or drinks brought in please.)

Guests are welcome and encouraged!

RSVP optional but appreciated to John Todd, Wichita AFPF coordinator
john@johntodd.net, (316) 312-7335 cell

Remarks delivered to the Wichita City Council, April 15, 2008. Audio is available here.

Mr. Mayor, members of the city council, I ask that you not vote to approve this request for a tax abatement, and that you cease this practice altogether. Alternatively, I ask that you adopt a practice that will help realize the costs of these actions.

It is no doubt difficult to compete with other states when they offer huge gifts to companies in order to lure them to their state. That's a problem that needs to be addressed at a different level of government.

The matter before you now, however, is not the same. This company is not threatening, to my knowledge, to leave our area if the tax abatement is not granted. It appears they would build this facility even if the tax abatement is not granted.

The harmful effect of this tax abatement is this: When someone escapes paying taxes, someone else has to make up the difference. While the tax abatement being considered at this moment is relatively small, many are large, and when companies appear before this body week after week asking for tax favors, it adds up.

This same effect applies to the other governments that are affected: Sedgwick County, the Wichita public school district, and the State of Kansas. When one person does not pay, someone else has to pay more.

These special tax favors expose an inconsistency: business and government leaders tell us all the time that we must "build up the tax base." Granting these tax favors destroys that base.

Now I don't blame this company for asking for this tax favor. When councils, commissions, and legislatures indicate their willingness to grant these, businesses respond. So this company, of which I am a shareholder, by the way, is simply responding rationally to its environment.

But some of these companies that are asking for tax favors have problems with consistency. The president of this company has testified in favor of higher taxes to pay for building a facility that his company will benefit from. Now his company asks for relief from paying the taxes he wants others to pay.

As long as this body is willing to grant tax abatements and other special tax favors, I propose this simple pledge: that when the City of Wichita allows a company to escape paying taxes, that it reduce city spending by the same amount. By following this simple rule, the City can be reminded of the cost of granting special tax favors, and the rest of us won't have to pay for them.

As the annual tax deadline is here, we should take a moment to examine our level of awareness of the taxes we pay.

Many families don't pay any federal income tax. According to a study by the Tax Foundation (link: http://www.taxfoundation.org/ff/zerotaxfilers.html) 58 million households, representing some 122 million people, or 44 percent of the U.S. population, pay no federal income tax. I made a few calculations, and Kiplinger's TaxCut software for 2004 shows that a family with two children and $40,000 income (that's approximately the median household income in Wichita), taking the standard deductions, pays $0 federal income tax.

These families probably do pay quite a bit in the form of Social Security tax, but as we're told, that's not really a tax. Instead, it's the government saving for our future retirement. At least it tells us so.

For those who do pay taxes, they often aren't aware, on a continual basis, of just how much tax they pay. That's because for wage earners, federal and state taxes are conveniently withheld for us on our paychecks. Many people, I suspect, look at the bottom line -- the amount they receive as a check or automatic bank deposit -- and don't really take notice of the taxes that were withheld. This makes paying taxes almost painless.

For local property taxes, anyone who has a mortgage probably has these taxes incorporated into their monthly mortgage payment. Renters pay them as part of their rent. Everyone who trades with a business pays them, as taxes are part of what goes into formulating prices.

An alternative would be to eliminate the withholding of taxes from paychecks and from monthly mortgage payments. Instead, each month or year the various taxing governments would send a bill to each taxpayer, and they would pay it just like the rest of their periodic bills. In this way, we would all be acutely aware of just how much tax we pay.

A curiosity is that many people are happy during tax season because they get a refund. And they're delighted to get that refund, so much so that many will pay high interest rates on a refund anticipation loan just to get the money a little earlier. The irony is that by adjusting their withholding, they could take possession of much of that money during the year as they earn it.

The other people happy during tax season are tax preparers. As a country we spend an enormous effort on tax recordkeeping and compliance. Another study by the Tax Foundation estimates that in 2002 we spent, as a nation, 5.8 billion hours and $194 billion complying with the federal tax code. (5.8 billion hours is equivalent to about 2,800,000 people working 40 hours per week, 52 weeks per year.) By simplifying our tax code, we could eliminate much of this effort, and return that effort to productive use.

Since tax withholding from paychecks and mortgage payments reduces our awareness of just how much tax we pay, it's unlikely that governments will stop the withholding of taxes and submit a bill to taxpayers. Instead, it's left to ourselves to remain aware of how much we are paying.

In today's Wichita Eagle (February 17, 2008), USD 259 (Wichita) school board member Lynn W. Rogers makes the case that a bond issue for the Wichita public schools will have a positive economic impact on the local community.

Many people are skeptical about the tax rebates recently passed by Congress and their ability to stimulate the economy. Why? That's because the money being sent to households is not "new" money. It had to come from somewhere. Many people realize that taking money from the pocket of one person and sending it to another doesn't add to total economic activity. And as our nation is drowning in debt at the federal level, many people are wary of borrowing money just to get a little boost now, when there is so much debt to be repaid.

It is the same at the local level. The money that will pay for the new facilities has to come from somewhere. When people pay taxes to USD 259, those tax payments represent money they can't spend somewhere else. Economic activity that might have taken place will not, because people had to spend their money on taxes.

This means that if the bond issue passes, and you drive by a construction site being funded with bond money, the workers you see will have displaced other workers in our local community.

If you see a new school building or new tennis courts, you see construction that has displaced other construction in our community.

School district officials will highlight the construction projects, just as they have in the past, as evidence of economic impact and progress. They can do that because it's easy to identify and show the new facilities. School officials will lead tours of the shiny new schools. They'll be promoted endlessly on the district's cable television channel. What is far more difficult, however, is to find the economic activity and jobs that were displaced to pay for these projects. No television or news reporters will look for them. There is no one to speak for them.

In a television news story, a teacher at an overcrowded school suggested that Wichitans forgo a couple nights out at supper to pay for the bond issue. What would be the impact on restaurants in Wichita if all families did that? How would that affect the people who work in those restaurants? I am tempted to ask what this teacher has against these people.

Mr. Rogers is correct on one thing: spending money the next few years while paying it back over 20 years does lead to more economic activity right now. He didn't mention, however, the economic activity that is not taking place this year because we're paying off the 2000 bond issue, and he doesn't mention the activity we'll lose in the future in order to pay for this bond issue.

In the past few weeks a handful of companies in Wichita have asked to be exempted from paying property taxes on investments they have made. This week Wichita may decide to grant special tax treatment to a large development in downtown Wichita.

Is it wise for the City of Wichita to grant these special tax favors?

Because capital for investment is in short supply, it is important that our economy allocate it where it does the most good, where it is valued most. Markets do a very good job of this when they operate free of government meddling. When government intervenes, however, decisions about how to allocate investment capital will be made for all sorts of non-economic reasons.

Here in Wichita, for example, there are some who believe that downtown Wichita suffers from underinvestment when compared to some of the city's outlying areas. These people -- many of them holding political office or a quasi-governmental position -- seek to use government and its ability to tax (or not to tax) to achieve their goals. They have passed measures like the sales tax to fund the downtown Wichita arena. Downtown developers and businesses are given tax breaks, tax abatements, and they may obtain low-interest loans backed by the credit of the City of Wichita. A special tax district overlays downtown, with the proceeds being used to promote downtown's interest in receiving more governmental largesse. Downtown is also filled with special tax increment financing or TIF districts, where property tax revenues that would normally be used to fund the general operations of government are instead diverted to enhance the profitability of the developer's project.

All this favorable treatment means that projects that would not be feasible on their own merits are undertaken because they satisfy a political agenda. This results in misallocation of scare capital. It's also not fair to those who risk their own capital without receiving special government favor, meaning that we may have less investment overall in Wichita because of reluctance to compete with tax-favored investors.

This interventionism is also harmful in that it creates a special class of firms: those firms who have asked for and received government favor. They gain a competitive advantage over their direct competitors. As Karl Peterjohn of the Kansas Taxpayers Network has taught me, these firms also have a competitive advantage over other firms of all types in Wichita. That's because firms of all types that don't receive special tax favors have higher overhead, and therefore may not be able to compete with the tax-favored firms in paying attractive wages to obtain employees.

This interventionism is harmful again because it creates a class of political entrepreneurs rather than market entrepreneurs. Instead of seeking to create products and services that please customers, they seek to please politicians and bureaucrats. This behavior, called rent-seeking, produces nothing of value to the economy as a whole.

Furthermore, if what those who seek special tax treatment say is true, that is, that the projects they propose would not be feasible if they had to pay their taxes, we have a serious problem: we have taxes that are so high that they inhibit private investment.

Finally, when government reduces someone's tax and doesn't reduce its own spending, the rest of the taxpayers have to make up the difference.

I propose a partial solution to this problem that will help our leaders become aware of the cost of this problem, and will also alleviate some of the inequity. When the City of Wichita (or any other taxing authority) grants special tax treatment, it must reduce its spending by the same amount. By following this simple rule, the City can be reminded of the cost of granting special tax favors, and the rest of us won't have to pay for them.

A recent article in the Wichita Business Journal (December 28, 2007) about Wichita public school bond issues contained this passage:

"The economic benefit was fantastic," says Joe Johnson, a partner at Schaefer Johnson Cox Frey, who was on the 2006 steering committee. "No one predicted the downturn, but this community got tremendous value from the bond issue."

There was also this passage concerning Wichita Schools Superintendent Winston Brooks:

There is a misconception, Brooks says, that the bond issue was a drain on the economy. Actually, he says, the bond issue had a positive economic impact on Wichita.

"I think we did bail out this community with the bond issue," Brooks says. "... Often times when you hear the district talk about bond issues, it's 'Here they come again. It's going to kill the economy.' The fact of the matter is that's not what happened last time.

"That bond issue helped the economy."

I have no doubt that the school bond issue in 2000 was a tremendous benefit to Mr. Johnson's firm. I'm sure Superintendent Brooks, in some way that I don't understand, benefited from the bond issue, too.

As to the rest of the community, however, the benefit claimed by these two men doesn't exist. It never existed. It is only a fantasy flowing from an economic fallacy. It comes from being so focused on one's own self that nothing else matters, and is therefore not seen or considered. As explained by Henry Hazlitt in his book Economics in One Lesson:

This [fallacy] is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.

Consider: If the bond issue in 2000 had not passed and people in Wichita kept the tax money that goes to retiring the bonds (and the future payments yet to be made), what do you suppose they would have done with that money? Wouldn't it be possible that they would have spent and invested it, and that spending and investing would have provided economic benefit to our community too?

I am reminded of another passage from Economics in One Lesson regarding a bridge to be built:

Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project.

It is as simple as that. Every dollar taken by taxes is a dollar that isn't spent somewhere else, with the attendant loss of economic activity. When we hear arguments about how much a new school bond issue will benefit Wichita's economy, remember this.

On November 6, 2007, the Wichita City Council considered and approved a request by Learjet for industrial revenue bonds. One of the benefits of IRBs such as these is that the property purchased with the proceeds is usually exempt from property tax. In this case, the period of tax abatement is ten years.

In the minutes of the meeting, under the heading "Economic Vitality and Affordable Living" we can read: "Granting an ad valorem property tax exemption and sales tax exemption will encourage the business to create new job opportunities and stimulate economic growth for the City of Wichita and Sedgwick County."

Wow! Someone in city hall realizes that a reduction in taxes is good for business, and is reducing taxes in response to that revelation.

Now if all businesses and individuals could have lower taxes -- instead of only those who lobby government for special favor -- think how nice that would be. The economic benefit that this tax reduction will bring to Learjet could be felt across our entire city.

Those sounding the alarm over global warming are full of evidence of rising temperatures and man's contribution to them. Rarely, however, do I read of what these advocates proscribe as the cure for global warming, and if one is given, we don't often hear of the grave damage the cure would do to our economy and standard of living.

The following article by George Resiman explains what caps on carbon dioxide emissions mean in terms of our economy. I wish that Roderick L. Bremby, secretary of the Kansas Department of Health and Environment, had read this article before making his recent decision denying the applications to build two coal-fired plants in Kansas. His reasoning for the denial: "it would be irresponsible to ignore emerging information about the contribution of carbon dioxide and other greenhouse gases to climate change and the potential harm to our environment and health if we do nothing."

I had the distinct pleasure of meeting Professor Reisman this summer, and I attended several of his lectures at Mises University in Auburn, Alabama. I am reading, slowly but surely, his monumental book Capitalism, which he inscribed for me. His website at www.capitalism.net and blog at www.georgereisman.com are valuable resources. You can read the full version of this article at http://georgereisman.com/blog/2007/05/global-warming-is-not-threat-but.html.

Global Warming Is Not a Threat But the Environmentalist Response to It Is

The UN’s Intergovernmental Panel on Climate Change recently released the summary of its latest, forthcoming report on global warming. It’s most trumpeted finding is that the existence of global warming is now “unequivocal.”

Although such anecdotal evidence as January’s snowfall in Tucson, Arizona and freezing weather in Southern California and February’s more than 100-inch snowfall in upstate New York might suggest otherwise, global warming may indeed be a fact. It may also be a fact that it is a by-product of industrial civilization (despite, according to The New York Times of November 7, 2006, two ice ages having apparently occurred in the face of carbon levels in the atmosphere 16 times greater than that of today, millions of years before mankind’s appearance on earth).

If global warming and mankind’s responsibility for it really are facts, does anything automatically follow from them? Does it follow that there is a need to limit and/or reduce carbon emissions and the use of the fossil fuels—oil, coal, and natural gas—that gives rise to the emissions? The need for such limitation and/or rollback is the usual assumption.

Nevertheless, the truth is that nothing whatever follows from these facts. Before any implication for action can be present, additional information is required.

Payday loans are expensive, a recent Wichita Eagle articles tells us. If someone needs to borrow money and has access to a loan from almost any other source, they should avoid payday lenders. But the reality is that there are people who have poor credit and are not able to obtain credit through the usual channels such as banks, credit unions, credit cards, and family and friends. These people may have but one source for loans: the maligned payday lenders.

Why can't these people borrow from traditional, "legitimate" lenders? The answer is that making small loans to people who have a history of credit problems is expensive. Wishing it weren't so and imposing government regulation won't change this fact.

Community activists call for existing banks and financial institutions to offer small loans at reasonable interest rates. One institution in Wichita, Communities United Credit Union, did just that. But earlier this year it failed after suffering losses from bad loans, providing more evidence that it is costly to offer small loans to credit-challenged customers.

If existing financial institutions are to make small loans to credit-challenged borrowers, they should do so only with the reasonable expectation of earning profits from these loans. To do otherwise is to abandon their responsibility to their investors, and, should I learn that my bank or a bank I had invested in was making risky loans without being compensated for the risk, I would withdraw my investment in that bank.

An irony is that existing government regulation may be a contributing factor as to why payday loans are so prevalent. In an Wichita Eagle article from earlier this year, we read “Some bankers are reluctant to offer them [small loans] because their industry is so tightly regulated ...” These regulations either prohibit or add to the cost of making small loans, bankers say.

Furthermore, usury laws, which limit the interest that banks and other traditional lenders may charge, are perhaps too restrictive. If traditional banks and credit unions could charge, say 25%, 40%, or even 50% for small loans, they might find it profitable to do so. An interest rate of 50%, while high, is certainly preferable to the several hundred percent rates that payday loan borrowers who roll over their loans pay.

Those who call for a limit on the interest rate that payday lenders can charge may very well drive these lenders out of business. I suspect that is their unstated goal. If they are successful, where will credit-challenged borrowers go for loans? As shown above, traditional lenders are not serving these borrowers.

A group named Sunflower Community Action says that payday lenders prey on poor people who have few financial options. I believe this group is misinformed on two points. First, the transaction between the borrower and lender is voluntary. Neither party is coerced, so there is no "preying." Second, it is true that poor people have few options. Eliminating payday loans removes one more option, an option that evidently some people use. To its credit, this group promotes financial education and literacy, which is the best weapon to fight the cycle of poverty that some find themselves stuck in.

Writing from New Orleans, Louisiana

A group in Kansas has been pressing for raising our state's minimum wage. Other groups in Kansas seek to impose a "living wage" that is higher than the federal minimum wage, which itself has been raised recently.

The great appeal of a higher minimum wage mandated by an act of the legislature is that it seems like a wonderfully magical way to increase the wellbeing of low-wage workers. Those who were earning less than the new lawful wage and keep their jobs after the increase are happy. They are grateful to the lawmakers, labor leaders, newspaper editorialists, and others who pleaded for the higher minimum wage. News stories will report their good fortune.

That's the visible effect of raising the minimum wage. But to understand the entire issue, we must look for the unseen effects.

The not-so-visible effect of the higher wage law is that demand for labor will be reduced. Those workers whose productivity, as measured by the give and take of supply and demand, lies below the new lawful wage rate are in danger of losing their jobs. The minimum wage law says if you hire someone you must pay them a certain amount. The law can't compel you to hire someone, nor can it compel employers to keep workers on the payroll.

The difficulty is that people with lose their jobs in dribs and drabs. A few workers here; a few there. They may not know who is to blame. The newspaper and television reporters will not seek these people, as they are largely invisible, especially so in the case of the people who are not hired because of the higher wage law.

If we are truly concerned about the plight of low-wage workers we can face some harsh realities and deal with them openly. The simple fact is that some people are not able to produce output that our economy values very much. They are not very productive. Passing a law that requires employers to pay them more doesn't change the fact that their productivity is low. But there are ways to increase productivity.

One way to increase workers' productivity is through education. Unfortunately, there is ample evidence that our public education system is failing badly.

Capital -- another way to increase wages -- may be a dirty word to some. But as the economist Walter E. Williams says, ask yourself this question: who earns the higher wage: a man digging a ditch with a shovel, or a man digging a ditch using a power backhoe? The difference between the two is that the man with the backhoe is more productive. That productivity is provided by capital -- the savings that someone accumulated (instead of spending on immediate consumption or taxes) and invested in a piece of equipment that increased the output of workers and our economy.

Education and capital accumulation are the two best ways to increase the productivity and the wages of workers. Ironically, the people who are most vocal about raising wages through legislative fiat are also usually opposed to meaningful education reform and school choice, insisting on more resources being poured into the present system. They also usually support higher taxes on both individuals and business, which makes it harder to accumulate capital. These organizations should examine the effects of the policies they promote, as they are not in alignment with their stated goals.

For a New Liberty: The Libertarian Manifesto by Murray N. Rothbard

An absolutely awesome book. If you are interested in liberty, this is, in my opinion, the most important book to read.

I think Lew Rockwell, who I recently had the pleasure to meet at the Ludwig von Mises Institute, says it best about this book:

Once you are exposed to the complete picture -- and For a New Liberty has been the leading means of exposure for more than a quarter of a century -- you cannot forget it. It becomes the indispensable lens through which we can see events in the real world with the greatest possible clarity. ... Its logical and moral consistency, together with its empirical explanatory muscle, represents a threat to any intellectual vision that sets out to use the state to refashion the world according to some pre-programmed plan. And to the same extent it impresses the reader with a hopeful vision of what might be. ... He never talks down to his readers but always with clarity. Rothbard speaks for himself. ... The reader will discover on his or her own that every page exudes energy and passion, that the logic of his argument is impossibly compelling, and that the intellectual fire that inspired this work burns as bright now as it did all those years ago.

And finally, from Lew again:

The book is still regarded as "dangerous" precisely because, once the exposure to Rothbardianism takes place, no other book on politics, economics, or sociology can be read the same way again. What was once a commercial phenomenon has truly become a classical statement that I predict will be read for generations to come.

This book is available for purchase at the Mises Institute at http://mises.org. It may be read in its entirety from that site, and an audio recording is available there as well.

By Frederic Bastiat

A PETITION

From the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.

To the Honourable Members of the Chamber of Deputies.

Gentlemen:

You are on the right track. You reject abstract theories and little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is, to reserve the domestic market for domestic industry.

We come to offer you a wonderful opportunity for your -- what shall we call it? Your theory? No, nothing is more deceptive than theory. Your doctrine? Your system? Your principle? But you dislike doctrines, you have a horror of systems, as for principles, you deny that there are any in political economy; therefore we shall call it your practice -- your practice without theory and without principle.

We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation.

This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us.

We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights, and blinds -- in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.

Be good enough, honourable deputies, to take our request seriously, and do not reject it without at least hearing the reasons that we have to advance in its support.

First, if you shut off as much as possible all access to natural light, and thereby create a need for artificial light, what industry in France will not ultimately be encouraged?

If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.

If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land.

Our moors will be covered with resinous trees. Numerous swarms of bees will gather from our mountains the perfumed treasures that today waste their fragrance, like the flowers from which they emanate.

Thus, there is not one branch of agriculture that would not undergo a great expansion.

The same holds true of shipping. Thousands of vessels will engage in whaling, and in a short time we shall have a fleet capable of upholding the honour of France and of gratifying the patriotic aspirations of the undersigned petitioners, chandlers, etc.

But what shall we say of the specialities of Parisian manufacture? Henceforth you will behold gilding, bronze, and crystal in candlesticks, in lamps, in chandeliers, in candelabra sparkling in spacious emporia compared with which those of today are but stalls.

There is no needy resin-collector on the heights of his sand dunes, no poor miner in the depths of his black pit, who will not receive higher wages and enjoy increased prosperity.

It needs but a little reflection, gentlemen, to be convinced that there is perhaps not one Frenchman, from the wealthy stockholder of the Anzin Company to the humblest vendor of matches, whose condition would not be improved by the success of our petition.

We anticipate your objections, gentlemen; but there is not a single one of them that you have not picked up from the musty old books of the advocates of free trade. We defy you to utter a word against us that will not instantly rebound against yourselves and the principle behind all your policy.

Will you tell us that, though we may gain by this protection, France will not gain at all, because the consumer will bear the expense?

We have our answer ready:

You no longer have the right to invoke the interests of the consumer. You have sacrificed him whenever you have found his interests opposed to those of the producer. You have done so in order to encourage industry and to increase employment. For the same reason you ought to do so this time too.

Indeed, you yourselves have anticipated this objection. When told that the consumer has a stake in the free entry of iron, coal, sesame, wheat, and textiles, "Yes," you reply, "but the producer has a stake in their exclusion." Very well, surely if consumers have a stake in the admission of natural light, producers have a stake in its interdiction.

"But," you may still say, "the producer and the consumer are one and the same person. If the manufacturer profits by protection, he will make the farmer prosperous. Contrariwise, if agriculture is prosperous, it will open markets for manufactured goods."

Very well, If you grant us a monopoly over the production of lighting during the day, first of all we shall buy large amounts of tallow, charcoal, oil, resin, wax, alcohol, silver, iron, bronze, and crystal, to supply our industry; and, moreover, we and our numerous suppliers, having become rich, will consume a great deal and spread prosperity into all areas of domestic industry.

Will you say that the light of the sun is a gratuitous gift of Nature, and that to reject such gifts would be to reject wealth itself under the pretext of encouraging the means of acquiring it?

But if you take this position, you strike a mortal blow at your own policy; remember that up to now you have always excluded foreign goods because and in proportion as they approximate gratuitous gifts. You have only half as good a reason for complying with the demands of other monopolists as you have for granting our petition, which is in complete accord with your established policy; and to reject our demands precisely because they are better founded than anyone else's would be tantamount to accepting the equation: + x + = -; in other words, it would be to heap absurdity upon absurdity.

Labour and Nature collaborate in varying proportions, depending upon the country and the climate, in the production of a commodity. The part that Nature contributes is always free of charge; it is the part contributed by human labour that constitutes value and is paid for.

If an orange from Lisbon sells for half the price of an orange from Paris, it is because the natural heat of the sun, which is, of course, free of charge, does for the former what the latter owes to artificial heating, which necessarily has to be paid for in the market.

Thus, when an orange reaches us from Portugal, one can say that it is given to us half free of charge, or, in other words, at half price as compared with those from Paris.

Now, it is precisely on the basis of its being semigratuitous (pardon the word) that you maintain it should be barred. You ask: "How can French labour withstand the competition of foreign labour when the former has to do all the work, whereas the latter has to do only half, the sun taking care of the rest?"

But if the fact that a product is half free of charge leads you to exclude it from competition, how can its being totally free of charge induce you to admit it into competition? Either you are not consistent, or you should, after excluding what is half free of charge as harmful to our domestic industry, exclude what is totally gratuitous with all the more reason and with twice the zeal.

To take another example: When a product -- coal, iron, wheat, or textiles -- comes to us from abroad, and when we can acquire it for less labour than if we produced it ourselves, the difference is a gratuitous gift that is conferred up on us. The size of this gift is proportionate to the extent of this difference. It is a quarter, a half, or three-quarters of the value of the product if the foreigner asks of us only three-quarters, one-half, or one-quarter as high a price. It is as complete as it can be when the donor, like the sun in providing us with light, asks nothing from us. The question, and we pose it formally, is whether what you desire for France is the benefit of consumption free of charge or the alleged advantages of onerous production.

Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!

Frédéric Bastiat (1801-1850), Sophismes économiques, 1845

This simple lesson from Henry Hazlitt explains so much, yet so little people realize and apply the truths explained here. Even trained economists like Paul Krugman, writing in The New York Times, fail to recognize the truth of Bastiat's lesson as explained by Hazlitt when he remarked that "the terror attack [of 9/11/2001 that destroyed the World Trade Center] could even do some economic good."

Part TWO THE LESSON APPLIED
THE BROKEN WINDOW

Let us begin with the simplest illustration possible: let us, emulating Bastiat, choose a broken pane of glass.

A young hoodlum, say, heaves a brick through the window of a baker's shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business?

Then, of course, the thing is endless. The glazier will have $50 more to spend with other merchants, and these in turn will have $50 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever- widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.

Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $50 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $50 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.

The glazier's gain of business, in short, is merely the tailor's loss of business. No new "employment" has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.

Recently two editorials appeared in The Wichita Eagle promoting government spending on the arts because it does wonderful things for the local economy. The writers are Rhonda Holman and Joan Cole, who is chairwoman of the Arts Council.

I read the study that these local writers relied on. The single greatest defect in this study is that it selectively ignores the secondary effects of government spending on the arts.

As an example, the writers in the Eagle promote the study's conclusion that the return on dollars spent on the arts is "a spectacular 7-to-1 that would even thrill Wall Street veterans." It hardly merits mention that there aren't legitimate investments that generate this type of return in any short timeframe.

So were do these fabulous returns come from? Here's a passage from the study that the Eagle writers relied on:

A theater company purchases a gallon of paint from the local hardware store for $20, generating the direct economic impact of the expenditure. The hardware store then uses a portion of the aforementioned $20 to pay the sales clerk’s salary; the sales clerk respends some of the money for groceries; the grocery store uses some of the money to pay its cashier; the cashier then spends some for the utility bill; and so on. The subsequent rounds of spending are the indirect economic impacts.

Thus, the initial expenditure by the theater company was followed by four additional rounds of spending (by the hardware store, sales clerk, grocery store, and the cashier). The effect of the theater company’s initial expenditure is the direct economic impact. The subsequent rounds of spending are all of the indirect impacts. The total impact is the sum of the direct and indirect impacts.

Relying on this reasoning illustrates the problem with the Eagle editorials: they ignore the secondary effects of economic action, except when it suits their case. The fabulous returns erroneously attributed to spending on the arts derive from this chain of spending starting at the hardware store. But what the authors of this study and the Eagle editorial writers must fail to see is that anyone who buys a gallon of paint for any reason sets off the same chain of economic activity. There is no difference -- except that a homeowner buying the paint is doing so voluntarily, while an arts organization using taxpayer-supplied money to buy the paint is using someone else's money.

The study also pumps up the return on government investment in the arts by noting all the other spending that arts patrons do on things like dinner before and desert after arts events. But if people kept their own money instead of being taxed to support the arts, they would spend this money on other things, and those things might include restaurant meals, too.

The fact that these editorials have been printed might lead me to suspect that government-supported arts organizations and Eagle editorial writers might feel a little guilty about using taxpayer funds. They should. To take money from one group of people by government coercion and give it to other people, especially when that purpose is to stage arts events, is wrong. It's even more so when the justification for doing this is so transparently incorrect.

Arts organizations need to survive on their own merits. They need to produce a product or service that satisfies their customers and patrons just as any other business must.

It may turn out that what people really want for arts and culture, as expressed by their own selections made freely, might be different from what government bureaucrats and commissions decide we should have. That freedom to choose, it seems to me, is something that our Wichita City Council, Arts Council, and Wichita Eagle editorial writers believe the public isn't informed or responsible enough to enjoy.

I, Pencil is one of the most important and influential writings that explain the necessity for limited government. A simple object that we may not give much throught to, the story of the pencil illustrates the importance of markets, and the impossibility of centralized economic planning.

From the afterword to I, Pencil by Milton Friedman:

Leonard E. Read’s delightful story, “I, Pencil,” has become a classic, and deservedly so. I know of no other piece of literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith’s invisible hand -- the possibility of cooperation without coercion -- and Friedrich Hayek’s emphasis on the importance of dispersed knowledge and the role of the price system in communicating information that “will make the individuals do the desirable things without anyone having to tell them what to do.”

Link to a pdf of I, Pencil: http://www.fee.org/pdf/books/I,%20Pencil%202006.pdf

Link to Leonard E. Read reading I, Pencil: http://www.fee.org/events/detail.asp?id=6239

From an article by Kenneth P. Green on energy policy. It explains why subsidy in any form is bad policy.

First, subsidies breed corruption. They don't create incentives for honest people that already have a market-worthy product -- such people can already sell their goods into the market easily. Rather, subsidies create a fertile garden for rentseekers who are unable to sell their goods competitively in a free-market, and prefer to tap the coercive and redistributionist force of government to lever their uncompetitive good into the market at the public's expense. Rather than contribute to overall social welfare by giving consumers the best goods at the least cost, or even maximizing the efficient use of people's taxes, rent-seekers undermine social welfare by foisting inferior or over-priced goods onto the market while taking money from people that could be used for other important purposes. This is a particular problem in countries with relatively weak property rights regimes, and countries with legal institutions insufficient to prevent it.

Full article at http://www.aei.org/publications/filter.all,pubID.26353/pub_detail.asp.