Author: Bob Weeks
WichitaLiberty.TV December 1, 2013
In this episode of WichitaLiberty.TV: What is libertarianism? Is it dangerous, as New Jersey Governor Chris Christie recently warned? David J. Theroux, who is Founder, President and Chief Executive Officer of The Independent Institute and Publisher of The Independent Review stopped by the WichitaLiberty.TV studios to answer these questions and give the liberty-based perspective on current events. Episode 22, broadcast December 1, 2013. View below, or click here to view at YouTube.
Wichita won’t consider this, I’m sure
As Wichita considers continuing taxing everyone to pay for a transit system that few people use, and as Wichita considers taxing everyone even more to pay for a bigger transit system that only a few additional people will use, here’s an example of something that I’m sure is not under consideration: Privatization, entrepreneurship, and diversity.Federal grants seen to increase future local spending
“Nothing is so permanent as a temporary government program.” — Nobel Laureate Milton FriedmanIs this true? Do federal grants cause state and/or local tax increases in the future after the government grant ends? Economists Russell S. Sobel and George R. Crowley have examined the evidence, and they find the answer is yes.
This paper is especially important as south-central Kansas starts a comprehensive planning process under a HUD Sustainable Communities Regional Planning Grant — a federal grant. Some officials have justified their votes in favor of the planning grant because the grant is “just for planning purposes.” It does not bind us to future actions that might raise taxes, they say. But this attitude is naive and dangerous.
The research paper is titled Do Intergovernmental Grants Create Ratchets in State and Local Taxes? Testing the Friedman-Sanford Hypothesis.
The difference between this research and most other is that Sobel and Crowley look at the impact of federal grants on state and local tax policy in future periods.
This is important because, in their words, “Federal grants often result in states creating new programs and hiring new employees, and when the federal funding for that specific purpose is discontinued, these new state programs must either be discontinued or financed through increases in state own source taxes.”
The authors caution: “Far from always being an unintended consequence, some federal grants are made with the intention that states will pick up funding the program in the future.”
The conclusion to their research paper states:
Our results clearly demonstrate that grant funding to state and local governments results in higher own source revenue and taxes in the future to support the programs initiated with the federal grant monies. Our results are consistent with Friedman’s quote regarding the permanence of temporary government programs started through grant funding, as well as South Carolina Governor Mark Sanford’s reasoning for trying to deny some federal stimulus monies for his state due to the future tax implications. Most importantly, our results suggest that the recent large increase in federal grants to state and local governments that has occurred as part of the American Recovery and Reinvestment Act (ARRA) will have significant future tax implications at the state and local level as these governments raise revenue to continue these newly funded programs into the future. Federal grants to state and local governments have risen from $461 billion in 2008 to $654 billion in 2010. Based on our estimates, future state taxes will rise by between 33 and 42 cents for every dollar in federal grants states received today, while local revenues will rise by between 23 and 46 cents for every dollar in federal (or state) grants received today. Using our estimates, this increase of $200 billion in federal grants will eventually result in roughly $80 billion in future state and local tax and own source revenue increases. This suggests the true cost of fiscal stimulus is underestimated when the costs of future state and local tax increases are overlooked.
So: Not only are we taxed to pay for the cost of funding federal and state grants, the units of government that receive grants are very likely to raise their own levels of taxation in response to the receipt of the grants. This is a cycle of ever-expanding government that needs to end, and right now.
An introduction to the paper is Do Intergovernmental Grants Create Ratchets in State and Local Taxes?.
Kansas school spending, sort of
A recent article in the Topeka Capital-Journal complained of the plight of schools in Kansas. Like much reporting we see regarding Kansas schools, the story is incomplete.
One district cited in particular was USD 348, Baldwin City Schools. The story contained “As state aid dwindled.” Let’s look at some actual numbers.
A nearby chart shows the level of spending in this school district for some recent years. The chart holds per-pupil amounts, adjusted for inflation. As the reporter noted, state aid did dwindle. That was during the recent recession, and the federal government increased aid to Kansas schools those years. The result was that total spending barely changed. (Click on the charts for larger versions.)
2009 was the highest level of spending for this district at $11,848 per pupil (adjusted to 2013 dollars). Spending in 2013 was $11,796.
Looking at levels of employment, we can see from the charts that the number of employees had been declining, but was stable or slightly higher for the most recent year. The ratios of these employees to students was rising, but fell the last year.
It’s often noted that some portion of recent school funding has been increased contributions to KPERS, the teacher retirement system. This funding doesn’t get “into the classroom,” whatever that means. The Baldwin school superintendent told the reporter “I can’t use KPERS to gas up our buses.” That’s true. But he can buy fuel with the money he doesn’t have to spend on teacher retirement benefits.If the Topeka Capital-Journal wants to do some reporting that will help Kansans understand what is happening in their schools, I suggest starting with the decisions that Kansas school leaders made regarding standards. If the reporter would look at the most recent version of Mapping State Proficiency Standards Onto the NAEP Scales, a report produced by the National Center for Education Statistics, we could learn that at the time when Kansas was spending more on schools due to an order from the Kansas Supreme Court, the state lowered its already low standards for schools. I’ve made it easy: All you have to do is view the illustrative video I made at Why are Kansas school standards so low?
Wichita city government ethics workshop
When law and morality contradict each other, the citizen has the cruel alternative of either losing his moral sense or losing his respect for the law.
— Frederic Bastiat
On Tuesday November 19 the Wichita City Council held a workshop. Two of the three topics presented were state and city laws regarding ethics.
As far as I can tell, the upshot is that the Wichita city ethics code is crafted so poorly that it is without meaning. More on this issue is at Wichita city code seemingly ignored.
The video for the presentation on state ethics is here, and the presentation starts on page 37 of this document.
The video for the presentation on city ethics is here, and the presentation is here.
WichitaLiberty.TV November 24, 2013
In this episode of WichitaLiberty.TV: Host Bob Weeks takes a look at proceedings of a Wichita City Council meeting and uses it to illustrate some of the reasons why the Wichita-area economy is not growing very rapidly. Episode 21, broadcast November 24, 2013. View below, or click here to view at YouTube.Charles G. Koch: Corporate cronyism harms America
From September 2012, and even more relevant today.
“The effects on government are equally distorting — and corrupting. Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.”
The editorial in today’s Wall Street Journal by Charles G. Koch, chairman of the board and CEO of Wichita-based Koch Industries contains many powerful arguments against the rise of cronyism. The argument above is just one of many.
In his article, Koch makes an important observation when he defines cronyism: “We have a term for this kind of collusion between business and government. It used to be known as rent-seeking. Now we call it cronyism. Rampant cronyism threatens the economic foundations that have made this the most prosperous country in the world.”
“Rent-seeking” was always a difficult term to use and understand. It had meaning mostly to economists. But “cronyism” — everyone knows what that means. It is a harsh word, offensive to many elected officials. But we need a harsh term to accurately describe the harm caused, as Koch writes: “This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.”
The entire article is available at the Wall Street Journal. Koch has also contributed other articles on this topic, see Charles G. Koch: Why Koch Industries is speaking out and Charles Koch: The importance of economic freedom.
Charles G. Koch: Corporate Cronyism Harms America
When businesses feed at the federal trough, they threaten public support for business and free markets.
By Charles G. Koch
“We didn’t build this business — somebody else did.”
So reads a sign outside a small roadside craft store in Utah. The message is clearly tongue-in-cheek. But if it hung next to the corporate offices of some of our nation’s big financial institutions or auto makers, there would be no irony in the message at all.
It shouldn’t surprise us that the role of American business is increasingly vilified or viewed with skepticism. In a Rasmussen poll conducted this year, 68% of voters said they “believe government and big business work together against the rest of us.”
Businesses have failed to make the case that government policy — not business greed — has caused many of our current problems. To understand the dreadful condition of our economy, look no further than mandates such as the Fannie Mae and Freddie Mac “affordable housing” quotas, directives such as the Community Reinvestment Act, and the Federal Reserve’s artificial, below-market interest-rate policy.
Far too many businesses have been all too eager to lobby for maintaining and increasing subsidies and mandates paid by taxpayers and consumers. This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.
With partisan rhetoric on the rise this election season, it’s important to remind ourselves of what the role of business in a free society really is — and even more important, what it is not.
Spinning for fundraising, Kansas-style
Kansas liberals accuse Republicans of “spinning” statistics on school funding. Can we look at some actual numbers?
Candidate for Kansas Governor Paul Davis sent this fundraising email:
This weekend another independent advocate for our schools called attention to Sam Brownback’s attempt to mislead Kansans about his real record on education. The fact is, Sam Brownback made the largest cut to our schools in Kansas history — leading to larger class sizes, school closings, and increased fees for parents.
But being the politician that he is, Sam Brownback is trying to spin his record. We won’t be fooled.
Kevin McWhorter of the Goddard School Board said it plainly, “State funding for education will continue to decline, and state officials will continue to twist the numbers to ask you to believe otherwise. Don’t fall for it. It’s just spin.”
Davis is referring to an op-ed in the Wichita Eagle written by a Goddard school board member. (Kevin R. McWhorter: Don’t fall for spin on school funding, November 17, 2013)
In his op-ed, McWhorter complains that present funding from the state is not as high as statute requires. He calls that a cut. He concludes that the “governor’s economic policy is a train wreck” and that “state funding for education will continue to decline.”
Nearby you may find charts of data for the Goddard school district. (Click for larger versions.) You may draw your own conclusions. Recall that Sam Brownback became governor in 2011. The charts are derived from visualizations of data obtained from the Kansas State Department of Education. You may click here to access the visualization for school spending. Information about school employment, including a video and interactive visualization is at Kansas school employment trends.
Charts for the entire state look similar: Employment going down, then rising. Ratios of employees to students improve correspondingly. This is not the case in every school district, however.
But not everyone believes the statistics. When the Kansas Republican Party posted a chart of statewide school employment on its Facebook page, someone remarked “Where do I find the facts supporting this graft [sic]? Where did the numbers come from? How are these more than 400 additional teachers and 500 certified employees being paid when school funding has been reduced?”
Sounds like someone’s been spun.
As Wichita considers continuing taxing everyone to pay for a transit system that few people use, and as Wichita considers taxing everyone even more to pay for a bigger transit system that only a few additional people will use, here’s an example of something that I’m sure is not under consideration: Privatization, entrepreneurship, and diversity.
“Nothing is so permanent as a temporary government program.” — Nobel Laureate Milton Friedman
Looking at levels of employment, we can see from the charts that the number of employees had been declining, but was stable or slightly higher for the most recent year. The ratios of these employees to students was rising, but fell the last year.
It’s often noted that some portion of recent school funding has been increased contributions to KPERS, the teacher retirement system. This funding doesn’t get “into the classroom,” whatever that means. The Baldwin school superintendent told the reporter “I can’t use KPERS to gas up our buses.” That’s true. But he can buy fuel with the money he doesn’t have to spend on teacher retirement benefits.
In this episode of WichitaLiberty.TV: Host Bob Weeks takes a look at proceedings of a Wichita City Council meeting and uses it to illustrate some of the reasons why the Wichita-area economy is not growing very rapidly. Episode 21, broadcast November 24, 2013. View below, or 
