Tag Archives: Bailouts

Kansas must reform KPERS

New research from Kansas Policy Institute reinforces what some have known but many have discounted: The Kansas Public Employee Retirement System is in poor financial shape, and it’s going to cost Kansans a lot to fix it. It is urgent that we enact substantive and meaningful reforms now, rather than later. KPI writes the following in introducing its new study Preventing Bankruptcy in the Kansas Public Employees Retirement System.

Preventing Bankruptcy in the Kansas Public Employees Retirement System

It turns out that the $9.2 billion hole found in Kansas’ public pension program will balloon under new accounting standards used by governments across the country.

Under the current standards, Kansas’ pension system (KPERS) is funded at 59.2%, 80% is a generally accepted barometer of pension health. These numbers demonstrate that Kansas has one of the worst funded pension systems in the country.

Unfortunately, the new standards will only make things worse as our funding ratio will drop to 46.1 percent under the new standards.

Each person in Kansas will have to pay $3,285 to fill our KPERS hole under the old standards and things will only get worse.

The executive summary of the study follows.

Recent evidence reveals that the Kansas Public Employees Retirement System (KPERS) is one of the most underfunded pension plans in the country (59 percent funding ratio at the end of 2011) and that there is a high probability the plan will not have sufficient funds to meet pension obligations over the next decade. This funding ratio will deteriorate further under the new accounting standards discussed below. The solution to this funding crises is to bring pension benefits into line with the costs of pension plans for individual employees. A number of states have successfully enacted structural reforms in their state pension plans to accomplish this objective, including defined contribution and hybrid plans.

Unfortunately the recent reforms enacted in KPERS creating a cash balance plan for new employees fails to accomplish that objective. This study provides a roadmap for pension reform in Kansas, the major conclusions of the study are:

1. Use the New GASB Accounting Standard

The new GASB standards to be implemented in 2013 and 2014 will require realistic actuarial assumptions and reporting. It is time for Kansas and other states too incorporate this more realistic data in transparent and timely reporting and to use this data in policy formulation.

2. Enact Structural Reforms

Using more realistic actuarial assumptions, via new GASB standards, most states, including Kansas, will find that they face a funding crises in their state and local pension plans. Kansas legislators must follow the lead of state and local governments that have successfully replaced these defined benefit pension plans with defined contribution or hybrid plans.

3. Bring Public Sector Pension Benefits In Line with Private Pension Benefits

Public sector workers receive wages and salaries equal to or greater than comparable employees in the private sector. The pension and other post employment benefits received by public sector workers are significantly above that received by private sector workers. The outcome of recent pension reforms is to bring convergence of pension benefits in the public and private sector.

4. Legal Challenges to Public Sector Pension Reform

Structural reforms enacted to solve the funding crises in state and local pension plans have been and will continue to be subject to legal challenges, and Kansas is well positioned to meet these legal challenges.

5. Bankruptcy, Not Bailouts

In Kansas there will be tremendous pressure to bailout failed state and local pension systems to avoid bankruptcy. Bailouts of pension plans create all the wrong incentives. If state and local governments cannot manage their pension plans and other financial affairs bankruptcy forces them to address these issues.

6. Launch an Education Campaign

Successful pension reform in other states such as Utah and Rhode Island has required a bi-partisan effort in the legislature and support from all the stakeholders. Generating this support for pension reform in Kansas will require an education campaign. Kansas citizens must understand that the current defined benefit pension plan is not sustainable. Solving the funding crisis in KPERS will require burden sharing by all the stakeholders, including current employees, retirees and new employees.

The full study is at Preventing Bankruptcy in the Kansas Public Employees Retirement System.

In Wichita, a gentle clawback

Tomorrow’s Wichita City Council meeting will consider a clawback provision for a forgivable loan made by the city. It’s on the consent agenda, so it is unlikely there will be any discussion.

Clawbacks are mechanisms whereby government can be paid back for the cost of economic development subsidies when companies don’t achieve the promised goals, usually employment levels or capital investment. Officials like to look tough on this issue, so they can say they’re fighting for the interests of the taxpayer. An example is Wichita City Council Member Jeff Longwell, who during his recent campaign was quoted by the Wichita Eagle on this topic: “We need to be consistent with policies that provide a positive return on investment and hold companies accountable with personal guarantees that include claw-back features to protect the taxpayers’ investment.”

It turns out, however, that clawbacks are often difficult to enforce. The most likely reason a company may not meet employment or investment targets is that the company is not performing well financially. This is the case with a Wichita company that received a forgivable loan of $62,000 from the city five years ago. The company has not met the agreed job levels, so it must repay the loan.

But, according to city documents: “the severe downturn in the aviation industry prevented the firm from growing its business as projected.” So the city is allowing the company to repay the loan in five annual installments.

By the way, in 2010 the city granted this company, Burnham Composite Structures, Inc., a property tax exemption worth an estimated $105,746 per year.

Sometimes the city council simply doesn’t want to enforce clawback agreements. Last year the council granted a bailout to Reverend Kevass Harding and his underperforming tax increment financing (TIF) district. New considerations showed that the project would not generate enough incremental property tax revenue to pay the TIF bonds. This should not have been a problem for the city, as the agreement with Harding contained this provision: “The developer will be required by the development agreement to provide satisfactory guarantees for the payment of any shortfall in TIF revenues available for debt service on all ‘full faith and credit’ TIF bonds issued by the City for this TIF district.”

So the city could have held Harding to his promise and taxpayers wouldn’t be hurt, at least not any more than the formation of the TIF district itself hurt.

Despite this provision, the city refinanced the TIF debt using the city’s debt service fund, charging Harding and his partners the same interest rate the city itself pays. See Ken-Mar TIF district, the bailouts.

Wichita’s bailout culture

On Tuesday the Wichita City Council will consider a bailout of a real estate development. If the council takes this action, it is one more step in a series of bailouts granted by the city, and it sets up expectations that the city will continue bailouts, creating a severe climate of moral hazard.

The property in question, owned by South Beech Development, LLC, received a loan from the city in 1995 under the HOME Investment Partnerships Program, a project of the U.S. Department of Housing and Urban Development, or HUD. According to city documents, the project has not generated sufficient cash flow to pay back this loan. The loan balance of $195,000 and $368,437 in accrued interest are unpaid.

The recommendation by city staff includes forgiveness of the $368,437 in accrued interest owed the city and a reduction in the loan interest rate, among other provisions. City documents indicate that if the project does not continue to meet the guidelines of the HUD grant, the city will owe HUD the loan balance of $195,000.

There is no way to characterize the recommend action as anything other than a bailout at taxpayer expense. It’s not the first time the city has done this. In 2008 the city made a $6 million no-interest and low-interest loan to movie theater own Bill Warren and his partners. The theater was in a tax increment financing (TIF) district. The city had borrowed money and used it to benefit the Warren project and others nearby, including building a parking garage that charged only $10 per month for each parking space. The expectation was that the theater would be able to pay off the TIF bonds through its property taxes. But when the theater wasn’t performing well, Warren threatened to close it. That would leave city taxpayers on the hook for the bonds, so the city lent Warren the money.

That’s a similar situation to what the council will face Tuesday. If it doesn’t prop up a failing investment, it’s going to cost us nonetheless. We find that government subsidy paves the way for bailouts, again.

There are other examples. Last October the city restructured the loan agreement for the Ken-Mar TIF district. This shopping center had already received $2.5 million in TIF financing, but the development turned out to be not as profitable as projected. Despite the fact that the city had a personal guarantee from the developers to cover any shortfall in TIF revenues, the city restructured the loan, saving the developers about $30,000 per year. Another bailout, and to politically-connected developers, providing another lesson on how Wichita and Kansas need pay-to-play laws.

Most recently the city bailed out new home developers with a program that rebates the first five years of city property taxes for buyers. City Manager Robert Layton said the “tipping point” for him was the ability for the city to collect delinquent taxes from the home builders. Despite the fact that the city tells us that there is a very low probability that these special taxes will go uncollected, the city issued another bailout.

Moral hazard

In economics, moral hazard describes “the idea that some actor will engage in overly risky behavior because he believes that he’ll be bailed out if the risk goes bad.” (Jagadeesh Gokhale, When to Worry about Moral Hazard?)

In a Cato Institute Policy Analysis, authors W. Lee Hoskins and James W. Coons write this regarding moral hazard: “It sends a message to investors, both foreign and domestic, that they can invest with little fear of a total loss. That weakens the integrity of financial contracts and the scrutiny that contracting parties would otherwise apply to each other. It also results in excessive risk taking because a third party bears the risk.”

The Wikipedia entry on moral hazard explains “Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions.”

All this applies to the City of Wichita and the bailouts it has issued, and the one to South Beech that it is considering next week. When people believe the city — or any other governmental or quasi-governmental agency — will come to their aid if something goes wrong, it means that the risk taken is not real. The taxpayers of Wichita have taken on the risk of these projects without agreeing to. The loan agreement between the city and South Beech didn’t say that the city would forgive the loan interest if business was not good. But now the city proposes acting as though there was such an agreement, shifting business risk from borrower to creditor.

This rewriting of contracts in arrears is a prime example of moral hazard. We have decreasing confidence that the City of Wichita is willing to hold its private sector partners to their word. This situation is sometimes referred to as socialization of risk, and privatization of profit. It applies to what the Wichita City Council is considering, and the council should reject this bailout.

Part of this article was rewritten to clarify the nature of the city assistance given to the Old Town Warren Theater.

Ken-Mar TIF district, the bailouts

Tomorrow the Wichita City Council handles two items regarding the Ken-Mar shopping center being redeveloped in northeast Wichita. These items illustrate how inappropriate it is for the city to serve as either entrepreneur or partner with entrepreneurs, and is another lesson in how Wichita needs pay-to-play laws.

In August 2008 the city formed a tax increment financing (TIF) district to benefit the center. This allows $2.5 million of the center’s future property taxes to be earmarked for the district’s exclusive benefit. In January 2009 the city approved a development plan that specified how the public money would be spent, and how the development would proceed.

The developer of the project is Reverend Kevass Harding, a former Wichita school board member who has announced future political ambitions.

The first and most serious issue regarding this TIF district is that changes to the development plan mean that the district will not be able to meet its debt obligations. In the sobering words of the agenda report: “The TIF financial analysis indicates that the incremental tax revenue will not cover the debt service on City TIF bonds.”

City staff is proposing to shift the debt to the city’s debt service fund, using money there to pay off the $2.5 million in temporary TIF financing bonds. Then, Ken-Mar will repay the debt service fund through the district’s incremental tax revenue over a period of 17 years, along with three percent interest.

The original development plan from 2009 includes a table that specifies an interest rate of 4.91 percent for the TIF bonds. Now the city is replacing that with its own debt, and charging Harding and Ken-Mar just three percent interest. My calculations indicate this reduced interest rate will save Harding about $30,000 per year, or about $516,000 over the course of the loan.

This action can only be characterized as a bailout, with all the negative connotations that accompany that word. It’s not the first time Wichita has had to create a bailout for a failing TIF district.

The second item the council will deal with is a change to the development plan. The development agreement from 2009 contemplates that changes will need to be made, “with the approval of City Representative from time to time.”

While the agreement doesn’t explicitly state that changes to the plan must be approved before proceeding, this is the only reasonable way to interpret the agreement.

But in this case, Harding made changes before getting approval from the city. And he didn’t just use a different paint color or different flowers in the landscaping. Instead, he made a big change. He demolished a large portion of the structure that was to be renovated, according to the plan he agreed to.

The world changes. No doubt about that. Changes to plans are necessary to accommodate changes in the world. But this is more evidence of how government is not prepared to serve as entrepreneur, or as partner with entrepreneurs.

There was an agreement in place. Harding changed it, and only several months later is the city going to grant its approval. This places the city in the position of appearing not to care whether its agreements are followed. The council finds itself in the awkward position of approving an agreement to do something that’s already been done.

(This is not an unusual position for the city, as recently it approved a letter of intent to do something for which it had yet to hold a public hearing.)

Pay-to-play lesson

Underlying the story of Ken-Mar and Reverend Harding is a lesson on the need for pay-to-play laws in Wichita and Kansas. As reported in 2009, Harding and his wife made campaign contributions to Wichita City Council Member Lavonta Williams (district 1, northeast Wichita), who is presently serving as vice-mayor. These campaign contributions, made in the maximum amount allowable, were out of character for the Hardings. They had made very few contributions to political candidates, and they appear not to have made many since then.

But in June 2008, just before the Ken-Mar TIF district was to be considered for approval, the Hardings made large contributions to Williams, who is the council member representing Ken-Mar’s district. Harding would not explain why he made the contributions. Williams offered a vague and general explanation that had no substantive meaning.

The close linkage between the contributions and Harding asking the city council to grant him money illustrates the need for pay-to-play laws in Wichita and Kansas. These laws impose various restrictions on the activities of elected officials and the awarding of contracts or other largesse to those who have made political contributions.

An example is a charter provision of the city of Santa Ana, in Orange County, California, which states: “A councilmember shall not participate in, nor use his or her official position to influence, a decision of the City Council if it is reasonably foreseeable that the decision will have a material financial effect, apart from its effect on the public generally or a significant portion thereof, on a recent major campaign contributor.”

In the absence of such laws, and with Harding and Williams unwilling to explain, we’re left with questions like these:

If the Ken-Mar TIF district served a genuine public purpose, why did the Hardings make the campaign contributions to Williams?

Must those who want to form a TIF district make contributions to the council member representing the district?

If council member Williams is accessible to her constituents, why the contributions?

Must those who receive money from the city offer a thank-you contribution?

None of these reflect well on the reputation of Wichita.

Kansas and Wichita quick takes: Monday August 29, 2011

Wichita City Council. The Wichita City Council will not meet this week, as Tuesday is the fifth Tuesday of the month. The council will not meet on September 6th, as that is a Tuesday after a Monday holiday.

Government and business. Today’s Wichita Eagle carries a letter to the editor that makes a comparison that would be humorous, if so many people didn’t believe it: that government can be, and should be, run like a business. Here’s part of the letter: “But government isn’t like a family. It’s a business — a business that provides the services we need and want. Things like courts, the financial system, the military, national parks, interstate highways and all the other things that the government does to make our life what it is today. And each of these services has costs. To stay in business, all businesses must make a profit, or have the potential to turn a profit in the near future.” … Government is nothing like a business, however, and failing to recognize this is dangerous. First, customers patronize businesses voluntarily because they like what they get for their money. We don’t have this voluntary relationship with government — we must pay whether we want to or not, and regardless of whether we use the services government provides. Government often becomes the sole source provider of many things, meaning that we must use government, even if we would like to get the service somewhere else. Thus, government is not often subject to competition, which characterizes markets that business operates in. Then, government has no ability to calculate profit, as it conscripts its capital. Finally, just because government currently provides a service, it doesn’t follow that government should provide it, or that government is the only way to provide it, or that government is the best way to provide it.

Developer welfare shop opened. From Wichita Business Journal: “The Wichita Downtown Development Corp. on Friday opened its new Innovation Center. Designed as a one-stop shop for developers interested in building downtown projects, the new center is expected to be a place where ideas are both created and shared.” Should Wichitans be worried about centralized government planning?

‘Kansans United’ formed. The Kansas City Star notes the formation of a new group named Kansans United in Voice and Spirit. According to the group’s website: “Kansans United in Voice & Spirit are concerned citizens throughout the state of Kansas who are uniting to support, advocate for, and protect valuable State services, programs, and policies and to promote government by and for all Kansans.” … Judging by posts on its Facebook page, the group is a reaction to the policies of Kansas Governor Sam Brownback, and is in favor of the glorification of government.

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.

No Wichita Pachyderm this week. The Wichita Pachyderm Club will not meet this week. Upcoming speakers: On September 9, Mark Masterson, Director, Sedgwick County Department of Corrections, on the topic “Juvenile Justice System in Sedgwick County.” Following, from 2:00 pm to 3:00 pm, Pachyderm Club members and guests are invited to tour the Sedgwick County Juvenile Detention Center located at 700 South Hydraulic, Wichita, Kansas. … On September 16, Merrill Eisenhower Atwater, great grandson of President Dwight D. Eisenhower, will present a program with the topic to be determined. … On September 23, Dave Trabert, President of Kansas Policy Institute, speaking on the topic “Why Not Kansas: Getting every student an effective education.” … On September 30, U.S. Representative Mike Pompeo of Wichita on “An update from Washington.” … On October 7, John Locke — reincarnated through the miracle of modern technology — speaking on “Life, Liberty, and Property.” … On October 14, Sedgwick County Commission Members Richard Ranzau and James Skelton, speaking on “What its like to be a new member of the Sedgwick County Board of County commissioners?” … On October 21, N. Trip Shawver, Attorney/Mediator, on “The magic of mediation, its uses and benefits.”

Myths of capitalism. In a short video, Dr. Jeffrey Miron explains three common myths of capitalism. The first, and one we struggle with in Wichita as our city and state seek to be business-friendly, is the common perception that business and capitalism are one and the same. Miron says: “Nothing could be farther from the truth. The point of capitalism is to make sure that businesses have to compete vigorously against each other, and that benefits consumers. It’s not good for the businesses per se, because they have to work really hard. So many businesses understand this, and they hate capitalism. They are constantly trying to get government to erect various rules, restrictions, and regulations that help them, but they’re not in the interests of consumers.” … Miron also addresses the issue of income distribution, noting that capitalism rewards those who are productive and who come up with good ideas. Some people have very little skill, he notes, and so it is reasonable to support some antipoverty spending. But hampering capitalism to achieve this goal makes everyone worse off. … Also, capitalism is not responsible for the recent financial crisis. We didn’t have unbridled capitalism before the crisis, he says, and it is much more likely that government interference with capitalism causes crises like in 2008. TARP and other bailouts shielded risk-takers from paying the true price for the risk they undertook, and encourages people to take other risks, knowing they will not have to pay. … This video is from LearnLiberty.org, a project of Institute for Humane Studies, and many other informative videos are available.

Kansas and Wichita quick takes: Wednesday July 20, 2011

Kansas budget director to be in Wichita. This Friday’s meeting (July 22) of the Wichita Pachyderm Club features Steve Anderson, Director of the Budget for Kansas. The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers: On July 29, Dennis Taylor, Secretary, Kansas Department of Administration and “The Repealer” on “An Overview of the Office of the Repealer.” … On August 5, the three newest members of the Wichita City Council will appear: Pete Meitzner (district 2, east Wichita), James Clendenin (district 3, south and southeast Wichita), and Michael O’Donnell (district 4, south and southwest Wichita). Their topic will be “What it’s like to be a new member of the Wichita City Council?” … On August 12 Kansas Representative Marc Rhoades, Chair of the Kansas House of Representatives Committee on Appropriations, will speak on “The impact of the freshman legislators on the 2011 House budgetary process.” … On August 19, Jay M. Price, Ph.D., Associate Professor and Director of the public history program at Wichita State University, speaking on “Clashes of Values in Kansas History.” His recent Wichita Eagle op-ed was Kansas a stage for “values showdowns.” … On August 26, Kansas State Representatives Jim Howell and Joseph Scapa speaking on “Our freshmen year in the Kansas Legislature.” … On September 2 the Petroleum Club is closed for the holiday, so there will be no meeting. … On September 9, Mark Masterson, Director, Sedgwick County Department of Corrections, on the topic “Juvenile Justice System in Sedgwick County.” Following, from 2:00 pm to 3:00 pm, Pachyderm Club members and guests are invited to tour the Sedgwick County Juvenile Detention Center located at 700 South Hydraulic, Wichita, Kansas. … On September 16, Merrill Eisenhower Atwater, great grandson of President Dwight D. Eisenhower, will present a program with the topic to be determined. … On September 23, Dave Trabert, President of Kansas Policy Institute, speaking on the topic Why Not Kansas,” an initiative to provide information about school choice. … On September 30, U.S. Representative Mike Pompeo of Wichita on “An update from Washington.”

All Kansans voted for “Cut, Cap, and Balance.” From Americans for Prosperity, Kansas: “Americans for Prosperity Kansas applauds Representatives Lynn Jenkins, Tim Huelskamp, Kevin Yoder, and Mike Pompeo for standing up to solve America’s debt crisis by voting ‘Yes’ on H.R. 2560, the Cut, Cap and Balance Act. The Cut, Cap, Balance Act directly addresses the nation’s staggering $14.3 trillion debt by immediately cutting spending, capping the federal budget and sending a strong balanced budget amendment to the states for ratification. … ‘Runaway spending has buried the United States Government in debt, causing us to hit our statutory ceiling at $14.3 trillion,’ said James Valvo, Americans for Prosperity Director of Government Affairs. ‘It is time for Washington to rein it its out-of-control spending and implement real spending reforms. The Cut, Cap, Balance Act provides necessary fiscal restraint that would get America back on the path to prosperity.’ … ‘Families and businesses alike in Kansas are tightening their belts and making tough choices to make ends meet, while Washington has continued to spend with no end in sight as if there are no limits,’ said Derrick Sontag, Americans For Prosperity Kansas State Director. ‘I thank the Kansas Representatives for safeguarding the future of America and demanding Washington tighten its belt.'”

Foreclosed homes: the maps. We hear about the large number of foreclosed homes, but until you see them on a map, it’s sometimes difficult to comprehend the scope of the problem. For a tour of satellite photographs with indications of foreclosed homes, click on Satellite view of U.S. Foreclosures.

Kansas certificates of indebtedness. Kansas Watchdog: “Without the state’s most recent internal borrowing, a $600 million certificate of indebtedness (COI) issued June 30, the state general fund (SGF) would have been out of money on July 5, just five days into the new fiscal year, and wouldn’t have a positive balance again until June 21, 2012.” Reporter Paul Soutar goes on to explain how these certificates — a loan to the state to be repaid with funds collected later in the fiscal year — are commonly used year after year. But this is just the start of the state’s problems, writes Soutar: “That’s just the tip of an off-balance iceberg according to the Institute for Truth in Accounting, an advocate for more open and honest accounting for government finance. If all financial obligations, including promised pension payments and health care benefits for retirees, are added up the Kansas state budget was actually $5.2 billion out of balance by FY2011 according to Truth in Accounting.” State accounting practices mask the true magnitude of the problem, too: “Accountants familiar with government and private accounting standards told KansasWatchdog the practice is called double counting and would not be allowed in a private business because it represents a fraud intended to deceive whoever reads the financial report. The double counting approved by the Legislature and Sebelius in 2003 continues in Kansas.” … The full article, well worth reading and understanding, is Certificates of Indebtedness Symptom of Bad Budget Choices.

Why more regulation is not the answer. Brad Raple of the adverse possessor explains: “Many people associate pure free-market capitalism with a complete lack of regulation. This is not the case. Regulation is the primary reason free-market capitalism works so well. But in a capitalist system, the regulations are market-based instead of based on politically motivated bureaucrats telling people what they can and can’t do. … Bailouts, government guarantees, subsidies, and all other methods of socializing private risk undermine the regulation imposed by free-market forces. … The FDIC is even a huge example of moral hazard. For example, people pay practically no attention to the financial condition or solvency of their banks. After all, why would they? They’re FDIC insured! In other words, no one cares if their deposits are in a bank that is over-leveraged because if it fails, the FDIC will bail out the depositors. Without the FDIC, people might pay a little more attention to the financial condition of their banks. Banks would probably compete based on financial security, as opposed to free toasters, interest rates, and how quickly they can rubber stamp a home equity loan to finance a boat.” … More at Why more regulation is not the answer.

Myths of the Great Depression. “Historian Stephen Davies names three persistent myths about the Great Depression. Myth #1: Herbert Hoover was a laissez-faire president, and it was his lack of action that lead to an economic collapse. Davies argues that in fact, Hoover was a very interventionist president, and it was his intervening in the economy that made matters worse. Myth #2: The New Deal ended the Great Depression. Davies argues that the New Deal actually made matters worse. In other countries, the Great Depression ended much sooner and more quickly than it did in the United States. Myth #3: World War II ended the Great Depression. Davies explains that military production is not real wealth; wars destroy wealth, they do not create wealth. In fact, examination of the historical data reveals that the U.S. economy did not really start to recover until after WWII was over.” This video is from LearnLiberty.org, a project of Institute for Humane Studies, and many other informative videos are available.

Kansas and Wichita quick takes: Wednesday October 20, 2010

Poll: Republicans to win big. Wall Street Journal: “A vigorous post-Labor Day Democratic offensive has failed to diminish the resurgent Republicans’ lead among likely voters, leaving the GOP poised for major gains in congressional elections two weeks away, according to a new Wall Street Journal/NBC News poll. Among likely voters, Republicans hold a 50% to 43% edge, up from a three-percentage-point lead a month ago. … ‘It’s hard to say Democrats are facing anything less than a category four hurricane,’ said Peter Hart, the Democratic pollster who conducts the Journal poll with Republican pollster Bill McInturff. ‘And it’s unlikely the Democratic House will be left standing.'”

Faust-Goudeau, Ranzau featured. The two major party candidates for Sedgwick County Commission District 4 — Democrat Oletha Faust-Goudeau and Republican Richard Ranzau — are featured in today’s Wichita Eagle. This is an important election, as the balance of power on the commission is at stake.

Rasmussen: Health care, bailouts, stimulus not popular with voters. “A new Rasmussen Reports national telephone survey finds that most Likely Voters think their representative in Congress does not deserve reelection if he or she voted for the national health care law, the auto bailouts or the $787-billion economic stimulus plan.” The complete story is here.

Downtown Wichita planning. The people of Wichita need to be wary about the planning for the revitalization of downtown Wichita developed by planning firm Goody Clancy. As Randal O’Toole explains in a passage from his book The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future, planning provides an opportunity for special interests to run over the will of the people: “When confronted with criticism about their plans, planners often point to their public involvement processes. ‘Hundreds of people came to our meetings and commented on our plans,’ they say. ‘So we must be doing something right.’ Wrong. Planning is inherently undemocratic. Efforts to involve the public mainly attract people who have a special interest in the outcome of the plans. … Planning processes are even less likely to attract the public than elections. Getting involved in planning requires a much greater commitment of time than simply voting, and the process is so nebulous that there is no assurance that planners will even listen to the public. … At the same time, some groups have a strong interest in getting involved in planning either for ideological reasons or because planning can enrich their businesses. The usual result when a few special interest get involved in a process ignored by everyone else is to develop a plan that accommodates the special interests at everyone else’s expense.” When we look at who is involved in the Wichita planning, we see these special interests hard at work.

More corporate welfare in Sedgwick County. Today, without meaningful discussion, the Sedgwick County Commission committed to a $25,000 forgivable loan to TECT Power. The loan agreement specifies targets of employment and wages that TECT must meet. This is not the only corporate welfare the company is seeking. The Wichita Business Journal reports: “The Wichita City Council will be asked to match the Sedgwick County loan, and the company is seeking incentives from the Kansas Department of Commerce.” Does this approach to economic development work? See Kansas spending should be cut, not frozen and In Wichita and Kansas, economic development is not working.

Heartland policy blog launched. The Heartland Institute has launched Somewhat Reasonable, described as an “in-house” policy blog. In an announcement, HI says: “It is the place friends and fans of The Heartland Institute can keep up with the conversation about free markets, public policy and current events that takes place every day among our fellows and scholars. Heartland staffers don’t always agree, which is part of the fun of working at a libertarian think tank.” Heartland is continually at the forefront of research and advocacy for free markets and economic freedom.

Tea Parties and the Political Establishment. The Sam Adams Alliance has released a new report that examines the relationship between tea party activists and the political establishment. Its research shows “shows the two entities are united on issue priorities, but differ when it comes to their level of enthusiasm and the Tea Party movement’s ability to accomplish its political goals.” One finding is that the political establishment doesn’t have much confidence in tea party activists’ ability to achieve their goals: “… only about 7 percent of Establishment respondents said the Tea Party knows how to accomplish its goals, while about 41 percent of Tea Party activists surveyed say this is true.” But the establishment needs tea party activists: “42 percent of Establishment respondents said it was ‘very important’ that Tea Partiers work with them.” In conclusion, the study states: “The Tea Parties have knowingly or unknowingly begun to promote a distinctly separate understanding of the political landscape compared to the Establishment’s. The tensions between them illustrate the underlying differences in their conception of the current political environment, their willingness to embrace populist elements, selection of means and tactics, and their acceptance of new entrants into the political world. However they share many of the same issue priorities, indicating that there is opportunity for a closer and more amicable relationship between the two factions.” The full document is at Surface Tension: Tea Parties and the Political Establishment.

Chevrolet Volt. The Chevrolet Volt plug-in car is suffering a bit of dings in its green-glamour now that GM has revealed that it will use its gasoline motor more often than previously thought. But there are substantive reasons why this car should be scrutinized. Writes Holman W. Jenkins, Jr.: “Cars account for 9% of America’s CO2 output, making power plants a much more sensible target if your worry is global warming. Ironically, the Volt rolls out amid news that an investor is abandoning a big U.S. nuclear project, leaving America more dependent than ever on ‘dirty’ coal for its electricity. Storing electricity — which is what the Volt’s batteries do — is probably the least efficient thing you can do with the output of such plants. Then again, perhaps this explains the rapturous greeting the Volt is receiving from the utility industry. … The Volt’s defenders will shout that the Volt is a blow against terrorism and in favor of energy independence. Two answers: The Volt doesn’t need defenders if it’s a car that consumers want, and that GM can make and sell at a profit. But GM can’t. … The second answer is that even if every American drove a Volt, and every car in America was a Volt, it would not appreciably change the global challenges we face.” More at Volte-Face: GM’s new electric car depends on coal-belching power plants to charge its batteries. What’s the point?

Financial reform passes Congress

This afternoon the United States Senate passed sweeping financial services regulation, sending the bill to President Obama. As the President has championed this legislation, it is certain he will sign the bill.

The Wall Street Journal reports “The measure, once implemented, will touch all areas of the financial markets, affecting how consumers obtain credit cards and mortgages, dictating how the government dismantles failing financial firms and directing federal regulators’ focus on potential flashpoints in the economy.”

The Journal also issues a warning: “The work of remaking the financial-regulatory regime, however, remains far from finished. Thursday’s vote effectively opens a second phase of lobbying and policy making as financial regulators begin to shape the rules and framework laid out in the legislation. That rule-making process will determine how the new law affects those ranging from traders of complicated derivatives to consumers shopping for a mortgage or a credit card.”

In an earlier story, the Journal reported on the broad reach of this bill: “Designed to fix problems that helped cause the financial crisis, the bill will touch storefront check cashiers, city governments, small manufacturers, home buyers and credit bureaus, attesting to the sweeping nature of the legislation, the broadest revamp of finance rules since the 1930s.”

The Wall Street Journal’s collection of reporting on this topic is at Financial Regulation.

ALG Condemns Financial Takeover as “One More Piece of Liberty Lost”

July 15th, 2010, Fairfax, VA – Americans for Limited Government (ALG) President Bill Wilson today condemned the U.S. Senate for enacting the conference version of the Dodd-Frank financial takeover bill, sending the bill to the desk of Barack Obama to become law.

“The American people have lost one more piece of their liberty, as the Senate has voted to create a hidden, permanent bailout that will enable faceless bureaucrats to levy taxes, bail out politically-privileged institutions and to seize and liquidate politically-unconnected ones, redistributing their assets to favored constituencies, like unions,” Wilson declared.

“There will be no votes in Congress like TARP ever again, as Congress has abdicated the power to tax and spend elsewhere,” Wilson explained, adding, “Which solves a political problem for members of Congress, but is really just a con game so that they don’t have to take responsibility for unpopular bailouts and government takeovers.”

Continue reading at Americans for Limited Government

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.

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.)

Articles of Interest

Bailout costs rise, local election turnout, health care, light bulbs, newspapers, Kansas coal prospects

Estimate of TARP’s Cost to Taxpayers Increases (Wall Street Journal) “The Congressional Budget Office has quietly altered its estimate of the ultimate cost to taxpayers of the $700 billion Troubled Asset Relief Program, now figuring the initiative will be much more expensive in the long run than it previously figured. In January, the CBO pegged the ultimate cost to taxpayers of the $700 billion TARP at $189 billion. When the agency issued revised numbers in late March, it revised that to $356 billion, a change that drew little attention.” I don’t imagine this will be the last time we see the cost of bailouts rising.

Expected Turnout For Tuesday’s Election: 12 Percent (Brent Wistrom in the Wichita Eagle) “The six candidates for Wichita City Council have clashed on many fronts. But they agree on one thing. The projected turnout for Tuesday’s election is dismal.”

That’s ridiculous (Letter to the editor of the Wichita Eagle) A letter-writer makes the case for government provided health care by illustrating a scenario where if a citizen calls for police or fire assistance, they’ll have to make payment arrangements before receiving service. This, of course, is a ridiculous comparison and ignores the context in which these services are provided. Besides, it wouldn’t be a bad thing to look into private provision of police and fire protection.

Climate Change’s Dim Bulbs (George F. Will in the Washington Post) Will comments on some of the problems with compact fluorescent light bulbs (CFL), as recently noted in a New York Times article The Bulb That Saved the Planet May Be a Little Less Than Billed. He concludes: “Worrywarts wonder what will happen when a lazy or careless, say, 10 percent of 300 million Americans put their worn-out bulbs in the trash. Stop worrying. What do you think? That Congress, architect of the ethanol industry and designer of automobiles, does not think things through?”

Life After Newspapers (Michael Kinsley in the Washington Post) Kinsley claims that people are getting more news and analysis than ever. It’s just online. If true — I was not aware of this — then there is hope for newspaper companies to survive: “Sorry, but people who have grown up around computers find reading the news on paper just as annoying as you find reading it on a screen. … If your concern is grander — that if we don’t save traditional newspapers we will lose information vital to democracy — you are saying that people should get this information whether or not they want it. That’s an unattractive argument: shoving information down people’s throats in the name of democracy. But this really isn’t a problem. As many have pointed out, more people are spending more time reading news and analysis than ever before. They’re just doing it online.”

Sebelius holding coal cards (Tim Carpenter in the Topeka Capital-Journal) Analysis of the “coal bill,” which passed the Kansas house, but with fewer votes than it has in the past. House Speaker Mike O’Neal said earlier this year that there would be enough votes in the house to override the governor’s promised veto, but it looks like the vote count is moving in the wrong direction.

Articles of Interest

Capitalism, CFL bulbs, green indoctrination, bailout constitutionality, Facebook, Twitter

‘The Road to Serfdom’ revisited: Markets display uncertainty over future of capitalism itself (Scott S. Powell in the Washington Times) Discussion of how government interventionism in the economy is not helping. “President Eisenhower called it ‘creeping socialism.’ Nobel Prize winner Friedrich von Hayek called it ‘The Road to Serfdom.'”

Do New Bulbs Save Energy if They Don’t Work? (New York Times) Many customers are not happy with compact fluorescent light bulbs. Short life for the expensive bulbs is a common irritation.

‘Green Hell’ Coming Soon to a Life Like Yours (Human Events) A review of a new book that merits reading. “Be prepared the next time your child comes home from school with some nice ‘green’ project or attempts to lecture you about how you ‘should’ be doing more ‘sustainable’ activities to ‘save’ the Earth. You will be ready to confront teachers, political leaders, neighbors, and annoying aunts with the astounding new book by Steve Milloy titled Green Hell: How Environmentalists Plan to Control Your Life and What You Can Do to Stop Them.”

Bailing Out of the Constitution (George Will in the Washington Post) Is the Emergency Economic Stabilization Act of 2008 — that’s the $700 billion bailout of banks from last year — constitutional? Perhaps it isn’t, argues Will. It has to do with the Vesting Clause of Article I says, “All legislative powers herein granted shall be vested in” Congress.

Is Facebook Growing Up Too Fast? (New York Times) Facebook will soon have 200 million members. All are not happy, evidence being the recent controversy over a redesign of some of its most important aspects. There’s also the “coolness” factor: can kids like a social network that their parents are now using?

When Stars Twitter, a Ghost May Be Lurking (New York Times) “In many cases, celebrities and their handlers have turned to outside writers — ghost Twitterers, if you will — who keep fans updated on the latest twists and turns, often in the star’s own voice. Because Twitter is seen as an intimate link between celebrities and their fans, many performers are not willing to divulge the help they use to put their thoughts into cyberspace. … It is not only celebrities who are forced to look to a team to produce real-time commentary on daily activities; politicians like Ron Paul have assigned staff members to create Twitter posts and Facebook personas. Candidate Barack Obama, as well as President Obama, has a social-networking team to keep his Twitter feed tweeting.”

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

Charity, Kansas legal intrigue, Kansas infant mortality rate rises under Sebelius, taxing it all, bailouts not wanted, cap-and-trade costs, school choice saves.

The Charity Revolt: Liberals oppose a tax hike on rich donors (Wall Street Journal) true-blue liberals who run most of America’s nonprofits, universities and charities” are worried that Obama’s plan to limit deductions for charitable contributions will cost them. This article introduces a term I saw for the first time: “New Charity State,” and it is a real danger. “Mr. Orszag [White House budget chief Peter] revealed the real agenda at work when he pointed out that the money taken from the ‘rich’ would be used to fund such Obama state-run charities as universal health care. The argument is that any potential declines in private gifts, whether to universities or foundations, will be balanced by increases in government grants paid with higher taxes — redistribution by another means. This is how Europe’s welfare state works: Taxes are so high that private citizens have come to believe it is only the state’s duty to support cultural institutions and public welfare. The ambit for private giving shrinks.” Ambit: sphere or scope, I learned.

Who is playing politics in the Kansas Judiciary by leaking information to the press? (Kansas Meadowlark) More intrigue.

State’s infant mortality rate rises under Sebelius (Kansas Liberty, a subscription service) “Roderick Bremby, the secretary of the Kansas Department of Health and Environment, told lawmakers Tuesday that between 1988 and 2007 the infant mortality rate increased in Kansas from a rate of 6.9 to 7.9 per 1,000 live births. Bremby said that though infant mortality rates for white babies actually decreased slightly during that time, rates for non-white babies increased greatly.” Wait … wasn’t Kansas Governor Kathleen Sebelius just appointed secretary of health and human services for the entire country? With this record?

The 2% Illusion: Take everything they earn, and it still won’t be enough (Wall Street Journal) Can President Obama finance his spending plans by increasing taxes only on the rich? “Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can’t possibly raise enough revenue to fund Mr. Obama’s new spending ambitions. … A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That’s less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable ‘dime’ of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.”

Some Banks, Feeling Chained, Want to Return Bailout Money (New York Times) It seems that even free money isn’t all it’s promoted to be. “The list of demands keeps getting longer. … others say the conditions go beyond protecting taxpayers and border on social engineering.”

The Climate Change Lobby Has Regrets: Cap and trade is going to cost them (Kimberley A. Strassel, Wall Street Journal) Jim Rogers, CEO of Duke Energy, decided to go along with the government’s plan for cap-and-trade as a way to control carbon emissions. “At the time, Mr. Rogers explained: ‘If you don’t have a seat at the table, you’ll wind up on the menu.’ Duke sat, yet it and its compatriots are still shaping up to be Washington’s breakfast, lunch and dinner.” Ms. Strassel explains how now we are beginning to realize just how expensive cap-and-trade will be for consumers, and how lucrative it will be for the government: “President Obama’s auction bonanza would earn the feds $650 billion in 10 years, according to the administration’s budget estimate — and that’s a low, low, low estimate.”

Finding room for school choice (John LePlante, Saint Paul Legal Ledger) The government school lobby says that school choice programs drain precious money from public schools. There’s plenty of evidence to the contrary: “In December, 2008, a research office of the Florida Legislature evaluated a school choice program in that state, and estimated that it saves state government $1.49 for every dollar spent. … Here in Minnesota, a 2005 report published by the Humphrey Institute stated that a majority of K-8 private schools in Minnesota charged less than the state sends to public school districts as their ‘basic formula allowance.’ The allowance is only one block of money, albeit the largest one, that the state sends to school districts. So can we ‘afford’ school choice programs? Perhaps we ought to ask the question ‘Can we afford to not have them?'”

Kansas City Tea Party Protest Photos

Coverage of a snowy Kansas City tea party protest provided by Chuck Armstrong. Click on Kansas City Tea Party: February 28, 2009.

Coverage from the Kansas Meadowlark is at “Tea Party” Rally and March to Senator McCaskill’s Office in Kansas City.

Also photos at Kansas City “Tea Party” (Stimulus and Bailout Protest).

Wichita Tea Party News Coverage on KSN Television

The Wichita Tea Party protest as covered by KSN Television, February 27, 2009. A very good job by reporter Josh Witsman.

“Someone needs to go and cut up Congress and President Obama’s credit card, because it’s not their credit card — it’s our credit card.”