Voice For Liberty

Tag: Economic freedom

Economic freedom means property rights are protected under an impartial rule of law, people are free to trade with others, both within and outside the country, there is a sound national currency, so that peoples’ money keeps its value, and government stays small, relative to the size of the economy.

  • Economic freedom improves lives

    Economic freedom, in countries where it is allowed to thrive, leads to better lives for people as measured in a variety of ways. This is true for everyone, especially for poor people.

    This is the message presented in a short video based on the work of the Economic Freedom of the World report, which is a project of Canada’s Fraser Institute. Last year Robert Lawson, one of the authors of the Economic Freedom of the World report, lectured in Wichita on this topic. The current video is made possible by the Charles G. Koch Charitable Foundation.

    One of the findings highlighted in the presentation is that while the average income in free countries is much higher than that in the least-free countries, the ratio is even higher for the poorest people in these countries. This is consistent with the findings that economic freedom is good for everyone, and even more so for those with low incomes.

    Civil rights, a clean environment, long life expectancy, low levels of corruption, less infant mortality, less child labor, and lower unemployment are all associated with greater levels of economic freedom.

    What are the components or properties of economic freedom? The presentation lists these:

    • Property rights are protected under an impartial rule of law.
    • People are free to trade with others, both within and outside the country.
    • There is a sound national currency, so that peoples’ money keeps its value.
    • Government stays small, relative to the size of the economy.

    Over the last ten years, the United States’ ranking has fallen relative to other countries, and the presentation says our position is expected to keep falling. The question is asked: “Will our quality of life fall with it?”

    Economic freedom is not necessarily the platform of any single political party. It should be noted that for about seven of the past ten years — a period in which our economic freedom has been falling — there was a Republican president, sometimes with a Republican Congress. The size of government rose. In 2005 the Cato Institute studied the numbers and found that “All presidents presided over net increases in spending overall, though some were bigger spenders than others. As it turns out, George W. Bush is one of the biggest spenders of them all. In fact, he is an even bigger spender than Lyndon B. Johnson in terms of discretionary spending.” This was before the spending on the prescription drug program had started.

    Critics of economic freedom

    The defining of what economic freedom means is important. Sometimes you’ll see people write things like “Bernie Madoff was only exercising his personal economic freedom while he ran his investment firm.” Madoff, we now know, was a thief. He stole his clients’ money. That’s contrary to property rights, and therefore contrary to economic freedom.

    Or, you’ll see people say if you don’t like government, go to Somalia. That country, one of the poorest in the world — but not the poorest — is used as an example of how bad anarchy is as a form of government. The evidence is, however, that Somalia’s former government was so bad that things improved after the fall of that government. See Peter T. Leeson, Better Off Stateless: Somalia Before and After Government Collapse and History of Somalia (1991–2006).

    You’ll also encounter people who argue that some countries are poor because they have no natural resources. But there are many countries with few natural resources that have economic freedom and a high standard of living. Most countries that are poor are that way because they are run by corrupt governments that have no respect for economic freedom, and follow policies that stifle it.

    Some will argue that economic freedom means the freedom to pollute the environment. But it is in wealthy countries that the environment is respected. Poor countries, where people are struggling just to find food for each day, don’t have the time or wealth to be concerned about the environment.

  • Charles Koch: The importance of economic freedom

    Charles Koch, chairman of the board and CEO of Wichita-based Koch Industries, contributes the following article on the importance of economic freedom and the harm of cronyism. Another article written by him on this topic is Charles Koch: Why Koch Industries is speaking out. Koch is also the author of the book The Science of Success: How Market-Based Management Built the World’s Largest Private Company. More about the importance of economic freedom may be found at www.economicfreedom.org, a project of the Charles Koch Institute, and also at Perspectives.

    In 1990, the year before the collapse of the Soviet Union, I attended an economic conference in Moscow.

    Like my father during his visits to the U.S.S.R. in the early 1930s, I was astonished and appalled by what I saw.

    Simple necessities, such as toilet paper, were in short supply. In fact, there was none at all in the airport bathroom stalls for fear it would be stolen. Visitors using the facilities had to request a portion of tissue from an attendant beforehand.

    When I walked into one of Moscow’s giant department stores, there was next to nothing on the shelves. For those shoppers who were lucky enough to find something they actually wanted to buy, the purchase process was maddening and time-consuming.

    Although the government provided universal healthcare, I never met anyone who wanted to stay in a Soviet hospital. Medical services might have been “free,” but the quality of care was notoriously poor.

    Reality check
    My experiences in the Soviet Union underscore why economic freedom is so important for all of us.

    Nations with the greatest degree of economic freedom tend to have citizens who are much better off in every way.

    No centralized government, no matter how big, how smart or how powerful, can effectively and efficiently control much of society in a beneficial way. On the contrary, big governments are inherently inefficient and harmful.

    And yet, the tendency of our own government here in the U.S. has been to grow bigger and bigger, controlling more and more. This is why America keeps dropping in the annual ranking of economic freedom.

    Devil’s bargain
    Citizens who over-rely on their government to do everything not only become dependent on their government, they end up having to do whatever the government demands. In the meantime, their initiative and self-respect are destroyed.

    It was President Franklin Roosevelt who said: “Continued dependence on [government support] induces a spiritual and moral disintegration fundamentally destructive to the national fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.”

    Businesses can become dependents, too. If your struggling car company wants a government bailout, you’ll probably have to build the government’s car — even if it’s a car very few people want to buy.

    Repeatedly asking for government help undermines the foundations of society by destroying initiative and responsibility. It is also a fatal blow to efficiency and corrupts the political process.

    When everyone gets something for nothing, soon no one will have anything, because no one will be producing anything.

    Cronyism
    Under the Soviet system, special traffic lanes were set aside for the sole use of officials in their limousines. This worsened driving conditions for everyone else, but those receiving favored treatment didn’t care.

    Today, many governments give special treatment to a favored few businesses that eagerly accept those favors. This is the essence of cronyism.

    Many businesses with unpopular products or inefficient production find it much easier to curry the favor of a few influential politicians or a government agency than to compete in the open market.

    After all, the government can literally guarantee customers and profitability by mandating the use of certain products, subsidizing production or providing protection from more efficient competitors.

    Cronyism enables favored companies to reap huge financial rewards, leaving the rest of us — customers and competitors alike — worse off.

    One obvious example of this involves wind farms. Most cannot turn a profit without the costly subsidies the government provides. Meanwhile, consumers and taxpayers are forced to pay an average of five times more for wind-generated electricity.

    We see far too many legislative proposals that would subsidize one form of energy over another, penalize certain emissions from one industry but not another, or place protective tariffs that hurt consumers.

    Legacies
    Karl Marx famously said: “From each according to his abilities, to each according to his needs.”

    The result of this approach is not equality, but rather a lowering of everyone’s standards to some minimal level.

    Some people worry about the disparity of wealth in a system of economic freedom. What they don’t realize is that the same disparity exists in the least-free countries.

    The difference is who is better off.

    Under economic freedom, it is the people who do the best job of producing products and services that make people’s lives better.

    On the other hand, in a system without economic freedom, the wealthiest are the tyrants who make people’s lives miserable.

    As a result of this, the income of the poorest in the least-free countries is one-tenth of what it is in the freest.

    Elected officials are often asked what they would like as their legacy. I’m never going to run for office, but I can tell you how I would answer that question.

    I want my legacy to be greater freedom, greater prosperity and a better way of life for my family, our employees and all Americans. And I wish the same for every nation on earth.

  • In Kansas, rejecting left-wing Republicans

    The headline in the Kansas City Star reads “Voters reject middle ground in Kansas Senate races.” A more accurate conclusion is that voters have realized that the governance of Kansas by a coalition of Democrats and left-wing Republicans has not been in the state’s best interest. Stagnate job growth as compared to other states, increasing spending on schools with no accountability and not even an honest discussion of achievement, falling behind other states in school reform and school choice, a highly undemocratic method of selecting our state’s top judges, resistance to privatization and other measures to streamline government, business tax costs topped by only a few other states: these are some of the results of this coalition.

    But yesterday, Kansas voters said goodbye to many of the left-wing Republicans — the so-called “moderates” or “traditional Republicans” — and nominated conservatives in their place. Some nominees face Democratic challengers in November.

    The results are a surprise not only for the number of victories by conservatives, but the margin of victory. In Johnson County, incumbent Senator Tim Owens was defeated 60 to 40. Owens ranked at the bottom of all senators — Democrats included — in the Kansas Economic Freedom Index.

    In a neighboring district, incumbent Senator Mary Pilcher-Cook won her primary election by a 64 to 36 margin. Pilcher-Cook ranked at the top of the Kansas Economic Freedom index. Conservative Steve Abrams, who ranked well in the KEFI, also defeated a challenger.

    Another notable result is the defeat of Senate President Steve Morris.

    Other defeats of moderates, some being incumbents, include Jeff Melcher over Pat Colloton to replace John Vratil, Jacob LaTurner over Bob Marshall, Forrest Knox over John Grange, Jeff King over Dwayne Umbarger, Greg Smith over Joe Beveridge, Bob Reader over Roger Reitz, Tom Arpke over Pete Brungardt, Michael O’Donnell over Jean Schodorf, Mitch Holmes over Ruth Teichmann, and Dan Kerschen over Dick Kelsey. Kelsey will dispute being lumped in the moderate camp, but on economic freedom issues, he ranked just barely above neutral.

    There were some victories for the moderates. Kay Wolf won the primary to replace Terrie Huntington, which is a retention for moderates. In Topeka, moderate Vicki Schmidt retains a place in the Senate, as does Carolyn McGinn in south-central Kansas. Pat Apple defeated a challenge from Charlotte O’Hara. Apple ranks barely above neutral in the KEFI, while O’Hara, in the Kansas House, was near the top. Jeff Longbine survived a challenge from conservative James Fawcett.

    Commenting on the results, Americans for Prosperity–Kansas state director Derrick Sontag said “The primary results make one thing clear: Kansans support those who promote fiscally conservative, limited government, free market policies. Fiscal conservatives are now being elected because of the policies that have failed our state for years. This new field of candidates vying for office reflects a continued desire to put a stop to the rampant state spending and high tax burdens of the past. It is evident from the results at the ballot box that Kansans want a reasonable, responsible government and we are optimistic that our state is now starting to head down the path toward prosperity and a strong Kansas economy.”

    In local races in south-central Kansas, voters rejected the challenge by left-wing Republican Wichita City Council Member Jeff Longwell to incumbent Karl Peterjohn. Longwell had the endorsement of Wichita Mayor Carl Brewer and all Wichita City Council members except Michael O’Donnell (district 4, south and southwest Wichita). Three Sedgwick County Commission members endorsed Longwell, too. As there is no Democratic contestant, this race is over.

    In suburban Andover, voters rejected a proposed property tax increase for schools. Update: After the final canvass of votes, the tax increase passed by two votes.

  • Kansas traditional Republicans: The record

    As Kansas Republicans decide who to vote for in next week’s primary election, moderate senate incumbents and many newspapers urge voting for those Republicans who promote a “reasonable,” “balanced,” and “responsible” approach to Kansas government. When we examine the record of the coalition of moderate Republicans and Democrats that governed Kansas for the first decade of this century, we see legislative accomplishment that not many Kansans may be aware of. Almost all have been harmful to our state.

    Most of the moderate Republicans run campaigns promoting themselves as fiscal conservatives. But their voting records often tell a different story. That’s why in 2010 I produced the Kansas Economic Freedom Index to shine light on the actual votes cast by legislators. This year I joined with Kansas Policy Institute and Americans for Prosperity–Kansas to produce a larger and more structured index. Kansans might be surprised to learn that the senator who ranks lowest in voting for economic freedom is a Republican.

    Perhaps the most important issue for most Kansans is jobs. In this regard, Kansas — under leadership of moderates — has performed poorly. A chart of the number of private sector jobs in Kansas as compared to a few surrounding states over the past eleven years shows Kansas at or near the bottom. (Kansas is the thick black line. Data is indexed so that all states start at the same relative position.)

    Kansas private sector job growth compared to other statesKansas private sector job growth compared to other states. Data is indexed, with January 2001 equal to 1. Source: Bureau of Labor Statistics

    Incredibly, not long ago Kansas was the only state to have a loss in private sector jobs over a year-long period. This is the culmination of governance by the coalition of moderate, traditional Kansas Republicans and Democrats.

    Analysis in the current edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index confirms that the Kansas economy has not performed well. The “Economic Outlook Ranking” is a forecast looking forward, based on factors that are under control of the states. The “Economic Performance Ranking” is a backward-looking rating that measures state performance, again using variables under control of each state.

    For Economic Performance Ranking, Kansas is ranked 39 among the states, near the bottom in terms of positive performance. In the 2010 edition, Kansas was ranked 40th, and in 2010, 34th. Kansas is not making progress in this ranking of state performance. In the forward-looking Economic Outlook Ranking, Kansas ranks 26th. Again, Kansas is not making progress, compared to other states. In annual rankings since 2008 Kansas has been ranked 29, 24, 25, 27, and now 26.

    Further evidence of the harm of moderate Republican/Democratic governance was revealed earlier this year when the Tax Foundation released a report examining tax costs on business in the states and in selected cities in each state. The news for Kansas is worse than merely bad, as our state couldn’t have performed much worse: Kansas ranks 47th among the states for tax costs for mature business firms, and 48th for new firms. See Kansas reasonable: We’re number 47 (and 48).

    On government reform, moderate Republicans have blocked efforts to improve the operations and reduce the cost of Kansas state government. In 2011 the Kansas Legislature lost three opportunities to do just this. Three bills, each with this goal, were passed by the House of Representatives, but each failed to pass through the moderate-controlled Senate, or had its contents stripped and replaced with different legislation. See Kansas reasonable: Government reform.

    Moderates are proud of keeping politics out of judicial selection. In reality, Kansas judicial selection is highly politicized and undemocratic, with out-sized power concentrated in a special interest group: lawyers. Among the fifty states, Kansas is at the undemocratic extreme in the way we select judges, and moderates defend this system. See Kansas reasonable: Judicial selection.

    Moderates usually claim that they are the “education” candidate, and are proud of their support for spending on Kansas schools. They “march in lockstep” with those who constantly call for more school spending, even to the point of suing the state’s taxpayers for more money. They join with the special interests who fight against accountability measures. They also fight against an honest assessment of the condition of public schools in Kansas, and when you look under the covers, it’s not the pretty picture that education bureaucrats paint.

    As an example, compare Kansas with Texas, a state that Kansas school spending boosters and moderate Republicans like to deride as a state with low-performing schools. In Kansas 69 percent of students are white, while in Texas that number is 33 percent. So it’s not surprising that overall, Kansas outperforms Texas (with one tie) when considering all students in four important areas: fourth and eighth grade reading, and fourth and eighth grade math. But looking at Hispanic students only, Texas beats or ties Kansas in these four areas. For black students, Texas bests Kansas in all four. Texas does this with much less spending per pupil than Kansas. See Kansas reasonable: The education candidates.

    A recent column described traditional, moderate Kansas Republicans as those who “believe government has a more affirmative role in assuring a high quality of life for Kansans.” The record, however, is one that has placed Kansas at disadvantage to other states, and it will be difficult to recover. Kansas traditional: the platform.

  • Money flows to Kansas elections

    Kansas Watchdog, in its article Tracking the PACs — big money flowing into crucial Senate contests, lays out the action of political action committees seeking to influence Kansas voters in the August primary election.

    The issue of third-party money involvement has been a concern to many, with Democrats and moderate Republicans railing against “special interest” money, frequently referring to the Kansas Chamber of Commerce and Americans for Prosperity. The claim is that these organizations are attempting to buy an election.

    Thanks to Earl Glynn’s reporting in Kansas Watchdog, we see that both sides have PACs that funnel money to, or advocate in favor of, candidates. In the case of moderate Republicans, we see that the Senate Leadership Committee PAC has received contributions from special interest groups, and then funneled that money in favor of moderate Republicans. Senate President Steve Morris controls this PAC.

    A large contributor to Morris’ PAC is Kansas National Education Association (KNEA), the teachers union. This is a special interest groups that advocates for the interests of teachers, not students and taxpayers.

    Another contributor is Kansas Contractors PAC. Its job is to get the state to spend as much as possible on roads and highways, without regard to whether these are needed or wanted.

    Casino money makes its way to the PAC, too. The existing casinos in Kansas would like to see competition prohibited.

    There are more special interest groups contributing in favor of moderate candidates, including labor unions, perhaps the most highly specialized interest group of all.

    Contrast these special interests with groups like Americans for Prosperity. I have supported AFP for many years because AFP promotes economic freedom, which is good for everyone, not just for certain groups. While the Kansas Chamber is more focused on business, a thriving business climate in Kansas is good for everyone — consumers, workers, taxpayers, and government coffers. We don’t have this now in Kansas. Instead, we have low private sector job creation at the expense of government jobs.

    Some are concerned about the influence of PAC spending, and also that of third parties that spend in favor of, or in opposition to, candidates. These are independent expenditures. They’re not supposed to be coordinated with the candidate or campaigns. Some of the most misleading and harshly negative ads come from these groups, instead of from the candidates’ campaigns.

    This level of separation allows candidates to disavow or distance themselves from these ads. A solution is to allow larger donations to be made directly to the candidates. In this way, the campaign is responsible for the advertisements and can’t shift blame to someone else.

  • Wichita-area economic development policy changes proposed

    The City of Wichita and Sedgwick County are considering a revision to their economic development policies. Instead of promoting economic freedom and a free-market approach, the proposed policy gives greater power to city bureaucrats and politicians, and is unlikely to produce the economic development that Wichita needs.

    A new feature of the proposed policy implements property tax forgiveness for speculative industrial buildings, with a formula that grants a higher percentage of tax forgiveness as building size increases. And, in a stroke of pure bureaucratic central planning, the ceilings of these buildings must be at least 28 feet high.

    The policy requires that projects have an estimated ratio of public benefits to public costs of at least 1.3 to 1, although there are factors that allow exceptions. This ratio should be met for both the city’s general fund, and its debt service fund. This — if the city actually enforces this — would be a welcome change. But within the last year, the city ignored a large negative cost-benefit ratio for the Ambassador Hotel, and instead used a positive ratio for the city’s general fund. See Fact checking the Wichita Ambassador Hotel campaign.

    Wichitans also need to realize that the “benefits” in the calculation are in the form of increased tax revenue paid to the city, county, etc. There is no consideration of actually rewarding the taxpayers that pay for — and assume the risk of — economic development incentives.

    There is also the curious focus on jobs that pay above-average wages. But what about workers who don’t have the skills to earn above-average wages? Shouldn’t they be able to benefit from the city’s economic development efforts?

    There is also the focus on exports: “A ‘Value-Added Job’ produces goods and/or services that are sold predominately outside of the MSA. Importing wealth into the community through value added jobs grows the local economy. Whereas non-value-added jobs typically re-circulate wealth within the community.” This is reminiscent of mercantilism, an economic strategy where exports are prized and imports are discouraged. It ignores the benefit that Wichitans receive from trading with themselves.

    There are also targeted industries and a list of eligible business activities.

    Clawbacks — the recovery of incentives if a company fails to live up to its agreed-to goals — are important in the new proposed policy. But the city has had clawbacks in effect, in the form of personal guarantees from TIF developers, for example. But last year the city decided not to enforce that agreement, and instead refinanced the debt at credit risk to the city.

    The record on economic development

    Earlier this year Greater Wichita Economic Development Coalition issued its annual report on its economic development activities for the year. The shows us that power of government to influence economic development is weak. In its recent press release, the organization claimed to have created 1,509 jobs in Sedgwick County during 2011. According to the Bureau of Labor Statistics, the labor force in Sedgwick County in 2011 was 253,940 persons. So the jobs created by GWEDC’s actions amounted to 0.59 percent of the labor force. This is a very small fraction, and other economic events are likely to overwhelm these efforts.

    In his 2012 State of the City address, Brewer took credit for creating a similar percentage of jobs in Wichita.

    Rarely mentioned are the costs of creating these jobs. These costs have a negative economic impact on those who pay these costs. This means that economic activity and jobs are lost somewhere else in order to pay for the incentives.

    Also, at least some of these jobs would have been created without the efforts of GWEDC. All GWEDC should take credit for is the marginal activity that it purportedly created. Government usually claims credit for all that is good, however.

    Danger going forward

    The danger we in the Wichita area face is the overwhelming urge of politicians to be seen doing something. For example, in response to the departure of Boeing, Wichita Mayor Carl Brewer called for the community to “launch an aggressive campaign of job recruitment and retention.”

    It is likely that we will become susceptible to large-scale government interventions in an attempt to gain new jobs. Our best course would be to take steps to make Kansas and Wichita an inviting place for all firms to do business. The instinct of politicians and bureaucrats, however, is to take action, usually in the form of targeted incentives as a way to spur economic development.

    We’ve seen the disappointing results — not only with Boeing, but also in a report showing that Wichita has declined in economic performance compared to other areas.

    These targeted economic development efforts fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. In the case of the Wichita and Sedgwick County policy, do we really know which industries should be targeted? Are we sure about the list of eligible business activities? Is 1.3 to 1 really the benchmark we should seek, or we be better off and have more jobs if we insisted on 1.4 to 1 or relaxed the requirement to 1.2 to 1?

    This lack of knowledge, however, does not stop governments from creating policies for the awarding of incentives. This “active investor” approach to economic development is what has led to companies escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

    Embracing Dynamism: The Next Phase in Kansas Economic Development Policy

    Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

    In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers that Wichita and other cities engage in: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

    In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

    There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates is an example of such a policy. Abating taxes for specific companies through programs like IRBs and other economic development programs is an example of precisely the wrong policy.

    We need to move away from economic development based on this active investor approach. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances. Wichita and Sedgwick County are moving in the wrong direction.

  • Kansas auto dealers benefit from anti-competitive law

    In Johnson County, a car dealer wants to move its dealership five blocks down the street. Amazingly, this simple act requires regulatory agency approval, and while unlikely in this case, existing auto dealers can block such actions under some circumstances.

    In Kansas, as in many states, existing automobile dealers have input as to whether competition will be allowed into their market areas. In Kansas, the statue is 8-2430, captioned “Establishment of additional or relocation of existing new vehicle dealer; procedure; relevant market area.”

    Examination of this statute reveals its anti-competitive nature. A person proposing a new dealership must state in writing why the new dealership should be allowed to be formed. The law requires that the applicant provide “a short and plain statement of the evidence the licensee, or proposed licensee, intends to rely upon in meeting the burden of proof for establishing good cause for an additional new vehicle dealer.”

    If the director of vehicles holds a hearing and finds that “good cause has not been established,” the director shall deny the application, according to the statute. The burden of proof is on the applicant for the new license, and must be proved “by a preponderance of the evidence presented.”

    The statute says that in determining whether there is good cause for a new dealer, the director of vehicles shall consider:

    • “permanency of the investment of both the existing and proposed new vehicle dealers”
    • growth in population
    • “effect on the consuming public in the relevant market area”
    • “whether it is injurious or beneficial to the public welfare for an additional new vehicle dealer to be established”
    • whether dealers of the same make of cars are “providing adequate competition and convenient customer care”
    • whether the proposed new dealer would increase competition and if that increased competition would be “in the public interest”
    • the effect of a new dealer on existing dealer(s)

    The decision of the director is not limited to these considerations, says the statute. Some of these factors are so vague and subjective that they give the director reason to deny a new license virtually at his discretion. Will a new dealer have an effect on an existing dealer? Sure. Licensed denied.

    We also have to wonder how it could injure “the public welfare” for people to have more choice in automobile dealers. Competition is the customer’s friend. Competition is always in the public interest. New business firms should not have to petition government regulators for permission to enter a market.

    These laws that restrain trade and competition are harmful to the consumer. In his recent book The Right to Earn a Living: Economic Freedom and the Law, author Timothy Sandefur discusses the Illinois Motor Vehicle Franchise Act, which has language similar to the Kansas law. He writes:

    Although cloaked in the language of public benefit, such laws are really private-interest legislation designed to allow the government to choose each company’s “fair share” of the trade. But the only way of determining what share of the trade is “fair” for any business is its success with consumers who are free to choose. If bureaucrats, rather than consumers, decide what amount of economic success is “fair,” businesses will devote their time not to providing quality products at affordable prices but to wooing government officials to give them special favors. … Consumers, again, are victims of anti-competitive laws of which most of them are not even aware.

    Sandefur cites studies that show that states with laws like Kansas’ have fewer new-car dealerships and higher prices for new cars. “This price difference means that consumers are forced to pay more for cars without getting any increased value; the extra money is merely transferred into the pockets of politically influential car dealers.”

    This law is bad for all Kansans except for one special interest group: those who own automobile dealerships. It ought to be repealed.

  • Kansas reasonable: The legacy

    As campaigns for positions in the Kansas Legislature heat up, some are calling for voters to support candidates who will follow a tradition of “reasonableness” that, they say, is characteristic of successful Kansas politicians — the “traditional” Republicans.

    Others call for a “balanced” approach to government and “responsible tax reform.” Senate President Steve Morris contributes an op-ed in support of “incumbent senators who put their local communities above the agendas of these special interest groups.”

    Reasonable, balanced, responsible. These are words that promote a positive image, although sometimes negative words are used, as in criticism of Kansas tax reform as “reckless.”

    So what is the record of the reasonable Kansas politicians? The first decade of this century was marked by a legislature and governors that were, well, reasonable. During this decade the Kansas economy performed poorly. A chart of the number of private sector jobs in Kansas as compared to a few surrounding states over the past eleven years shows Kansas at or near the bottom. (Kansas is the thick black line. Data is indexed so that all states start at the same relative position.)

    The record of Kansas government policies has not been one we can be proud of. It is not reasonable, balanced, or responsible to continue with the policies that caused this lost decade. Kansans need to support candidates who will vote in favor of economic freedom, which is the key to jobs and prosperity for Kansas. The Kansas Economic Freedom Index is a resource that voters can use to learn more about incumbent candidates and how they voted on issues of economic freedom.

    Kansas private sector job growth compared to other statesKansas private sector job growth compared to other states. Data is indexed, with January 2001 equal to 1. Source: Bureau of Labor Statistics

  • Coalition Grades Kansas Legislators’ Support of Economic Freedom

    Americans for Prosperity–Kansas, Kansas Policy Institute, and Voice for Liberty in Wichita Partner to Inform Citizens

    Wichita — July 12, 2012 — A new scorecard released today takes a broad look at voting records and establishes how supportive state legislators were of economic freedom, limited government and individual liberty in the 2012 legislative session. The 2012 Kansas Economic Freedom Index is produced by Americans for Prosperity–Kansas, Voice for Liberty in Wichita, and Kansas Policy Institute.

    The Index is intended to provide educational information to the public about broad economic issues that are important to the citizens of our State. It is the product of nonpartisan analysis, study, and research and is not intended to directly or indirectly endorse or oppose any candidate for public office.

    The organizations that produced this first annual edition of the Kansas Economic Freedom Index do so in the belief that an informed citizenry is an essential element of maintaining a free society. Having a deeper understanding of how legislation impacts economic freedom and the constitutional principles of individual liberty and limited government allows citizens to better understand the known and often unknown consequences of legislative issues. The social and economic benefits of economic freedom have been widely studied by groups such as the Fraser Institute in Canada and the Heritage Foundation in Washington, D.C.

    “Economic freedom is not a partisan issue,” said KPI president Dave Trabert. “Indeed, the 2012 Kansas Economic Freedom Index shows that quite clearly. There were 32 Republicans and 8 Democrats in the 2012 Senate; the House had 92 Republicans and 33 Democrats. Those counts would produce fairly strong results one way or the other if economic freedom was a partisan issue, but instead, the overall score of both chambers is very near neutral.”

    The Index is based on 24 House and 20 Senate votes. A vote in support of individual liberty, limited government and free markets received positive points; a vote opposed received negative points. Votes of Present or Not Voting (absent) were awarded zero points. A full list of the bills tracked and scores of the House and Senate are available at www.KansasPolicy.org/EconomicFreedomIndex.

    A positive cumulative score indicates that a legislator generally supported economic freedom, while a negative cumulative score indicates that a legislator generally opposed economic freedom. At the same time, the magnitude of both positive and negative scores generally indicates the degree to which a given legislator is supportive or opposed to economic freedom. A score of zero indicates that a legislator was generally neutral on economic freedom. The cumulative score only pertains to the specific votes included in the Kansas Economic Freedom Index and should not be interpreted otherwise. A different set of issues and/or a different set of circumstances could result in different cumulative scores.

    Bob Weeks, of Voice for Liberty in Wichita, started a version of this index after the 2010 legislative session and had this to say, “The value of a voting index is that it shines light on how lawmakers vote on important economic issues. It’s often hard for citizens to get a full understanding of the implications of a bill so this Index will hopefully provide a deeper understanding of economic freedom.”

    Derrick Sontag of Americans for Prosperity – Kansas offered, “The Kansas Economic Freedom Index is an important tool for Kansans who want to know if their state legislators follow through with promises to lower taxes, control government spending and protect individual liberties. This comprehensive measurement does a good job showing which legislators voted against key issues of limited government, free market ideals. Kansans clearly want a smaller, more efficient government and Kansas families and business owners deserve to know how legislators’ actions impact their economic freedom and individual liberty.”