Voice For Liberty

Tag: Interventionism

  • Kansas and Wichita quick takes: Wednesday October 26, 2011

    Tax increment financing. “Largely because it promises something for nothing — an economic stimulus in exchange for tax revenue that otherwise would not materialize — this tool [tax increment financing] is becoming increasingly popular across the country. … ‘TIFs are being pushed out there right now based upon the but for test,’ says Greg LeRoy. ‘What cities are saying is that no development would take place but for the TIF. … The average public official says this is free money, because it wouldn’t happen otherwise. But when you see how it plays out, the whole premise of TIFs begins to crumble.’ Rather than spurring development, LeRoy argues, TIFs ‘move some economic development from one part of a city to another.’ … In Wichita, those who invest in TIF districts and receive other forms of subsidy through relief from taxes are praised as courageous investors who are taking a huge risk by believing in the future of Wichita. Instead, we should be asking why we have to bribe people to invest in Wichita. Much more on tax increment financing at Giving Away the Store to Get a Store: Tax increment financing is no bargain for taxpayers from Reason Magazine.

    Tax incentives questioned. In a commentary in Site Selection Magazine, Daniel Levine lays out the case that tax incentives that states use to lure or keep jobs are harmful, and the practice should end. In Incentives and the Interstate Competition for Jobs he writes: “Despite overwhelming evidence that state and local tax incentives are having little to no positive effect on promoting real economic growth anywhere in the country, states continue to up the ante with richer and richer incentive programs. … there are real questions as to whether the interstate competition for jobs is a wise use of anyone’s tax dollars and, if not, then what can be done to at least slow down this zero sum game?” As a solution, Levine proposes that the Internal Revenue Service classify some types of incentives as taxable income to the recipient, which would reduce the value and the attractiveness of the offer. Levine also correctly classifies tax credits — like the historical preservation tax credits in Kansas — as spending programs in disguise: “Similarly, when a ‘tax credit’ can be sold or transferred if unutilized it ceases to have a meaningful connection to state tax liability. Instead, in such circumstances the award of tax credit is merely a delivery mechanism for state subsidy.” In the end, the problem — when recognized as such — always lies with the other guy: “Most state policy makers welcome an opportunity to offer large cash incentives to out-of-state companies considering a move to their state but fume with indignation when a neighboring state uses the same techniques against them.”

    The Moral Case Against Spreading the Wealth. From The Moral Case Against Spreading the Wealth by Leslie Carbone: “After two years, the results of President Obama’s wealth-spreading policies have confirmed centuries of economics, political philosophy, and common sense: Forced wealth redistribution doesn’t make things good for everybody; it makes things worse, both fiscally and morally.” Carbone explains the two reasons: Government-mandated wealth distribution does create prosperity, and it’s not a legitimate function of government. On the type of behavior we’d like to see in people, she writes: “Wealth redistribution discourages the virtuous behavior that creates wealth: hard work, saving, investment, personal responsibility.” After explaining other problems that progressive taxation — wealth redistribution — causes, she sounds a note of optimism; “Through Tea Parties and popular protests, millions of Peters and Pauls, and Joe the Plumbers are rejecting what F.A. Hayek so aptly called the fatal conceit of paternalistic government. Decades of federal expansion have demonstrated what history, economics, philosophy, and common sense have told us all along: People, working through the market, are the engines of prosperity, both moral and financial — but only if we get government out of their way.” Leslie Carbone is the author of Slaying Leviathan: The Moral Case for Tax Reform. That book expands on the ideas presented in this article.

    Political pretense vs. market performance. What is the difference between markets and politics or government? “There is a large gap between the performance of markets and the public’s approval of markets. Despite the clear superiority of free markets over other economic arrangements at protecting liberty, promoting social cooperation and creating general prosperity, they have always been subject to pervasive doubts and, often, outright hostility. Of course, many people are also skeptical about government. Yet when problems arise that can even remotely be blamed on markets, the strong tendency is to ‘correct’ the ‘market failures’ by substituting more government control for market incentives.” The article is The Political Economy of Morality: Political Pretense vs. Market Performance by Dwight R. Lee. Lee explains the difference between “magnanimous morality” (helping people) and “mundane morality” (obeying the generally accepted rules or norms of conduct). Markets operate under mundane morality, which is not as emotionally appealing as as magnanimous morality. But it’s important, as it is markets — not government — that have provided economic progress. There’s much more to appreciate in this article, which ends this way: “The rhetoric dominating the public statements of politicians and their special-interest supplicants is successful at convincing people that magnanimous morality requires substituting political action for market incentives, even though the former generates outcomes that are less efficient and moral than does the latter. The reality is that political behavior is as motivated by self-interest as market behavior is. … As long as there are people who cannot resist the appeal of morality on the cheap, the political process will continue to serve up cheap morality. And the result will continue to be neither moral nor cheap.”

    Increasing taxes not seen as solution. “Leaving aside the moral objection to tax increases, raising taxes won’t in fact solve the problem. For one thing, our public servants always seem to find something new on which to spend the additional money, and it isn’t deficit reduction. But more to the point, tax policy can go only so far, given the natural brick wall it has run into for the past fifty years. Economist Jeffrey Rogers Hummel points out that federal tax revenue ‘has bumped up against 20 percent of GDP for well over half a century. That is quite an astonishing statistic when you think about all the changes in the tax code over the intervening years. Tax rates go up, tax rates go down, and the total bite out of the economy remains relatively constant. This suggests that 20 percent is some kind of structural-political limit for federal taxes in the United States.’” From Rollback: Repealing Big Government Before the Coming Fiscal Collapse by Thomas E. Woods, Jr. Hummel’s article may be read at Why Default on U.S. Treasuries is Likely. A similar concept is Hauser’s Law.

  • Intellectuals against the people and their freedoms

    At a recent educational meeting I attended, someone asked the question: Why doesn’t everyone believe what we (most of the people attending) believe: that private property and free exchange — capitalism, in other words — are superior to government intervention and control over the economy?

    It’s question that I’ve asked at conferences I’ve attended. The most hopeful answer is ignorance. While that may seem a harsh word to use, ignorance is simply a “state of being uninformed.” That can be cured by education. This is the reason for this website. This is the reason why I and others testify in favor of free markets and against government intervention. It is the reason why John Todd gives out hundreds of copies of I, Pencil, purchased at his own expense.

    But there is another explanation, and one that is less hopeful. There is an intellectual class in our society that benefits mightily from government. This class also believes that their cause is moral, that they are anointed, as Thomas Sowell explains in The vision of the anointed: self-congratulation as a basis for social policy: “What all these highly disparate crusades have in common is their moral exaltation of the anointed above others, who are to have their very different views nullified and superseded by the views of the anointed, imposed via the power of government.”

    Murray N. Rothbard explains further the role of the intellectual class in the first chapter of For a New Liberty: The Libertarian Manifesto, titled “The Libertarian Heritage: The American Revolution and Classical Liberalism.” Since most intellectuals favor government over a market economy and work towards that end, what do the intellectuals get? “In exchange for spreading this message to the public, the new breed of intellectuals was rewarded with jobs and prestige as apologists for the New Order and as planners and regulators of the newly cartelized economy and society.”

    Planners and regulators. We have plenty of these at all levels of government, and these are prime examples of the intellectual class.

    As Rothbard explains, these intellectuals have cleverly altered the very meaning of words to suit their needs:

    One of the ways that the new statist intellectuals did their work was to change the meaning of old labels, and therefore to manipulate in the minds of the public the emotional connotations attached to such labels. For example, the laissez-faire libertarians had long been known as “liberals,” and the purest and most militant of them as “radicals”; they had also been known as “progressives” because they were the ones in tune with industrial progress, the spread of liberty, and the rise in living standards of consumers. The new breed of statist academics and intellectuals appropriated to themselves the words “liberal” and “progressive,” and successfully managed to tar their laissez- faire opponents with the charge of being old-fashioned, “Neanderthal,” and “reactionary.” Even the name “conservative” was pinned on the classical liberals. And, as we have seen, the new statists were able to appropriate the concept of “reason” as well.

    We see this at work in Wichita, where those who advocate for capitalism and free markets instead of government intervention are called CAVE people, an acronym for Citizens Against Virtually Everything. Or, in the case of Wichita Mayor Carl Brewer and Wichita Eagle editorial writer Rhonda Holman, “naysayers.”

    The sad realization is that as government has extended its reach into so many areas of our lives, to advocate for liberty instead of government intervention is to oppose many things that people have accepted as commonplace or inevitable.

    Rothbard further explains the role of intellectuals in promoting what they see as the goodness of expansive government:

    Throughout the ages, the emperor has had a series of pseudo-clothes provided for him by the nation’s intellectual caste. In past centuries, the intellectuals informed the public that the State or its rulers were divine, or at least clothed in divine authority, and therefore what might look to the naive and untutored eye as despotism, mass murder, and theft on a grand scale was only the divine working its benign and mysterious ways in the body politic. In recent decades, as the divine sanction has worn a bit threadbare, the emperor’s “court intellectuals” have spun ever more sophisticated apologia: informing the public that what the government does is for the “common good” and the “public welfare,” that the process of taxation-and-spending works through the mysterious process of the “multiplier” to keep the economy on an even keel, and that, in any case, a wide variety of governmental “services” could not possibly be performed by citizens acting voluntarily on the market or in society. All of this the libertarian denies: he sees the various apologia as fraudulent means of obtaining public support for the State’s rule, and he insists that whatever services the government actually performs could be supplied far more efficiently and far more morally by private and cooperative enterprise.

    The libertarian therefore considers one of his prime educational tasks is to spread the demystification and desanctification of the State among its hapless subjects. His task is to demonstrate repeatedly and in depth that not only the emperor but even the “democratic” State has no clothes; that all governments subsist by exploitive rule over the public; and that such rule is the reverse of objective necessity. He strives to show that the very existence of taxation and the State necessarily sets up a class division between the exploiting rulers and the exploited ruled. He seeks to show that the task of the court intellectuals who have always supported the State has ever been to weave mystification in order to induce the public to accept State rule, and that these intellectuals obtain, in return, a share in the power and pelf extracted by the rulers from their deluded subjects.

    And so the alliance between state and intellectual is formed. The intellectuals are usually rewarded quite handsomely by the state for their subservience, writes Rothbard:

    The alliance is based on a quid pro quo: on the one hand, the intellectuals spread among the masses the idea that the State and its rulers are wise, good, sometimes divine, and at the very least inevitable and better than any conceivable alternatives. In return for this panoply of ideology, the State incorporates the intellectuals as part of the ruling elite, granting them power, status, prestige, and material security. Furthermore, intellectuals are needed to staff the bureaucracy and to “plan” the economy and society.

    The “material security,” measured in dollars, can be pretty good, as shown by these examples: The Wichita city manager is paid $185,000, the Sedgwick county manager is paid $175,095, and the superintendent of the Wichita school district is paid $224,910.

  • Kansas and Wichita quick takes: Monday October 10, 2011

    AFP meeting features former Congressman Tiahrt. Tonight’s (October 10th) meeting of Americans for Prosperity, Kansas features former United States Representative Todd Tiahrt speaking on “How regulations affect our economy.” There will be a presentation followed by a group discussion. Tiahrt represented the fourth district of Kansas from 1995 to 2011. He is presently our states Republican National Committeeman. … This free meeting is from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. The event’s sponsor is Americans for Prosperity, Kansas. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

    Government planning. In an address from 1995, Gerald P. O’Driscoll Jr. spoke on Friedrich Hayek and his ideas on government interventionism. His conclusion should be a caution to those — such as Wichita City Council members and city hall bureaucrats — who believe they can guide the economic future of Wichita through interventions such as TIF districts, grants, forgivable loans, tax credits, tax abatements, sweetheart lease deals, eminent domain, zoning, and other measures: “In all his work, Hayek focused on the self-ordering forces in society. Hayek’s fellow Nobel laureate Kenneth Arrow has suggested that ‘the notion that through the workings of an entire system effects may be very different from, and even opposed to, intentions is surely the most important intellectual contribution that economic thought has made to the general understanding of social processes.’ The Arrovian formulation echoes Adam Smith’s observation that, as a consequence of the interaction of conflicting interests, man is ‘led by an invisible hand to promote an end which was no part of his intention.’ The classic Hayekian statement visualizes economics as analyzing ‘the results of human action but not of human design.’ The economic conception of society is an affront to the conceit of those who would impose order from above. Economic forces defy the will of authoritarians seeking to mold social outcomes. Human beings respond to each government intervention by rearranging their lives so as to minimize its disruptive effects. The resulting outcome may thus be different from and even opposed to the intention of the intervention.” The full lecture is at The Meaning of Hayek.

    Longwell joins Democrats to defeat Republicans. While Wichita city council members are officially non-partisan — meaning they don’t run for election as members of political parties — most members are closely identified with a party. Some, like Jeff Longwell (district 5, west and northwest Wichita), see themselves as leaders in their parties, the Republican Party in this case. Last week, however, Longwell joined with the three Democrats on the Wichita City Council to oppose the votes of three Republicans. (There was a nuance to that vote, but nonetheless Longwell voted with the Democrats.) On Sunday he teamed with left-wing Council Member Janet Miller (district 6, north central Wichita) to write an op-ed that appeared in The Wichita Eagle (Grant helps region). The piece approved increased federal government spending, increased federal government control, and increased centralized planning.

    Optimal size of government. Is government too large? Yes, and trying to determine an optimum size for government is impossible. So says a new policy briefing paper from the Center for Global Liberty and Prosperity, a project of the Cato Institute.

    Can We Determine the Optimal Size of Government? by James A. Kahn. In the executive summary, we can read this: “The massive spending programs and new regulations adopted by many countries around the world in response to the economic crisis of 2008 have drawn renewed attention to the role of government in the economy. Studies of the relationship between government size and economic growth have come up with a wide range of estimates of the ‘optimal’ or growth-maximizing size of government, ranging anywhere between 15 and 30 percent of gross domestic product (GDP).

    This paper argues that such an exercise is ill conceived. Modern growth economics suggests, first, that government policies leave their long-term impact primarily on the level of economic activity, not the growth rate; and, second, that the sources of this impact are multi-dimensional and not necessarily well measured by conventional measures of ‘size,’ such as the share of government spending in GDP.

    In fact, measures of economic freedom more closely relate to per capita GDP than do simple measures of government spending. The evidence shows that governments are generally larger than optimal, but because the available data include primarily countries whose governments are too large, it cannot plausibly say what the ideal size of government is. The data can realistically only say that smaller governments are better, and suggest that the optimal size of government is smaller than what we observe today.”

    Steve Jobs. What is his legacy? From Richard A. Viguerie: “Steve Jobs, Apple Computer’s late founder and CEO, gave the vast majority of his hundreds of thousands of dollars in political contributions to liberal Democrats, such as Nancy Pelosi, Ted Kennedy and California Governor Jerry Brown. Yet it is hard to think of a 21st Century entrepreneur who has done more to empower individuals and free them from the demands of the liberal collective than Steve Jobs did through the invention of the iPod, and iPad and the popularization of personal computing. Through the innovative products Apple brought to market, Jobs proved the collectivist premise of John Kenneth Galbraith’s The Affluent Society to be both absolutely true and utterly wrong.” … More at Steve Jobs’ Conservative Legacy.

    Lieutenant Governor in Wichita. This week’s meeting (October 14th) of the Wichita Pachyderm Club features Lieutenant Governor Jeff Colyer, M.D. speaking on “An update on the Brownback Administration’s ‘Roadmap for Kansas’ — Medicaid Reform” … Upcoming speakers: On October 21st: N. Trip Shawver, Attorney/Mediator, on “The magic of mediation, its uses and benefits.” … On October 28th: U.S. Representative Tim Huelskamp, who is in his first term representing the Kansas first district, speaking on “Spending battles in Washington, D.C.” … On November 4th: Chris Spencer, Vice President, Regional Sales Manager Oppenheimer Funds, speaking on “Goliath vs Goliath — The global battle of economic superpowers.” … On November 11th: 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 November 18th: Delores Craig-Moreland, Ph.D., Wichita State University, speaking on “Systemic reasons why our country has one of the highest jail and prison incarceration rates in the world? Are all criminals created equal?”

    When governments cut spending. Advocates of government spending argue that if it is cut, the economy will suffer. Is this true? Is government spending necessary to keep the economy functioning? “There is no historical credence to this very popular idea that cutting spending now will actually slow down the economy and actually lead to a double dip recession or an increase in economic stagnation.” This is the conclusion of Dr. Stephen Davies in a short video. As one example — he cites others — Davies explains that there was fear in the United States that the end to massive government spending during World War II would lead to a return of the Great Depression. “In fact, as we know, exactly the opposite happened. As the defense spending of the war years was wound down, and as government was pulled back in other ways as well under the Truman and Eisenhower administrations, the result was an enormous period of sustained growth in the United States and other countries that went through a similar process.” Davies says that economic growth accelerates when government reduces its spending. Reasons include the greater productivity of private sector spending as compared to government spending, and increased confidence of private sector investors. … The video is from LearnLiberty.org, a project of Institute for Humane Studies.

  • Courtyard Hotel up again for tax breaks

    This week the Wichita City Council will consider extending property tax breaks for the Courtyard Wichita at Old Town Hotel at 820 E 2nd Street.

    Five years ago when the city granted the property tax breaks, the hotel wasn’t eligible for tax increment financing. That’s because the TIF district the hotel is located in, the Old Town Cinema Redevelopment District, was running a shortfall at the time (it still is, as of December 31, 2010). Therefore, the city proposed that the hotel agree to a Payment In Lieu of Taxes, or PILOT, of $45,000 per year. That agreement has been in place for five years.

    This week the city is proposing that the agreement be extended for five years. But there’s a hitch. The TIF district is not eligible to received PILOT payments under Kansas law, according to city documents. So the city proposes to charge the hotel a “bond origination fee” of $225,000, to be paid in five installments of $45,000.

    To the casual observer, $45,000 seems like a lot to pay. City documents from 2006 describe it as a “substantial contribution,” and that characterization is repeated this week. But it is a small fraction of what a similar hotel would pay, if it wasn’t located in a tax-advantaged part of Wichita.

    The hotel property, according to records in the Sedgwick County Treasurers Office, has an appraised value of $8,306,230 for tax year 2010. The assessed value is not given by the treasurer, as the property is tax exempt. But we can perform the calculation ourselves. Since business property is assessed for tax purposes at 25 percent of appraised value, the assessed value is $2,076,557.

    If we apply the mill levy of 126.0176 (126.0176 / 1000 x $2,076,557), that means the annual property tax would be $255,453 on this property, if it weren’t tax exempt.

    So the hotel, while paying $45,000 each year, is paying only 17.6 percent of what other business property with similar value is paying. As the word “substantial” has no precise meaning, each person will have to decide for themselves whether the hotel’s payments meet that definition. But when this hotel pays just $1 for every $6 that other business property pays in taxes, I think we can say the hotel made quite a deal for itself.

    There is some question as to the hotel’s value, too. The recent history of this property’s appraised value, according to the Sedgwick County Treasurer’s office, is this:

    Year   Land    Improvements       Total      Change
2007  $336,000   $9,634,430    $9,970,430
2008  $336,000   $9,629,420    $9,965,420     0%
2009  $336,000  $11,794,690   $12,130,690    22% increase
2010  $336,000   $7,970,230    $8,306,230    32% decrease

    The valuation doesn’t affect the hotel’s tax payments for the next five years, if the city approves extending the current tax exemption. But if the city doesn’t approve the extension, the valuation matters. And in five years when the hotel is no longer eligible for tax exemptions, it will certainly matter then.

    Further, there is the curious change in the valuation of the improvements to the property. From 2008 to 2009, the valuation of the improvements increased by 22 percent. Then, the next year the value dropped by 32 percent. The Sedgwick County Appraiser was not able to provide an explanation for these changes.

    A question that citizens might be interested in is how in 2006 the hotel received industrial revenue bond financing in the amount of $14,135,000 — presumably all spent on the hotel — but now has an appraised value of only $8,306,230.

    Further questions lie in this passage from the city’s agenda report, where it is explained that the proposed deal will “extend the maturity date and add an additional $1,750,000 of debt to Old Town Lodging for a total loan of $15,000,000 to satisfy all outstanding debt with Nationwide.”

    Here the hotel proposes to take on debt of $15,000,000 when the property is appraised for just $8,306,230. And, the amount of debt the hotel is carrying is increasing. Sources in the commercial real estate industry tell me this isn’t a good sign.

    Pay-to-play laws needed

    Recent campaign contributions made by Jim Korroch and related parties.

    This episode is another exhibit in the case for pay-to-play laws in Wichita and Kansas. The owner of the hotel, Jim Korroch, has made campaign contributions to at least three members of the current city council. Tomorrow he will ask the city council to extend the favor of allowing him to escape paying $210,453 per year in the taxes that the city demands other businesses pay. That’s a benefit of $1,052,265 over the next five years, and that’s in addition to the benefits already received.

    Citizens may also remember that last year Korroch received many millions in subsidy for another downtown hotel he built.

    Pay-to-play laws would prevent council members who have accepted campaign contributions from voting to enrich those who gave them. 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.”

    Some council members have said that those who advocate for these laws and ask council members to refrain from voting to enrich their campaign contributors are accusing council members of accepting illegal contributions. That’s not the case. We object to what’s happening in plain sight.

  • Kansas and Wichita quick takes: Wednesday October 5, 2011

    Green energy in Kansas. Kansas Representative Charlotte O’Hara of Overland Park issues a cautionary note on Kansas energy policy. Commenting on Kansas Governor Sam Brownback’s recent energy policy forum, she writes: “I applaud the governor’s energy summit, however with the recent events and controversy swirling around the issue of renewable/green energy initiatives at the federal level (Solyndra), we in Kansas need to step back and analyze whether our current tax incentive packages for green energy is based on sound economic principles or rather an attempt to embrace ‘green’ energy for politically correct reasons. Here’s the question that begs to be asked, are incentive programs offered in Kansas useful economic development tools or are we throwing money at failed public policy? Among those incentives: Up to $5 million in bond financing for wind the solar manufacturers; a 10 percent corporate income tax credit for new capital investment; a tax abatement on real property for up to 10 years (subject to community approval); no franchise or inventory tax; the ability to retain payroll and withholding taxes for five to 10 years depending on the number of jobs created in Kansas.” … She references a recent op-ed written by the governor (Wind energy offers clean path to economic growth) and cites the rebuttal by Paul Chesser of American Tradition Institute. That may be read at ATI Release: Kansas Gov., Former Sen. Brownback Incorrect on Promise, Economics of Renewable Energy. More coverage at Kansas Governor Sam Brownback on wind energy.

    Economic development in Wichita. Events yesterday in Wichita City Hall and today at the Sedgwick County Commission indicate that most city leaders are firmly committed to rent seeking, corporate welfare, and large-scale government interventionism as the way to create propensity for our city and county. Here are a few articles with a different perspective: Wichita’s economic development strategy: rent seeking: “So what is rent seeking? Wikipedia defines it like this: ‘In economics, rent seeking occurs when an individual, organization or firm seeks to earn income by capturing economic rent through manipulation or exploitation of the economic environment, rather than by earning profits through economic transactions and the production of added wealth.’ … The private returns of rent seekers come from the redistribution of wealth, not from wealth creation. The tax that rent seeking imposes on the productive sector reduces the output growth rate by reducing the incentives of entrepreneurs to produce and innovate.” … Wichita again to bet on corporate welfare as economic development: “This week the Wichita City Council will consider three measures that, if adopted, will further establish corporate welfare and rent-seeking as Wichita’s economic development strategy. … When people are living on welfare, we usually see that as a sad state of affairs. We view it as a failure, both for the individual and for the country. We seek ways to help people get off welfare so that they become self-sufficient. We want to help them contribute to society rather than being a drain on its resources. But Wichita’s leaders don’t see corporate welfare as a bad thing. Instead, as these three measures — all of which will likely pass unanimously — illustrate, welfare is good when you’re a business in Wichita. Especially if you can raise speculation that your company might move out of Wichita.” … The ‘active investor’ role that the city of Wichita is about to take with regard to these three companies is precisely the wrong role to take. These actions increase the cost of government for the dynamic small companies we need to nurture. Instead these efforts concentrate and focus our economic development efforts in an unproductive way.”

    The first rough draft of the Solyndra story. As compiled by David Boaz, it’s a story that “just keeps getting more discouraging.” The headlines tell the story in his compilation at The First Rough Draft of the Solyndra Story.

    Tax increment financing. From Randal O’Toole: “Tax-increment financing (TIF) costs taxpayers around $10 billion per year and is growing as fast as 10 percent per year, according to a new report, Crony Capitalism and Social Engineering: The Case against Tax-Increment Financing published by the Cato Institute. Though originally created to help renew “blighted” neighborhoods, TIF today is used primarily as an economic development tool for areas that are often far from blighted. The report argues that TIF does not actually generate economic development. At best, it moves development that would have taken place somewhere else in a community to the TIF district. That means it generates no net tax revenues, so the TIF district effectively takes taxes from schools and other tax entities. At worst, TIF actually slows economic development, both by putting a larger burden on taxpayers and by discouraging other developers from making investments unless they are also supported by TIF.” … Tax increment financing — TIF districts — are expected to be a major source of revenue for the revitalization of downtown Wichita — and the accompanying social engineering directed from Wichita city hall. Wichita has also shown itself to be totally incapable of turning away from crony capitalism.

    Democrats Anonymous. “The first step is admitting you have a problem.”

  • Kansas and its own Solyndra

    At this moment, we can’t say that Kansas has its own version of Solyndra, the subsidized and politically-connected solar energy firm that recently shut down its operations and declared bankruptcy. But as far as absorbing the important lessons from Solyndra, we may have another chance to learn them in Kansas.

    Solyndra is a failure in several ways. Much money was lost. It may be that corrupt or criminal activity was involved; we don’t know that yet. It appears that Solyndra will be a useful political scandal for Republicans to exploit, especially in the upcoming election campaign against the president. We can be sure that Republicans will keep us informed on this.

    But the largest and most important lesson from Solyndra is one that many politicians — Democrats and Republicans both — don’t want to recognize: Government intervention in the economy is wrong for the health of the country.

    The problem is that when government intervenes in the economy, it almost always gets it wrong. It’s not that Obama and other politicians aren’t smart. It’s the problems inherent in government interventionism: There will be both routine and spectacular examples of waste, as people — politicians and bureaucrats, especially — are not spending their own money. Decisions will be made to benefit the well-connected and for political, not market-based reasons. Cronyism and corruption flourish, as many will find it easier to compete in the marketplace for politicians rather than in the free market where fickle consumers rule with their fleeting tastes and preferences.

    But politicians and bureaucrats love to intervene. For bureaucrats, intervention — government programs, that is — provides jobs, and well-paid jobs, too. Since much government intervention in the economy is in the form of subsidies, it allows politicians to dispense other peoples’ money and take credit for having “created” jobs or having built a bridge, probably to be named for them later on.

    Other government intervention is in the form of creating unneeded regulations or tax loopholes that favor politicians’ friends or harm their competition.

    All of this means that economic activity is directed according to political, not economic, considerations. It’s wasteful. It’s harmful. It diminishes market-based investment, that is, investment made according to what people really want and need. It reduces the freedom, liberty, and prosperity of everyone.

    Back to Kansas: Last week the Department of Energy announced the award of a $132.4 million loan guarantee to Abengoa Bioenergy Biomass of Kansas, LLC. This is the same federal agency and the same loan guarantee program involved in the Solyndra matter. The difference is that it’s an even newer so-called green energy technology involved: cellulosic ethanol production.

    The plant in Kansas is to be at Hugoton, in southwest Kansas. The press release from DOE promotes the number of jobs that will be created.

    Cellulosic ethanol is produced from plant material that is usually considered waste, such as corn stalks or wheat straw. That’s different from the usual input to ethanol production in America, which is corn that would otherwise be used as animal or human food. Because of this, cellulosic ethanol is thought of by many as the “silver bullet” that will dramatically improve the path of America’s energy future. That may be the case, or it may not be. Because of the reasons listed above, government is particularly unsuited to make that decision and to participate in the scientific and entrepreneurial experimentation that will produce the answer.

    At one time President George W. Bush praised the potential of this fuel. A Reuters analysis from July opens with: “The great promise of a car fuel made from cheap, clean-burning prairie grass or wood chips — and not from expensive corn that feeds the world — is more mirage than reality. Despite years of research, testing and some hype, the next-generation ethanol industry is far from the commercial success envisioned by President George W. Bush in 2006, when he pledged so-called cellulosic biofuels would be ‘practical and competitive’ by 2012.”

    That hints at the problem: despite much effort, scientists haven’t been able to demonstrate cellulosic ethanol production on a commercially-successful scale. According to the Wall Street Journal, as of this summer, no commercial cellulosic ethanol has been produced.

    The loan guarantee is not the only form of government subsidy and boost ethanol producers received. There is a tax credit for each gallon produced and a tariff that protects producers from cheaper imported ethanol.

    Despite these very large measures of government intervention, cellulosic ethanol backers blame the government for lack of progress in the industry, citing the government’s failure to mandate production levels and provide assurances that the industry would receive subsidies. And the loan guarantees are not made fast enough, they add to the list of complaints. An analysis by ClimateWire that appeared in the New York Times in January had industry boosters blaming the federal Department of Energy for its slow pace in issuing loan guarantees.

    We won’t know the success or failure of the Abengoa plant in Kansas for some time, and now we taxpayers are placed in the position of hoping that it succeeds. But it has the pedigree of a government plan to correct a perceived market failure, and that’s a danger sign.

    Both Kansas Senators Pat Roberts and Jerry Moran have spoken approvingly of this plant despite the government intervention involved; Moran in a statement after the announcement, and Roberts in previous years as plans were being made. U.S. Representative Tim Huelskamp, who represents the district where the plant is located, has not commented on this plant, and offered no comment for this story.

  • Kansas and Wichita quick takes: Monday October 3, 2011

    Wichita City Council. Tomorrow the Wichita City Council considers these items: First, the council will have a do-over of a public hearing it held on September 21st. The need for this arises from a mistake regarding proper notification. Mistakes like this are not uncommon at Wichita city hall. … Then the council considers revising the development agreement for the Ken-Mar TIF district. More about that at Ken-Mar TIF district, the bailouts. … The council will be asked to approve an agreement with Service Employees International Union (SEIU) Local 513 providing for pay raises of 2.5 percent per year for the next two years. … As always, the agenda packet is available at Wichita city council agendas.

    What if the NFL Played by Teachers’ Rules? Writing in the Wall Street Journal, former NFL quarterback Fran Tarkenton explains the harm of teachers unions (What if the NFL Played by Teachers’ Rules? Imagine a league where players who make it through three seasons could never be cut from the roster.): “Teachers’ salaries have no relation to whether teachers are actually good at their job — excellence isn’t rewarded, and neither is extra effort. Pay is almost solely determined by how many years they’ve been teaching. That’s it. After a teacher earns tenure, which is often essentially automatic, firing him or her becomes almost impossible, no matter how bad the performance might be. And if you criticize the system, you’re demonized for hating teachers and not believing in our nation’s children. … Perhaps no other sector of American society so demonstrates the failure of government spending and interference. We’ve destroyed individual initiative, individual innovation and personal achievement, and marginalized anyone willing to point it out.”

    Do-nothing Hoover? A new briefing paper from the Cato Institute (Herbert Hoover: Father of the New Deal) challenges the commonly-held view of President Herbert Hoover as doing nothing to prevent or fix the Great Depression. “Politicians and pundits portray Herbert Hoover as a defender of laissez faire governance whose dogmatic commitment to small government led him to stand by and do nothing while the economy collapsed in the wake of the stock market crash in 1929. In fact, Hoover had long been a critic of laissez faire. As president, he doubled federal spending in real terms in four years. He also used government to prop up wages, restricted immigration, signed the Smoot-Hawley tariff, raised taxes, and created the Reconstruction Finance Corporation — all interventionist measures and not laissez faire. Unlike many Democrats today, President Franklin D. Roosevelt’s advisers knew that Hoover had started the New Deal. One of them wrote, ‘When we all burst into Washington … we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administration itself.’ Hoover’s big-spending, interventionist policies prolonged the Great Depression, and similar policies today could do similar damage. Dismantling the mythical presentation of Hoover as a ‘do-nothing’ president is crucial if we wish to have a proper understanding of what did and did not work in the Great Depression so that we do not repeat Hoover’s mistakes today.” … Well worth reading.

    Kansas school cash. “A new report this month shows that cash reserves in Kansas’ 286 school districts grew 9 percent during the year ending June 30, even as schools statewide made plans to trim staff and cut programs because of reductions in basic state aid to education. The cash reserve increase is the sixth in as many years.” See Kansas Reporter, “Lawmakers question Kansas schools’ stashes of cash.”

    John Locke to appear in Wichita. This week’s meeting (October 7th) of the Wichita Pachyderm Club presents John Locke — reincarnated through the miracle of modern technology — speaking on “Life, Liberty, and Property.” This promises to be informative and entertaining. The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club … Upcoming speakers: On October 14th, Lieutenant Governor Jeff Colyer, M.D. Speaking on “An update on the Brownback Administration’s ‘Roadmap for Kansas’ — Medicaid Reform” … On October 21st, N. Trip Shawver, Attorney/Mediator, on “The magic of mediation, its uses and benefits.” … On October 28th, U.S. Representative Tim Huelskamp, who is in his first term representing the Kansas first district, speaking on “Spending battles in Washington, D.C.”

  • Free market energy solutions don’t jeopardize national security

    By Mike Pompeo (R-KS) and Jeff Flake (R-AZ), Republican Members of Congress.

    This is not the first time Rep. Pompeo has spoken in favor of free markets for energy. As reported in the Wichita Eagle in May: “Rep. Mike Pompeo, R-Wichita, wants Congress to just say ‘no’ to all energy subsidies.” He has also introduced H. Res. 267, which is subtitled “Expressing the sense of the House of Representatives that the United States should end all subsidies aimed at specific energy technologies or fuels.” Following is an article by Pompeo and Rep. Flake, a version of which appeared in the Washington Examiner.

    Details of the Solyndra scandal continue to unfold, but what we know so far should teach a valuable lesson: The government should not be in the business of picking winners and losers in the energy industry. With half a billion taxpayer dollars now likely gone forever, you would think the Obama Administration would learn. Unfortunately, it has not. The Department of Energy said in a recent blog posting, “We have always recognized that not every one of the innovative companies supported by our loans and loan guarantees would succeed, but we can’t stop investing in game-changing technologies that are key to America’s leadership in the global economy.” Translation: We’re not that good at manipulating the energy industry, but we’re not going to stop anytime soon.

    By spurring development of the politically-favored alternative fuel of the moment, devotees of federal energy subsidies say that we can stop sending dollars overseas. Interests ranging from wind to solar, from propane to biodiesel, from natural gas to algae purport to provide the key to America’s energy and national security needs. Unfortunately, even some conservatives appear to have fallen for this ruse.

    We can agree that having less oil imported from the Middle East would improve America’s national security interests. However admirable that goal, having Congress and the President pick winners and losers in the energy sector is neither practical nor principled.

    Let’s begin with what we know: national security interests compel us first and foremost to get our financial house in order. We agree with Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, when he said, “Our national debt is our biggest national security threat.” With the federal debt estimated to hit $25 trillion by 2021, the United States cannot continue throwing billions of taxpayer dollars away on federal energy subsidies. In 2009 alone, the government gave over $18 billion in handouts to a wide variety of energy sources, including wind, hydrogen, natural gas, oil, and ethanol. We simply cannot keep wasting money on federal energy subsidies.

    Not only are federal energy subsidies that try to artificially inspire a market for a given product unaffordable, they simply aren’t effective. Subsidy policy toward the renewable and alternative fuels industry has been tried for more than three decades (from President Carter’s Synfuels Corporation in the early 1980s to President Obama’s Solyndra just this year) — and it has failed.

    Alternative energy producers often say that consumers have just not yet caught on to how wonderful the subsidized product is. All we need, they say, are just five years of handouts and everything will be okay. And when those five years are up? These same folks come back for more because customer demand alone will not support the industry as it becomes accustomed to relying on government handouts. It’s precisely this kind of phenomenon that led President Reagan to observe that “nothing is so permanent as a temporary government program.”

    The constant pursuit of federal tax subsidies also keeps some private capital on the sidelines that would otherwise be invested in alternative energy. What private company wants to compete with the federal government? This failed history makes the continued push for energy subsidies by some supposed-conservatives all the more puzzling.

    With gas prices continuing to skyrocket and the federal subsidy policy continuing to fail, how can we make U.S. energy policy reflect our national security interests? First, we must lift the de facto moratorium on domestic energy exploration — off the Gulf Coast, on the Outer Continental Shelf, and elsewhere. Second, we must remove other regulatory burdens, such as the threat that EPA will halt hydraulic fracturing. And finally, we have to stop using taxpayer dollars to pick winners and losers in the energy sector. With these commonsense steps, we can achieve successful energy reform.

    Phasing out market-distorting energy subsidies, preventing the expansion of existing subsidies, and stopping the creation of new ones (for the “latest, greatest” technology) must be part of the overall strategy. Many subsidies, such as fuel tax credits for ethanol, hydrogen, and natural gas, are set to expire soon. There is no reason to pile on our debt while simultaneously distorting the energy market for fuel products that can stand on their own. It is far better for government to keep its thumb off the scale and allow market competition to determine which alternative energy source or sources will succeed.

    Forking over taxpayer handouts in the name of national security does not change that simple truth. Although subsidy seekers argue that OPEC’s dominant position in the world oil market means that government intervention in the energy marketplace is warranted, there is a major flaw in that logic. If collusion by the OPEC cartel really boosts the price of oil artificially high, then alternative fuels should have an easier time competing against it without a subsidy.

    A real conservative solution to energy security requires less government, not more. Looking at our energy policy through a national security lens only strengthens the argument for relying on free-market solutions. When it comes to national security, we cannot afford to abandon free-market principles. As the Solyndra example demonstrates, the stakes are simply too high to cast aside the single best arbiter of capital allocation in human history — the free market — in favor of misguided central planning via government mandate.

  • Citizen activists launch protest petition in response to Wichita City Council vote on hotel development

    A press release from Americans for Prosperity, Kansas.

    For Immediate Release — Sept. 14, 2011
    Contact: Susan Estes, 316-681-4415

    WICHITA, KAN. — Despite hearing from numerous local residents speaking in opposition to the project yesterday, the Wichita City Council approved a number of public incentives for a hotel development in downtown Wichita. In response, the Wichita chapter of the grassroots group Americans for Prosperity plans to work to overturn part of the incentive package.

    “It’s apparent that a majority of Wichita City Council members don’t understand simple economics and are determined to continue hand-picking winners and losers in the marketplace,” said AFP-Kansas state director Derrick Sontag. “They hide under the guise of ‘job creation’ when in fact all they are doing is taking taxpayer money and using it against real job creators in the private sector — the ones who don’t rely on government handouts.”

    “But the real losers in this project are the people of Wichita, the majority of whom we believe do not approve of subsidizing a boutique hotel in downtown Wichita. The signatures gathered in our protest petition effort will represent citizens who for the most part are not able to attend city council meetings, but are voicing their disapproval of this type of taxpayer funded expenditure.”

    AFP’s Wichita group plans to launch an effort to overturn the council’s approval of a charter ordinance allowing the developer to use a special tax for its own purposes. The group will collect signatures on a protest petition, and will have 60 days after the charter ordinance’s final publication to gather the needed signatures to put a stop to the guest tax incentive.

    “Yesterday’s vote in the city council to approve public incentives for a private development was disappointing,” said AFP-Kansas Field Director and Wichita resident Susan Estes. “Thanks to this vote, Wichita taxpayers will be paying for a development that should be funded privately.”

    “And aside from our philosophical opposition to such a project, the proposal to refund 75 percent of the hotel’s guest tax simply turns the idea of taxation on its head. Taxation is a public function the government uses to pay for public services such as public safety, schools and infrastructure. However, in this case we are allowing private interests to use a public function for their own purposes.”

    Additionally, funneling 75 percent of a hotel’s guest tax back to it for its exclusive use is not compatible with current city policy, Estes said. According to a description of the Tourism and Convention Fund in the city budget, the goal of the guest tax is to “support tourism and convention, infrastructure, and promotion of the City.” Its outlined priorities are to be “debt service for tourism and convention facilities, operational deficit subsidies, and care and maintenance of Century II.”

    Upon successful completion of the petition, the city council could either vote to rescind the charter ordinance on the guest tax usage or hold an election so Wichita voters can decide on the matter.

    Residents will be able to learn more about what AFP is doing to keep taxpayer dollars out of private developer’s coffers and to join our efforts by visiting dtwichita.com.

    Americans for Prosperity (AFP) is a nationwide organization of citizen-leaders committed to advancing every individual’s right to economic freedom and opportunity. AFP believes reducing the size and intrusiveness of government is the best way to promote individual productivity and prosperity for all Americans. AFP educates and engages citizens to support restraining state and federal government growth and returning government to its constitutional limits. AFP is more than 1.7 million activists strong, with activists in all 50 states. AFP has 31 state chapters and affiliates. More than 85,000 Americans in all 50 states have made a financial contribution to AFP or AFP Foundation. For more information, visit www.americansforprosperity.org

    Americans for Prosperity does not support or oppose candidates for public office.