Voice For Liberty

Tag: Interventionism

  • Kansas and Wichita quick takes: Friday March 25, 2011

    Elections coming up. On Tuesday April 5 voters across Kansas will vote in city and school board elections. Voting has been underway for about a week through the advance voting process. For those who haven’t yet decided, here’s the Wichita Eagle voter guide. You can get a list of the candidates, along with their responses to questions, customized for your address.

    Campaign signs. The placement of political campaign signs can be an issue. Here is a City of Wichita letter describing placement rules, and a diagram. … If you live in a neighborhood with covenants prohibiting campaign signs, the covenants don’t apply at election time. See In Kansas, political signs are okay, despite covenants.

    In Kansas, cutting unnecessary spending can avoid service cuts. Following up on Kansas state agency spending, Kansas Policy Institute finds examples of spending on overtime, advertising, cell phones, and dues, memberships and subscriptions totaling $50 million. KPI president Dave Trabert remarked: “Hardly a day goes by that we don’t see some group or state agency saying they will have to cut necessary services if their funding is reduced, but it’s pretty clear that there are lots of other ways to reduce spending. Some degree of spending in these categories is understandable, but the data clearly show that large amounts of taxpayer money are being spent unnecessarily.” Other examples uncovered by KPI: “The Legislature spent $144,408 to join the National Council of State Legislators and also spent $107,022 to join the Council of State Governments. The Governor’s office bought memberships in three governors’ associations: the National Governor’s Association ($83,800), the Western Governors’ Association ($36,000) and the Midwestern Governors’ Association ($10,000).” More is in the KPI press release K-State #1 in Cell Phone Spending: Cutting unnecessary spending can avoid service cuts.

    March to Economic Growth stalled. The Kansas House of Representatives has passed a bill that would gradually reduce Kansas personal and corporate income tax rates. The so-called MEGA bill wold create a mechanism where if revenue flowing to the state increases, income tax rates would be reduced proportionally, after adjusting for inflation. Besides lowering these tax rates, which would make Kansas more attractive to business and jobs, the bill would also decrease the rate of growth of spending. But Senate leadership, namely its president, doesn’t care for the bill, so it appears it is dead this year. Last year Senate President Stephen Morris was strongly in favor of the statewide sales tax increase. Despite being a member of the Republican Party, he is part of the Senate’s liberal wing, according to the Kansas Economic Freedom Index and other legislative ratings.

    Open records under attack. CommonSense with Paul Jacob reports on efforts underway in Utah to reduce citizens’ ability to learn about their government: “House Bill 477 changes the core of the GRAMA law, mandating that citizens must prove they deserve access to records, rather than the previous rule requiring government officials to show cause for why a document should not be released. The legislation also exempts text messages, emails and voicemails from being disclosed, the better to keep lobbyists and special interests out of the limelight.” The Daily Herald wrote: “The principle of open government now would apply only when ‘the public interest favoring access to the record outweighs the interest favoring restriction of access to the record,’ in the opinion of the government.” … This bill actually became law, but so much public opinion was roused that it is likely the Utah legislature will overturn the act, according to reports. … Jacob’s email on this matter was subtitled “Paul Jacob notices nearly absolute power corrupting GOP legislators in Utah.”

    Ignorant or just ill-informed? L. Brent Bozell in Investor’s Business Daily: “Anyone who’s ever seen Jay Leno do one of his ‘Jaywalking’ segments on NBC, locating average Americans and asking them factual questions on street corners, knows there are far too many Americans who know next to nothing about just about everything. They can’t name our first president or don’t know what the phrase ‘Founding Fathers’ means. Ask them to name our current vice president and watch the brain waves flat line. Newsweek magazine recently announced its disgust after it offered the government’s official citizenship test (the one we require immigrants to pass before being naturalized) to 1,000 Americans. Thirty-eight percent of the sample failed. Newsweek worried in its headline: ‘The country’s future is imperiled by our ignorance.’” Locally, I am reminded of the Kansas Policy Institute and its survey of Kansans and their knowledge of school spending. Regarding that, I reported: “When talking about Kansas school spending, few Kansans have accurate information. Those with children in the public school system are even more likely to be uninformed regarding accurate figures.”

    Government spending overrides privates spending. The last two days have featured readings from Robert P. Murphy’s book Lessons for the Young Economist on the importance of profits and loses in guiding investment, and how government is unable to calculate its profit or loss. Today, Murphy explains government spending and the political process: For example, suppose the government decides to build a public library in order to make books and internet access free to the community. Because the government only has a limited budget, it won’t do something ridiculously wasteful such as coating the library with gold, or stocking the shelves with extremely rare first editions of Steinbeck and Hemingway novels. Suppose the government tries to be conscientious, puts out bids to several reputable contractors, and has a modest library constructed for $400,000. Yet even if outside auditors or investigative journalists could find nothing corrupt or shocking about the process, the question would still remain: Was it worth it to spend $400,000 on building this particular library, in this particular location? The crucial point is that we know one thing for certain: No entrepreneur thought that he could earn enough revenues from charging for book borrowing to make such an enterprise worthwhile. We know this because the library didn’t exist until the government used its own funds to build it! One way to think about government expenditures is that they necessarily call forth the creation of goods and services that people in the private sector did not deem worth producing. When the government spends money, it directs resources away from where private spending decisions would have steered them, and into projects that would not be profitable if private entrepreneurs had produced them relying on voluntary funding. Thus the political authorities in an interventionist economy face one-half of the socialist calculation problem. … The government in essence is a giant distributor of charitable donations. Even those citizens who welcome the concept should ask themselves: Why do we need to route our donations through the political process? Why not decentralize the decisions and allow each person to donate his or her funds to the various charities that seem most worthy? … Regardless of its possible benefits, government spending suffers from the calculation problem afflicting socialism. The system allows a select group of political authorities to override the input of private individuals in how (some of) their property should be used to steer resources into various projects. This is a very serious drawback for anyone who favors interventionism as a way to increase the “general welfare,” however defined.

    Kansas income is growing. While still lower than its peak in 2008, wage and salary income in Kansas is on the way up, and has been throughout 2010.

    iPhone screen

  • Kansas and Wichita quick takes: Thursday March 23, 2011

    Owens still blocks judicial selection reform. Kansas Reporter writes that one man, Senator Tim Owens, an attorney and Republican from Overland Park, is still blocking judicial selection reform. But a move by the House gives Senate President Stephen Morris a chance to let Senators vote to concur with the reform measure passed by the House. Or, Morris could refer the measure to Owens’ Judiciary committee, where it will die. See New way of picking appeals judges gets second shot.

    Greed is killing Detroit. Greed is often portrayed as a negative quality of the rich. But Investor’s Business Daily tells what happens when union greed — yes, everyone can be greedy — runs wild in a city: “Census data released Tuesday show Detroit’s population has plunged 25% since 2000 to just 713,777 souls — the same as 100 years ago, before the auto industry’s heyday. As recently as the 1970s, Detroit had 1.8 million people. What’s happening is no secret: Detroiters are fleeing an economic disaster, the irreversible decline of the Big Three automakers. … Sure, a lot of the blame goes to a generation of bad management. But the main reason for Detroit’s decline is the greed of the industry’s main union, the UAW, which priced the Big Three out of the market.” … Having killed the goose with the golden egg once, union leadership seeks seek to do it again: “Even as Detroit collapses, new UAW chief Bob King promises to ‘pound’ the transplants into submission and force them to drink his union’s poison, too. Given what we know, every town that is now home to a foreign automaker should be very afraid. If King has his way, they’ll soon suffer Detroit’s fate.”

    Liberal Bias at NPR? Stephen Inskeep, co-host of the National Public Radio program Morning Edition, defends his network against charges of liberal bias. In The Wall Street Journal Inskeep writes that NPR draws an audience with diverse political views, including conservatives: “Millions of conservatives choose NPR, even with powerful conservative alternatives on the radio.” Which, I would say, is all the more reason why the network should stand on its own without government funding. … Inskeep also writes about the recent undercover video by James O’Keefe, who NPR claims, through a spokesperson, to have “inappropriately edited the videos with an intent to discredit” NPR. If true, shame on O’Keefe. The NPR spokesperson concedes that then-NPR chief fundraiser Ron Schiller made some “egregious statements.”

    Electric cars questioned. Margo Thorning writing in The Wall Street Journal, explains that the new crop of all-electric or near-all-electric cars not worthy of government support. She notes the Consumer Report opinion of the Chevrolet Volt: “isn’t particularly efficient as an electric vehicle and it’s not particularly good as a gas vehicle either in terms of fuel economy.” … Batteries remain a problem: “A battery for a small vehicle like the Nissan Leaf can cost about $20,000 and still only put out a range of 80 miles on a good day (range is affected by hot and cold weather) before requiring a recharge that takes eight to 10 hours. Even then, those batteries may only last six to eight years, leaving consumers with a vehicle that has little resale value. Home installation of a recharging unit costs between $900 and $2,100.” … Thorning notes that half of the electricity that powers America is generated by coal, so all-electric cars are still not free of greenhouse gas emissions. Also, “a substantial increase in the numbers of them on the road will require upgrading the nation’s electricity infrastructure.” … While electric cars are not ready to save the earth, the U.S. government insists on intervention: “Despite these significant flaws, the government is determined to jump-start sales for plug-ins by putting taxpayers on the hook. The $7,500 federal tax credit per PEV is nothing more than a federal subsidy that will add to the deficit. There are also federal tax credits for installing charging stations in homes and businesses and for building battery factories and upgrading the electric grid. The administration’s goal — one million PEVs on the road by 2015 — could cost taxpayers $7.5 billion.” And saddle Americans with expensive automobiles that do little to address the problem they’re designed to solve. Reading the Journal article requires a subscription, but it is also available at The American Council for Capital Formation, where Thorning is Senior Vice President and Chief Economist.

    Government as business. Yesterday’s reading from Robert P. Murphy’s book Lessons for the Young Economist explained the value of the profit-and-loss system in guiding resources to where they are most valued. For those who wan to “run government like a business” I offer today’s excerpt from the same book, which explains how lack of the ability to calculate profit means this can’t happen: [Regarding a capital investment made by Disney as compared to government:] The crucial difference is that the owners of Disneyland are operating in the voluntary market economy and so are subject to the profit and loss test. If they spend $100 million not on personal consumption (such as fancy houses and fast cars) but in an effort to make Disneyland more enjoyable to their customers, they get objective feedback. Their accountants can tell them soon enough whether they are getting more visitors (and hence more revenue) after the installation of a new ride or other investment projects. Remember it is the profit and loss test, relying on market prices, that guides entrepreneurs into careful stewardship of society’s scarce resources. In contrast, the government cannot rely on objective feedback from market prices, because the government operates (at least partially) outside of the market. Interventionism is admittedly a mixture of capitalism and socialism, and it therefore (partially) suffers from the defects of socialism. To the extent that the government buys its resources from private owner — rather than simply passing mandates requiring workers to spend time building bridges for no pay, or confiscating concrete and steel for the government’s purposes — the government’s budget provides a limit to how many resources it siphons out of the private sector. (Under pure socialism, all resources in the entire economy are subject to the political rulers’ directions.) However, because the government is not a business, it doesn’t raise its funds voluntarily from the “consumers” of its services. Therefore, even though the political authorities in an interventionist economy understand the relative importance of the resources they are using up in their program — because of the market prices attached to each unit they must purchase — they still don’t have any objective measure of how much their citizens benefit from these expenditures. Without such feedback, even if the authorities only want to help their people as much as possible, they are “flying blind” or at best, flying with only one eye.

  • Quantitative easing: another round?

    With uncertainty on the rise globally, talk of a new round of quantitative easing — it would be QE3 — is increasingly common. QE is a policy where the U.S. Federal Reserve System creates additional money through its open market operations.

    Last year the Fed announced QE2, a policy of buying $600 billion in bonds, meaning that $600 billion in new money will have been created by the time the program ends in June. While it is commonly said that the Fed prints new money to pay for these bonds, the bonds are paid for via bookkeeping entries, sort of an electronic bill pay system between the Fed and banks who sell the bonds. That’s even cheaper than printing stacks of $100 bills. Reason explains in more detail how QE works:

    One simplified way to describe how this round of quantitative easing will work is this: The Fed doles out $600 billion in made-up money to the world’s biggest banks, who make a tidy profit on the sale and then split that profit up into bonuses. As Reuters financial blogger Felix Salmon writes, “We’re not exactly helping the unemployed here.”

    The actual process is slightly more complicated, but not much more appealing. Once the members of the Federal Open Market Committee vote to buy additional bonds, the Fed schedules a series of sales, and notifies the banks on its list of primary dealers — 18 very large banks. Those banks then buy up bonds with the intention of selling them at higher rates to the Fed. And then when the scheduled sales come around, they trade their store of bonds for money that the Fed has newly created, as The Washington Post explained, “essentially out of thin air.” Interest rates go down. Inflation goes up. Investors, knowing that money is cheap now and might not be worth as much later, start to spend. The economy gets back in gear.

    At least that’s the idea. It’s not the first time the Fed has pursued the QE strategy (hence QE2), and the first go-round wasn’t an obvious success. When the financial crisis first landed, the Fed pumped $1.7 trillion into the system, yet failed to lift the economy out of its sluggish state. By the time this round of quantitative easing ends, the Fed will have added almost $3 trillion to the money supply — and that’s if it quits with $600 billion.

    One major worry is that all that extra currency will only lead to out of control inflation.

    For another explanation of QE and whether it works, a video from last November explains.

  • In Wichita and Kansas, economic development is not working

    The effort of Wichita and Kansas to retain Hawker Beechcraft, one of our leading employers and a Wichita institution, provides a lesson in the futility of corporate welfare as an economic development policy: Someone is usually willing to pay more. We would be much better off if we start transforming Kansas to a state where all companies are nurtured, not by bureaucratic and political oversight and handouts, but by a low taxing and spending environment, and a reasonable regulatory regime.

    Recently I was shown a listing of all the industrial revenue bonds (IRBs) that Hawker Beechcraft and its predecessors have been authorized over the last 20 years. The number is large: $1.2 billion. This is not money that any governmental body has lent to Hawker Beechcraft. The purpose, instead, of the IRB program is to allow companies to escape paying property tax on property purchased with the bond proceeds. In some cases, companies escape paying sales tax as well.

    It would be difficult to calculate how much tax Hawker Beechcraft and its predecessors have not paid due to the abatements, but it is a lot. The company still pays some property tax. Records from the Sedgwick County Treasurer’s system indicate the company paid $971,073 in tax year 2009.

    When asking for tax breaks like this, companies often point out that they hire many people and pay good wages, so the taxing entities make up their money in other ways. That may be true. In fact, the cost-benefit analysis the city and county use make just that reckoning: if we give up collecting some tax from a company, how much additional tax will we collect from everyone else? Perhaps government officials don’t realize that much of this “benefit” is simply taxes shifted to someone else.

    Nonetheless, politicians and bureaucrats call this making an investment in, say, Hawker Beechcraft or whatever company is asking for tax breaks at the moment. The problem is that we don’t know if investing in these companies is the right investment, if government should be making these investments at all.

    Somewhere in Wichita or Kansas there a small unknown company that has half a dozen or so employees — maybe more, maybe less — that is working on some innovation. If we’re lucky, we have many such companies. These companies could be working on a new technology, manufacturing process, computer software, video game, internet site, food processing technology, retail concept, chemical process, restaurant idea, engineering methodology, agricultural process, airplane wing — we just don’t know. Many will fail. But some will succeed, and few will, hopefully, succeed in a big way.

    But these small startup companies may not fit in to the economic development programs the city and state have. Some people may not even think of looking to government for economic development assistance, as when I interviewed a successful Vietnamese grocer in Wichita. He didn’t know “where to dig” for government handouts.

    Any of these now-small companies could become the next Microsoft, Google, Home Depot, or Pizza Hut. We just don’t know which. But these companies, when in small startup stage, struggle to pay the taxes that large companies are able to escape. Being small, they may also be disproportionally impacted by regulation. It’s not necessarily the case that a small startup aviation company is competing directly with Hawker Beechcraft and is handicapped by the larger company’s tax advantages. But these two companies could be competing for the same employees, for example, and that puts the smaller company at a disadvantage.

    How can we identify which companies are deserving of government subsidy? Which companies should have their tax burden softened at the expense of others? Allocating resources — deciding what to do — in the face of uncertainty is the crux of entrepreneurship. It’s something that government is not equipped to do, as its incentives and motivations are all wrong.

    For politicians, the prime motivation is to be reelected. It is rare that the time horizon of a politician extends beyond the next election.

    For bureaucrats, the motivation is to expand their sphere of influence and power.

    Neither of these motivations are compatible with entrepreneurship. Some are not compatible in any way with running a business. For example, a business firm looks at its employees as a cost that must be managed and controlled if a profit is to be made and the firm survive. But to government, spending on employees is a social benefit, and one that is paid for by someone else.

    Another problem is the nature of knowledge. In a recent issue of Cato Policy Report, Arnold King wrote:

    As Hayek pointed out, knowledge that is important in the economy is dispersed. Consumers understand their own wants and business managers understand their technological opportunities and constraints to a greater degree than they can articulate and to a far greater degree than experts can understand and absorb.

    When knowledge is dispersed but power is concentrated, I call this the knowledge-power discrepancy. Such discrepancies can arise in large firms, where CEOs can fail to appreciate the significance of what is known by some of their subordinates. … With government experts, the knowledge-power discrepancy is particularly acute.

    I emphasized the last sentence to highlight the problem of the dispersed nature of knowledge.

    There are other problems with government management of economic development. We need to move away from this and towards a free market approach to economic development. This will take some time, and until then, we’re forced to defend our industry from other states, as we are presently doing with Hawker Beechcraft.

    But if we don’t start transforming Kansas, we’ll be doing this forever. And someone else always seems to have more money to spend.

  • Kansas and Wichita quick takes: Monday October 18, 2010

    Last day to register to vote. Today is the last day to register to vote in the November general election in Kansas. Contact your county election office for details.

    Democratic foreign campaign money. “Democratic leaders in the House and Senate criticizing GOP groups for allegedly funneling foreign money into campaign ads have seen their party raise more than $1 million from political action committees affiliated with foreign companies. … Republicans with groups under fire from the White House say the hefty campaign contributions illustrate Democratic hypocrisy.” More at The Hill: Dems have raised more than $1 million this cycle from foreign-affiliated PACs. Related: Axelrod, Gibbs keep up Dems’ offensive on Chamber donations.

    Rasmussen polls from last week. 55% Favor Repeal of Health Care Law: “The majority of U.S. voters continue to favor repeal of the new national health care law but are slightly less emphatic about the impact the law will have on the country. Confidence in home ownership falls: “Now more than ever, homeowners expect to see the value of their home go down over the next year. A new Rasmussen Reports survey finds that 32% expect the value of their home to decrease over the next year, the highest finding since Rasmussen Reports began asking the question regularly in December 2008.” Generic Congressional ballot: “With just three weeks to go until Election Day, Republicans hold an eight-point lead on the Generic Congressional Ballot. Polling for the week ending Sunday, October 10, shows that 47% of Likely Voters would vote for their district’s Republican congressional candidate, while 39% prefer the Democrat.”

    Waiting for Superman to open in Wichita. Opens October 22 at the Warren Theater on East 13th in Wichita. Check the website for show times. Of the film, the Wall Street Journal wrote: ” The new film “Waiting for ‘Superman’” is getting good reviews for its portrayal of children seeking alternatives to dreadful public schools, and to judge by the film’s opponents it is having an impact. Witness the scene on a recent Friday night in front of a Loews multiplex in New York City, where some 50 protestors blasted the film as propaganda for charter schools.” In Kansas, the Wichita Eagle printed an op-ed penned by the education bureaucracy status quo — Sharon Hartin Iorio, dean of the Wichita State University College of Education in this case — to inoculate Wichitans against the effects of what I am told is a powerful film. Let’s hope this film gets Kansans to thinking about public schools in our state, as Kansas is way behind the curve on innovation, compared to other states.

    Democratic political activists wanted. Craigslist ad: “The Kansas Coordinated Campaign (Democrat) seeks passionate and hard-working persons to do paid door-to-door voter contact in Sedgwick. This is not a fundraising position, and is exclusively focused on ensuring that Democratic voices are heard this November.” Pay is $9/hour. An earlier ad from September: “Looking for several energetic people to work with a small campaign and make sure that Kansas voices are heard in the government! Looks great on resumes, etc. Must be able to work 8-12 hours a week (weekends and/or evenings). Registered Democrats only, no felony convictions.” That job advertised pay of $10/hour.

    Energy to be topic at Wichita Pachyderm. This Friday’s meeting of the Wichita Pachyderm club will feature John A. McKinsey speaking on the topic “Cap and Trade: What is the economic and regulatory impact of Congressional legislation?” The public is welcome at Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club.

    Trackers at work. The Kansas City Star explains the role of trackers in political campaigns: “Martin’s job is to follow and film political opponents — and try to catch them in a misstep. Trackers like Martin, who works for the Kansas Democratic Party, have become a fixture of modern political campaigns. They now are so common that many political consultants say campaigns are behind the times if they don’t employ one.” In the Kansas fourth Congressional district campaign, Democrat Raj Goyle employes a tracker to follow Republican Mike Pompeo. At the several events where I’ve seen him, he hasn’t asked a question. Here’s some video, apparently shot by the tracker himself, in which Republican National Chairman Michael Steele has a little good-natured fun at the tracker’s expense at a Pompeo campaign event. When asked by me, the Pompeo campaign would not reveal if they use a tracker.

    Kansas owes — a lot. From Kansas Budget Watch, a project of the Institute for Truth in Accounting: “One of the reasons Kansas is in this precarious position is state officials used antiquated budgeting and accounting rules to determine payroll costs. Truthful accounting would include in the payroll costs the portion of pension benefits employees earn every year they work. Accurate accounting provides that these real and certain expenses be reported on the state’s budget, balance sheet and income statement when earned, not when paid. Because the pension benefits are not immediately payable in cash, Kansas’ politicians have ignored most of these costs when calculating ‘balanced’ budgets. More than $8.5 billion of these and other costs have been pushed into the future, and thus onto your children’s and grandchildren’s backs.” See Financial State of Kansas for more. Whenever the shortfall of funding KPERS, the Kansas Public Employee Retirement System, is mentioned, public sector employees attack the messenger rather than facing the reality of the situation. Their strategy, as it is for a majority of legislators, is to pass along this funding shortfall to a future generation. This is dishonest, and a reason why the public employee pension system needs reform — now.

    Sales tax changes could scuttle grocery store CID. A proposal by Kansas Senator Dick Kelsey to eliminate the sales tax on groceries in Kansas could have an impact on a Wichita grocery store’s plans. The store, a Save-A-Lot proposed to be built in Planeview, would use the state’s Community Improvement District law to allow it to collect an extra two cents per dollar sales tax. Question: If the state stopped taxing groceries, could the store still collect the two cents per dollar CID tax? I’m guessing the answer is no. The store’s developer made the point that many of the stores customers use the food stamp program, so they don’t pay tax anyway. And non-grocery items like household supplies would still be taxed (probably), so there’s some sales tax and CID tax there. Here’s an example of how relying on government and politicians adds extra uncertainty and risk to entrepreneurial activity, as if market risk wasn’t enough already. Although I would say that those like Rob Snyder, the developer of the proposed store, who seek government subsidy to back their ventures can hardly be classified as entrepreneurs — at least not the type we need more of.

    TIF for rich, bit not for poor? A letter writer in yesterday’s Wichita Eagle writes: “Tax-increment financing districts have been used to provide millions of dollars to developers in their attempts to revitalize downtown Wichita. Blocking $400,000 for Planeview implies that buildings downtown are of far greater importance than the concern for human beings living in one of the poorest communities in Sedgwick County.” This is an issue the city has to grapple with, although it was the county commission that rejected the formation of the TIF district. The writer continues with a moral plea: “What has happened to our morality and our concern for and recognition of the needs of those who are less fortunate?” Morality is one of the reasons why I and my friend John Todd have opposed all TIF districts, regardless of location and purpose. That, and the fact that they don’t work — if growth in the entire community is the goal, instead of enriching specific people.

    Organist Massimo Nosetti. Tuesday Italian organist Massimo Nosetti will perform a recital as part of the Rie Bloomfield Organ Series. The recital starts at 7:30 pm in Wiedemann Recital Hall (map), on the campus of Wichita State University. Cost is $10.

    Wichita Eagle Opinion Line. “Am I the only one offended by Russ Meyer’s comment that ‘Anybody who is dumb enough to run against Carl (Brewer) is not qualified to be the mayor of Wichita’? When did Meyer become God?”

  • Kansas and Wichita quick takes: Wednesday October 13, 2010

    FactFinder 12: Goyle campaign ad. From KWCH Television: “FactFinder 12 found no evidence Sentry International directly outsourced manufacturing work, only that it partners with companies in China and many other countries to purchase foreign made products.” What’s not talked about in regard to this issue is that U.S. companies don’t manufacture products overseas just for the heck of it. Competitive pressures force them to.

    The energy future will look familiar. George Will takes a look at the future of energy in America. But a reminder of the past, in case you forgot: “In 1977, Jimmy Carter said mankind could ‘use up’ all the world’s proven [oil] reserves ‘by the end of the next decade.’ Since then, the world has consumed three times more oil than was in the proven reserves.”

    The truth about our jobs crisis. BankruptingAmerica.org has a short video illustrating the depth and magnitude of the crisis. “The jobs report released on Friday shows that unemployment persists at 9.6 percent. As high as this number is, it doesn’t tell the whole unemployment story.” Additional resources are available at the site.

    Sowell on government greed. “Those who are always accusing people in the private sector of “greed” almost never accuse government of greed, no matter what it does. Indeed, the question of whether the government is greedy almost never comes up, so most of us probably never think about it. … Perhaps one of the most unconscionable acts of greed by government is confiscating people’s homes, in order to turn this property over to other people, who are expected to build things that will pay more taxes.”

    Tweets from Communications Week. At Wichita State University I served on a panel on social media and political campaigns. Some tweets from the audience: “Denae Herrman: Bob Week’s advice for candidates on Twitter: Be more candid & informal. Loosen up! I agree. What makes SM fun is the interactivity.” … “Shae Blevins: @bob_weeks says Goyle, Brownback and Pompeo have failed at using social media for their campaigns in some way. UPDATE your stuff!” … “Lou Heldman: Brownback, Goyle, Pompeo campaigns criticized by @bobweeks on Elliott School panel for sometimes inept use of social media.” I’m sorry, campaigns … but it’s true.

    DCCC cuts back on Moore support. From The Atlantic: “The Democratic Congressional Campaign Committee has pulled some funding from 10 districts, canceling their ad buys in six and reducing their buys in another four. … The committee has also continued cutting time in KS 03, where Stephene Moore (D) is running for her husband’s seat.”

    Liberal Billionaires Take On The Koch Brothers In California Energy Fight. Clare O’Connor in Forbes: “Much has been written about the oil and gas billionaire Koch brothers and their multimillion-dollar donations to right-wing causes. … However, in recent days a handful of liberal billionaires have decided to take on the Kochs in one of the most hotly contested battles this election season: Proposition 23, the California ballot that may well prove a bellwether for the future of energy legislation in the U.S.”

    Election dates to note: October 13 — advance ballots start to be mailed. October 18 — last day to register to vote or change party affiliation. October 29 — last day election office will mail advance voting ballots, so make sure your application arrives at your county election office before this date. November 2 — election day.

    Obama and the Politics of Outsourcing. William S. Cohen, writing in the Wall Street Journal: “For every job outsourced to Bangalore, nearly two jobs are created in Buffalo or other American cities.” … American popular opinion: “A Wall Street Journal/NBC News poll released Sept. 28 found that outsourcing was the top reason cited by Americans as the cause of the country’s economic problems — and that for the first time in years a majority (53%) of Americans say free-trade agreements have hurt the U.S.” This sentiment is unfounded. Continuing: “Most people treat outsourcing as a zero-sum game — one foreign worker replaces one American worker. But this is not how the dynamic global economy works. … [An analysis] found that when U.S. firms hired lower-cost labor at foreign subsidiaries overseas, their parent companies hired even more people in the U.S. to support expanded operations. … Those new U.S. jobs were higher-skilled and better-paying.” The politics of it: “During difficult economic periods, people are tempted to seek refuge in the false promise of protectionism. … Politicians are not above exploiting an issue by appealing to popular sentiment even when that sentiment is belied by economic reality.” Outsourcing of Kansas jobs is the major campaign theme — and attack ad hammer — of Kansas fourth district Congressional Democrat candidate Raj Goyle.

    Will Wichita have a government “bank” to fund downtown? The Wichita Eagle reports that the Wichita contingent visiting Louisville is being pitched the benefits of a government-run fund to spur downtown development. Two takeaways: “The fund, says JPMorgan banker Louis Straub II, doesn’t provide ‘free money’ to developers. ‘It’s a loan with much more favorable terms’ than developers would get through a traditional bank loan.” I would say that sounds like free money to me — as long as you consider paying interest on a loan a cost. Then, a real whopper: “Gary Schmitt, executive vice president at Intrust Bank, said the creation of such a fund in Wichita is possible. … there is precedent for Wichita-area banks getting together to help finance downtown projects. He said it was done in the case of the Hyatt Regency Wichita, for which local banks came together and created a participation loan to finance the hotel. ‘History has shown that the banks will come together for the betterment of the community,’ Schmitt said.” So wow did that work out? The Hyatt failed and is now owned by the city of Wichita, and can operate without concerns about profit. In 2001 the Eagle editorialized: “Having a marquee downtown hotel wholly owned by a city can’t be good for stimulating more private hotel development … Who’s going to be willing to finance, build and open a hotel in direct competition with one supported by public dollars?” As we’ve seen by recent action regarding the Broadview Hotel and Fairfield Inn, no one will — unless the government contributes millions in subsidy.

    Wichita Eagle opinion line. “The reason some people can’t find voter fraud in Kansas is the same reason a thief can’t find a policeman.”

  • Hawker Beechcraft might not be viable, in Wichita or Louisiana

    News reports that the state of Louisiana has lured Wichita-based Hawker Beechcraft to relocate there is being greeted — understandably — with grave concern by Wichitans and Kansans.

    But Louisiana may be buying — and Wichita possibly losing — a company that isn’t viable, at least in its present form.

    The Wichita Business Journal reported in August on a report that recommended that Hawker Beechcraft “should forgo making jet aircraft altogether.”

    The move to Louisiana is thought to be a move to save on labor costs. But the report, as reported by the Journal, said that “cutting costs and waiting for the market to recover may not work.”

    The article is Report: Hawker should divest all but King Air.

  • Drury request for more Broadview Hotel subsidy should be rejected

    Tomorrow’s meeting of the Wichita City Council features a public hearing on the creation of a Community Improvement District to benefit Drury Southwest, developer of the Broadview Hotel in downtown Wichita.

    CIDs are a creation of the Kansas Legislature from the 2009 session. They allow merchants in a district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID.

    In this case, Drury is asking hotel guests — these are visitors to Wichita, usually — to pay an extra two cents per dollar sales tax. This CID is being constructed as “pay-as-you-go,” in which the extra sales tax is sent back to the applicant as it is collected.

    The agenda material for this item tells us that Drury suffered increased costs due to “delays to the project caused by legislative changes to the value of historic tax credits.” Last week I told the council how economic development management by government adds political uncertainty to the entrepreneurial process. The Broadview developers chose to operate in the political arena rather than the marketplace. They were hurt — they claim — and now they want politicians to make up for that.

    Drury has already received, or will receive, a huge amount of assistance from government for its work on the Broadview Hotel. Its participation in Kansas’ historic preservation tax credit program means a grant to the developers of perhaps $4 million. It is just as though the state wrote a check to Drury for that amount, and this is money that Kansas taxpayers have to make up.

    Further, Drury will escape paying much of the taxes that the rest of us have to pay. According to city information provided last week, Drury plans to spend $22,797,750 on the hotel. If we use this as the appraised value for the property when it is complete, the annual property taxes due for this property would be $22,797,750 times .25 times 126.323 divided by 1000, or $719,970. This calculation may be rough, but it gives us an idea of the annual operating subsidy being given to this hotel for the next ten years.

    Then, as part of the industrial revenue bond program this hotel is participating in, the hotel will avoid paying sales tax on purchases related to its renovation and furnishing. It’s a little ironic, then, that the hotel asks its guests to pay a special additional sales tax that benefits only the hotel.

    Finally, the city accelerated riverbank improvements that benefit the Broadview, and there’s a sweetheart sale by the city of a parking garage across the street.

    So this hotel is receiving plenty of subsidy from Wichita and Kansas taxpayers.

    Does Wichita trust its planners?

    This request by Drury for more Broadview Hotel subsidy poses a challenge to Wichita city council members. Goody Clancy, the firm that has been planning the revitalization of downtown Wichita, has proposed what seems to be a tougher stance towards government handouts to downtown developers. David Dixon, principal planner for Wichita’s planning effort, was reported in the Wichita Eagle thusly: “Dixon was clear: There will be enough private development downtown to repay taxpayers for the public investments through increases in the tax base.”

    In January’s preliminary findings, Goody Clancy told Wichita that there is a strong market for hotels in downtown Wichita. The final report states: “Downtown Wichita offers a strong potential for new lodging developments.” That implies that hotels ought to be profitable without requiring massive subsidy. But right after the preliminary finding, the city broke new ground in granting millions in subsidy to a hotel developer to build a Fairfield Inn downtown.

    The Goody Clancy plan has not yet been before the Wichita city council for formal acceptance. But most members, especially Mayor Carl Brewer, are enthusiastic about the plan.

    Tomorrow’s meeting and the action by the council will let us know if the city has the political will to take Goody Clancy’s findings and advice to heart.

  • Subsidy for Planeview Save-A-Lot grocery store bad for Wichita

    By John Todd

    I am troubled by what I see the Wichita city government doing to the owners of the Checkers Grocery store located near the Wichita Planeview neighborhood. At the public hearing before the Wichita City Council on September 14th, one of the Checkers owners testified that their grocery business has been serving the people of Planeview for many years. After listening to the owner’s testimony and listening to testimony presented by Planeview customers at the hearing, it appears obvious to me that the Checkers grocery store’s Planeview customer base is a vital part of their business.

    At the hearing, the Checkers owner expressed his opposition to the massive subsidy our city was offering the developer of the proposed Save-A-Lot grocery store in Planeview. His concern was the unfair economic advantage city government was creating for their competitor through the use of public funding programs.

    The total economic incentive package city officials were offering the Save-A-Lot project through tax increment financing (TIF) and Community Improvement Districts (CID) funding packages was $880,440 of total project cost of $2,083,430. That figure is in excess of 40 percent of the total project cost.

    I believe the Checkers grocery store owner’s concerns are valid, and the massive subsidy that the Wichita City Council has approved for their Save-A-Lot competitor is wrong. The council vote was 7 to 0 in favor of the subsidy with no consideration given by council members for Checkers or any other taxpaying grocery businesses that competes in the Wichita market.

    The CID funding program, as approved by the Wichita city council, allows the Save-A-Lot grocery store to charge an additional two cents per dollar sales tax. This extra sales tax is then given to the project developer. Under the guise of helping an economically “underserved” neighborhood, customers of the new Planeview Save-A-Lot grocery store will soon be paying 9.3 percent sales tax on their grocery purchases. This additional sales tax enriches the developer and punishes the residents of the Planeview neighborhood.

    The TIF funding program, also approved by the city council, diverts future real estate taxes into developers’ pocket instead of paying for police and fire protection and the schools that educate our children.

    The subsidy programs our city is offering the Planeview Save-A-Lot grocery project are great for the developer, but bad for competing businesses and their customers. They create an unfair advantage for other grocery stores and result in increased sales tax for the very residents it is intended to help. The grocery store will no doubt expect fire and police protection and the grocery store customers will want schools for their children. Yet, the store will not be paying anywhere near its fair share for these services, as it will continue to effectively pay the same property taxes as does a vacant lot. Perhaps these programs should be renamed “The Developer Relief Act!”

    Under TIF, the developer is the winner and the people that pay the city’s bills lose. In other words, one guy wins and the taxpaying public loses. The harm is that by exercising its power to choose winners and losers, government discourages the risk-takers that invest their own money in projects. The potential for abuse of government’s power to create winners and losers in the marketplace creates a sense of regulatory uncertainty.

    This uncertainty serves to keep private capital on the sidelines rather than being invested, as businessmen are justifiably concerned that the city may prop up a subsidized competitor in their same market. Not only do entrepreneurs have to contend with all the usual economic risks they face, they must also face political risk coming from Wichita City Hall. No one can plan ahead with this type of government involvement tampering with markets.

    Unfortunately, as is the case when government exercises its power to influence economic development outcomes, the hidden results of this intervention does more harm than good. Government mandated stimulus programs, even on the local level, are not good public policy.

    State law gives the Sedgwick County Commissionand USD 259 (the Wichita public school district) until October 14th to voice objection to the diversion of tax funds away from county services and schools and into the pocket of the Planeview Save-A-Lot grocery developer. I hope they exercise the check over local government’s abuse of local economic stimulus tools by voting to opt out the county taxpayer from the city’s abuse of their economic power. Sedgwick County commissioners need to step to the line and put a stop to this nonsense!