Voice For Liberty

Tag: Republican Party

  • Kansas STAR bonds vote tests beliefs in capitalism, economic freedom

    An upcoming vote in the Kansas Legislature, possibly today, will let Kansans know who is truly in favor of economic freedom, limited government, and free market capitalism — and who favors crony capitalism instead.

    The bill is Senate Substitute for HB2382: AN ACT concerning economic development; concerning the STAR bonds financing act; relating to the provisions regarding STAR bond projects; extending the sunset date. Under current law, the Kansas STAR bonds program will expire on July 1, 2012. This bill extends the program’s life for five years.

    The STAR bonds program allows increases in sales tax revenue to be directed to private interests rather than feeding the state treasury. The mechanism is that local governments like cities can sell bonds and give the proceeds to developers. Then, increments in sales tax revenues are used to make bond payments.

    In economic impact and effect, the STAR bonds program is a government spending program. Except: Like many spending programs implemented through the tax system, legislative appropriations are not required. No one has to vote to spend on a specific project. Can you imagine the legislature voting to grant $50 million over a period of years to a proposed development in northeast Wichita? That doesn’t seem likely. Few members would want to withstand the scrutiny of having voted in favor of such blatant cronyism.

    But under stealth-like tax expenditure programs like STAR bonds, that’s exactly what happens — except for the legislative voting part.

    Government spending programs like STAR bonds are sold to legislators as jobs programs. Development, it is said, will not happen unless project developers receive incentives through these spending programs. Since no legislator wants to be seen voting against jobs, many are susceptible to the seductive promise of jobs.

    But often these same legislators are in favor of tax cuts to create jobs. This is the case in the Kansas House, where many Republican members are in favor of reducing the state’s income tax as a way of creating economic growth and jobs. On this issue, these members are correct.

    But many of the same members voted earlier this year for a previous version of the STAR bonds extension bill. (See In Kansas, STAR bonds vote uplifted cronyism over capitalism.) These members voted in favor of a tax expenditure program. These two positions — voting for tax cuts, but voting for targeted spending through the tax system — cannot be reconciled. If government taxing and spending is bad, it is especially bad when part of tax expenditure programs like STAR bonds. And there’s plenty of evidence that government spending and taxation is a drag on the economy.

    It’s not just legislators that are holding these incongruous views. Secretary of Commerce Pat George promoted the STAR bonds program to legislators. This seems to be contrary to the spirit of tax reform plans Kansas Governor Sam Brownback promoted earlier in the session. At that time, he proposed ending spending programs implemented through the tax system. Historic preservation tax credits was a particular program that he wanted to end.

    The danger of false, or “crony” capitalism

    Last year at the time Brownback and a new, purportedly more conservative Kansas House took office, I wondered whether Kansas would pursue a business-friendly or capitalism-friendly path: “Plans for the Kansas Republican Party to make Kansas government more friendly to business run the risk of creating false, or crony capitalism instead of an environment of genuine growth opportunity for all business.” I quoted John Stossel:

    The word “capitalism” is used in two contradictory ways. Sometimes it’s used to mean the free market, or laissez faire. Other times it’s used to mean today’s government-guided economy. Logically, “capitalism” can’t be both things. Either markets are free or government controls them. We can’t have it both ways.

    The truth is that we don’t have a free market — government regulation and management are pervasive — so it’s misleading to say that “capitalism” caused today’s problems. The free market is innocent.

    But it’s fair to say that crony capitalism created the economic mess.

    But wait, you may say: Isn’t business and free-market capitalism the same thing? Not at all. Here’s what Milton Friedman had to say: “There’s a widespread belief and common conception that somehow or other business and economics are the same, that those people who are in favor of a free market are also in favor of everything that big business does. And those of us who have defended a free market have, over a long period of time, become accustomed to being called apologists for big business. But nothing could be farther from the truth. There’s a real distinction between being in favor of free markets and being in favor of whatever business does.” (emphasis added.)

    Friedman also knew very well of the discipline of free markets and how business will try to avoid it: “The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses generally prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.”

    The danger of Kansas government having a friendly relationship with Kansas business is that the state will circumvent free markets and promote crony, or false, capitalism in Kansas. It’s something that we need to be on the watch for. The vote on the STAR bonds project will let us know how our state is proceeding. If the upcoming vote goes as did the earlier votes on this matter, the verdict is clear: Kansas legislators — including many purported fiscal conservatives — prefer crony capitalism over free enterprise and genuine capitalism.

    The problem

    Government bureaucrats and politicians promote programs like STAR bonds as targeted investment in our economic future. They believe that they have the ability to select which companies are worthy of public investment, and which are not. It’s a form of centralized planning by the state that shapes the future direction of the Kansas economy.

    Arnold Kling has written about the ability of government experts to decide what investments should be made with public funds. There’s a problem with knowledge and power:

    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.

    Despite this knowledge problem, Kansas legislators are willing to give power to bureaucrats in the Department of Commerce (along with local government officials and bureaucrats) who feel they have the necessary knowledge to direct the investment of public funds. One thing is for sure: the state and its bureaucrats have the power to make these investments. They just don’t have — they can’t have — the knowledge as to whether these are wise.

    What to do

    The STAR bonds program is an “active investor” approach to economic development. Its government spending on business leads to taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

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

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

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

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

    We need to move away from economic development based on this active investor approach. We need to advocate for policies at all levels of government that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to not act in most circumstances. But politicians have an irresistible urge to be seen doing something, even though most of what is done is harmful.

  • Kansas STAR bonds vote a test for capitalism

    Update: The bill passed in the House of Representatives 92 to 31. A similar bill passed in the Senate 27 to 13.

    An upcoming vote in the Kansas House of Representatives will let Kansans know who is truly in favor of economic freedom, limited government, and free market capitalism — and who favors crony capitalism instead.

    The bill is HR 2561: Extension of the STAR bonds financing act sunset provision regarding STAR bond projects. Under current law, the Kansas STAR bonds program will expire on July 1, 2012. This bill extends the program’s life for five years.

    The STAR bonds program allows increases in sales tax revenue to be directed to private interests rather than feeding the state treasury. The mechanism is that local governments like cities can sell bonds and give the proceeds to developers. Then, increments in sales tax revenues are used to make bond payments.

    In economic impact and effect, the STAR bonds program is a government spending program. Except: Like many spending programs implemented through the tax system, legislative appropriations are not required. No one has to vote to spend on a specific project. Can you imagine the legislature voting to grant $50 million over a period of years to a proposed development in northeast Wichita? That doesn’t seem likely. Few members would want to withstand the scrutiny of having voted in favor of such blatant cronyism.

    But under tax expenditure programs like STAR bonds, that’s exactly what happens — except for the legislative voting part.

    Government spending programs like STAR bonds are sold to legislators as jobs programs. Development, it is said, will not happen unless project developers receive incentives through these spending programs. Since no legislator wants to be seen voting against jobs, many are susceptible to the seductive promise of jobs.

    But often these same legislators are in favor of tax cuts to create jobs. This is the case in the Kansas House, where many Republican members are in favor of reducing the state’s income tax as a way of creating economic growth and jobs. On this issue, these members are correct.

    But many of the same members are, I am told, in favor of tax expenditure programs like the STAR bonds program. These two positions cannot be reconciled. If government taxing and spending is bad, it is especially bad when part of tax expenditure programs like STAR bonds. And there’s plenty of evidence that government spending and taxation is a drag on the economy.

    It’s not just legislators that are holding these incongruous views. Secretary of Commerce Pat George is promoting the STAR bonds program to legislators. He wouldn’t do that unless Governor Sam Brownback supported the program.

    Last year at the time Brownback and a new, purportedly more conservative Kansas House took office, I wondered whether Kansas would pursue a business-friendly or capitalism-friendly path: “Plans for the Kansas Republican Party to make Kansas government more friendly to business run the risk of creating false, or crony capitalism instead of an environment of genuine growth opportunity for all business.” I quoted John Stossel:

    The word “capitalism” is used in two contradictory ways. Sometimes it’s used to mean the free market, or laissez faire. Other times it’s used to mean today’s government-guided economy. Logically, “capitalism” can’t be both things. Either markets are free or government controls them. We can’t have it both ways.

    The truth is that we don’t have a free market — government regulation and management are pervasive — so it’s misleading to say that “capitalism” caused today’s problems. The free market is innocent.

    But it’s fair to say that crony capitalism created the economic mess.

    But wait, you may say: Isn’t business and free-market capitalism the same thing? Not at all. Here’s what Milton Friedman had to say: “There’s a widespread belief and common conception that somehow or other business and economics are the same, that those people who are in favor of a free market are also in favor of everything that big business does. And those of us who have defended a free market have, over a long period of time, become accustomed to being called apologists for big business. But nothing could be farther from the truth. There’s a real distinction between being in favor of free markets and being in favor of whatever business does.” (emphasis added.)

    Friedman also knew very well of the discipline of free markets and how business will try to avoid it: “The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses generally prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.”

    The danger of Kansas government having a friendly relationship with Kansas business is that the state will circumvent free markets and promote crony, or false, capitalism in Kansas. It’s something that we need to be on the watch for. The vote on the STAR bonds project will let us know how our state is proceeding. If the vote goes as sources tell me, the verdict is clear: Kansas legislators — including many purported fiscal conservatives — prefer crony capitalism over free enterprise and genuine capitalism.

    The problem

    Government bureaucrats and politicians promote programs like STAR bonds as targeted investment in our economic future. They believe that they have the ability to select which companies are worthy of public investment, and which are not. It’s a form of centralized planning by the state that shapes the future direction of the Kansas economy.

    Arnold King has written about the ability of government experts to decide what investments should be made with public funds. There’s a problem with knowledge and power:

    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.

    Despite this knowledge problem, Kansas legislators are willing to give power to bureaucrats in the Department of Commerce who feel they have the necessary knowledge to direct the investment of public funds. One thing is for sure: the state and its bureaucrats have the power to make these investments. They just don’t have — they can’t have — the knowledge as to whether these are wise.

    What to do

    The STAR bonds program is an “active investor” approach to economic development. Its government spending on business leads to taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

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

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

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

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

    We need to move away from economic development based on this active investor approach. We need to advocate for policies at all levels of government that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances.

  • Herman Cain: My interview

    In July 2010, some 15 months ago, I had a chance to interview Herman Cain, who is now at or near the top of the polls of Republican presidential candidates. At the time his name was starting to be seen on lists of possible presidential candidates. Following is what I wrote at the time.

    Herman Cain: Conservatives should dream, be united, informed, inspired

    Herman CainHerman Cain

    At this weekend’s RightOnline conference at The Venetian in Las Vegas, businessman and radio talk show host Herman Cain delivered an inspirational message to the audience of some 1,100 conservative activists from across the country.

    Cain has a nightly radio show and is a frequent guest host for the Neal Boortz show, which is heard in Wichita on KNSS radio. Cain has been an executive at several companies, including serving as president of Godfather’s Pizza, a unit of Pillsbury. He appears on Fox News, and WorldNet Daily carries his weekly column.

    He also runs The Hermanator PAC, which seeks to elect economically responsible conservatives to office. His name is mentioned in lists of presidential contenders for 2012, and he may launch a presidential exploratory committee.

    Speaking at Saturday’s general session at RightOnline, Cain told the audience “The tragedy in life does not lie in not reaching your goals; the tragedy lies in having no goals to reach for. It’s not a calamity to die with dreams unfulfilled, but it is a calamity to have no dreams.”

    Cain said that his dream is that we return to the principles that the Founding Fathers envisioned for what turned out to be the greatest country in the world: life, liberty, and the pursuit of happiness. “It didn’t say anything about a Department of Happy!” It is the pursuit of happiness that is mentioned.

    Cain told the audience there are three things the audience must do: First, conservatives and their citizen movements must stay united in their efforts take back our government.

    Second, conservatives must stay informed. “Stupid people are ruining this country,” he said, telling the audience that over half the people can be persuaded by a slick speech or a slick campaign ad.

    Third, conservatives must stay inspired. Telling the audience the story of his recovery from cancer, he said his inspiration for his work comes from God Almighty.

    He also related the story of the bumblebee, and how aerodynamic equations and computer models predict that the bumblebee should not be able to fly. “There’s only one reason the bumblebee flies: He didn’t get the memo that said he couldn’t. The bumblebee believes he can fly.”

    Telling the audience that they have “bumblebee power,” he believes that conservatives can take back the government in November 2010.

    Cain also mentioned what he calls the “SIN” tactics that liberals employ: First, they shift the subject, then they ignore the facts. “Liberals can’t handle the facts,” he told the audience, and that’s why they shift the subject and ignore the facts.

    Finally, liberals resort to name-calling, calling himself and other conservatives racists, a charge he said is ridiculous and has backfired.

    Later that day, I had an interview with Cain in his suite at Encore Las Vegas. Casually dressed and sipping a glass of wine, he was more relaxed than during his energetic speech earlier that day, although eventually his engaging enthusiasm broke out.

    Referring to his optimism for the chances of conservatives in the upcoming elections, I said I’m not so sure, even pessimistic. Why am I wrong, I asked?

    Cain said that callers — both to his Monday through Friday radio show and when he substitutes for Boortz and Sean Hannity — express their frustrations with the direction of the country, the stalled economy, and lack of private sector job creation. That makes him optimistic. Callers say they’ve been duped by the “hope and change” message, and they’re waking up.

    Another factor he cited is the ongoing Gallup poll showing conservatives outnumbering liberals two to one, and independents and moderates outnumbering liberals one-and-a-half to one. He said this tells him that the numbers are on our side.

    I asked Cain about the controversy about the Civil Rights Act of 1964: As a black man, who at age 64, growing up in the south, faced real and actual discrimination: Is our country better off for it?

    “Absolutely we are,” he said, for both the Civil Rights act of 1964 and the Voter Rights Act of 1965, adding that they had historical impact on our country.

    The Great Society programs and the rise of the modern welfare state: Are we better off for that? No, he said. He said that these programs didn’t provide enough incentives for people to help themselves. “That’s what’s wrong with most of the social programs today. That’s why they need to be modernized. When you provide incentives, and you provide help, but you also have requirements in there for people to help themselves: guess what? The programs will work.” But people have figured out how to game the system, and then the programs don’t work.

    “Look at systemic poverty, look at crime, look at the quality of education in our inner cities — it’s all worse than it was.” The welfare reform of the 1990s, which required people to do certain things in order to continue to receive a check, shows that when people have an incentive to help themselves, they will use assistance programs more effectively, he said.

    Since he mentioned education, I explained that in Kansas we have very few charter schools, and no school choice. What are we missing out on in Kansas? Are we behind the curve?

    Yes, he said. “Competition makes everything better.” He told about the success of the Washington DC school choice program, with over 90 percent of the students going on to college. But the Democrat-led Congress and the President would not re-authorize the program. The teachers unions don’t like competition, he said, and this was the reason why.

    I mentioned that often liberals are opposed to school choice because they say that poor uneducated parents are not equipped to make decisions regarding schools for their children. This is not true, Cain said. “It’s part of that whole attitude that government can make better decisions for a poor family then they can make for themselves.”

    A focus of this conference is that liberty and free markets are superior in creating prosperity for everyone. But many people believe that one person becomes rich only if others become poor. I asked: Why do people believe that? Why have we as conservatives not been successful in getting out that message? Why doesn’t the president seemed to believe that?

    Cain said that President Obama doesn’t believe this because he is “at least a socialist.” Republicans have not been good about managing “sharper, clearer messages about certain things.” He said and the Republican National Committee focuses on raising money, which is good, but they don’t do a good job of explaining what the Republican Party stands for. Cain said that while he supported current chairman Michael Steele for that job, he doesn’t know what Steele believes are the priorities or focal points for Republican candidates running for office in November.

    While we know that we have to do something about spending, taxes, and education, these are general, broad statements, he said. We even know how to fix most problems. “We just don’t have the political will or the leadership to fix some of these problems. That’s what America faces, that’s our biggest challenge.”

  • Lies of liberal progressives, Sunday edition

    On the C-SPAN television program Washington Journal (Sunday August 14, 2011) Democratic strategist Mark Mellman appeared and gave viewers a lesson on how the political left lies and distorts in order to score political points against what it sees as easy targets.

    Mellman said: “The tea party comes out, and has really done real damage to this country. Most people in this country think it’s okay to to stop giving subsidies to oil companies. The tea party says no. Most people say it’s okay in the country to make corporate jet owners pay taxes, or hedge fund managers pay taxes. The tea party says no, you can’t do that, you only have to cut spending. And what spending do they end up cutting? They want to cut Medicare, they want to cut Social Security. Those are the plans that have been put forth by the Republican Party.”

    Mellman is not alone in his use of these lies and distortions. They are stock talking points of the Democratic Party and liberals or progressives. It’s a low form of demagoguery that picks a few targets that are easy to stir up hatred for, and then distorts facts without any regard for the truth.

    On the oil industry, for example: The magnitude of the subsidies and tax breaks to the oil industry is about $4 billion per year. Eliminating this is not going to come anywhere close to balancing the budget. As a matter of fact, this annual amount that President Obama complains about is just about what the U.S. borrows each day to cover its spending in excess of its revenues.

    But being a relatively small amount is not a reason for ridding the tax code of these measures, even though some of the tax measures appear to be similar to treatment that all industries receive, such as the ability to intangible costs associated with drilling a well. To the extent that conservatives and tea party groups oppose eliminating special tax treatment of the oil industry or any other industry, they become just another special interest group. It is essential for our country to eliminate preferential tax treatment and the spending of money through the tax system.

    Regarding Mellman’s assertion that we need to “make corporate jet owners pay taxes” — with the implication that presently they pay no taxes: This is a lie. The measure Mellman refers to is an economic incentive implemented in the form of accelerated depreciation for purchasers of corporate jets. This provision allows companies to deduct depreciation costs from their income sooner, so they save on taxes now rather than later.

    (This incentive, by the way, was part of President Obama’s stimulus bill passed in February 2009.)

    Depreciation is an accepted concept that allows companies to recognize the costs of their capital investments over time, which is appropriate for purchases of long-lived assets like airplanes. Accelerated depreciation doesn’t increase the total amount of depreciation that can be deducted from income, and therefore doesn’t decrease the tax that must eventually be paid. While not as blatant as other forms of preferential treatment found in the tax code, this provision should be eliminated with all others.

    Of course, taking a deduction this year rather than in a later year is valuable. But receiving this deduction a few years sooner is nowhere near the same as paying no tax at all, which is what Mellman asserted.

    At the same time Mellman and liberals attack industries they sense they can stir up hatred towards, they pick programs they believe are unassailable to accuse conservatives of attacking.

    For example, Mellman mentioned Medicare. He didn’t tell viewers that President Obama has proposed cutting Medicare spending, too. It’s rare that any Democratic source mentions this.

    And according to the Washington Post at one time this summer Obama proposed Social Security cuts as part of the debt ceiling negotiations.

    In either case, the changes that are usually proposed to these programs by conservatives are quite gentle, and recognize that reforms must be made or these programs will sap the country of its vitality.

    Democratic political operatives, on the other hand, ignore these problems and attack those who recognize them. They must do this. The entire system of modern American liberalism is based on the lie that human freedom and liberty is enhanced by expanding government beyond what is minimally necessary to secure our true rights and freedoms.

  • Kansas: business-friendly or capitalism-friendly?

    Plans for the Kansas Republican Party to make Kansas government more friendly to business run the risk of creating false, or crony capitalism instead of an environment of genuine growth opportunity for all business.

    An example is the almost universally-praised deal to keep Hawker Beechcraft in Kansas. This deal follows the template of several other deals Kansas struck over the past few years, and outgoing Governor Mark Parkinson is proud of them. Incoming Governor Sam Brownback approved of the Hawker deal, and probably would have approved of the others.

    Locally, the City of Wichita uses heavy-handed intervention in the economy as its primary economic development tool, with several leaders complaining that we don’t have enough “tools in the toolbox” to intervene in even stronger ways.

    The problem is that these deals, along with many of the economic development initiatives at the state and local level in Kansas, create an environment where the benefits of free market capitalism, as well as the discipline of a market-based profit-and-loss system, no longer apply as strongly as they have. John Stossel explains:

    The word “capitalism” is used in two contradictory ways. Sometimes it’s used to mean the free market, or laissez faire. Other times it’s used to mean today’s government-guided economy. Logically, “capitalism” can’t be both things. Either markets are free or government controls them. We can’t have it both ways.

    The truth is that we don’t have a free market — government regulation and management are pervasive — so it’s misleading to say that “capitalism” caused today’s problems. The free market is innocent.

    But it’s fair to say that crony capitalism created the economic mess.

    But wait, you may say: Isn’t business and free-market capitalism the same thing? Here’s what Milton Friedman had to say: “There’s a widespread belief and common conception that somehow or other business and economics are the same, that those people who are in favor of a free market are also in favor of everything that big business does. And those of us who have defended a free market have, over a long period of time, become accustomed to being called apologists for big business. But nothing could be farther from the truth. There’s a real distinction between being in favor of free markets and being in favor of whatever business does.” (emphasis added.)

    Friedman also knew very well of the discipline of free markets and how business will try to avoid it: “The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses generally prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.”

    The danger of Kansas government having a friendly relationship with Kansas business leaders is that these relationships will be used to circumvent free markets and promote crony, or false, capitalism in Kansas. It’s something that we need to be on the watch for, as the relationship between business and government is often not healthy. Appearing on an episode of Stossel Denis Calabrese, who served as Chief of Staff for Majority Leader of the U.S. House of Representatives Congressman Richard Armey, spoke about crony capitalism and its dangers:

    “The American public, I guess, thinks that Congress goes and deliberates serious issues all day and works on major philosophical problems. Really a typical day in Congress is people from the private sector coming and pleading their cases for help. It may be help for a specific company like the [window manufacturing company] example, it may be help for an entire industry, it may be help for United States companies vs. overseas companies.”

    He went on to explain that it is wrong — corrupt, he said — for Congress to pick winners and losers in the free enterprise system. Congress wants us to believe that free enterprise will be more successful when government gets involved, but the reverse is true. Then, the failures are used as a basis for criticism of capitalism. “This is an unholy alliance,” he said, and the losers are taxpayers, voters, and stockholders of companies.

    Later in the show Tim Carney said that “A good connection to government is the best asset a company can have, increasingly as government plays a larger role in the economy.”

    Host John Stossel challenged Calabrese, wondering if he was part of the problem — the revolving door between government, lobbyists, and business. Calabrese said that “Every time you see a victim of crony capitalism you’re looking at a potential client of mine, because there’s somebody on the other side of all these abuses. When Congress tries to pick a winner, there are losers, and losers need representation to go tell their story.” He added that he lobbies the American people by telling them the truth, hoping that they apply pressure on Congress to do the right thing.

    He also added that it is nearly impossible to find a single area of the free enterprise system that Congress is not involved in picking winners and losers.

    While the speakers were referring to the U.S. federal government, the same thing happens in statehouses, county courthouses, and city halls across the country — wherever there are politicians and bureaucrats chasing economic development with government as the tool.

    It is difficult to blame businessmen for seeking subsidy and other forms of government largesse. They see their competitors do it. They have a responsibility to shareholders. As Stossel noted in the show, many companies have to hire lobbyists to protect them from harm by the government — defensive lobbying. But as Carney noted, once started, they see how lobbying can be used to their advantage by gaining favors from government.

    The danger that Kansas faces is that under the cover of a conservative governor and legislature, crony capitalism will continue to thrive — even expand — and the people will not notice. The benefits of a dynamic Kansas economy as shown by Dr. Art Hall in his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy may never be achieved unless Kansas government — at all levels — commits to the principles of free market capitalism.

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

    This week at Wichita City Council. Roger Smith will be sworn in to take the place of Jim Skelton. Smith’s term will end in April, when the voters will select a permanent member of the council from district 3. Of course, Smith could be that person. … The council will hear from an independent fact-finder regarding the firefighters. See Wichita Eagle Wichita firefighters union stresses staffing in contract requests with city. … Also improvement of two south Wichita intersections will be considered. See Wichita City Council to consider $4 million in street work on S. Broadway.

    Last meeting for two commissioners. This Wednesday will be the last meeting for two members of the Sedgwick County Commission, Gwen Welshimer and Kelly Parks. New members will be sworn on this Sunday.

    Legislators to hear from citizens. The South-Central Kansas Legislative Delegation will be taking public comments Tuesday January fourth from 7:00 pm to 8:30 pm in the Jury Room of the Sedgwick County Courthouse, 525 N. Main in Wichita. (Use the north entrance to the courthouse). This is your opportunity to let local legislators know your wishes on issues that will be considered during the 2011 legislative session. In the past, each person wishing to talk has been limited to between three and five minutes depending on the number of people wishing to speak.

    State GOP chief to speak in Wichita. This Friday (January 7th) Amanda Adkins, who is Chair of the Kansas Republican Party, will speak at the Wichita Pachyderm Club. The topic is “Conservative Leadership Now — 2020: Building Long-term Political Infrastructure for the State of Kansas.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. Upcoming speakers include Bob Lamke, Director of the Sedgwick County Division of Public Safety on January 14th, and Ed Flentje, Professor at the Hugo Wall School of Urban and Public Affairs at Wichita State University, will be discussing a book he co-authored titled “Kansas Politics and Government” on January 21.

    Repeal of sales tax. Many of the new members of the Kansas House of Representatives ran on opposition to the statewide sales tax increase that took effect in July. I had speculated in an appearance on This Week in Kansas that the House would entertain a bill to repeal the sales tax, while another — more experienced, I might add — observer of Kansas politics felt that leadership would tamp down such an effort. Today David Klepper of The Kansas City Star takes a look at the prospects for legislative action on this issue. Some would like to repeal the sales tax right away, while others say that repeal needs to be part of a broader, long-term look at Kansas tax policy. Senate Vice President John Vratil — not a supporter of limited government and economic freedom — is quoted as saying tax reform is a “multi-year project.”

    Net neutrality advances. Almost lost in all the congressional activity before Christmas was the fact that the Federal Communications Commission voted to pass new rules on net neutrality. Writing in The Wall Street Journal, John Fund says: “The Federal Communications Commission’s new ‘net neutrality’ rules, passed on a partisan 3-2 vote yesterday, represent a huge win for a slick lobbying campaign run by liberal activist groups and foundations. The losers are likely to be consumers who will see innovation and investment chilled by regulations that treat the Internet like a public utility.” Fund explains the radical political views of those behind the net neutrality campaign. He also explains that President Barack Obama is ignoring the will of Congress and court rulings, seeking to impose internet regulation through the executive branch.

    Wichita noticed in Boston. A writer from the Boston Globe visits Wichita and writes on his tourist experiences. It follows a predictable template: First, put away the Toto jokes and overlook the city’s problematic reputation. Then — I found public art, lattes, and a restaurant! Wow! Who would have figured?

  • Kansas and Wichita quick takes: Tuesday December 21, 2010

    Steineger switches teams. Chris Steineger, a Kansas State Senator from Kansas City, has switched to the Republican Party. As a Democrat, Steineger had compiled a voting record more conservative than many senate Republicans. On the Kansas Economic Freedom Index for this year — recognizing that supporting economic freedom is not the same as conservatism or Republicanism — Steineger had a voting record more in favor of economic freedom than that of 15 of the senate’s Republicans.

    Kansas school funding reform to wait. Incoming Kansas Governor Sam Brownback says that the Kansas economy comes first, and then school finance, Medicaid, and KPERS in a “year or two.” Tim Carpenter of the Topeka Capital-Journal reports in Revitalizing the Kansas economy is the governor-elect’s No. 1 priority.

    Tax cuts in Kansas not likely, says new senate leader. Yesterday Kansas Senate Republicans elected Jay Emler of Lindsborg to be the majority leader, replacing Derek Schmidt, who will become Attorney General. As the Associated Press reports, Emler is not in favor of any tax cuts, including a repeal of the recent increase in the statewide sales tax.

    McGinn to lead Ways and Means. Carolyn McGinn, a Kansas Senator from Sedgwick, will chair the Ways and Means Committee. This important committee handles appropriations — in other words, the actual spending of money. On the Kansas Economic Freedom Index for this year, McGinn scored seven percent, tying her with Senate President Stephen Morris as the Republicans most opposed to economic freedom. She also scores low in the Kansas Taxpayer Network/Americans for Prosperity ratings.

    Kansas holds on to House seats. At one time it was feared that the 2010 U.S. Census might find Kansas losing one of its four seats in the U.S. House of Representatives. But Kansas will retain them. Texas picks up four seats, Florida adds two, while Georgia, South Carolina, Arizona, Nevada, and Utah gain one seat each. Ohio and New York lose two each, while Illinois, Iowa, Massachusetts, Michigan, Missouri, and New Jersey lose one each.

    Rasmussen polls. As often, Rasmussen is the bearer of bad news. Like: What’s the deal with Obama? “For the first time since he became president, only 35% of voters say Barack Obama thinks society is fair and decent. That’s almost half as many as voters who hold that belief themselves. A new Rasmussen Reports telephone survey finds that 49%, on the other hand, say Obama thinks society is unfair and discriminatory.” See America’s Best Days: Fewer Voters Than Ever Say Obama Thinks Society is Fair and Decent. … Tea Party people skeptical of newly elected officeholders: “Most Tea Party members view the candidates they elected in November as agents of change from government business as usual, but non-members are a lot more skeptical. A new Rasmussen Reports national telephone poll finds that only 34% of all Likely U.S. Voters think Tea Party candidates elected in November will remain true to their beliefs. See Most Tea Party Members Think Those They Elected Won’t Sell Out, Others Aren’t So Sure. … Others are pessimistic, too: “Just 23% of Likely U.S. Voters now say the country is heading in the right direction.” See Right Direction or Wrong Track.

  • Sedgwick County Republicans elect leadership

    Last night the Sedgwick County Republican Party met in an organizational meeting to elect its leadership for the next two years. The primary news made was in the contest for chairman and vice-chairman. The secretary and treasurer positions were not contested.

    Some observers, including myself, saw the contest as being between “establishment” Republicans and a group associated with the tea party. Others cast the election as more between experienced and veteran party members versus relative newcomers, while still others saw the differences as based more on personalities than anything substantive. Whatever the terminology, the newcomers did not do well in the election.

    The people attending the organizational meeting and voting on leadership are those elected or appointed as precinct committeemen or committeewomen. That election was held in August in conjunction with the statewide primary election.

    In the past, there have been contentious election contests at the organizational meeting, with the dividing line being between conservatives and moderates, with the abortion issue prominent. The last organizational meeting in November 2008 was calm, with one slate of candidates offered for the leadership and delegate positions, with party leaders urging that no nominations be brought up from the floor.

    This year’s meeting had two slates of candidates. One — clearly the establishment or veteran slate — was headed by Bob Dool, a Wichita businessman who has been serving as treasurer of the fourth congressional district party committee. Julie Sipe was the slate’s nominee for vice-chair. Dool was endorsed by Mike Pompeo, the recently-elected U.S. congressman from the Kansas fourth district, which includes all of Sedgwick County.

    The other slate was headed by Jim Anderson, who recently ran for U.S. Congress, with Judy Park of Republican Women United as vice-chair.

    There’s a backstory here that deserves mention. The 2008 organizational meeting, where there was one slate of candidates and any talk of offering nominations from the floor was strongly discouraged by party insiders, made a bad impression on many activists. Some were particularly disturbed that the slate of delegates to the fourth district committee — the next level up in the party hierarchy — included many people who were not elected precinct committeemen or committeewomen. To newcomers, the 2008 meeting smacked of “good ol’ boy” cronyism, with no consideration given to the newcomers who had ran for election to — and had to campaign in order to win — precinct committee positions.

    Since then, the tea party movement started in the winter months of early 2009. This movement, operating largely outside the established Republican party, grew to become a significant force nationally. Locally, a tea party activist group led by Craig Gabel and Lynda Tyler played a significant role in the November elections by working for Republican candidates, although the group did support one Democrat, Gwen Welshimer. The group played a crucial role in electing Benny Boman and Les Osterman to the Kansas House of Representatives by defeating incumbent Democrats. The group helped in the reelection of Phil Hermanson to the House, and helped elect Joseph Scapa and Jim Howell to open House seats. John Stevens and James Clendenin came surprisingly close to gaining election over their Democratic Party incumbents.

    At the county level, the group was active in helping Richard Ranzau in his election to the county commission. Gabel estimates his group distributed 4,000 blended packets of literature, placed 600 signs, and made 40,000 robo-calls plus several thousand live calls.

    Having played a role in local politics — successful by their own account, but perhaps not appreciated by everyone — the group wanted inclusion in the local Republican Party process. Neither Gabel or Tyler sought leadership positions. (Tyler is running for Wichita city council in the spring.) Instead, both wanted an open and honest process that was inclusive and gave everyone an opportunity to seek office, either as leadership or a delegate to the higher committee.

    Both leaders seem genuinely concerned that the Republican Party be open and seek to grow. I asked Gabel what he would like to see in a chairman. He said: “A chair that would reach out to all portions of the Republican Party, that would keep the momentum flowing that was started in the election — someone interested in filling the precincts, raising funds, and educating people.” Reaching out to young people and minorities is also important, Gabel said.

    As Dool made his candidacy for chair known, Gabel, Tyler, and others invited him to a meeting. Initially Dool did not want to meet and declined the invitation. A meeting with Dool took place earlier this week, said Gabel. He described the meeting as unproductive.

    Back to last night’s organizational meeting: While social issues weren’t the primary issue on voters’ minds in the recent national election, abortion politics played a role last night. In his nominating speech for Dool, Mark Kahrs said that Dool “strongly supports the sanctity of life, which is the concern of this local party, and must remain the cornerstone of our party’s platform.” That drew applause from the audience.

    Before that, in her speech Park, the nominee for vice-chair, said that someone in the audience was spreading rumors that she is not conservative and not pro-life. Park said these allegations were not true.

    In nominating Jim Anderson, John Stevens praised Anderson for his experience in campaigning and technology. Explicitly referring to the tea party, Stevens said that we need as chair “a person who is inclusive of all Republicans, as well as tea party active people. These folks helped make it work this time. Don’t deny them.”

    Speaking for himself, Dool said he wanted to increase the Republican Party base by increasing communication, hosting events for elected officials to meet with the public, increasing opportunities for all to participate in the political process, creating a business-friendly environment with lower taxes and less regulation, and raising enough money locally for a full-time employee. He said he supports the tea party movement, saying such populist movements have helped us stay true to the Founding Fathers’ principles.

    In his speech, Anderson referred to his run for U.S. Congress. He also addressed an issue that many said would prevent them from voting for Anderson — his failure to endorse Mike Pompeo after Anderson lost to him and others in the Republican primary election in August. Anderson said he pledged his support to Pompeo — privately, though. Anderson said we need to grow the party by reaching out to all people, including independents.

    The results of the election for vice-chair were Park 43 votes (21 percent), and Sipe 164 votes (79 percent).

    For chair, the result was Anderson 59 votes (28 percent), and Dool 149 votes (72 percent).

    In the selection of delegates to the fourth congressional district committee, voters had to select 98 delegates and 100 alternate delegates. A group called “Republicans for Conservative Leadership” provided a slate. The group headed by Gabel and Tyler had a slate, but the slate did not have enough names. The RCL slates won. (Disclaimer: my mother was on the RCL slate as an alternate delegate.)

    Analysis

    After the meeting, reaction was mixed as to whether the group of tea party or new activists felt welcomed into the process. Some felt the process was improved over 2008, as there were two candidates for each of the top leadership positions. Others felt that the outcome was nonetheless predetermined. But like in most elections, the winning candidates had the message most voters agreed with, and simply did a better job of campaigning for their positions.

    Going forward, the local party has the same challenge as does the national party: how to integrate or channel the energy of the tea party. If the vote for the challengers — about one-fourth of the party members present — is a measure of the numbers in the tea party, it’s a significant force that Republicans should welcome. But an initial challenge for Dool and party leaders is that many tea party activists will resent anything they perceive as channeling of their energy or integration of their politics.

    Also, some had asked that the slates of delegates should have been made available before the meeting. Voters had to vote for 98 delegates and 100 alternates. But party officials refused to release the names before the meeting, which seems to be the type of needless secret-keeping that breeds distrust and conspiracy theories.

  • Kansas and Wichita quick takes: Thursday November 4, 2010

    The future of politics is here, now. After noting how California reached way back to the past to elect a governor, Denis Boyles writes in National Review Online about the future, and how it’s being made right here: “If you want to see the bright and shining politics of the future, you have to go to the country’s heartland, and specifically to Kansas, a place most Democrats only know from Thomas Frank’s liberal folklore. There, the election has yielded two new congressmen — Mike Pompeo and the remarkable Tim Huelskamp — who were not created by the Tea Party movement because their politics were already ahead of that helpful wave. Here‘s a local paper’s coverage. Pompeo is a natural leader, while Huelskamp is something even more — an inspiration, maybe. (He’s briefly sketched in Superior, Nebraska). Mark these guys. Politically, they’re how it’s going to be.”

    Schools hope we won’t notice. Kansas Reporter tells of the new Kansas school funding lawsuit, filed on Election Day. Schools must have hoped that news of the filing would get swamped by election day news, which is what happened. The remedy asked for is more money, which has been shown not to work very well in terms of improving student performance … but it makes the education bureaucracy happy. I would suggest that students sue the Kansas State Department of Education for the inadequate education many have received. For a remedy, ask for things that have been shown to work: charter schools and widespread school choice.

    Kansas House Republicans. Yesterday I reported that Republicans gained 15 seats in the Kansas House of Representatives. Double-checking revealed that I had made a data entry error. The actual number of Republican gains is 16, for a composition of 92 Republicans and 33 Democrats.

    Kansas House Conservatives. In the same article it was noted that since some Kansas House Republicans — the so-called moderates or left-wing Republicans — vote with Democrats more often than not, there was a working caucus of about 55 conservatives. It is thought that conservatives picked up four seats in the August primary, bringing the number to 59. With most of the Republicans who defeated Democrats expected to join the conservative cause, it appears that conservatives now fill over 70 seats, constituting a working majority in the 125-member Kansas House of Representatives. Conservatives do not enjoy a majority of votes in the Kansas Senate, however.

    Local smoking bans still wrong. As noted in today’s Wichita Eagle, there might be a revisiting of the relatively new Kansas statewide smoking ban. Incoming Governor Sam Brownback believes that such decisions should be left to local governments, presumably counties or cities in this case. For those who believe that the proper foundation for making such decisions is unfoundering respect for property rights — plus the belief that free people can make their own decisions — it doesn’t matter much who violates these property rights.

    GOP: Unlock the American Economy Daniel Henninger in the Wall Street Journal on spending and what Congress really needs to do: “It is conventional wisdom that what voters, tea partiers and talkers want the Republican Party to do is cut the spending. … Getting the spending under control matters a lot.” But Henninger says controlling spending is not enough: “The new GOP has to find an identity beyond the Beltway power game, a way to make the nation’s most important activity not what is going on in Washington, as now, but what is done out in the country, among the nation’s daily producers and workers. The simplest way for the Republican Party to free itself and the economy from this unending Beltway hell is by reviving a core belief of one of the country’s most successful presidents: If the government will get out of the way, Ronald Reagan argued, there’s no limit to what the American people can achieve.” Government getting out of the way was one of freshly-minted Congressman Mike Pompeo’s campaign themes. National figures are warning Republicans that they have one chance to get things right in Washington or risk losing the support they won in this election. And Pompeo urged his supporters, more than once, to hold him accountable in Washington. Maybe Raj Goyle might want to linger in Wichita for a few years to see how things work out.