Inflation has reared its ugly head again—hitting a 30-year high of 6.2 percent, which is more than triple the Federal Reserve’s definition of stable prices. Unfortunately, the wayward policies that have contributed to soaring prices, pervasive shortages, and sputtering growth are not going away. In fact, they are poised to get a whole lot worse.

President Biden signed the first of two giant spending bills into law on Nov. 15. That was the $1 trillion “Infrastructure Investment and Jobs Act.” The second bill is the administration’s proposed Build Back Better Act, passed by the U.S. House of Representatives a few days later and now pending before the Senate.

Taken together, we are looking at a potential tsunami of bad policymaking. Let us count the ways the two pieces of legislation threaten our nation’s freedom and prosperity:

#1. The infrastructure act is only partially about infrastructure as most people think of it. For example, the law spends only $110 billion on fixing roads and bridges—barely putting a dent in the maintenance backlog—while Amtrak alone will get 60 percent as much as all of America’s bridges and roads combined. Yes, that Amtrak—the one that has consistently run operating losses almost every year for the past 50 years. Tens of billions of additional dollars will go into public transportation even though only five percent of Americans rely on public transit in commuting to work.

#2. Also under the infrastructure act, the government says it will make “the largest investment in clean energy transmission and grid in American history,” and it calls for “building thousands of miles of new resilient transmission lines to facilitate the expansion of renewables and clean energy.” Wind and solar have been lavishly supported for decades, but still only account for 11 percent of U.S. electrical power generation, and their actual role is much less than that because they are intermittent. Does anyone seriously think they can come anywhere close to replacing gas and coal as the primary source of 60 percent of electrical power generation and be equally cheap, reliable, and easy to use?

#3. Then, too, as part of the green energy component of the “infrastructure” plan, the federal government will mastermind the building of a network of 500,000 electric vehicle charging stations, thereby not only putting taxpayer money at risk, but also putting the federal government in the position of picking winners and losers among America’s small-town communities through its choice of where to put those stations. The survival of local communities may soon depend increasingly on Washington, D.C.’s whims.

#4. The proposed Build Back Better Act would permanently and dramatically expand the welfare state and abolish work requirements as a condition for receiving aid. There would be some “free money” for taxpayers at all levels of income. The wealthy would get theirs in the form of expanded state and local tax (aka SALT) deductibility. The top current deduction of $10,000 isn’t much for a top-one-percenter living in an expensive house in a spendthrift, high-tax state like California or New York. Build Back Better includes an eightfold expansion of the maximum SALT deduction to $80,000. The typical taxpayer would get no benefit, while top earners would receive an average windfall of nearly $23,000. The Build Back Better Act would also permanently enshrine the Biden administration’s reimagined Child Care Tax Credit, which would allow a family to receive thousands of dollars a year ($3,600 per child under age 6 and $3,000 per child at 17 and under) in government cash with zero earned income and no expectation whatsoever of anyone having to seek a job.

#5. Adjusted for a lot of gimmickry, a close reading of the bill shows that it would result in nearly three trillion dollars in cumulative budget deficits over the next decade. Claims that the bill will not add a dime to deficits and debt are entirely spurious.

To sum up, what we have here is an overarching vision for transforming America. It would concentrate more decision-making power in the hands of the central government. And it would turn what has been a society of producers, workers, and investors into a society of people and institutions (including unions, businesses, schools, and an enlarged army of social workers and activists) whose livelihoods depend on what government gives them.

The post Commentary: A Tsunami of Bad Policy appeared first on Show-Me Institute.

Imagine painting yourself into a corner—as someone of limited means who is subject to wacky increases in the cost of something as basic as renting an apartment. I do mean wacky, with this big component in the cost of living not just doubling, but going up no fewer than eight times over the course of a single year.

That happened to me in 1975 as the sole breadwinner in a family of three. I offer this small bit of personal history as something to think about in pondering today’s news.

In the beginning of that long-ago year, I quit my job as a newspaper reporter at the St. Louis Globe-Democrat and moved to Beirut as a self-deployed freelance writer. This was shortly after the OPEC oil embargo and the quadrupling of oil prices in 1974. Thinking the Middle East would experience one of the greatest transfers of wealth in the history of the world, I wanted to be there as an observer.

My wife and I left a three-bedroom, two-bath apartment St. Louis’s Central West End. Our rent was $165 a month. With one young child, the cheapest, somewhat comparable place we could find in Beirut cost $700 a month.

The civil war in Lebanon erupted in early April, shortly after our arrival. By the end of the year, fighting in the streets of Beirut became so fierce it led to a mass evacuation of most of the city’s large expatriate business population. As a result, the Lebanese capital was suddenly “halas” —the Arabic word for finished—as the regional center for business in the Middle East. But the spending spree in Saudi Arabia, Iran, and other countries was just beginning. We resettled in Bahrain, where more sticker shock awaited. We moved into a three-bedroom, two-bath bungalow that cost more than $1,400 a month.

Why would it cost more than eight times as much money to find a place to live in the Middle East as it would in St. Louis?

The Middle East had been bitten by a strange curse—known in economic literature as the “resource curse,” or the paradox of plenty. Resource-rich countries are all too likely to squander the windfall wealth that comes from possession of precious metals or vital resources such as oil. Bubbles develop as people who have benefited the most from a sudden influx of money bid up the price of real estate and other assets that then become increasingly unaffordable for many other people.

I got lucky. I landed a full-time position with Mideast Markets, a high-priced publication that had sprung up to provide ongoing coverage of the fast-changing business scene in the Middle East. My new employer paid the full cost of our move and our housing as well. Bahrain became my jumping-off point for traveling throughout the region over the next three years.

With my own eyes, I saw the inevitability of prodigious waste in places where money was no object. I also saw how the resource curse exacerbates the divide between haves and have-nots. In Bahrain we lived across the street from a Persian family where eight sons—all in their twenties and thirties—were still living with their parents. Though they all had jobs, they had been priced out of the housing market—and this at time when others we knew were making fortunes in speculating in real estate.

Today our own government in Washington, D.C., is acting in much the same way as the governments in the newly oil-rich countries of yesteryear. Since the onset of the pandemic, our government has been passing out “free” money all kinds of reasons—from paying the unemployed to stay unemployed (knowing they would lose money by going back to work) to $3,000-a-child tax credits and $2,800 handouts to households with annual incomes of up to $140,000. And now we are seeing some of the same (if not quite so wild) distortions in housing prices and other asset values I saw in the Middle East.

I am not arguing against a safety net for the truly needy. Nor am I saying that there should be no compensation from governmental entities for government-ordered lockdowns that have forced thousands businesses to close their doors and deprived millions of workers of their livelihoods.

But where is all the money to come from to pay for what looks like a massive and ill-considered increase in the size of the welfare state? Not from current tax revenues or any gain in productive capacity. It is coming from funny money—trillions of dollars of borrowed or newly created money used to grease the wheels of an already strong recovery. If not repudiated through inflation, these financial obligations will have to repaid by American taxpayers in future years.

Good luck with that. How can making people less reliant on doing things for themselves and more dependent on getting checks from the government be a recipe for sound money and future success?

The post Return of the Resource Curse: The Trouble That Comes from Too Much Money appeared first on Show-Me Institute.

Missouri is considered one of the most “conservative” of the 50 states. Is that a good thing or a bad thing? It depends on how you define the word.

Over the past several decades, Missouri has been going downhill both economically and educationally—as one of the worst-performing states in GDP growth and educational achievement in K-12 public education. Why?

Too often, Show-Me State conservativism has been characterized by a lack of urgency and a satisfaction with the status quo.

As I would define it, conservatism does not begin and end with the preservation of existing institutions, and it most definitely is not about protecting the privileges of the rich by exploiting the poor or being indifferent to the problems of the needy. Where it begins is with the desire to protect and enlarge freedom for all members of society—enabling people to work and live lives of their own choosing so long as they do no harm to others in the pursuit of their own betterment.

Here, then, are five New Year’s Resolutions for leaders in local and state government:

#1: Improve Missouri’s competitiveness; turn the Show-Me State from an economic sluggard into a great place to live, work, and own or operate a business. That means lowering taxes—leaving more money in people’s pockets to spend or invest as they choose. It also means removing obstacles to commerce and opportunity posed by excessive licensing and regulatory requirements.

#2: End crony capitalism—stop providing subsidies and tax carve-outs for politically favored businesses that are not available to all other businesses. In 2019, Missouri reported 524 tax-increment financing (TIF) projects from 100 political subdivisions across the state. These projects are anticipated to have $10.1 billion in TIF-reimbursable project costs. Such subsidies drain money from public services and have a bad track record of failing to deliver promised job, investment, or economic growth. Reductions in tax incentives and spending can provide some of the budgetary space to lower or eliminate individual income and earnings taxes.

#3: Don’t treat small, owner-operated businesses as the designated fall-guys in government-ordered lockdowns—calling them “non-essential” businesses while allowing their big-box counterparts such as Wal-Mart and Target to continue to operate.

#4: Don’t be penny-wise and pound-foolish when it comes to taking care of essential infrastructure on a timely basis. Interstate 70, an economic and transportation lifeline, is falling apart. Numerous other major roads are badly in need of repair. Travel on Missouri’s roads has increased by 12 percent since 2008, but the state’s transportation budget has fallen by 15 percent. According to Missouri’s Department of Transportation, it now gets only enough revenue to cover a little more than half the state’s needed road and bridge repairs. One thing is certain: Postponing needed maintenance on long-lived assets such as roads and bridges is not a smart idea. It leads to escalating costs and catastrophic failure.

#5: Expand educational choice for students and families at all income levels throughout the Show-Me State. There is no worse example of blind allegiance to the status quo than Missouri’s K-12 public education system.

Supported by nominally conservative lawmakers, the state’s educational establishment—meaning school superintendents, teachers’ unions, and DESE (Missouri’s Department of Elementary and Secondary Education)—have blocked almost every initiative aimed at expanding school choice from vouchers and education savings accounts to expansion of charter schools. Despite a long record of poor results in the so-called “Nation’s Report Card,” members of the establishment continue to oppose all forms of competition and choice in public education.

And who is hurt the most by this self-serving obstinacy on the part of the providers of public education? It is of course the users: students and their parents and families, and most especially lower-income families trapped in non-performing schools who cannot afford to move to other school districts or to private schools.

As I see it, true conservatism is really about an allegiance to principles—and to enduring values such as freedom, hard work, and equality under the law—rather than an allegiance to the status quo.

The post Five New Year’s Resolutions for Missouri Lawmakers appeared first on Show-Me Institute.

Well, you could try the hidden ball trick. Indiana’s Trine University softball team played this old ruse to perfection in advancing to the 2019 Women’s College World Series.

In a surprise pick-off move, Trine pitcher Kate Saupe turned and fired a bullet to second base. But the ball got away from the infielder and rolled into the outfield. So it seemed. Actually, the ball never left the pitcher’s glove. When the runner tried to advance, Saupe tagged her for the game-winning out.

In promoting the idea of a cost-free expansion of Missouri’s Medicaid program, the Missouri Budget Project, the Missouri Hospital Association, and others are using a similar (and equally spectacular) misdirection play to gain public support for a policy initiative that would be neither cheap nor free.

At $10.9 billion, Medicaid already accounts for 39.6 percent of Missouri’s 2019 budget. That’s more than education, prisons, public safety, or roads. It’s the most for any service funded in part or total by Missouri taxpayers.

So how can Missouri boost the number of Medicaid participants from 850,000 to more than a million people—and save money? It can’t. If we increase Medicaid enrollment more than quarter, there has to be a similar increase in costs—something on the order of $2 billion a year.

The hidden ball here is to treat the federal contribution in this joint state-federal program as “free money” —a manna-from-the-heavens gift from Uncle Sam to the Show-Me State. But the money is not free. Like the residents of other states, Missourians are on the hook for federal Medicaid obligations, no less than state Medicaid obligations. They pay the final bill either way—through state and federal taxes.

Under the Affordable Care Act, the federal government set out to expand Medicaid to include people earning up to 138 percent of federally defined poverty level.

As originally written, this legislation would have required states to comply with the planned expansion of Medicaid or face the loss of all federal matching funds, split roughly on a $3-to-$2 basis between the federal government and the states. The Supreme Court struck down that part of the law in 2012. The Obama administration then agreed to a $9-to-$1 split in favor of the states if they opted to participate in the expansion. What had been a “gun to the head” (as Chief Justice John Roberts wrote) suddenly became a mouth-watering carrot.

Kansas recently became the 37th state to opt into Medicaid expansion. If Missouri were to follow suit, it would still need to put up 10 percent of the cost. Citing a Washington University study, Medicaid expansionists think they have found a way to make even that cost disappear. But this is just one more example of cost-shifting as opposed to cost reduction.

According to the study, Missouri could re-enroll existing recipients currently classified as permanently and total disabled (PTD) based on income, rather than disability. That would trigger the new $9-to-$1 federal match—meaning more federal funds for the same people.

But there is a problem: This maneuver appears to be against the law. So the federal Office of Inspector General said in a recent audit of New York State when it tried to do same thing.

Over the last two decades, Medicaid has been a rapidly rising cost at both the state and national levels. But it remains a deeply troubled program that is not succeeding in its basic mission of providing ready access to high-quality healthcare for low-income families and individuals.

When it comes to promoting needed change in healthcare, using feel-good, sleight-of-hand accounting to promote a false idea of something-for-nothing benefits is a step backward, not forward.

The post The Myth of “Free” Medicaid Expansion appeared first on Show-Me Institute.

With Super Sunday just around corner, we will cite the Apple commercial that introduced the Apple Macintosh personal computer in January 1984. It had the punch line: “You’ll see why 1984 won’t be like Nineteen Eighty-Four.”

That was an allusion to the dystopian future described in George Orwell’s book, 1984. The ad opens with a lone woman on the run. She bursts into an auditorium, where Big Brother—speaking not in person, but from a towering television screen—is haranguing a frightened mass of people. Then, spinning like a top, she hurls a sledgehammer at the figure on the screen. It flies high and right. Big Brother is silenced. The voice-over followed.

In this 60-second spot that aired during Super Bowl XVIII, the first Macintosh ad captured the one thing that an all-powerful or monolithic state cannot easily afford to tolerate. That is, any real expression of individual freedom and initiative.

We believe that is a timely message not just on the eve of another Super Bowl, but still more in the context of the current debate over economic and public policies.

Following a long period of stagnation, the U.S. economy has come roaring back to life. We now have full employment, a booming stock market, and rising wages for most workers, including the lowest paid.

How did that happen? Fast answer: Over the past three years, the free market became a whole lot freer.

In its first year in office, the current administration delivered on its promise of sweeping regulatory relief. Suddenly, the regulatory state, which had expanded by leaps and bounds during the previous administration, began to contract . . . and that has continued, as a result of major changes in policy and direction at the Environmental Protection Agency, the Labor Department, the Department of Health and Human Services, and other arms of government.

Then came the biggest tax cuts and tax reforms since the Reagan era. With the passage of the Tax Cuts and Jobs Act of 2017, the administration lowered income taxes across the board and left more money in the pockets of individuals and business entities alike.

So, we are now living in the best of times economically. How could anyone argue otherwise? But they can—and are. Never mind what the numbers say.

Among leaders on the Left, there is a broad consensus that we are living not in the best of times, but in the most desperate of times—almost as if we were back in the early years of the Great Depression, when industrial production plunged, unemployment soared, and more than a quarter of the population was without any income at all.

In the badly mistaken belief that capitalism and free enterprise have run amok, they are promoting economic policies and ideas that are diametrically opposed to those that got us where we are today.

With little disagreement between them, these same leaders want free college, free health care for all, universal child care, and the banning of fossil fuels as part of a many-splendored Green New Deal—and they don’t appear to care what anything costs or what the adverse impact may be on ordinary people.

Apart from the astronomically high price tags associated with all of these programs—which would quickly bring the economy to a shuddering halt if any serious attempt were made to implement them—it is worth thinking about the underlying message that the leaders who are espousing this great agglomeration of multi-trillion-dollar programs want to send to the American people.

The real take-away message comes down to this:

·         “If you or any of your children want to go to college, don’t worry about being able to afford the college tuition. We’ll take care of the problem for you.”

·         “If you’re worried about health care, don’t think you have to buy health insurance or do anything else. We’ll take care of you.”

·         “Got young children at home and want to go to work? We’ll take care of the kids, too.”

If all that sounds too good to be true, it’s because it is too good to be true. Someone has to pay for college tuition—and all the other freebies—and that can only mean higher taxes on working people at all levels of income.

As George Orwell, the author of 1984, understood very well, a free people who stop taking care of themselves and rely on the state to do everything for them make a very bad bargain. It is one of the insights you find on almost every page of his book.

When people cease to make their own plans—and trust government to make decisions for them in more and more areas of their lives—they commit the error of failing to make full use of their capacities as individual human beings. In failing to make the most of their own gifts and talents, and their own dreams and aspirations, they sell themselves short . . . and lead less-fulfilling lives.

How prophetic was Orwell’s book? Not that this was the author’s intention, but how well did the book foretell the future of socialism in his native country—this being Britain in the first few years after World War II?

The British elections in mid-1945 marked a major turning point—not only sweeping Winston Churchill and a Tory-led government out of office, but also standing as an unquestioned affirmation of the desire of most of the British electorate to bring a new government to power that was fully committed to socialism.

So how did things work out in Britain during the three and a half decades when socialism, as opposed to free-market capitalism, was the prevailing mode of government—a period lasting from 1945 to 1979, when Margaret Thatcher came to power?

Socialist Britain did not become a police state. But it did undergo a metamorphosis. It changed from a powerful and dynamic country into the perennial “sick man of Europe,” reeling from one financial crisis to another in a sustained period of economic stagnation and decline. It became a country obsessed with issues of job security and income redistribution as different groups competed with one another in trying to wring more favors out of an increasingly improvident state. There was little or no new business formation—none of the spark provided by people like Steve Jobs and products like the first Macintosh computer.

Even the Labor Party could see the futility of its centralized, interventionist approach. Jim Callaghan, the last Labor prime minister before Thatcher, admitted in Parliament: “Let me say that of course there has been a fall in peoples’ standard of life. It has fallen this year and will fall again next year.”

Fortunately, Thatcher supplied the leadership that was necessary to pull Britain out of the decades-long decline that began with the wrong turn that it took at the end of World War II.

Is there any possibility that we as a country could make the same mistake that Britain made in 1945?

The danger is there. It is time to throw another hammer—or sledge-hammer—into the works of another historic wrong turn—this time involving the United States.

This does not require heroic action on the part of a solitary individual. But it does require a willingness on the part of many people to play the same kind of role within their own group of friends and relatives that Thatcher played in Britain—in stressing the paramount importance of individual freedom and initiative in securing the future we want for ourselves and future generations.

The post Is There a 1984 in Our Future? A Super Bowl Reflection appeared first on Show-Me Institute.

Surely, it would be a giant shock to discover your memory was gone.

To be cut adrift from your own past is, literally, to lose your own life in the midst of living it. Suddenly, you have no friends, no background, no identity. You have lost any sense of meaning and purpose of the life you once led. And how can you even begin to think about the future if you don’t know your own past?

But what if we as nation were to wake up one day in the same condition—destitute of any knowledge or understanding who we are as a people and what was going on at different stages in the long and eventful history of our country?

If not yet there, we may be fast approaching that state.

“We’ve been raising several generations of young Americans who are, by and large, historically illiterate,” says David McCullough, two-time winner of the Pulitzer Prize for history. As someone who has lectured at scores of colleges and universities across the country, he adds, “I know how much these young people – even at the most esteemed institutions of higher learning—don’t know. It’s shocking.”

By way of example, he tells the story of being approached by a college sophomore at a top Midwestern University who told him, “Until I heard your talk this morning, I never realized the original colonies are all on the East Coast.” “McCullough thought, “What have we been doing so wrong that this obviously bright young woman would get this far and not know that?”

In The Nation’s Report Card: U.S. History 2010, the U.S. Department of Education found that only 12 percent of high school seniors performed well enough to be rated “proficient” in their knowledge of the rudiments of U.S. history. To put that another way, 88 percent of high school seniors flunked the minimum proficiency rating, and only two percent correctly answered a question about the Supreme Court’s landmark decision in Brown vs. Board of Education.

When speaking in different forums about the dangers of historical illiteracy, McCullough puts “gratitude” high on his list of the many “benefits to history.” “Every day, we’re all enjoying freedoms and aspects of life that we would never have had if it weren’t for those who figure importantly in history.” And again he says: “I think that America has come further in giving opportunity to the best that’s in human nature than any other country ever in history.”

Yes, we ought to be grateful. At the same time, we ought to be keenly aware of the great danger to the good life that we are living posed by collectivist thinking – the kind of thinking that is the deadly enemy of individual liberty and the idea that people should be free to lead their own lives as they choose as long as they don’t impose upon the same freedoms of other people.

Metaphorically speaking, no country—not even the United States—is an island, entire in itself. In order to understand our own history, we also have to understand world history and how other people have coped in dealing with some of the same problems that we have faced in our own country.

Today, most Americans under the age of 40 are unaware of the millions upon millions of people murdered or starved to death by communist regimes around the world over the past century. They just have no idea.

Why? At both the high school and university levels, the true history of Marxist-inspired socialism isn’t being taught—or, if it is, it is being taught in a sanitized fashion to glosses over the enormous crimes against humanity committed by Vladimir Lenin, Joseph Stalin, Mao Zedong, Pol Pot, and other communist leaders.

In the hands of gifted historians like David McCullough—the author of best-selling books on Harry Truman, John Adams, and the Wright Brothers—stories of historical figures and important events tell us more about ourselves than we guessed possible.

In both our schools and our homes, we need to upgrade the teaching (and learning) of history. It really should be an eye-opening experience—something that makes us more aware of who we are and what we are capable of doing as a people and a nation.

The post The End of History as We (No Longer) Know It : A New Year’s Day Reflection appeared first on Show-Me Institute.

As a revealing example of the magnitude of the changes that would be required to put the so-called “Green New Deal” into effect, let’s look at the little village of Kingdom City, Missouri, population 124. Endorsed by several presidential candidates, the Green New Deal would ban all use of fossil fuels over the next decade.

The big business in Kingdom City is servicing heavy trucks passing through Missouri going East and West on Interstate 70 and North and South on U.S. 54. Three filling stations in Kingdom City handle more than 450 18-wheelers on an average day.

What would it take for the Kingdom City filling stations to do the same work using electric power rather than diesel fuel?

That is an answerable question, using mathematics to convert from one form of energy usage to another. We know that a “Green” 18-wheeler must supply essentially the same average power to move a load of cargo over the same distance as a diesel-powered vehicle. Based on diesel fuel usage and engine efficiency, we estimate the required average power at 160 kW (a little over 200 horsepower).

To recharge a single truck after eight hours on the road in 20 minutes would require a charging station capacity of 3.88 megawatts. For three truck stops, each with 10 electric “pumps,” you must multiply this number by 30 to get the needed capacity. That comes to 116 megawatts, which is the equivalent of 58 2-megwatt windmills costing $3 to $4 million each.

In other words, to use electricity to refuel heavy trucks passing through Kingdom City would require a starting investment on the order of $200 million in new wind-generated electric capacity. This calculation does not include further substantial change-over costs, including the installation of additional transmission lines and the construction of recharging stations. For simplicity sake, we have also ignored the significant reduction in fuel economy caused by the approximately 10 tons of extra weight of the Tesla-like batteries that a “Green” 18-wheeler would carry.

The Kingdom City example underscores the prohibitively high cost of trying to implement even a tiny part of the all-encompassing Green New Deal. Take the $200 million starting investment in this little village and multiply it by the thousands of other locations across the United States. You quickly arrive at a figure in the hundreds of billions of dollars.

But would there be any positive impact on the environment?

Now, you must consider that three-quarters of Missouri’s electrical generating capacity comes from burning coal and another 5 percent from natural gas. We also get another 10 percent from nuclear energy, but the Green New Dealers are not calling for more nuclear power. So where, over the next decade, could we find the additional generating capacity that would power electric cars and trucks?

It could only come from increased burning of fossil fuels.

The post What It Would Take to Bring Green Energy to Kingdom City, Missouri? appeared first on Show-Me Institute.

Are businesses and people in our state ready to make the jump from an economy that is heavily dependent on fossil fuels to one that would “meet 100 percent of power demand in the United States through clean, renewable, and zero-emission energy” over the next ten years?

Let’s start with Missouri farmers. Are they ready to switch to electric tractors, trucks, and combines in order to reduce their carbon footprint to the vanishing point over the course of a single decade?

We can answer that question with an unequivocal “No.” Here’s why.

Begin with the fact that there are no—repeat, no—Tesla-like, battery-powered farm vehicles on the market today that could begin to replace most of today’s diesel-powered vehicles in doing the heavy-duty, energy-intensive work involved in ploughing fields and gathering harvests. The battery-powered substitutes for today’s machines don’t exist, and – even if they did – other problems would prevent their instant and widespread use.

Did any of the utopian thinkers who devised the Green New Deal stop to consider that most farms are wired in much the same way as most homes. That is to say, they are not wired for industrial use – which is what would be required to bring about the presumed greening of agriculture through electrification.

The problem here cannot be solved by putting up hundreds or even thousands of new wind turbines to supplement the 500 now in use in Missouri – which provide an average of two megawatts of power per turbine, and then only when the wind blows.

As Blake Hurst, the president of the Missouri Farm Bureau, points out, the electrification of Missouri agriculture would be an immensely expensive undertaking. It would require nothing less than “totally rebuilding the electrical grid” in order to deliver far greater quantities of electric power to farms in thinly populated areas around the state. The grid, along with charging stations and other supporting infrastructure, would have to treat every farm with a fleet of one truck, one tractor, and one combine or cotton-picker as if it were a town with 10,000 or more inhabitants.

To understand the physics, consider a conservative estimate of the electrical requirements posed by a hypothetical electric combine that replaces a typical grain combine. The latter weighs 15 tons, consumes approximately 15 gallons of diesel fuel per hour, and is often used about 16 hours a day during harvest. At 40-percent efficiency, its diesel engine delivers about 244 kW of power.

To do the same work, the electric combine would need to carry the equivalent of about 3.5 Tesla batteries (4,400 pounds) for each hour of continuous use. It would therefore need approximately 28 Tesla batteries to go eight hours without recharging. The combined weight of all of batteries would be 17 tons, making the electric combine significantly heavier than the piston-driven combine. While battery technologies are improving, it will be some time before any dramatic changes in energy to weight are likely to take place.

Since recharge time has to be short for economic reasons (a farmer racing against time to bring in a harvest can’t afford to spend several hours a day twiddling his thumbs), suppose that the electric combine “fast charges” in 20 minutes, an optimal time suggested for electric cars. The charging station and related infrastructure (i.e., generation and power distribution) would have to be capable of supplying in the vicinity of six megawatts of power during the recharge period! Let us pause to consider what that means.

Recharging a single combine requires the same power output as three of today’s wind turbines. According to government data, 1 megawatt of power capacity will supply 750 homes. Looked at in this way, the infrastructure necessary to recharge just one electric combine in 20 minutes would also be capable of supplying electrical power to the equivalent of 4,500 homes.

Suffice it to say: If you multiply that one combine by the total number of big combines and other heavy-duty vehicles used on Missouri farms today, you arrive at a very big number.

Even if we, as a state, were prepared to pay the huge costs of participating in a federal government-led crash effort to transition from diesel-powered to battery-powered farming, it is doubtful that our farmers would thank us. Apart from the inevitable adjustment problems in the introduction of new equipment, the electric combines, tractors, etc. would be more likely to bog down in muddy fields because of the extra weight of carrying a multitude of Tesla-like battery packs. And that’s not all. Barry Bean, a large cotton grower in the Bootheel in southeastern Missouri, shudders at the thought of the long lines of farmers with their tractors and cotton-pickers at charging stations at the end of a long day: “We all work the same hours and we’d all be coming in at the same time.”

*****

Let us turn then to freight transportation, another area important to Missouri as a crossroads between East and West, North and South. If, in the year 2030, all of the heavy trucks passing through Missouri were battery-powered, what would it take to charge them? We could not answer that question without a good deal more research. But we can say what it would take to open a single recharging station to handle a tiny fraction of the heavy-truck traffic that flows through the little village of Kingdom City, lying at the intersection of Interstate 70 and U.S. Route 54, on a daily basis.

Using the same analysis as above, to support a single service station at this site capable a) of recharging a Class 8 truck in 20 minutes that has been on the road for eight hours, and b) of handling 10 such trucks simultaneously, we have estimated that the supporting electric infrastructure must be capable of supplying close to 40 megawatts. That is the equivalent of about 20 2-megawatt windmills just to serve one refueling station. That same infrastructure would serve the needs of about 30,000 homes, or a decent-sized town.

*****

All this brings us to a final consideration. Where does Missouri’s electrical power come from? According to the U.S. Energy Information Administration, we get more than three-quarters of Missouri’s net electrical generation from burning coal, and another five percent from natural gas-fired plants. Oh, yes, our one nuclear power plant in Callaway County is good for another 10 percent, not that the Green New Deal manifesto is calling for more nuclear power.

Even in the act of saying “sayonara” to the use of fossil fuel in just two sectors of the state’s economy – agriculture and freight transportation – we would have to fall back on fossil fuels to provide additional electrical generating capacity.

The post Why the “Green New Deal” Will Not Fly in Missouri appeared first on Show-Me Institute.

Well, my friend, if you are, I have to admit: You had a couple of modest “wins” in 2018. Here in Missouri, free-market thinking took it on the chin in two ballot initiatives. On Aug. 7, by an overwhelming majority, Missourians voted to kill a right-to-work law passed by the Missouri Legislature in 2017. Then on Nov. 6, Missouri voters passed another ballot initiative boosting the state’s minimum wage from today’s $7.85 to $12 by 2023.

Compared with other news, however, those victories by deep-pocketed trade union groups and their co-dependent, big-government allies were small beer. The year’s big story was the striking success at the national level of free-market policies in driving faster growth and widely shared prosperity for all groups of people. For two years, the federal government has been lifting the burden of regulations and taxes on businesses and consumers alike. The dynamism of American capitalism has done the rest.

Recent GDP growth has been close to 4 percent – or about double the rate sustained over the eight years of the prior administration. Suddenly, there are more job openings than people seeking work. That, in turn, has led to higher pay for people at all income levels.

On Oct 2, Amazon CEO Jeff Bezos announced that he was raising his company’s internal minimum wage for warehouse and other unskilled workers to $15 an hour. This led to mutual back-slapping between Bernie Sanders and Bezos. The self-declared socialist complimented the world’s richest man on “doing the right thing,” and Bezos responded with self-congratulations, saying he hoped that other companies would follow his lead.

But guess what? He wasn’t leading. The U.S. Labor Department recently reported that wages for nonsupervisory warehouse employees had risen 4.6 percent from a year earlier, to $17.87 an hour. That’s almost $3 an hour more than the wage set by Amazon’s act of supposed enlightenment. Faced with the demands of an expanding economy and a tight labor market, companies did what they had to do – they raised wages to poach workers or keep the ones they have. So it wasn’t Mr. Bezos who deserved the compliment, but the unimpeded operation of the free market.

If you look around the country and the world, you see people everywhere who are fed up with the cluelessness of wealthy and long-established political elites who continue to pursue highly questionable policy objectives regardless of the cost in higher taxes, reduced paychecks, and lost economic growth. We are witnessing what the Wall Street Journal calls a “Global Carbon Tax Revolt,” with ordinary people rising up in protest against fuel-tax hikes and costly climate-change initiatives aimed at boosting unreliable renewable power. That has happened with the violent “Yellow Vest” protests in Paris and many rural areas that have rocked the presidency of France’s Emmanuel Macron. Other hot spots in the same revolt by taxpayers opposed to sacrificing growth on the altar of environmental piety include Germany and Canada, along with the states of Arizona, California, and Washington.

In sum, 2018 was a bad year for government-failure deniers. It was a much better year for those who believe in the unrivaled power of free markets to create and spread wealth and to promote greater individual freedom, responsibility, and creativity. But 2018 wasn’t all roses either, with rising fears of a global trade war sparked by retaliatory tariffs.

Tariffs are another tax – a tax on commerce. Of course, the more you tax something, the less you get of it. Missouri is a soybean basket to the world. Our state can ill afford a major disruption in world commerce. Neither can the nation. Looking ahead to 2019, let us hope that the substantial economic gains made in 2018 are not jeopardized or lost through the folly of managed (or mismanaged) trade policy.

The post 2018: A Bad Year for Government-failure Deniers appeared first on Show-Me Institute.

Well, my friend, if you are, I have to admit: You had a couple of modest “wins” in 2018. Here in Missouri, free-market thinking took it on the chin in two ballot initiatives. On Aug. 7, by an overwhelming majority, Missourians voted to kill a right-to-work law passed by the Missouri Legislature in 2017. Then on Nov. 6, Missouri voters passed another ballot initiative boosting the state’s minimum wage from today’s $7.85 to $12 by 2023.

Compared with other news, however, those victories by deep-pocketed trade union groups and their co-dependent, big-government allies were small beer. The year’s big story was the striking success at the national level of free-market policies in driving faster growth and widely shared prosperity for all groups of people. For two years, the federal government has been lifting the burden of regulations and taxes on businesses and consumers alike. The dynamism of American capitalism has done the rest.

Recent GDP growth has been close to 4 percent – or about double the rate sustained over the eight years of the prior administration. Suddenly, there are more job openings than people seeking work. That, in turn, has led to higher pay for people at all income levels.

On Oct 2, Amazon CEO Jeff Bezos announced that he was raising his company’s internal minimum wage for warehouse and other unskilled workers to $15 an hour. This led to mutual back-slapping between Bernie Sanders and Bezos. The self-declared socialist complimented the world’s richest man on “doing the right thing,” and Bezos responded with self-congratulations, saying he hoped that other companies would follow his lead.

But guess what? He wasn’t leading. The U.S. Labor Department recently reported that wages for nonsupervisory warehouse employees had risen 4.6 percent from a year earlier, to $17.87 an hour. That’s almost $3 an hour more than the wage set by Amazon’s act of supposed enlightenment. Faced with the demands of an expanding economy and a tight labor market, companies did what they had to do – they raised wages to poach workers or keep the ones they have. So it wasn’t Mr. Bezos who deserved the compliment, but the unimpeded operation of the free market.

If you look around the country and the world, you see people everywhere who are fed up with the cluelessness of wealthy and long-established political elites who continue to pursue highly questionable policy objectives regardless of the cost in higher taxes, reduced paychecks, and lost economic growth. We are witnessing what the Wall Street Journal calls a “Global Carbon Tax Revolt,” with ordinary people rising up in protest against fuel-tax hikes and costly climate-change initiatives aimed at boosting unreliable renewable power. That has happened with the violent “Yellow Vest” protests in Paris and many rural areas that have rocked the presidency of France’s Emmanuel Macron. Other hot spots in the same revolt by taxpayers opposed to sacrificing growth on the altar of environmental piety include Germany and Canada, along with the states of Arizona, California, and Washington.

In sum, 2018 was a bad year for government-failure deniers. It was a much better year for those who believe in the unrivaled power of free markets to create and spread wealth and to promote greater individual freedom, responsibility, and creativity. But 2018 wasn’t all roses either, with rising fears of a global trade war sparked by retaliatory tariffs.

Tariffs are another tax – a tax on commerce. Of course, the more you tax something, the less you get of it. Missouri is a soybean basket to the world. Our state can ill afford a major disruption in world commerce. Neither can the nation. Looking ahead to 2019, let us hope that the substantial economic gains made in 2018 are not jeopardized or lost through the folly of managed (or mismanaged) trade policy.

The post 2018: A Bad Year for Government-failure Deniers appeared first on Show-Me Institute.

Separated from others in two mechanized U.S. Army platoons, many of them already killed or wounded, and hunkered face-down behind an 18-inch high dike in a paddy field, he experienced a my-life-flashing-before-my-eyes moment. “I totally zoned out,” he recounted, “disconnected into a rapid slide show in my head. Beginning as quick flashes of scenes from my early life, long since forgotten, progressing in chronological order to a family scene at a point just before I left for Vietnam.”

Waking up from that dream (“While obviously only seconds had passed it seemed like an hour or more”), he peeked over the top of the low dike and saw supremely confident North Vietnamese Army (NVA) soldiers advancing in the direction of the scattered remains of his unit in no particular hurry. They were visibly smiling and engaged in audible sing-song chatter – firing their rifles as they went about what they clearly saw as an easy mop-up operation. The beginning of the end?

Hardly. A minute or two later, Quint heard the distinctive roar of M-113 armored personnel carriers (also known as APCs or “tracks”) – the first crashing at full speed through a line of hedgerows that had constituted one of the two extended arms of the U-shaped ambush. In a manner of speaking, it was the U.S. cavalry arriving in the nick of time.

Prelude to the Battle of An Bao

Fought 5–6 May, in Bing Dinh Province, South Vietnam

RIP: 22 American soldiers killed in action

This is Gary Quint’s story and that of several other combatants, including my own brother, Lieutenant Harry B. Wilson, and his company’s commander, the hard-charging and intrepid Captain Jay Copley, who spearheaded the rescue mission in what came to be known as the Battle of An Bao. On April 28, 2011, Capt. Copley was awarded the Distinguished Service Cross. Though badly injured, Copley survived the battle. He lives today with his wife in Columbus, Georgia, and recently celebrated his 86^th birthday.

All of the Americans in this story were part of 1^st Battalion of the 50^th Infantry Regiment of the U.S. Army, which was engaged in action in Vietnam from 1967 to 1970. The battalion consisted of four companies (A, B, C, and D). In this battle, C Company under Copley’s command, with about 120 men, raced to the rescue of a large part of A Company under the acting command of Lt. Dennis Hinton, with 50 men. Hinton was killed by sniper fire in the first 30 minutes of the battle.

The story begins at Landing Zone (LZ) Uplift, which was the battalion’s command post. On this same day, C Company arrived at the site and was scheduled to take over base defense from A Company the following day. This was standard procedure, with responsibility for defense of the battalion’s base camp rotating between companies on roughly a weekly basis.

At 7:48 a.m., Lt. Hinton departed from LZ Uplift with nine APCs, or tracks, with orders to search for an NVA regimental command post somewhere in the central coastal plain to the north (going up the asphalted Highway 1) and west (across dirt trails and coastal flatland). As it happened, the distance between what became the battlefield and the command post was not far – just five kilometers as the crow flies, but double that by road in having to skirt around a hilly mass – known to the soldiers as “Miss America” because of its supposed resemblance to a reclining woman.

Quint, a tall, lanky man who had been drafted into the army within a few weeks of his graduation from Lindbergh High School in 1966, was riding in the command track with Lt. Hinton as his radio operator.

Late in the morning, A Company broke into big rice paddy field. Except for a wide opening at the northeast corner of the field, it was bordered by long lines of thick hedgerows that backed up on tall palm trees. Uncomfortable with the situation, Hinton ordered a strafing of the hedgerows and sent out foot patrols to probe into the hedges and palms. Satisfied, at about 11:40 a.m. he told the men they could break for lunch.

“The respite was short lived,” Quint recalls, “Alpha (A Company) was literally out to lunch when the first high-explosive round aimed at the command track fell. Fortunately, that one missed. Then – BOOM, BOOM, BOOM. We lost three other tracks in less than a minute” – all of them set ablaze by rifle fire or rocket-propelled grenades.

You can get some sense of the awful speed of the assault from three radio dispatches sent in rapid succession by Quint to the command post (preserved in the battalion’s radio log from the battle):

11:44 a.m. Received one round recoilless rifle fire.

11:45 a.m. Request MEDEVAC (i.e., medical evacuation by helicopter), just had one APC hit.

11:46 a.m. Receiving fire from 360 degrees.

The battalion’s base camp mobilized artillery and air support within the next few minutes. At 12:12 p.m., it radioed back that air strikes were on their way and that C Company had been dispatched from the base to provide on-the-ground support and rescue.

One of the helicopter gunships sent to the embattled rice field was hit with enemy fire and exploded with the loss of four lives. The situation on the ground became increasingly desperate. Inside the command track in the large opening behind the turret, Lt. Hinton stood fully exposed from the belt up. He was trying both to direct the movement of the craft and to direct its firepower against the enemy. When the track became stuck on a berm, he gave his last order. He directed everyone to “leg it” – meaning to evacuate out the back side of the vehicle and continue the battle on the ground. Hit in the head by sniper fire a moment later, he died instantly.

C Company to the Rescue

In a personal account of the battle, Lt. Harry Wilson gave this account of how C Company entered the battle:

We pulled into LZ Uplift in mid-morning on 5 May 68, supposedly for a stand-down after a long, hard time in the field. We got orders to mount up again on the tracks after a very short period, with almost no knowledge of what we were doing other than that A Company was in trouble over Miss America, a line of hills. We went down Highway 1 at top speed (over 40 mph on pavement), with Capt. Copley continually radioing me (the point platoon) for more speed. He was hammering for speed.

After turning west off the highway, Wilson’s 3^rd platoon APC encountered heavy small arms fire. He pulled up to return fire, but, as Wilson put it, “Capt. Copley in the command track (following the point platoon as usually did), just kept going past us through the incoming fire – without holding up at all – and burst out into the dry paddies, and we followed . . . The captain, and then we, just drove right through a serious firefight.”

It appears that the NVA battle planners had devised a double and perhaps even a triple ambush for the Americans. Having marshalled an unusually large force in the immediate vicinity of the battle (more than 1,000 men with heavy equipment and firepower), it is plain that they fully expected and were prepared for the U.S. battalion command to send another company (and possibly a third company) out to rescue the first company.

Capt. Copley spoiled this plan by hurtling straight through both ambushes and exposing NVA forces to heavy casualties of their own. The captain told me: “Perhaps we shocked them as much or more than they shocked us. We were able to consolidate and pull Alpha Company in with Charlie Company, though both of us suffered heavy casualties.”

Postscript to the Battle of An Bao

C Company arrived at the scene at about 12:45 p.m. – and just about 60 minutes after A Company first came under fire. Gary Quint – who went on to a 43-year-long career with the Kirkwood Police Department ending with his retirement in 2012– was one of those who was scooped up and taken to safety. Today he says: “If they [C-Company] had even stopped for a cigarette, we would have all been dead.”

The post The Quintessential Quint appeared first on Show-Me Institute.

We already have a RTW law – passed by the Missouri Legislature and signed by the governor in early 2017. It was supposed to take effect on Aug. 28, 2017. However, on Aug. 18, organized labor groups collected enough signatures to give voters the choice of implementing the law (with a “yes” vote on Prop A) or rejecting it (with a “no” vote). A simple majority wins.

At a labor rally in St. Louis on June 23, AFL-CIO President Richard L. Trumka joined with other labor leaders in proclaiming that RTW would set off a “race to the bottom” for all workers, not just union members. He said: “Proposition A will lower wages, destroy jobs, (and) increase poverty.”

Naturally, no union boss who can limit the supply of labor to members of his own union wants to give up that ability. Who wants competition – when you are in the cushy position of not having to compete? But the idea that competition is bad for growth and job creation is complete nonsense.

In fact, RTW states have consistently outperformed forced-union states in job growth, personal income growth, and economic growth. That’s not a matter of opinion; it comes from hard data provided by three federal bureaus (Census, Labor Statistics, and Economic Analysis) over the ten-year period from 2004 to 2014.

During this period, average job growth in the 22 states with RTW laws in place for most or all of that time was more than twice as fast (at 9.1 percent) as in the 28 forced-union states. The RTW states also had considerably faster growth in personal income (at 54.7 percent compared to 43.5 percent), and a much stronger economic growth (50.7 percent compared to 38.0 percent).

And there were other ancillary benefits, including faster population growth (more than double that of forced-union states). From 2004 to 2014, many Americans voted with their feet in moving into RTW states and out of forced-union states.

The devastation that befell the U.S. auto industry during and after the 1980s exemplifies what happens when companies are kept from responding to market forces as a result of compulsory unionization, forced to pay an artificially high price for labor, and forced to absorb “legacy” costs (health care and pensions) they cannot possibly afford over the long run.

During the Great Recession of 2008–2009, two of the three big automakers – GM and Chrysler – would have collapsed but for government bailouts totaling billions of dollars of taxpayer money. Meanwhile, Toyota and other foreign manufacturers that had opened plants in RTW states continued to perform well without bailouts.

In 2012, Michigan – the state that gave birth to the United Auto Workers union – became the 24th state to adopt RTW. Gov. Rick Snyder said that he believed that the legislation would lead to “more and better jobs for Michiganders.”

It is not just employers who benefit from right to work. It is anyone and everyone who seeks employment. Compulsory unionization represents an unfair and counterproductive abridgement of the freedom of people to offer their services to the highest bidder; they should not be locked out of an opportunity because a union with political clout has been granted a broad monopoly over the supply of labor.

The post How and Why Prop A Will Boost Jobs and Growth appeared first on Show-Me Institute.

So why is President Donald Trump taking Harley-Davidson—another U.S.-based global super-brand—to task?

A day after the company announced plans to serve the European market with motorcycles built in Europe, the president thundered: “A Harley-Davidson should never be built in another country—never!” He accused the company of hoisting the “white flag” of surrender and predicted “If they move, watch, it will be the beginning of the end.”

Harley-Davidson, Inc., made its announcement after the European Union raised tariffs on U.S.-made motorcycles by 25 percent—in retaliation to the 25 percent tariff on European exports of steel to the U.S. imposed by the Trump administration. Noting that the higher EU tariff would add approximately $2,200 to the average cost of a motorcycle exported from the U.S. to Europe, the company said:

Increasing international production to alleviate the EU tariff burden is not the company’s preference, but it represents the only sustainable option. Europe is a critical market for Harley-Davidson. In 2017, nearly 40,000 riders bought new Harley-Davidson motorcycles in Europe, and revenue generated from the EU countries is second only to the U.S.

The president said that he had “chided” Harley-Davidson executives on an earlier occasion for moving production to India as a way around high motorcycle tariffs in that country. But is it reasonable to expect a profit-seeking enterprise to keep all production and employment in the U.S., regardless of the cost in lost sales, profit, and overall competitiveness?

Certainly, the Trump Organization has not followed such a policy. Under licensing or other arrangements, it has fancy hotels bearing the Trump name in four different cities in India (Mumbai, Delhi, Pune, and Kolkata). Apart from Chicago, however, the Trump Organization has no luxurious hotels anywhere in the great American heartland. Why not?

Presumably, it made more sense from a business perspective to build hotels for the super-rich in India—though other cities in the American Midwest would have welcomed the same investment.

The president faulted Harley-Davidson for not being more “patient”—suggesting that his deliberately provocative approach to trade negotiations would force other nations to bend to his will for fear of losing access to the rich U.S. marketplace. As he said a couple of months ago— “Trade wars are good, and easy to win.”

But as Joe Haslag, the chief economist for the Show-Me Institute, notes, the president is playing “a very dangerous game,” because “the size, scale, and scope of the products that we are now talking about in increasingly acrimonious trade negotiations are staggering—a potentially U.S.-GDP-changing event.”

A grand strategy? Maybe, but early results are not promising. Mid Continent Nail in Poplar Bluff says its orders have dropped in half as a result of having to raise prices to make up for the higher cost of importing steel from Mexico. It has laid off 60 workers and says it may have to dismiss all of its 440 remaining workers by Labor Day.

In 2017, the Trump administration withdrew from the Trans Pacific Partnership—an agreement that would have reduced tariffs in Asian markets on motorcycles made in the U.S. That seems to have prompted Harley-Davidson’s earlier decision to build a manufacturing plant in Thailand. It may also have been a factor in the company’s decision to close its Kansas City manufacturing facility by 2019.

What caused the world-famous company with the “HOG” stock exchange symbol to make those choices? Surely it was rising tariffs on manufactured goods—a problem that does not exist in the luxury hotel business.

The post Trump vs. Harley-and the World appeared first on Show-Me Institute.

But one of the most attention-getting findings contained in a newly released report from the Brookings Institution titled “How Trump’s Steel and Aluminum Tariffs Could Affect State Economies“ might cause you to think otherwise.

As the Brookings report points out, Missouri’s imports of steel and aluminum amount to $1.4 billion, or 7.4 percent of our state’s total imports. By that measure, Missouri’s exposure to tariff-driven increases in the price of those two commodities is the highest of any state in the country. But how meaningful is that metric?

Joseph Haslag, chief economist for the Show-Me Institute, points out that the metric is misleading for a couple of reasons. One is the presence of a large automotive sector in our state, and the other is the simple fact that Missouri is just not a large importing state.

A better measure, therefore, is to look at Missouri’s exposure relative to our state’s total output of goods and service—its gross domestic product. By that measure, Missouri falls from the state that is “most exposed” to steel and aluminum purchases to the 8th most exposed state—still not anything to be happy about.

At both the state and national levels, agriculture is one sector of the economy that is likely to suffer. As Blake Hurst, president of the Missouri Farm Bureau, told me, “Farmers are going to be hit two ways—having to pay more for tractors, combines, and other equipment made from steel and aluminum, and also having to deal with the possible loss of foreign markets due to retaliatory tariffs on U.S. agricultural exports.”

 Watch this space for further information on how changes in tariffs and trade agreements are likely to affect Missourians.

The post How Would Missouri Fare in a Global Trade War? appeared first on Show-Me Institute.

It seems so, if we take him at his recently tweeted word (“Trade wars are good, and easy to win”) and take the liberty of injecting him into the center of the argument found in the “Candlemaker’s Petition,” a satire of protectionist tariffs written by the great French economist, Frédéric Bastiat (1801–1850).

In this classic economic parable, published in 1845, the manufacturers of “candles, tapers, lanterns, and street lamps” join forces with the producers of “tallow, oil, resins, and alcohol” in demanding protection against a powerful foreign competitor – namely, the sun. They ask for a law ordering their countrymen to keep all windows and doors covered during the day. Their petition states:

We are suffering from the intolerable competition of a foreign rival, placed, it would seem, in a condition so far superior to ours for the production of light that he absolutely inundates our national market with it at a price fabulously reduced.

Even in pre-electrical days, if a government were to order everyone to switch from sunlight to candlelight, it might create a number of jobs in candlemaking and related industries. However, it would also impoverish a far larger number of people by forcing them to replace a free and plentiful resource with an inferior yet costly product. In this case, the money people would spend on additional lighting products would raise profits for candlemakers – but as a needless expense for everyone else, it would lower disposable incomes and reduce productivity across the board (forcing even candlemakers to work in poorly lit conditions).

The same logic applies today if the president proceeds with plans to slap a 25-percent tariff on steel imports, along with a 10-percent tariff on aluminum imports. Above all, such duties would hurt a thousand or more people for every one they help – limiting choice and pushing up prices for most consumers, while imposing a significant burden on steel-dependent industries that employ 6.5 million people, or close to 50 times the number of U.S. steelworkers (140,000).

In the opening words of his essay, Bastiat paid mocking tribute to politicians opposed to free trade, saying:

Gentlemen: You are on the right track. You reject abstract theories and have little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is, to reserve the domestic market for domestic industry.

Free markets and free trade come down to the same thing: voluntary exchange for mutual benefit. It makes no difference whether that happens within a country or across national borders. In the absence of job- and growth-destroying government coercion, the buyer or consumer holds the upper hand. In a competitive marketplace, unless buyers agree to part with some of their money for someone else’s product, there is no trade and there are no transactions.

With his recent tweet, President Trump seems not (or pretends not) to understand that basic idea. Let’s hope it is pretends.

The post Would Trump Banish Sunlight to Protect American Jobs? appeared first on Show-Me Institute.

Witness an incredible turn of events:

We now hear the proudly progressive governors of California and New York howling in outrage at the removal of a substantial tax break for those at the highest level of income – the top 10 percent, and, especially, the top one percent.

Under the Tax Cut and Jobs Act that went into effect on Jan. 1, taxpayers may no longer count all of their state and local income tax payments, plus property taxes, as deductible expenses on their federal returns. The new law caps the deductibility of these state and local taxes (the so-called SALT deduction) at $10,000 per taxpayer. What follows is a rough calculation of how the cap will impact people at several different levels of income (focusing only on California, where local income taxes are not as important a factor as they are in New York, and disregarding property taxes).

Based on California income tax tables, a couple earning $150,000 in 2018 will owe $8,797 to the state of California – with the consolation of knowing that every cent will be deductible. The couple will save about $2,000 on their federal return.

A tipping point occurs at $164,000 in adjusted gross income. Exceeding that, a California couple filing jointly runs out of cap room and gets no further benefit from the SALT deduction.

The top one percent in California starts at about $500,000, according to the latest available data from the Internal Revenue Service. With that income, an entry-level couple in the one percent club will owe $41,347 to the state. Since all but $10,000 of the state tax is nondeductible under the new law, it has the effect of bumping up the adjusted gross income on their federal return by $31,347. Applying the top federal rate of 37 percent to that sum, the couple will owe an additional $11,598 to Uncle Sam.

The average income for families in the top one percent in California is $1.6 million, or more than three times the starting income. So how does the “average” ultra-rich family fare under the new tax regime? In 2018 it will owe $165,072 to the state – with a whopping $155,072 no longer counting as a deductible expense. Consequently, the family will take a hit of a little more than $57,000 in what it owes to Uncle Sam.

In a nutshell, the top one percent of filers in California are about to lose a huge tax break. No longer will they be able to reap one dollar in federal tax savings for every three or four dollars going to the state government.

No wonder the governors of the two states are worried. At 13.3 percent, California has the highest marginal income tax rate of all the states. New York State’s top rate is 8.82 percent, and that jumps to 12.7 percent in New York City. Each state garners nearly 50 percent of its total income tax revenues from the top one percent of earners.

Who has compensated for the outsized deductions that the highly paid denizens of Hollywood, Silicon Valley, and Wall Street have been able to claim on their federal returns due to exceptionally high state and local taxes?

Taxpayers in low-tax states and less affluent regions have done so. In the process, they have helped to subsidize the growth in public spending that has occurred in Sacramento, Albany, and New York City.

The situation will soon change. In early 2019, when people file their local, state, and federal tax returns for the 2018 tax year, the cross-subsidies, of a reverse Robin Hood nature, will largely disappear.

At the same time, taxpayers outside the top ten percent of filers will appreciate the positive impact of a near doubling in the standard deduction – to $12,000 for individuals and to $24,000 for couples. According to the nonpartisan Tax Foundation in Washington, D.C., a married couple with two children and a combined adjusted income of $85,000 will reap a $2,254 tax savings in 2018 as a result of provisions in the new law.

So, what about the vociferous complaints coming from progressives, who say that the new law only serves to make the rich richer and does nothing to help working people?

But the tax tables tell an entirely different story.

The post Tax Reform and Tax Hypocrisy appeared first on Show-Me Institute.

This is your conscience calling. I speak to all of you who call yourselves conservatives – the champions of limited government and economic freedom. Another year has come and gone and what do you have to show for it? “Too damned little,” I say, given super-majorities in both houses of the Legislature and control of the executive branch as well.

Look at what has just happened in the U.S. Congress. With far narrower majorities than you have in the Missouri Legislature, your counterparts on the national stage passed the most important pro-growth tax policy in many years – cutting the corporate income tax to 21 from 35 percent while also allowing businesses to write off the full costs of new equipment to improve operations and enhance productivity. In addition, under the new legislation, middle-income taxpayers will pay about $900 less in their 2018 tax bill than they would under the current law, according to the Tax Policy Center.

Though I may sound critical, I really do want you to succeed – for nothing is gained if you continue to ignore the chastisements of your often-troubled but ever-hopeful conscience. Here are my New Year’s Resolutions for you going into the 2018 session of the Missouri Legislature –

One, don’t be afraid to think big and act boldly. For almost three decades, Missouri has been one of the slowest-growing states in the nation. That alone should tell you that a major course correction is in order – and long overdue.

Two, say “No” to corporate welfare. Slaughter the fatted calves of tax credits for economic development (eliminating as much as $400 million in annual state expenditures).

Three, use those savings to lower taxes for all Missourians – both individuals and businesses.

Four, deregulate, deregulate, deregulate. Nationally, the undoing of many of the regulatory excesses from the Obama administration helped to power 3-percent-plus GDP growth in the second and third quarters. Further deregulation at the state and local government levels in Missouri can have a similarly beneficial effect. The governor’s No MO Red Tape initiative looks like a big step in the right direction.

Five, and this is a plea that is meant not just for lawmakers, but for who believe in the power of free markets: Do not shirk debate and, still more, do not shrink from the important task of ridding young people of the pernicious idea (widely accepted at colleges and universities in Missouri and across the country) that free-market capitalism is an evil system that promotes social injustice.

Nothing could be further from the truth. Free-market capitalism under limited (as opposed to wide-ranging) government is the only economic system that spreads opportunity far and wide and that reliably delivers both growth and prosperity to the many and not just the few.

To you lawmakers, I say, in closing: Good luck on ringing in the New Year with the strength and conviction that come from knowing that you are capable of achieving great things.

This op-ed also appeared in th Joplin Globe.

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In his First Thanksgiving 1621, we see prosperous, black-clad Pilgrims in the company of new-found friends – bare-chested Indians in feathered war bonnets (one of several historical inaccuracies). The “thanks” here are for a bountiful harvest and the early realization of America as a land of milk and honey.

But how could it have been so easy for the settlers to carve a life out of the wildness in a cold and unknown land far from home?  Simple answer: It wasn’t, as most people instinctively recognize.

Out of 102 passengers on the Mayflower who arrived in Plymouth, Massachusetts, in December of 1620, 51, or exactly half, died from malnutrition or disease within a few months. The bereaved survivors must have been painfully aware of the precariousness of their own existence. They included William Bradford, the author of the classic Of Plymouth Plantation, who went on to become governor of the colony for many years. Gravely ill, his young wife, Dorothy May, either fell or threw herself to her death as the Mayflower lay at anchor in Cape Cod.

The Pilgrims did not build on a record of success.  As Donna Curtin, the executive director of the Pilgrim Hall Museum points out, “Many other colonies (in the Americas) had failed terribly.” Set up in 1607, the original English settlement in Jamestown, Virginia, had all but collapsed three years later – with 80-90 percent of its inhabitants lost to starvation and disease. In Ms. Curtin’s words, “They had murder, cannibalism, you name it – horrific, brutal conditions.”  No fewer than 10 colonies set up before Jamestown by the Spanish and French had also ended in disaster.

The Pilgrim leaders were well aware of this string of failures, as we know from Bradford’s journal. Coming with intact families and a strong sense of community, the Pilgrims bore more than a passing resemblance to the ancient Jews who sojourned in Egypt before going on to find their new home. Having fled religious persecution in England, the Pilgrims spent a dozen years in the Netherlands before fresh troubles there prompted many of their congregation to pin their hopes on the new world.

However, within three years of their landing, Pilgrims faced major problems of their own.   Bradford wrote:  “Famine began to pinch them [the Pilgrims] sore.”

The investors who paid their passage hoped to get an adequate payback on their investment in the founding company.  Fearing that would not be possible if people were free to farm their own land, they insisted upon “a common course and conditions” over the first seven years – under which there were no individual property rights and each member was entitled an equal share of total output.

Bradford recognized the demoralizing aspect of this arrangement. The industrious would subsidize the slackers; the most productive would get no more “in the division of the victuals and clothes” than the least productive. Instead of fostering harmony, communal property led to laziness, envy, thievery, poverty, and social dysfunction – just as it would in the 20^th Century through the spread of communism.

In 1623, Bradford and other leaders assigned to every family “a parcel of land” for its own use. With private property came economic freedom and individual initiative. “This had a very good result,” Bradford wrote, “for it made all hands very industrious” – leading to a big increase in corn production and far greater “contentment” for the community as a whole.

That’s how private property and economic freedom saved the Pilgrims. Happy Thanksgiving!

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Will Saint Louis (or Kansas City) surprise the business world in winning the Amazon Prize? I speak, of course, of the bidding war to decide what city, suburb, or close-in town – out of 238 contestants – will be selected as the site of Amazon’s second headquarters. In every important way, “HQ2” is supposed to equal its existing headquarters in Seattle. Amazon will announce its choice in the spring of next year. Both of our two biggest metro areas are in the bidding – with enthusiastic support from Gov. Eric Greitens and his team.

The potential payout dwarfs the Orteig prize, but so too do the costs to the cities and states doing the bidding. Amazon says it is prepared to invest about $5 billion of its own money at its new site and create up 50,000 jobs with an average annual compensation of more than $100,000 per job.

In Lindbergh’s case, Saint Louis businessmen put up $15,000 (to his $2,000) to underwrite the cost of building his airplane. As for HQ2, it seems clear that the costs to local and state taxpayers over a period of 15 to 20 years will run into the billions of dollars.

It’s a big and potentially wildly uneven trade-off, beginning with the fact that Amazon cannot guarantee 50,000 sustainable jobs – or even 5,000 jobs or 1,000 jobs. Who is to say Amazon will continue to grow at the same phenomenal pace that it has maintained over the past two decades? In the tech world, many once-hot companies have either fallen into bankruptcy (think Wang Laboratories and Digital Equipment Corporation) or stopped growing and faded into insignificance (think AOL and Yahoo).

Remember that the initial build-out of HQ2 is supposed to take 15 years. That is a long time, and it makes this competition a very different proposition than the Lindbergh flight. Less than three months after getting his final go-ahead from Major Albert B. Lambert (after whom Saint Louis’s airport is named) and other backers, Lindbergh had designed and built his Spirit of St. Louis monoplane and completed his historic flight from New York to Paris.

It is disturbing that city and state officials in Missouri have responded with such rapturous glee to the Amazon bidding – while maintaining that they must, in deference to Amazon’s wishes, remain mum about what they have offered in the way of tax breaks and other subsidies.

Nobody knows what Amazon will look like in 15 or 20 years. In that sense, HQ2 is a multi-billion-dollar pig in a poke. Whatever city wins the Amazon Prize, you may be sure that local and state taxpayers will, for a long time, be deeply in hock to trying to make a go of it.

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