Susan Pendergrass speaks with Robert C. Enlow, president and CEO of EdChoice, about whether Milton Friedman’s ideas still hold up seventy years after Capitalism and Freedom. They discuss why capitalism is losing favor with younger Americans, how regulatory capture rather than free markets is driving the backlash, what declining public school enrollment signals about the future of education, and more.

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Episode Transcript

Susan Pendergrass (00:03): Thanks so much for joining us on the Show Me Institute podcast, Rob Enlow of EdChoice. You’ve been executive director, CEO there for how long?

Robert Enlow (00:13): Since two thousand nine.

Susan Pendergrass (00:15): That’s a long time.

Robert Enlow (00:16): Well, not as long as when I started in 1996, so thirty years this year.

Susan Pendergrass (00:21): 30 years. Yeah. Wow. Well, I don’t know how time is flying, but I wanted to have you on to talk about a couple things that are going on recently, and one thing in particular, which is, there’s poll after poll, there’s election after election, it seems to be the case that capitalism is losing favor with the American public, socialism is gaining steam with the American public. And recently I saw an editorial about the fact that JD Vance has said that Milton Friedman is essentially no longer relevant. That Milton Friedman’s ideas made sense in the 80s, but it’s no longer relevant for today. We need more of a Hamiltonian economic plan than what Milton Friedman put forth. And of course, Milton Friedman’s seminal work, Capitalism and Freedom, is now 70 years old. And well, I just realized 20 years ago you edited a volume on his work, Liberty and Learning, and certainly you worked side by side with him. You ran his foundation before he died, and you know him. I’m just curious your thoughts on whether or not Milton Friedman is still relevant.

Robert Enlow (01:40): I think we need more Milton, not less, right now. And I think we need far less Hamiltonian central banking, centralized scrutinizers, to quote the great Frank Zappa, I need no more central scrutinizers in our life, regardless of whether they come from the right or the left. There is a distrust in systems across the board, whether you’re right or left. And some people respond to that by saying we need to have a socialist system. And some people respond to that by saying we need to have a Hamiltonian sort of centralized control system. Milton Friedman’s correct solution is that we need a bottom-up system of individual liberty and enlightened self-interest. And we need far more of that than we need less.

Susan Pendergrass (02:25): So why is it out of favor now? What do you think is going on, that the idea of the government taking care of housing, healthcare, education, the basic foundations of each individual’s life, that the government should be managing that? Is it just too far in the rear-view mirror, the idea of individual liberty and individual responsibility, and folks haven’t seen it recently enough? Or maybe it’s neither of these, or is it that the particular form of capitalism folks are seeing right now, where some people are making a ton of money and a lot of people are not making much money at all, is that what’s causing this backlash against capitalism?

Robert Enlow (03:12): So what people are seeing is absolutely causing a backlash. Let’s just say that. I have a 28-year-old son, and he and I argue about this constantly, right? And I love him for that. Everyone seems to see that both government is a major problem, but also there’s a massive inequity in how our systems of competition are working. What people forget is what Milton would say about that. He would say, we do not have a free market, we do not have individual liberty, and we don’t. What’s happening in America and what’s happening around the world is Milton’s greatest fear, and it’s also beginning to happen in education reform, even among some of our allies. The idea of regulatory capture. People forget that what ends up happening, and it was chapter six in Milton’s Free to Choose, is Milton’s book story on what’s wrong with our schools. People often forget chapter seven, which is who protects the consumer. In that chapter, he talks a lot about what used to happen with the old ICC, the Interstate Commerce Commission, and the Railroad Commission, and how at one point everyone, all these people got together from right and left to create a change to a massive problem. That problem got changed, everyone was happy, and all the advocates went home, and the bureaucrats were left to put it in place. The bureaucrats did what? They put it in place in a self-interested way, and now all of a sudden you have to come and reform the reform. This is what’s happening, I think, both writ large in America and certainly with education. I think there’s this real challenge with regulatory capture. This is true among private schools, charter schools. The minute schools get into a choice program, sometimes they’re like, well, we don’t want any other schools in these programs. And so this regulatory capture is not a free market. Milton would be railing against that as much as he would be about anything else, in my opinion.

Susan Pendergrass (05:06): And I always go back to this very simple explanation of the four ways to spend money, right? And clearly the least careful way is when you spend other people’s money on other people. And the idea that folks want to expand that exponentially right now concerns me, because we’re just going to be burning more money for worse results.

Robert Enlow (05:29): This is why ideas like ESAs are so important, and directing direct funding to families where they have to pay something and have the actual act of paying, I think that puts skin in the game. For your listeners, maybe they don’t remember the four ways Milton said you spend money, but I think it’s important. Well, you know it, but I always use this with you. If I spend my money on you, I am super careful about how much I spend, I don’t care what I buy. If I spend your money on me, I’m super careful about what I get, but I don’t care how much I spend. And if you spend someone else’s money on someone else, you don’t care how much you spend or how much you buy. And I think that is our problem right now. And you mix that with companies, associations, unions that all make it harder for others to enter the marketplace. This is the real challenge of barriers to entry, right? We’re seeing this in K-12 education now, where a bad story creates a desire to have a regulatory impulse. This is not the right way to go. We should be going toward more freedom. And I think this is what young people are reacting to, Susan. In my opinion, people like my son and others are reacting to the basic, obvious problem that government is not capable of doing it, but the current structure of entering a marketplace is impossible and only advantages some.

Susan Pendergrass (06:54): Yeah. Right. Clearly the idea of parents choosing where their kids go to school is an extremely popular idea. You guys poll it every month. I think as long as those polls have existed, it’s been 70% plus, parents want to do this. And yet that’s one that’s being strongly resisted by the same folks who are leaning towards socialism. They want to really lock the doors on letting kids out of the worst schools.

Robert Enlow (07:26): So, you know me and my background. For those of you who don’t know, I actually did liberation theology work back in the day before I got to Milton Friedman’s organization. And then I got to meet Milton Friedman, which, by the way, in about 12 seconds I felt like a minuscule intellect, because he’s so incredibly smart. But I call my transition from liberation to liberty, and part of that is because I think Dr. Friedman, and I think the radical left, the socialist left, identify the problem. The problem is ineffective government and systems that do not work for people. So whether it’s an oppressive government or a fascist government or a dictatorial government, it is not working for people. Now the socialists and those who will argue, well, then the best solution is my view of government because I’m better, so, in a very sort of old George H. W. Bush way, it’s a kinder, gentler kind of socialism, my way, better than others. Milton’s argument was, no, the solution to this government problem is to give individuals more ability and autonomy. This is common sense that I don’t think a lot of our younger folks understand anymore. But the interesting thing is, it’s a difference, I think, between their public and private life. Publicly, they say this is a problem, we’ve got to solve this problem. Privately, they use choice and competition and individualization and customization more than any generation ever before. This is their entire life, and it’s called a cell phone. And every app leads them to individual customization.

Susan Pendergrass (09:04): Thank God that’s not my problem.

Robert Enlow (09:06): You mean scrolling, doom scrolling?

Susan Pendergrass (09:09): Yeah. Thank God I never scroll. But I just feel like there is a disconnect. You’re exactly right, of course they want more choice in everything. And I don’t want to say “they,” but I think this is also sort of crossing generational lines, this idea that capitalism is evil and bad and is creating, I think we see a lot of crony capitalism right now. We see our elected officials making billions of dollars and buying up parts of companies. We see this weird form of capitalism. And then we have the vice president himself saying it’s not relevant anymore. It’s for the 80s and it’s not relevant anymore. And maybe people are just buying that. Maybe there’s like, okay, I guess capitalism is on the way out, what’s the next thing? And socialism is being sold in a pretty neat package.

Robert Enlow (09:58): Right. Yeah, but you know who’s not buying it anymore? This is, I think, the hope for the future. Communities of color. Communities of color are seeing the importance of unleashing rampant individual capitalism and rampant opportunity. You see this with micro schools and homeschooling. The fastest growth of homeschooling is in the Black community. The same thing is often true in the micro school community. It is communities who are most challenged, often and sometimes most oppressed,

Susan Pendergrass (10:04): Yeah.

Robert Enlow (10:25): that understand the benefits of opportunity in free markets in a way that you might argue “bougie” suburbanites who go to Columbia don’t get. And that is, of course, I think a problem of privilege more than anything. And so I think that’s a challenge for our society. But I’m watching communities of color embrace competition and individual liberty in a way I’ve never seen before in education. And I think we’ll get there again, but I think right now there’s a real disillusionment. And I think part of it has to do with our current government and with our previous government. We’ve not had a really good go of it the last two times.

Susan Pendergrass (11:06): Yeah, and I’ve met many parents from communities of color, like Black parents, Black moms, who will do anything to make sure their kids get the same opportunities, particularly if they’re economically disadvantaged, to make sure their kids get the same educational opportunities. And they are the ones who are pressing. In Missouri, there are groups of parents pressing for open enrollment, pressing to expand our ESA program, going to Jefferson City, learning how to be politically active, and they’re putting pressure on these folks also to get their kids out of unsafe schools and to stop being told, yeah, I’m sorry, I know only three percent of the kids are proficient in math in your school, but we can’t let you out of it. They’ve had it with that argument, and they’re the ones who are really pressing it. I don’t know if it’s landing, because we’ve made some progress, but we haven’t really

Robert Enlow (12:01): Where it’s landing, Susan, here’s where you’ve got to remember it’s landing. What is the enrollment in our traditional schools looking like right now? Down dramatically, right? What is the enrollment and effort in what I would call, what Vela, my dear friends at Vela, call “indie education”? It’s dramatically increasing. And this is the proof of the positive. Milton used to say the readiness for a true free market can be seen

Susan Pendergrass (12:08): Down.

Robert Enlow (12:28): in the prior years by an underground marketplace. And in many ways we have an underground marketplace of education happening, which is fantastic. It’s leading to so many opportunities. You’ve done the research in Arizona and other places. The massive growth of new vendors, the massive growth of opportunity, is really amazing.

Susan Pendergrass (12:47): Yeah, it’s only limited by what parents can think up. And they just keep thinking up new stuff.

Robert Enlow (12:52): Yeah, it’s shocking. Milton’s quote is always true: there’s not been another way heretofore discovered to raise the masses out of poverty than what happens when you unleash the free market and capitalism. And I think the challenges we’re seeing with capitalism and with liberty and with the view of liberty now are problems related to government and cronyism and regulatory capture. I don’t think people realize, when a legislator says, how do I know if someone’s learning? Well, you know what doesn’t tell them if someone’s learning? A test they have to take once a year after a certain period of time. That does not really tell you. All that gives you is a mark in the day in the life of a kid. And by the way, those aren’t doing very well, right? Not anywhere. So I don’t want to rely on that system to tell me how kids are doing. And I think people see

Susan Pendergrass (13:38): Not in Missouri.

Robert Enlow (13:47): this huge disconnect between what they’re told and what they’re seeing in real life. And they want to do it themselves. Young kids want to do it themselves.

Susan Pendergrass (13:54): That’s right. And parents know when their kids can’t read. And they know when their kids are watching too many movies at school and don’t want to get on the bus. Parents know all of that. And if they don’t have any options,

Robert Enlow (14:07): And what’s exciting?

Susan Pendergrass (14:09): certainly work to expand options for parents. I know we’re up to a million and a half, maybe, in private school choice programs, maybe closer to two.

Robert Enlow (14:18): Yeah, I think it’s more important to look at what’s happening in some states. So it’s a million and a half across the country. That’s tripled in seven years, which is amazing in terms of publicly funded private school choice. You’ve got to look at what’s happened in places like Florida and Arizona and Arkansas. Florida has gone, since two thousand and one to today, from eighty-nine percent of kids in their assigned public schools to barely fifty percent. You’re seeing diversity of choice. And the future of education, and I think therefore the growth of liberty in educational marketplaces, is in the following three things: there are fewer kids, there are dramatically more options, and there’s no money. So that will lead to, in my opinion, a free market system of education far faster than any kind of top-down socialist idea.

Susan Pendergrass (15:08): And then they’re all going to come back and blame you, right? The idea that school choice is the reason, I mean Missouri enrollment is down, it’s projected to go down more. I looked at kindergarten cohorts, it’s absolutely going down. They continue to hire teachers. And when they have to start laying off teachers and closing school buildings, they’re going to say it’s because of school choice. And of course it isn’t because of school choice. But when parents can have school choice, they take it.

Robert Enlow (15:32): It’s the only system where I’ve seen you blame the customer for a failure of your product. I’ve just never seen anything like it in the country. We literally blame education failures on parents who don’t want to go to educational failures. It’s crazy.

Susan Pendergrass (15:53): And then in Missouri they lock the door on them. It’s like, well, too bad, you can’t leave. So maybe it’s just a matter of not needing to refer to any of this as capitalism, because when it comes down to it, parents don’t really care what it’s called, as long as they can pick their kids’ school. They don’t really care.

Robert Enlow (16:08): Look, the reality is parents don’t know if it’s a charter school, private school, or public school most of the time. And that’s okay with me. But the reality is, do they have power and control over how the money is spent and where their kids go? And the best thing we know about it, in my opinion, from the data we’ve seen, and we continue to see this, is families who make choices make better choices over time. This is one of the most amazing things. You start and say, hey, I want a good school for my kid, I think this is better. And then they get in there, and three years later they’re like, what’s the test scores, and how’s it working, and what’s your pedagogy? Because, shockingly, the more options you have, the better customer you become, because you care more. I use this story all the time. When I was a kid, I asked my mother for a ten-speed. I got it for Christmas and proceeded to leave it outside. By the fall it was all rusted and nasty. And I said, hey Mom, I need another ten-speed. And she said, no, but if you earn half of it, I’ll buy the other half. Well, I earned half of it and she bought it for me. Guess how well taken care of that ten-speed was.

Susan Pendergrass (17:14): Leave it outside.

Robert Enlow (17:16): Right, what happens? So when you put some skin in the game and allow free markets to work, this is what families benefit from.

Susan Pendergrass (17:24): So Milton Friedman’s still relevant?

Robert Enlow (17:27): I think Milton Friedman will become

Susan Pendergrass (17:29): Me too, even hearing it said, but yes, go.

Robert Enlow (17:31): Well, no, so actually I think what’s really interesting, I think Milton Friedman, if you read Michael Kanudi’s Wall Street Journal piece, which is amazing, the other day about Milton and this whole conversation, I think Milton is the countercultural revolution that’s coming. I think Milton is both, I mean, one of the things about knowing him and getting to know him over the last decade of his life was he was an equal opportunity challenger.

Susan Pendergrass (17:46): Okay.

Robert Enlow (18:00): If he was a right-leaning guy who didn’t like free markets, he would immediately call out a right-leaning guy who didn’t like free markets. If it was a left-leaning guy, he would do the same thing. Milton was about true individual liberty. I think we’re going to get back to that kind of countercultural revolution. Just like it was seen in Eastern Europe and Latin America. I think that’s the next thing, in America you’ll see communities who are poor reading Milton Friedman in the basement.

Susan Pendergrass (18:27): Love it. Well, you heard it here first. Maybe you can come back and talk to us more about it.

Robert Enlow (18:32): I’m happy. Thanks so much for having me.

Susan Pendergrass (18:34): Appreciate it.

Produced by Show-Me Opportunity

The post Why Young People Are Turning Away from Capitalism with Robert C. Enlow appeared first on Show-Me Institute.

Electric companies in the Midwest say new large scale power lines are needed to get more energy onto the grid to serve big power consumers such as artificial intelligence data centers. Now, the utilities argue reducing competition is the fastest way to [build transmission infrastructure].

Specifically, utilities want to reduce competition by halting competitive bidding for multi-state transmission projects, as the bidding process can take 16 to 20 months. If approved, the utilities would be the default developers of those projects, with no competition involved. In Missouri, both Ameren and Evergy, our state’s largest utilities, operate in multiple states and would gain that right of first refusal.

For starters, it’s worth acknowledging that 16 to 20 months is a long time to select a developer, and these companies are right that we quickly need more energy to serve big new customers.

This situation illustrates why Missouri is between a rock and a hard place in its efforts to modernize our electricity grid. Do we really need to choose between (1) remaining content with the slow, bureaucratic speed at which the energy sector operates, which is unsuited for this time of rapid and unpredictable growth or (2) giving up on a competitive bidding process and simply awarding the project to the biggest utility in the region?

There has to be a better way—and fortunately, there is. Missouri instead could allow private electricity grids (also known as consumer regulated electricity, or CRE) for large customers like data centers.

With CRE, a company like Amazon could partner with a supplier that would build and possibly operate a power plant and transmission/distribution exclusively for its customer(s). Since these grids would only be serving islanded, sophisticated clients, they would not need to be regulated like a utility serving the general public—meaning less red tape and fewer delays in getting power plants up and running.

Authorizing CRE would not mean replacing the existing regulated grid. Rather, it would create parallel pathway to serve the growing number of big power customers. Allowing private companies to work directly with electricity providers also would incentivize both parties to find innovative ways to bring power to data centers and other industries. Missouri doesn’t have to sacrifice competition for speed; rather, it can create more pathways for competition simply by letting the power suppliers and the power providers negotiate the price and schedule themselves.

The post Utilities Want More Control to Meet Growing Energy Demand appeared first on Show-Me Institute.

Susan Pendergrass speaks with Emily Ekins, vice president for policy and society and director of polling at the Cato Institute, about new survey data on Americans’ declining civic knowledge and growing openness to socialism. They discuss why younger Americans are less averse to socialism and communism than older generations, what Cato’s polling reveals about basic civic knowledge gaps, why the founders prioritized protecting rights and freedoms above solving economic problems, the psychological concept of locus of control and its link to support for socialism, and more.

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Episode Transcript

Susan Pendergrass (00:00):
Thanks so much for joining us on the podcast. Emily Ekins, you are at the Cato Institute, vice president of politics and society and also director of polling, right, Cato? Thanks for

Emily Ekins (00:10):
That’s correct, yes.

Susan Pendergrass (00:11):
joining us. You guys do lots of great polling and survey that you did recently this summer that kind of coincided with the two hundred and fiftieth birthday of the United States particularly caught our eye, and I appreciate you coming on to talk about it.

Emily Ekins (00:25):
Thank you for having me. Glad to talk about it.

Susan Pendergrass (00:28):
Yeah, I mean, honestly, there’s a lot in the news these days, multiple surveys coming up with results that I guess some people are shocked by, but clearly within this week we’ve had new election results, and something about the idea of socialism is really resonating with folks in the United States right now. Why do you suppose that is?

Emily Ekins (00:52):
Well, that’s a really tough question. I think

Susan Pendergrass (00:53):
That’s a big question. But first of all, you could tell us what your poll found on it, but your poll supports what many of them support, which is that views on socialism are more positive than they’ve been in the past, and views on capitalism are more negative. And I just wonder, since you’re out talking to people, why do you suppose?

Emily Ekins (01:12):
Yeah, so first let’s separate out young people from older people.

Susan Pendergrass (01:17):
Okay.

Emily Ekins (01:17):
especially Americans who grew up and came of political age during the Cold War, they know what socialism is and they know how many tens of millions of people it murdered over the past hundred years or so. And so there’s really a strong aversion to the word socialism, to the word communism, among people of that older generation. But there really is a drop-off. And it’s hard not to think that the Cold War ending had something to do with it, where these younger generations had less reason, perhaps, or teachers didn’t talk about why not socialism, why not communism, it just doesn’t work. And so right now, a lot of young people are worried about affordability, and particularly housing. I have to say, looking through the data, it seems like housing may be kind of a linchpin here, that people who are really struggling to afford their rent or their mortgage, or paying a large percentage of their income on housing, they’re very susceptible to these arguments, because people come around and say, well, we’re going to lower your price, the cost of living. The problem is that these policies, centralized economic planning, just does not work. It has the same set of consequences. But I think economic anxiety is part of it. But there’s actually more to it, and I’d love to talk to you about that, because our survey was connected to America’s 250th and the Fourth of July. We launched it right before the Fourth of July, but we had a lot of questions on our nation’s founding. What led to the founding and the creation of our country? And I think what we found is that young people know next to nothing about things that matter. We asked, we had a series of civic questions, seven questions. They only answered one of seven correctly. The one they answered correctly was, who was the first president? And 70% knew it was George Washington. And I thought, well, good, at least they know that. But the problem is they don’t know the more important questions. Why did we declare independence from Great Britain? Why did we adopt the Constitution of the United States? What is the purpose of the Constitution of the United States? And without knowing the why, it’s really easy for other people, trying to curry favor and win votes, to come in, rewrite history, and basically tell young people that they offer an alternative program that will solve their problems. And without knowing the history of why we set up a system of limited government, when they hear these alternative proposals, they don’t understand where it could go wrong.

Susan Pendergrass (04:10):
Yeah, and just to clarify, some of the questions you asked were like, how many branches of the federal government are there? And half, almost half, of the respondents got it wrong, right? They did not know it was three. What country we fought in the Revolutionary War, a lot of folks didn’t get that right. I mean, some of these very basic questions, and that jumped out at me immediately, like when you ask somebody their opinion on socialism and they don’t know how many branches we have of our federal government, how could they possibly answer that question in an informed way? Right.

Emily Ekins (04:40):
Yes, no, I’d love to share something with you. We kind of got into the weeds on this one question. We asked a question where we said, what is the purpose of government? Is the purpose of government primarily, not to say there’s no other purpose, but what’s the primary purpose of government, is it to protect rights and freedoms, or is it to solve economic and social problems, or both equally? And about a third of all Americans, so this isn’t just looking at young people, this is all Americans, only a third of Americans said to protect rights and freedoms. Most everyone else said it was either both equally or to solve economic and social problems. And so here’s the fun part. We took this question and we loaded it into four of the leading AI models, so Grok, ChatGPT, Claude, Google Gemini. We said, feed in all of the writings, speeches, drafts, letters, published and unpublished works of the American founders. How would they have answered this question? And all four models came back with the same answer. They said, this isn’t even contestable, this isn’t even hard, it was very clearly number one, which was to protect rights and freedoms. So why? Well, so that’s why I’m saying the why really matters. Teaching young people, teaching Americans the why. Why did the founders think it was protecting rights and freedoms? Aren’t there complex economic and social problems we want to tackle? Well, here’s why. The argument they made was, they weren’t anarchists, they wanted the government to do some things, but they recognized that when government was not constrained in its power, and was not governed by consent of the governed, right, that problems happened, that government exploited people, government oppressed people. And so there was a hierarchy of goals here, and the main goal was government needs to protect rights and freedoms first. And then everything else has to be subordinate to that. And as long as your program or your idea does not require the government to fail in its duty to that first goal, which is to protect rights and freedoms, then you can have a discussion. And apparently, this was just the thing the founders agreed on. Now, you had Alexander Hamilton and Thomas Jefferson, different sides, different opinions about the role of government, but I thought that is the argument, that’s the discussion I think is missing from our current framework, which is why. Why is unlimited government dangerous? Why do we want to limit it? Isn’t it obstructive? Isn’t it preventing us from solving problems that we need to solve? Well, here’s why. And then if you want to have government do X, Y, or Z, make sure we don’t undermine liberty in the process of doing it.

Susan Pendergrass (07:41):
Yeah, I think that’s right, but then you also see, okay, so absolutely, when you talk to folks who are gravitating towards this new idea of socialism and democratic socialism, it’s like, well, I think

healthcare should be free for everybody, I think housing needs to be affordable, I think childcare needs to be affordable, without kind of taking that next step, which is to say the government’s going to pay for everything. And then the government’s going to decide. I’ve talked to people who like this idea, and they’re like, I’m

Emily Ekins (08:07):
Mm-hmm.

Susan Pendergrass (08:08):
willing to give some of my paycheck to help do this. And I’m like, but there’s central planning involved. They will decide how much of your paycheck and they will decide where it goes to. And that is, they, whoever’s in office. Like if you don’t like the people in office today, they, we are the central planners. That’s how it works, and generally they haven’t done a good job at it. But on the other hand, they’re like, I just want people to have healthcare and I just want people to have housing, what’s wrong with that? Without realizing, I think, to your point, this idea of the social contract, where the government only governs by the consent of the people, I just think that violates that in a way that says, we’ll give all the power to the government and we’ll let them decide how that gets redistributed. Not to mention the fact it’s never worked. It’s been tried multiple times and has never worked, but it sounds so attractive right now. And

Emily Ekins (08:57):
Right.

Susan Pendergrass (08:58):
I also think part of that attractiveness that comes out in your survey is people recognize that currently there is a feeling that capitalism is turning into crony capitalism, and there’s a lot of fears around fraud and things at the federal level, that I think is not only making socialism more attractive but is kind of giving capitalism a bad name. What do you think?

Emily Ekins (09:28):
Yes. Okay, there’s so much I agree with what you were saying there, and there’s a lot to unpack. I think that there’s two things going on when we’re talking about, like you said, people just want affordable healthcare, they want people to be able to afford their housing, childcare if they need that, and so forth. So there’s two issues. One is abuse of power, and then what actually works. So one is, make sure that you don’t give government too much power, because it always leads in the same direction. Can someone show me an example where unchecked government power ever didn’t result in the oppression of the people? I would

Susan Pendergrass (10:07):
Yeah.

Emily Ekins (10:08):
love for a democratic socialist to point that out, because there isn’t one. That’s something we’ve learned through the test of time. The second thing is just more pragmatic, centralized economic planning, where the government says, we’ll take more of your taxes and then we’re going to plan out your healthcare, your childcare, we’re going to, when it comes to housing and things like that. Whenever you centralize economic decision making, we have some data on that, and it has never worked, because of something called the knowledge problem. Nobel Prize-winning economist F.A. Hayek wrote extensively about this. Those government experts, you could take the whole faculty from Harvard and MIT and Yale, and have them sit on a board and try to figure this out, they would not do as good of a job as millions of Americans making individual decisions when they’re free and able to do so. Now, people would say, well, then why isn’t the free market working in healthcare, why isn’t the free market working in housing? And the argument is this: that’s not the free market. That’s actually

Susan Pendergrass (11:16):
Right.

Emily Ekins (11:17):
government, excessive government management of those areas. Like with housing, there’s a lot that goes into it, and I’m not going to go, we don’t need to go into all of it, but there’s just some simple things, right? When you think about supply and demand, if you have more people in demand of housing than you have supply of it, the first thing you should look at is, are we limiting the supply of housing in some way? And if the answer is yes, start there before we have the government seizing property from landlords, for heaven’s sakes. So there’s some first steps that people should look to. But again, without civic knowledge, without economic knowledge, how could we expect people to do that?

Susan Pendergrass (11:57):
I mean, that’s the basic point, right? We talked a little bit before we started, like Missouri, our kids aren’t even learning to read. So I understand that we need to do a better job of teaching civics and history and geography, and certainly at the federal level, there’s NAEP tests on those things and the results are terrible. And the results of your survey are dismal when it comes to why younger people, what their civic knowledge even is about how the government works and why it was founded. But I don’t see how we can begin to tackle that, or what is capitalism, what is socialism, and who are Lenin and Stalin and Friedrich Hayek, how do we tackle that if they can’t even learn to read? I feel like we’re

Emily Ekins (12:36):
Yeah.

Susan Pendergrass (12:37):
we’re slouching towards Gomorrah, it’s like, I feel like we need to start at these basic levels and then try to take on civics and history, but I could see you thinking we need to do them simultaneously. What do you think?

Emily Ekins (12:52):
Well, yes, to your point about wanting to raise the reading level of kids in Missouri, my very first thought was let’s think about Mississippi versus California, and the dramatic differences in reading competency between the kids in both states. One state implemented better processes, phonics, right? Phonograms, phonics.

Susan Pendergrass (13:17):
Yes. Yes.

Emily Ekins (13:19):
I was raised in California, they were like, we’re not going to do something new, we’re going to teach it this new way, like sight words, and learn by absorption. Anyway, some things work better than others. And when economic decisions like education are made in a centralized fashion, and the centralized planners get it wrong, then all the students suffer. So what can we do about that? Well, more school choice, that’s one approach that we could look at, and then also doing a better job at figuring out what works, what doesn’t work, and actually implementing it. Public education is not a jobs program for adults, right? It’s for children.

Susan Pendergrass (14:03):
Yeah, I’ve heard it argued both ways, honestly, in Missouri, but that’s it.

Emily Ekins (14:06):
Well, we care about both. We want teachers and students to be taken care of well.

Susan Pendergrass (14:11):
Yes.

Emily Ekins (14:11):
But again, if we have experimentation, competition, where people are actually innovating, apply what works. But if we just have it centrally determined by one small group of people and they get the answer wrong, lots of kids suffer.

Susan Pendergrass (14:30):
So where do you see this heading? You know, Zohran Mamdani is opening up government grocery stores in New York, and as somebody who grew up in the sixties and seventies, I can only think of what happened in the Soviet Union when they had government grocery stores, and there were lines and they were terrible. The fact that that isn’t an attractive idea to anyone kind of blows my mind. So where do you see this going? Are they going to have to, is it going to have to play out? Rent controls and government grocery stores and free childcare, are they going to have to play that out and see that it doesn’t work? Or what do you think is going to happen ten, twenty years from now?

Emily Ekins (15:09):
Yeah, it’s hard to say. Maybe they’re going to just do a live demonstration for us so we can repeat and learn exactly what we learned every other time government

Susan Pendergrass (15:17):
Yeah.

Emily Ekins (15:18):
tried to do these things. I mean, it’s just like a huge eye roll. Like, what are they doing? We

Susan Pendergrass (15:23):
Right.

Emily Ekins (15:23):
have some data. I mean, I think that a lot of these leaders would purport to support the idea of scientific research, academic research. Well, consult that. What does that say will happen with government-run grocery stores? It’s not going to go well. But

Susan Pendergrass (15:41):
Right.

Emily Ekins (15:42):
I understand, again, his goal, people could say, is noble. But

Susan Pendergrass (15:46):
Right.

Emily Ekins (15:47):
markets actually deliver that better than government, and empirically there is evidence to support that.

Susan Pendergrass (15:55):
I mean, New York’s had rent control for a long time. I just am kind of surprised, if it’s not maybe the person and the personality, I just don’t understand. And again, I go back to thinking to myself, right now we have a group of folks with a lot of money. We have our own president making a lot of money in office, and he’s hanging out with people with a lot of money, Elon Musk, Jeff Bezos, and maybe if people are associating that with capitalism, maybe what they’re saying is they want to reject that.

Emily Ekins (16:27):
Yes, I think that that’s exactly right. There’s something called policy moods, where when you have a Democrat in office, the voters tend to say they want smaller government. When you have a Republican in office, the voters start to say they want bigger government. This is a well documented phenomenon, that kind of whoever’s in office, voters will tend to go the other direction. And I too have wondered that very thing, if having a billionaire for president and having him be friends with lots of billionaires, anyone that’s like, well, I’m against them, then whatever they stand for. So if they were religious, then they’d probably be like not as religious, depending on how they’ve really been framed. And I think Trump has been framed as this billionaire capitalist. And so I think that that is definitely playing a role here. I also think that there are some

deeper trends happening in the American electorate, and we probably don’t have time to go into that in too much depth. But

Susan Pendergrass (17:24):
Let’s try. Yeah.

Emily Ekins (17:25):
what I would say is I think some of the problems are psychological, in kind of almost a spiritual psychological sense, not religious, I’m talking about something else. I’m talking about this concept of the locus of control. In psychology, there’s this idea that people can differ to what extent they explain events in their lives as being within their control, or outside their control. And people who think of things inside their control, they’re more likely to be happier and earn more money, have better relationships, better friendships, be healthier, less likely to get in fights, because they think that they have some say in what’s happening in their lives. They think their choices matter. Now, for the external locus of control group, psychologists have really worried about this, because all the good things I just mentioned just reversed, flipped, worse grades, worse health outcomes, poorer relationships, more likely to get in fights when they’re in high school, because, you know, if people think, well, it’s not my fault, they’re just a victim of circumstance, then it’s harder for them to feel like their choices matter. Well, anyway, at a more societal level, what we are observing is that each generation of young people, when asked survey questions to measure their locus of control, they’re becoming more and more external in their locus of control. What that means is, young people, each generation of young people, we’ve been studying this since the 1970s, this is Jean Twenge’s work, each generation of young people is more likely than those before them to say external forces are shaping their lives. They’re less likely to believe that their own agency is what matters in their lives. Now, the reasons for that are complicated, multivariate, and

Susan Pendergrass (19:22):
Sure.

Emily Ekins (19:23):
complicated. But what the consequence of that is, is that we do know this, people that have an external locus of control, they externalize the events in their lives, they are far more drawn to socialism. That’s just the way it is. They’re drawn to socialism, a zero-sum view of the world, it’s like us versus them. And some really bad things can happen when people go down that route. There’s a lot more tolerance of political violence, and we’re seeing that play out. And so the question is, well, why is that happening? I don’t have all the answers to why, but I do think we should recognize that it is happening, and it’s not just economic, it’s not just political, it’s at the level of psychology.

Susan Pendergrass (20:05):
Yeah, and were we to enact the agenda of some of these democratic socialists, then we would simply be, I think I heard somebody say, fitting people for cement shoes. We would simply be putting them more into the externalist camp, right? Where it’d be like, I depend on the government for food, housing, healthcare, and childcare, I have no control over my life. And if they decide to raise how much or lower how much, or put in a work requirement, I have no control over how well my family’s doing or my own well-being, because it all depends on these decisions by the government, doesn’t that exacerbate this idea of externalism?

Emily Ekins (20:48):
Well, that’s actually the irony here. So evolutionary biologists have actually gone through and documented what happens here, is that kind of this external locus of control will lead people to support policies that actually make the world more external, meaning

Susan Pendergrass (21:04):
Oof.

Emily Ekins (21:04):
that they have less control over the situation. So, in the case of the 2008 financial crisis, in which they were really examining this, the crisis will make people feel like they lack agency, because understandably a recession is not the fault of any one person. So then those voters go out and vote for politicians who promise to do X, Y, and Z policies that actually will, ironically, make another recession more likely, will actually slow the economy, make things worse. And so it’s interesting from an evolutionary biology perspective, how that can happen, those negative feedback

Susan Pendergrass (21:40):
It’s a self-fulfilling prophecy. Well, what’s the policy implication of that? Or what do we do to try to stem that tide? I mean, I’ve heard folks say, number one, we improve high school education in regard to civics, history, and economics. Maybe, I don’t know. That feels like a very

long term goal that’s unlikely to have any real impact, but what do you do from a policy point of view?

Emily Ekins (22:05):
Right, no, that gets tricky. I feel like a book could be written on this topic.

Susan Pendergrass (22:09):
Yes. Mm-hmm.

Emily Ekins (22:11):
But I do think, like, the way I’ve thought about it mostly is from a perspective of kids, and how do you raise each rising generation to have a more internal locus of control rather than external. Right now we’re doing the opposite. And, you know, just anyone that’s a parent of young kids, I think you can probably, or if you’re a parent of children at all, you’ve probably seen this in action, where kind of the zeitgeist in our public schools, the zeitgeist, and especially social media, is not helping, where like you can see at micro levels how we all the time are telling young people it’s not their fault, it’s forces beyond their control. I do think that in colleges and universities, as well as K through 12, critical race theory and ideologies that are similar to that really emphasize the external. That’s not to say that external forces like racism or sexism don’t exist or don’t matter, that’s not what we’re talking about. But if you tell kids the reason for the challenges you face are due to insurmountable challenges that you cannot overcome without electing this politician, that’s teaching young people an external locus of control. So at the college level, it’s rampant, and I don’t observe any efforts on the part of administrators or faculty to recognize the psychological harm that they are doing to their students by propagating ideas that really turn the attention of their students to focus and emphasize on external forces.

Susan Pendergrass (23:43):
Yeah, there’s certainly folks like Ian Rowe out there who are fighting hard against it, to say don’t

Emily Ekins (23:48):
Yes.

Susan Pendergrass (23:48):
you dare talk to our kids that way, but I think you’re exactly right, we don’t even talk about AI. But I can see us heading for a big correction, and if that’s what it takes, that’s what it takes. But it’s hard for me to foresee a future where the idea of the government taking care of things for everybody loses popularity. I just don’t see

Emily Ekins (24:18):
Right.

Susan Pendergrass (24:19):
where we’re going with it. Like, I just don’t know.

Emily Ekins (24:23):
And here’s why it works. This is what I would also remind people is that when the government runs businesses or runs industries, we observe the same sorts of consequences. It’s all a matter of degree, longer wait times, lower

Susan Pendergrass (24:35):
Yeah. Yeah.

Emily Ekins (24:37):
quality services, limited access to kind of the best of the quality. So, like in healthcare, for instance, the more government gets involved, and this is, there’s academic papers that demonstrate this, it’s quite clear, you have less access to the star doctors, to the star hospitals, to the highest ranked, in terms of quality. And think about it, if you have a cold or the flu and you need something minor, for instance, a government-run healthcare system, I think, probably seems great in that situation.

Susan Pendergrass (25:11):
Yeah.

Emily Ekins (25:12):
But what if you have a life-threatening illness? You don’t want long wait times. You want the best quality. You want to have access to the best doctors and providers, clinicians. Unfortunately, the more government gets involved in running things, longer wait times, lower quality, less access to the best. And it is like that everywhere it’s been tried. And I think we should do more to push back, to say no, they will fail to deliver what they’ve promised, and here’s why.

Susan Pendergrass (25:45):
Yeah, I know somebody who moved to Canada for the healthcare system and currently has a torn ACL. Surgery is

Emily Ekins (25:52):
Oh no.

Susan Pendergrass (25:53):
scheduled for like twelve months from now. And that’s like a year wait to fix a torn

Emily Ekins (25:56):
Oh my god. Yes. Wait time. Wait time.

Susan Pendergrass (26:00):
I assume it will heal itself, but I mean, I don’t think that reality sinks in. Certainly there’s a lot of work to be done, and there’s a lot of people with a lot of great ideas. You mentioned one I work on all the time, school choice, to improve outcomes in education for everybody, and give all kids, regardless of income, more opportunities. That’s what you do. You make the schools perform for the families. But even that faces incredible headwinds. And there’s great ideas out there around healthcare and around housing. We had Bryan Caplan on talking about, just build more housing. San Francisco, it’s impossible to buy a house, build more, stop regulating and over-regulating where they can be built. We know that there are some things that could work, but instead I think it just must seem easier to just have the government print the money and pay for it. I just don’t know. That’s why I think we might have to see a correction of some sort, because when I see in your poll that of the eighteen to twenty-nine year olds, thirty-eight percent had a positive view of communism, that means that we have an incredible work ahead of us. I mean, communism,

Emily Ekins (27:15):
That’s right.

Susan Pendergrass (27:16):
like Stalin, and like, yes, what led to genocides, and they must, I don’t think that side of communism is out there. So

Emily Ekins (27:28):
No. And I think there’s an organization that has polled on this, and we should do some polling as well. But most young people just don’t, I think they

Susan Pendergrass (27:34):
Yeah. I don’t know.

Emily Ekins (27:36):
run out of time after World War II, and like everything after that, they just

Susan Pendergrass (27:40):
Yeah, yeah, yeah.

Emily Ekins (27:41):
too. I was a studious student, I paid attention, and we didn’t get to any of that. Like

Susan Pendergrass (27:47):
No, yeah.

Emily Ekins (27:47):
the Cold War, the Cultural Revolution, Mao’s Cultural Revolution, the Khmer Rouge, like all of these communist revolutions that killed probably upwards of a hundred million people. How did we run out of time to talk about that? Might there be some value in us

Susan Pendergrass (28:02):
Right.

Emily Ekins (28:02):
learning some lessons of the very recent past?

Susan Pendergrass (28:06):
Yeah, absolutely. Okay, well, what’s next for you guys in terms of what we can look for, for more interesting polls? I know you’re always doing

Emily Ekins (28:14):
Yes, actually, we are in the process right now of writing an exciting survey where we’re looking at economic populism and democratic socialism. And this is where I get really excited. We’re looking at the psychological correlates of those types of policies. What types of psychological traits and underlying beliefs and assumptions correlate with support for these types of economic policies? So we’ll have to wait to see what the data says, but I’d love to share it with you.

Susan Pendergrass (28:45):
That’s awesome. Thank you so much, Emily. I really appreciate it. I could talk to you forever, but let’s wait and come back and talk about that one. I do really appreciate it.

Emily Ekins (28:54):
Thank you for having me.

Produced by Show-Me Opportunity

The post The Rising Appeal of Socialism in America with Emily Ekins appeared first on Show-Me Institute.

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On July 30, 2026, while guest hosting Mundo in the Morning on KCMO Talk Radio, Patrick Tuohey spoke with Kansas City Mayor Quinton Lucas about the city’s race- and sex-conscious contracting program. The city’s own consultants recently told the council it lacks the factual basis to continue the program.

The post Does Kansas City Still Need Race- and Sex-Conscious Contracting Preferences? appeared first on Show-Me Institute.

Many communities are unsure how to respond to data-center proposals.

The upside is real. Data centers have multi-billion-dollar assessed valuations that can bring significant tax revenue, expand the tax base, and allow for lowering tax rates for everyone. Loudoun County, Virgina—part of “Data Center Alley” —is a clear example. There, data centers account for almost half of property tax revenues, enough to fund every county function outside the school system.

But there are costs, too. A single 100-megawatt data center can use 80,000 households’ worth of electricity and consume, on average, 2,600 households’ worth of water. Hyperscale facilities push that further, and can have power draws of 1,000 megawatts, which is comparable to the output of the Callaway Nuclear Energy Center, one of Missouri’s most powerful generators. That kind of load can seriously strain infrastructure.

Further complicating matters is the fact that technology can change quickly, especially when billions of dollars and national security interests are at stake. Computing power that once required hardware that filled warehouses can now fit in a pocket or be worn on a wrist. A decision that originally seemed reasonable when a proposal was first presented might not age well if the costs or benefits of a data center change as a result of technological advances.

Missouri has already taken some action to limit ratepayer costs resulting from new data centers by requiring large data centers to pay their share of costs for connecting to the grid, such as for transmission lines. But Ameren recently stated:

All Ameren customers, including residential customers, pay for expanding the grid through building new power plants through rate increases, and that may be needed to accommodate large-load customers.

This means that average ratepayers would likely pay for new power plants constructed to meet data center demand if Ameren or Evergy does indeed need new power plants. But this possibility is also in question based on how major technology companies implement their recently signed “Ratepayer Protection Pledge” with President Trump.

One promising state-level solution are private electricity grids, also called consumer regulated electricity (CRE). This could create a parallel path for energy generation, and help protect ratepayers from risk, accelerate capacity buildout and innovation for both data centers and power plants, and alleviate pressure on the government to meet every aspect of this complex challenge. New Hampshire became the first state to allow it, and the U.S. Congress is considering a federal CRE policy. Similar solutions can be implemented for water usage.

Locally, the most important thing communities can do is resist handing out large tax incentives. Beyond the digital services they support, the primary local benefit data centers provide is tax revenue. Unlike many other industries, data centers generally do not create large numbers of long-term jobs, generate substantial secondary development, or attract tourists.

If local governments heavily reduce tax collections through incentive packages, they ask residents to absorb many of the significant costs while receiving little benefit.

Besides, developers are scrambling to find suitable locations. We don’t need to bribe them to come here. At Missouri’s Nuclear Energy Summit at the University of Missouri, numerous development experts noted how electricity availability and speed-to-operation had moved to the very top of many industrial corporations’ priority lists. Communities with reliable electricity, water, and advantageous locations are already attractive. Reforms like CRE could make Missouri even more competitive while keeping risk on investors rather than ratepayers.

The better answer is patience. If communities resist handing out tax incentives, ensure additional revenues turn into broad tax cuts, and focus on removing barriers that could hinder timely development, then data centers could become a genuine opportunity rather than a threat.

The post How Missouri Communities Can Keep Data Centers from Raising Utility Bills appeared first on Show-Me Institute.

Imagine getting a large one-time bonus, then using that money to buy an expensive new car. There are some obvious parallels to Missouri’s budget.

Shortly before the June 30 deadline, Governor Kehoe signed Missouri’s more-than-$50-billion budget for fiscal year 2027, which began on July 1. He also issued about $53 million in vetoes and more than $400 million in spending restrictions. While the vetoes are generally in line with recent years, the expenditure restrictions are much larger than have been necessary in more than a decade. The restrictions also indicate that the governor believes the legislature approved roughly $400 million more in spending than projected state revenues can support.

Unlike a veto, a spending restriction doesn’t permanently eliminate an appropriation. Instead, it temporarily withholds the authority to spend it. Missouri’s constitution requires the governor to keep the budget balanced throughout the fiscal year, so if projected revenues won’t support all the spending approved by the legislature, the governor must reduce authorized spending through vetoes, restrictions, or a combination of both. The difference is that vetoes are permanent unless the legislature overrides them, while restrictions can be lifted if revenues improve. The governor then decides which restricted appropriations, if any, are ultimately released.

Perhaps the most interesting part of the governor’s budget signing was the explanation he provided for this year’s actions. Kehoe reiterated something he’s said before: Missouri has a spending problem rather than a revenue problem. He also said the state needs to reduce its reliance on what are called general revenue pickups. General revenue is the state’s primary operating fund, supported largely by income and sales taxes. A general revenue pickup occurs when a temporary funding source disappears, leaving general revenue to cover an ongoing expense. That’s exactly how temporary spending becomes a permanent obligation.

The governor’s explanation reflects two concerns I’ve written about repeatedly. First, Missouri’s spending has been growing faster than its revenues. As the auditor has highlighted, between fiscal years 2020 and 2025, general revenue collections increased 45.8 percent. During that same period, general revenue spending increased 53.4 percent, more than double the rate of inflation.

Second, lawmakers treated the surge in temporary federal COVID relief and an extraordinary period of state revenue growth as an opportunity to expand ongoing commitments. As those temporary dollars disappeared, the state became increasingly reliant on general revenue pickups, shifting costs that had once been covered by other funding sources onto Missouri taxpayers.

Remember the car? If soon after your purchase you found you couldn’t afford your new car, nobody would say you had an income problem. They’d rightfully say you spent too much. Missouri’s budget shouldn’t be viewed differently. The good news is that Governor Kehoe’s actions indicate he has correctly identified the problem. Now it’s up to lawmakers to get serious about solving it.

The post New Budget, New Problems appeared first on Show-Me Institute.

If you sat down and intentionally tried to come up with the worst tax policy you possibly could, you would want to include the following elements:

• Raising taxes on some people, but not all people;
• Replacing charitable giving with mandatory taxation;
• Creating another obscure taxing authority with little to no oversight;
• Creating services with the new tax that benefit people who specifically do not pay for those services; and
• Directing the entire program of new services at people who are exempt from the tax, and who also happen to be the wealthiest group in society.

This would be about as bad a tax policy program you could imagine, and, voila, this is exactly what voters in St. Louis County get to decide on in November.

Many Missouri counties have a property tax that funds senior services. However, almost all of them passed it before the senior service property tax freezes were put into place, so at least senior citizens paid the taxes that funded the services. That is not how it works in Jackson County, which adopted the tax freeze and then passed the senior service tax in 2024, and is not how it would work in St. Louis County if voters approved this tax. Senior citizens who get the services would be exempt from paying the new tax if they own their home. Yes, seniors who rent would possibly pay the new tax through their rent payments, but keep in mind that many seniors who don’t live on their own live in senior communities, which are sometimes non-profits (entirely, or in part) that also won’t pay the new tax.

It is bad enough that seniors now vote, thanks to the freeze, on tax increases that they don’t have to pay. But to create a new fund specifically to fund senior services from a new tax they (mostly) won’t pay is truly entering the tax policy Twilight Zone. (Note that seniors who own their homes will be exempt from this tax if it passes. People saying it won’t apply in this instance, such as in this story, are wrong.)

The post The Senior Services Tax Proposal in St. Louis County Is as Bad as It Gets appeared first on Show-Me Institute.

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Episode Transcript

Susan Pendergrass (00:00):
So great to be joined today by Professor Joe Haslag of Auburn University, formerly of the University of Missouri. You’re an expert on all things economic in Missouri, and you have a new paper for the Show-Me Institute about the Missouri economy. A lot of people when they think of the economy only think of the national economy and not the fact that states have economies too, with GDPs and all kinds of things that influence them, and not all state economies are the same. One of the things I was struck by initially in the paper is that Missouri is ranked 44th for GDP growth. What do you think is going on with that? Why has Missouri fallen so far?

Joe Haslag (00:52):
We couldn’t answer that question in half an hour, Susan. That’s a big one.

Susan Pendergrass (00:55):
Yeah, well let’s just give it a shot. Why have other states’ economies grown faster than ours?

Joe Haslag (01:03):
Well, Missouri has not been a center of innovation, and those things are hard to pin down. There are states that have grown really fast. Since air conditioning has become more accommodating and cheaper, we’ve seen some growth in the South, and there are states like Florida and Texas that have opted for faster growth and attracted a lot of people. So there’s always this question of are you talking about just the total economy and how it grows, or are you talking about the economy per person? Both matter and both are relevant measures depending on the story you’re trying to tell. At the heart of it, though, where growth comes from is not just from adding a bunch of people. If that were the case, we would have grown during the Middle Ages just from population growth. It’s not just about adding people and workers, it’s about the productivity of those workers, how much each one can produce. We’ve seen innovations: the tractor was an innovation compared to the horse and plow, and computers were an innovation compared to adding machines. And when you say 44th, that’s one of the critical things. Missouri is also 44th in the average rate of productivity growth per worker. We just haven’t been a source of super

Susan Pendergrass (02:26):
Sure.

Joe Haslag (02:54):
strength in that area. And I still say “we” because I was born in Missouri and spent a major chunk of my professional career at the university there. Until we change, and it’s hard, what you’d like to say is is there an easy path? Can we just do X, Y, and Z and guarantee it? No. There is no one thing that fits all. But what we do see is that people respond to incentives. What you’d like to set up is a business environment, a tax environment, and other kinds of settings that just make people take some chances. Some are going to pay off and some are going to fail, and you recognize that, but over time you see faster growth in those places.

Susan Pendergrass (03:41):
Yeah. You talk specifically about states in terms of labor productivity. States that invest in certain sectors of the economy, particularly construction, where productivity may be growing faster than other sectors. Is that something Missouri should do? Should we be placing bets on labor sectors?

Joe Haslag (03:57):
That’s a great question. The evidence in this paper is that industrial policy is not something that works very well. Trying to pick winners and losers is exactly the kind of thing we saw in the failed experiments of the USSR and some other places. We all talk about China’s explosive growth for a couple of decades. That wasn’t part of the planned economy. That was coming from the part where they just let loose their entrepreneurs and gave them the right environment, that word again, where they could take chances and succeed. So yeah, picking an industrial policy, there’s just no evidence that growth in one sector’s labor is going to give rise to faster productivity growth.

Susan Pendergrass (05:10):
Okay, so let’s look at a different lever that we’re talking about a lot in Missouri right now, which is reducing or getting rid of the income tax. It feels like a lot of states are trying to do it. And what if all the states around Missouri did the same thing? Would that have an impact on how much our GDP benefits from it?

Joe Haslag (05:29):
Sure. I mean, if we, first of all you said something interesting at the beginning. We think about the national economy, but you can draw borders around any area you want, a state, a city, a metropolitan area like St. Louis, and ask how they’re doing. One of the things that is remarkable is the biggest metropolitan area in Missouri has been stagnant for four or five decades. The population in the St. Louis MSA has been about two and a half million people for at least thirty or forty years. Where they live on the Missouri side or the Illinois side may fluctuate, but the total hasn’t changed. And the city of St. Louis proper has this weird status. Missouri has a unique thing where the city of St. Louis is its own county entity. And the city of St. Louis is

Susan Pendergrass (06:05):
Yeah. Right.

Joe Haslag (06:25):
almost becoming a ghost town. It went from a million people in 1900 to somewhere around 300,000 right now.

Susan Pendergrass (06:32):
Yeah. And they of course have the earnings tax. I can definitely see the counterfactual to this argument. I know people who live in states where they keep raising the income tax and piling on other taxes, Oregon comes to mind, and people are leaving. And we know that Texas and Florida, like you said, people are moving there and they don’t have income tax.

Joe Haslag (06:50):
I think it’s more to it than just the income tax rate, but the income tax rate is part of this package of incentives. Alone, the income tax is a pretty powerful thing, because it changes the returns to every kind of business activity, every kind of trade where we’re exchanging work or productivity or investment for something. Getting rid of the income tax, and there’s a piece in the paper where there’s actually an estimate, a projection of how much, based on the evidence across the country, getting rid of Missouri’s income tax would add to the growth rate.

Susan Pendergrass (07:32):
And how much would it add to people’s pockets?

Joe Haslag (07:33):
Well, the growth rate is about between a

Susan Pendergrass (07:35):
I mean, this is a number that people have been talking about in Missouri the last year. We get rid of the income tax, everyone will have $2,800 or $2,900 more. And your estimate is $2,900?

Joe Haslag (07:39):
Right around $2,900. And it takes a few years to get there, but the point is you get an immediate pop and then faster growth for the rest of the time.

Susan Pendergrass (07:57):
And you have a similar estimate if we improve our labor productivity. How do we go about doing that?

Joe Haslag (08:02):
You create incentives. Productivity still comes from what human beings do, what men and women in the labor force do. My incentive to innovate in a state where the income tax rate is eight or nine percent is a lot lower than it is in a state where it’s one or two percent,

Susan Pendergrass (08:06):
Yeah. Right. Yeah.

Joe Haslag (08:29):
simply because I get to keep more of what the risk produces. We often talk about business as us versus them. But at the heart of the matter, there are people out there saying, I want a better standard of living for myself and my family, and I’m willing to take some risk. I may start in my basement, or in an office with just two or three people. But if my idea is a winning idea, those people who started with me, the people I employ as I expand my business, sure, do I benefit? Yeah, I do. But I also took a lot of risk to do that. I could have fallen flat on my face and come away with nothing.

Susan Pendergrass (09:05):
Yeah. I think you make that point quite well where you talk about dividing up the pie versus growing the pie. You could grow the size of the pie and everyone could theoretically get a bigger slice of it. And I think that’s where people assume everything is fixed. In fact, in the data you were analyzing, we have both the Great Recession and COVID bookending it, and that has to have some impact on Missouri’s long-term growth trajectory, right?

Joe Haslag (09:26):
Yeah, it’s harder to discern. The financial crisis cleared out a bunch of stuff where people had taken risk, some of those were financial risks, and it spread to a bigger group of people. The Great Recession

Susan Pendergrass (09:48):
Did it muddy things up at all?

Joe Haslag (10:09):
It goes back to the idea of creative destruction. Sometimes you have a big destruction and it creates an opportunity for lots of creation. Did the financial crisis of 2008 give rise to the AI expansion? It might have sped it up.

Susan Pendergrass (10:12):
Yeah. Yeah.

Joe Haslag (10:26):
I don’t know for sure, but I think COVID probably had some impacts on that as well. Since we couldn’t be with one another and couldn’t get those spillovers from working together, we relied on computer hardware and software to do those things for us.

Susan Pendergrass (10:36):
Yeah. It was an engine of change in education because people started tutoring and teaching online, realizing you could get a tutor from across the country. It really opened up a lot of interesting new things that I’m not sure have completely sifted out, and I assume that’s true throughout the economy. In a lot of ways, necessity being the mother of invention, it increased productivity.

Joe Haslag (11:16):
No doubt. But I also think that what we’re seeing is the call by so many corporations across the country that, sure, you’ve worked five days a week remote for a couple of years, but we really want you to come back. We think it’s in our best interest as a corporation, for our shareholders, for those folks to be back in the office. Maybe four days a week instead of five, but there’s something about being together that creates possibilities for innovations as well. I’ll tell you a quick story. The semester after the University of Missouri got off of any sort of

Susan Pendergrass (11:38):
Mm-hmm. Yeah. Yeah.

Joe Haslag (11:55):
remote or semi-remote teaching, I was teaching an undergraduate class. That class is typically between 60 and 80 kids, an advanced course, mostly juniors and seniors. You can tell with senioritis, somewhere about 12 weeks into a 16-week semester, you’re down to somewhere between 60 and 70 percent attendance.

Susan Pendergrass (12:11):
Yeah. Yeah.

Joe Haslag (12:19):
That first semester back, it stayed close to 90 percent the entire semester, simply because they were dying to just be in the same room with each other. They recognized that there were spillovers from being in the classroom.

Susan Pendergrass (12:27):
Right. That’s interesting. So if you were given a magic wand and you wanted Missouri’s GDP growth to not be 44th, to be maybe top 25, what would you do with the Missouri economy to really kick-start it?

Joe Haslag (12:52):
I think two things. The easiest one is on the policy front: we just let the returns go back to the people. The tax rate in Missouri, I wouldn’t say it’s an abomination, but I just don’t think it’s been very helpful. But on top of that, our K-12 education, and this is going to appeal to you, has been an issue. We don’t have much competition. But I’m also going to put in a plug: I think Missouri has almost turned its back on higher ed.

Susan Pendergrass (13:20):
Yeah. You say this in the paper. Our educational attainment is tanking, right?

Joe Haslag (13:36):
Yeah. We just don’t have a commitment to it. The question I think would be most interesting is what would the St. Louis economy look like if Wash U wasn’t there? Wash U is an engine of innovation. There’s a lot of great things going on at the med school and the engineering school, and I think it’s just teaching people to learn how to think. Now those people end up going all over the world, but if there was a commitment to, I mean, the University of Missouri has lagged behind some of our Midwestern counterparts. Illinois, Michigan, Wisconsin are all suffering from the same straitjacket, which is that the amount of state funding they receive is down. But I’d also say Missouri is sort of doubly hurt because the state gives the university system whatever money they’re going to give, but then the university system is also controlled by the state in terms of how much they can raise tuition. So there’s no freedom to test what the market forces would look like. And at higher ed, maybe more so than K-12, spending per student at K-12 is not always the recipe for predicting success. However, at higher ed, because there are market forces that tend to work at a different level,

Susan Pendergrass (15:08):
It is not. Yeah.

Joe Haslag (15:19):
money and innovation tend to go hand in hand. Higher ed seems to be going through some sort of shift right now, and I’m not sure I understand exactly what’s going on with it. But if you were to tell me what the two big policies would be, I’m not saying the state of Missouri should spend more on higher ed, but they should loosen the purse strings and let those institutions compete with the market and see what they could do.

Susan Pendergrass (15:31):
Yeah. I think it’s one of the easier parts of the budget to cut. And as our revenue is going down, there seems to be a larger group of stakeholders in K-12: there are 520 superintendents and school boards. That’s a tougher one to cut than higher ed, and I feel like they’ve taken budget cuts.

Joe Haslag (15:55):
And maybe it’s not that the state should be paying the university systems more, but they should let them go. Let them set tuition rates at whatever they think is right. And if it doesn’t work and they fail, then you end up looking more like the University of Idaho than the University of Michigan in terms of how you’re contributing to the state economy. But

Susan Pendergrass (16:22):
Yeah.

Joe Haslag (16:37):
I think there are opportunities to exploit there and we just can’t seem to. There also seems to be this weird critical mass that’s important in higher ed. You have to have a bunch of people together who are all pulling the wagon in the same direction.

Susan Pendergrass (16:42):
Yeah. Well, we also have declining enrollment. Fewer kids coming up. I think we had our largest graduating high school class last year or the year before, so that’s going to make it tough. So just to clarify,

Joe Haslag (16:59):
Yeah.

Susan Pendergrass (17:03):
if Missouri were able to move its income tax rate down close to zero, you, based on your research, feel confident that Missourians would have more money in their pocket?

Joe Haslag (17:12):
More than confident. I think it’s unambiguous. The math is pretty straightforward. If you have a hundred-dollar paycheck and your taxes go from five percent to two percent,

Susan Pendergrass (17:15):
Okay. You heard it here.

Joe Haslag (17:35):
it was my pleasure. Susan, it’s always good to see you and cross paths. I wish I could be there on the ground and have all those conversations I had fifteen years ago when we were talking about this. Thanks for your service.

Susan Pendergrass (17:44):
We’ll welcome you back. Thank you so much. Appreciate it.

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Interview Transcript

Patrick Tuohey (00:00)
Good morning, Kansas City. This is Patrick Tuohey, Kansas City’s second favorite Patrick, sitting in on the Pete Mundo Show for the whole morning. If you have read anything in the Kansas City papers about either the Royals Stadium or the Chiefs Stadium, the chances are that you are familiar with my next guest. J.C. Bradbury, a professor of economics at Kennesaw State University, has been studying the economic impacts of building stadiums, tearing down stadiums, getting teams, and losing teams. He’s got a book coming out at the end of next month called This One Will Be Different. I’ll get to the book in a second, JC, but my first question is: why do you hate baseball?

J.C. Bradbury (00:43)
Hi Patrick, thanks for having me on. I get that question a lot because I bring a lot of bad news, or uncomfortable truths, let’s say, about baseball. But I study these things because I love baseball. I’m a huge fan. I grew up an Atlanta Braves fan, but I follow baseball generally and all sorts of sports. I was an Atlanta United season ticket holder for many years. That’s why I do this — because I enjoy it.

Patrick Tuohey (01:09)
It’s funny — years ago somebody recommended Moneyball. It’s a fantastic book. The movie is just as good. I rewatched it the other day, and if you haven’t seen it or haven’t seen it in years, it really holds up. I think of that because baseball claims to be so statistics driven that you’d think fans would be more amenable to the kind of economic analysis you’re doing. But maybe it’s just love of the game and fandom that clouds their reason.

J.C. Bradbury (01:44)
There’s some of that. There are many people who are baseball fans, sports fans, who understand what I’m arguing — and I’d argue it’s more than you’d realize. But most of the people vocally speaking out about stadium issues and public finance are largely blinded by their own fandom. I deal with people on social media all the time who respond to things I say about stadiums and tell me I don’t understand the public finance — and they’re just totally incorrect. They don’t even bother to check it. It’s religion to some people. I say most people would give up their religion before they’d give up their subsidies to their sports teams.

Patrick Tuohey (02:27)
If you don’t already follow J.C. Bradbury on Twitter, I recommend it — JC underscore Bradbury. If you’re a fan of baseball, economics, or The Simpsons, you’ll love his account. So JC, tell me about your book, This One Will Be Different, which comes out at the end of July.

J.C. Bradbury (02:44)
I’ve been studying stadium subsidies and publicly funded stadiums for a very long time. I fell into it accidentally because the Atlanta Braves Stadium opened in Cobb County, a few miles from where I live — just outside Atlanta, where my family has been for generations. I had a lot of interest in how the stadium was built and funded, with three hundred million dollars in subsidies. I was familiar with a lot of the economics behind stadiums, and when I tried to share this research with other people, I was heavily rebuffed. So I began to study the issue more, and before I knew it, I had a very long book about the economics of stadiums. My idea was to explain public finance issues in stadiums using simpler methods. I use sound research methods, but I try to explain it through the narrative story of the Braves coming to Cobb County — here’s what happened, here’s what people argued, here’s what actually happened, let’s look at some of the financial numbers, and let’s understand the general intuition of why stadiums get built even though economists say they’re a bad deal. I look at the politics of it too. And one of the things I find is that these stadiums are mostly built by insider coalitions — chamber of commerce types, folks who are going to sit in the owner’s box and enjoy cocktails, or people with season tickets. They’re the large beneficiaries of the subsidy. They push these advocacy campaigns and try to get them passed as quickly as possible without going to voters if they can. That’s why we get these deals.

Patrick Tuohey (04:35)
One of the things that frustrates me about this whole issue — and I’d be curious if you agree, though I hate when TV and radio hosts make a statement and then ask the guest if they agree, and here I am — is that when St. Louis was considering funding a Major League Soccer stadium, or here in Kansas City with the Royals or the Chiefs, what I wish they would do is just say, “Hey everybody, we are a sports town. We think it’s important to have a sports team here, so we’re going to spend hundreds of millions of dollars to build something.” And just leave it at that. It would be a defensible argument. You could argue whether it’s worth the expenditure, but at least everybody would be honest. But they don’t do that. They go the extra step and say, “And we’re going to make money doing it.” That’s where they mess everything up. That’s where they get the numbers wrong. Is it as simple as that, or am I missing something?

J.C. Bradbury (05:31)
Absolutely. I wish there was some honesty in these debates. The reality is that a lot of people who argue these things don’t actually believe the phony economic impact studies they put out. They do it for a couple of reasons. Number one, politically, it’s a winning issue — if you tell someone it’s good for them economically, they’re more likely to support it. But also, if you just argue it’s good for the community and we’re a sports town — okay, how much does it cost? A billion dollars. How much does that increase taxes? Three hundred dollars. Well, hold on, we’re not that much of a sports town. Think about how you make your own decisions. What kind of car do you want to drive? I want a Ferrari. Great. But to drive a Ferrari, you’d need to move into a two-bedroom apartment, never travel again, and eat ramen noodles. You know what — I’ll get the base model sedan. People make those kinds of decisions, and that’s one of the reasons they use false economic benefits — because once you start talking about social benefits, people look at the costs more closely, and it makes a lot less sense.

Patrick Tuohey (06:40)
I had your colleague Victor Matheson on a few weeks ago and we talked about this, specifically with the World Cup. I’ve also asked Neil Damas this question. In your experience, how good are journalists at reaching out to you and your colleagues to vet the numbers they’re being told by chambers of commerce or the city? Where are we now, and are we getting better?

J.C. Bradbury (07:14)
I think the situation is getting worse, and a lot of it is accidental. Newsrooms have gotten smaller and younger, so there’s less institutional knowledge. People don’t remember the last stadium being built, and they’re told to go cover this stadium story. They call a few local sources — who of course are members of the local chamber — and those people say it’s great. At best, they call a local economist who says it’s bad, and it ends up being a tie. But often they don’t even call the economist. That’s part of the nature of the news business, which is one of the reasons I think it’s so important to use social media and other mediums to get the word out. Even journalists trying to do their best often fall short. And journalists deserve some blame here — when I reach out to try to help them, they often get very defensive, and I think that needs to stop. I’m not just angry at journalists. Both my parents were journalists, and my first job was in a newsroom. I understand what’s going on.

Patrick Tuohey (08:19)
The previous segment, I talked about World Cup reporting. Local people put out outrageous economic development claims a year and a half ago, nobody questioned them, and journalists just repeated them — even though past experience hadn’t lived up to those claims. So what can we do to encourage journalists to reach out, or maybe just give them a primer on what economic impact studies look like and where the flaws are? Whether I’m looking in St. Louis, Kansas City, or around the country, they are all flawed in the same way.

J.C. Bradbury (08:56)
It’s important to always speak up. It’s easy to get tired and think you can’t keep doing it. When someone asks me to look through one of these studies, I tell them it’s not a real study — it’s a fake study. I try to spread that message. Part of the problem is that the big number is the story, and that’s what they want out there. The fact that it’s wrong later doesn’t matter. And sometimes people get mad at me because I’ll call out bad reporting. I do it not because I dislike journalists, but every time I’ve tried to be nice about it, I get told I don’t know what I’m talking about or that they don’t want to tell their boss they need a correction. I think it’s important for journalists to know that if they get it wrong, they’re going to get called on it — not to be mean, but to set the standard.

Patrick Tuohey (09:54)
And do a better job because policymakers and business owners are making decisions based on the numbers you’re putting out there. We see this with the World Cup — people were expecting much bigger crowds than they got. It’s not just a matter of being right. It’s a matter of being right so that people make decisions based on real information, not just projections. JC, I’m grateful for your time this morning. Thank you so much. We’ve been talking to J.C. Bradbury of Kennesaw State University. His book, This One Will Be Different, comes out at the end of July. We’ll be right back.

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Jackson County has begun attempting to correct its poorly conducted reassessments in 2023 and 2025. It will do this by retroactively rolling back property assessments for some property owners, sending refunds to other taxpayers, and withholding future tax funds from other taxing entities, such as fire districts, to make up for the overpayments by taxpayers in 2023 and 2025. The county has to withhold future payments because counties collect all the property taxes within the county, but then distribute almost all of that money to other taxing districts. Jackson County does not have a large pot of its own money it can make amends from. Not surprisingly, some of those taxing entities are suing over the withholding of their future tax payments.

The problem is, those school districts and other taxing entities were not the ones who caused the problems in 2023 and 2025. They followed the rules, set their tax rates, received their tax money, and spent it. Now they are being told they have to give some of it back.

So, I understand the objections by the taxing districts, but I have much more sympathy for the taxpayers who were victimized by a poor process over the past few reassessments. The Jackson County assessor’s office, among other problems, failed to provide taxpayers with the rights of appeal and relief they were entitled to during the process. So, yes, some taxpayers were overcharged because they did not have their full opportunity to appeal their taxes.

In short, the new Jackson County leadership team deserves credit for changing course and finally trying to correct the problems and refund money to some taxpayers.  I think the taxpayers deserve these refunds—and the entire process needs wholesale changes.

I have no idea how the courts will rule in this lawsuit. I’ll be following it closely. Hopefully this controversy and similar, recent issues in Platte County can lead to massive changes in how we conduct property reassessments in Missouri.

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Susan Pendergrass speaks with Andrew G. Biggs, senior fellow at the American Enterprise Institute, about the Social Security trustees’ latest report and what it means for the program’s future. They discuss the projected 2032 insolvency of the retirement trust fund, why the trustees’ birth rate assumptions may be too optimistic, the proposed Moreno-Warren plan to eliminate the payroll tax ceiling, the Cassidy-Kaine plan, and why pension experts oppose it, what would actually happen if the trust fund ran out, and more.

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Episode Transcript

Susan Pendergrass (00:00):
I feel fortunate to have grabbed some of your time. Andrew Biggs from the American Enterprise Institute, I appreciate you coming on to talk to us. Social security has been nothing but in the news recently, and you know more than anyone else. So thank you for taking the time.

Andrew Biggs (00:14):
That’s why I’m so cheerful. The more you know about Social Security, the happier you are. But thanks for having me, Susan. It has been busy. I’m really happy to be with you today.

Susan Pendergrass (00:16):
I’m in my sixties. I see something about Social Security running out of money and I pay attention. So just to bring us all up to speed: in the last week, there was a news flash that Social Security is going to run out of money sooner. What does it really mean?

Andrew Biggs (00:39):
Every year the Social Security trustees, which is mostly members of the cabinet, the Secretary of the Treasury, the Social Security Commissioner, and so on, come out with a report projecting the program’s financial health, both in the short term and the long term. That happens every year, and it’s been getting worse every year. In this year’s report, they projected that the retirement trust fund will go insolvent, or run out of money, in 2032. They also projected a significantly larger long-term funding gap in the years thereafter, and this is worth explaining.

When the trust fund runs out, it doesn’t mean there’s zero money to pay benefits. As long as we’re paying a trillion dollars a year in payroll taxes, there will be money to pay benefits. But when the trust fund runs out, it means benefits will be cut, and their projection is somewhere around 22%. The size of that long-term funding gap dictates how big the cuts are going to be in the years thereafter. The trustees lowered their projections for birth rates, and they found that the One Big Beautiful Bill has worsened Social Security’s finances. A variety of things made this long-term funding gap worse. It’s really hard to paint a happy picture. The trust fund can be running out in about six years, and the funding gap and the benefit cuts in years thereafter are going to be larger. It’s a sobering picture.

Susan Pendergrass (02:16):
I’m not trying to pile on, but I think I saw that they extended the time when they expect birth rates to bounce back. Is that true? Because I have not seen anything anywhere, and I’ve spoken to some demographers, to suggest birth rates are ever going to bounce back.

Andrew Biggs (02:35):
Here’s the interesting thing. If you look at the Congressional Budget Office or the US Census Bureau, right now the fertility rate is about 1.6 children per woman on average, and both the CBO and the Census project that’s going to remain pretty much steady, declining a little bit over coming decades. Social Security had a very different picture. As of last year, they thought the birth rate, which is 1.6 now, was going to immediately start rising and go back up to 1.9 children per woman in the next several decades. That makes Social Security’s finances better. More kids being born means more people paying into the system. What they did in this year’s report is moderate a bit on fertility. They said, okay, it’s not going to rise back to 1.9, it’ll rise back to 1.75. So they are still over-optimistic. I’ve talked to some demographers and economists who’ve really focused on the birth rate, and they described the trustees’ assumptions as, quote, fanciful, meaning they just weren’t plausible. Now they’re somewhat more plausible, but they still tend

Susan Pendergrass (03:32):
Okay.

Andrew Biggs (03:48):
to be more optimistic than other agencies. And to me, frankly, this is a concern. You really want the people who are the scorekeepers, the umpires, to be playing it as straight as they possibly can. We know that these guesses are going to be wrong because this stuff is impossible to predict with certainty, but most demographers think the best guess is we’ll stay around 1.6 going forward. You’ve seen a decline, and a good predictor of birth rates is religiosity, the level of religious belief in a country. The US has typically been much more religious than Western Europe, and that’s played into fertility. There has been a big decline in religious belief, particularly among younger Americans, along with all the other pessimism you see among younger people. When people are pessimistic, they tend not to have a lot of kids. So the best guess is we’re going to stay about where we are.

I wrote something the other day saying the bad news in this trustees report is even worse than last year’s, but it could have been even worse. They project a long-term funding gap above 4.4 percent of payroll. What that means is if you took the 12.4% payroll tax today and raised it immediately and permanently by 4.4 percentage points, from 12.4 to 16.8, that would in theory keep the trust fund solvent for 75 years. But a better guess would be a funding gap of around 4.8 to 5 percent. This is real money. For years, people on the left have said, well, okay, we know Social Security has a solvency problem, but it’s a manageable issue. They were saying that when the funding gap was 2% of payroll. Now you’re looking at four to five percent. That’s a lot of money, at a time when a lot of other things are making claims on the budget. We have some difficult choices to make and we really have to start thinking hard about this.

Susan Pendergrass (06:09):
Okay, so what about this idea that’s been floated in the last week of getting rid of the payroll cap? First of all, explain the payroll cap, and then this idea of getting rid of it.

Andrew Biggs (06:17):
Sure. Social Security has a 12.4% payroll tax, half paid by you and half paid by your employer. That applies only to wages up to $184,500. That’s called the payroll tax ceiling, or the tax max. That dollar figure goes up every year, but this year it’s $184,000. You only pay taxes on those wages, and you also earn benefits only on those wages. People say, well, Bill Gates doesn’t pay more taxes than that. But he doesn’t earn any benefits either. So you’re capping both the taxes and the benefits.

To fast forward a little bit: there’s an op-ed in the Washington Post this week from Senator Bernie Moreno, a Republican from Ohio, and Elizabeth Warren, a Democrat from Massachusetts. They say it’s just common sense to eliminate that cap and tax all earnings for Social Security. The interesting thing is how uncommon that would actually be. Our payroll tax ceiling is $184,000. Almost every other country has a ceiling on their payroll taxes for their pension system, and in almost every other country that ceiling is lower. In Canada, you only pay taxes and earn benefits up to around $60,000 in earnings. In the UK it’s about $70,000. In Germany it’s about $70,000. We are already an outlier for how high up the income ladder we tax people. To eliminate the cap entirely is a big deal. It’s effectively a 12 percentage point increase in the top marginal tax rate. I pulled an example of somebody living in New York City. A high-income person already pays 37% in federal income taxes, plus regular Medicare taxes, the additional Medicare tax, state taxes, and city taxes. If you add another 12 percentage points on top of that, their marginal tax rate would be in the mid-60s. And that’s before we’ve fixed Medicare or done anything else. The federal budget is still broke, and you’ve taxed these people as high as you possibly can. So these things that look like common sense, why don’t we just tax everybody,

Susan Pendergrass (08:37):
Right, right.

Andrew Biggs (08:46):
look, there are reasons for that.

Susan Pendergrass (08:49):
And were they suggesting that if I make $300,000 and I pay my 6.2 percent, totaling 12.4 with my employer, on my entire salary, that my Social Security benefit one day would be higher? Are they talking about capping the benefit or just getting rid of the cap on contributions?

Andrew Biggs (09:06):
They haven’t been very specific. They say Social Security would continue to be an earned benefit, which kind of implies you would continue to earn benefits on the additional taxes you would pay. Let’s say if we uncap the payroll tax and base your taxes on your total earnings, you’d also base your benefits on your total earnings. What you get then is, okay, you’re getting all this money from people in the short term, but you have to pay them higher benefits in the long term. That offsets some of the savings. And this morning I was running some numbers looking back to the 1970s. We had a huge run-up in benefit levels from Social Security in the 1970s. The benefit formula we have today is not the one FDR invented. It really happened in the 1970s, where they jacked up benefits in a really foolish way, and then to help pay for it, they increased the payroll tax ceiling. Right now you pay taxes on earnings up to $180,000. If we had just kept the tax max from 1970 and indexed it to wages, it would have been only $95,000. So they essentially doubled the wages on which you pay Social Security taxes. But what happens is they also doubled the wages on which people earn benefits. I’ve highlighted the point that if you have a high-income

Susan Pendergrass (10:38):
Mm-hmm.

Andrew Biggs (10:43):
couple retiring today, they could get almost $100,000 in total benefits, which is absurd. There’s no reason a government program should be paying anybody that amount. If you want that kind of income in retirement, you save more in your 401k. It’s better for you, better for the economy. But it was a result of this short-term step they took in the 70s. They said, hey, we raised benefits too high, let’s jack up the tax max. And they didn’t worry about the fact that in the future you’d have to pay benefits on that. Well, the future is today.

Susan Pendergrass (11:05):
Okay.

Andrew Biggs (11:13):
Now we’re broke again, we need extra money again, and these guys say, well let’s just jack up the tax max. But then you’ll pay extra benefits in the future. It becomes this chasing-your-tail kind of thing.

Susan Pendergrass (11:16):
Yeah. Yeah.

Andrew Biggs (11:25):
And the problem when you do it is there’s no country on earth paying $100,000 a year from a social insurance program, except for us. And the reason we do is these stupid historical decisions. If you’ve got this high-income couple in the US retiring today, they can get almost $100,000 from Social Security. If they lived in Canada, they’d get like $35,000. And that’s perfectly fine. Nobody’s starving to death in Canada in retirement. They just save more on their own.

Susan Pendergrass (11:35):
I’ll say.

Andrew Biggs (11:55):
The irony is that we think of ourselves as a free-market, small-government country, and our Social Security program is enormous, primarily because we’re paying benefits to people that other countries say, yeah, we don’t need to pay benefits to these guys.

Susan Pendergrass (12:11):
And yet people say, I put my money in, I get my money out.

Andrew Biggs (12:14):
Yeah, and I understand it. When I say we shouldn’t be paying $100,000 a year to a high-income couple, you get the email saying, well, I paid in. And if you paid in, you feel you have this moral claim on benefits. The problem is Social Security is still broke. We still need higher taxes or lower benefits. The idea that you’re just going to get your full benefits with the taxes you paid doesn’t work because the system can’t afford to do it. So you have to make the choice: do I want to pay higher taxes or get lower benefits? I’ve got to pick my poison. Most high-income people would prefer to get lower benefits. They care more about their taxes than their benefits. But people are still living in this dream world where this system, which is $30 trillion in the hole, is somehow going to pay them everything they’ve been promised and just screw somebody else. Everybody thinks they’re the guy who’s going to get everything and somebody else is going to get screwed.

Susan Pendergrass (13:14):
Yeah. I definitely hear people saying today, maybe I should go ahead and take it early and then I’ll get grandfathered in and my benefits won’t get lowered.

Andrew Biggs (13:26):
It probably won’t make a difference. In general, the Social Security benefit formula works based on your birth cohort, the year in which you’re born, not really the year in which you claim benefits. And people who are going to do Social Security reform understand the incentives. They don’t want to make it easy for people to game the system. So Social Security reform will probably work itself out in such a way that

Susan Pendergrass (13:42):
Right.

Andrew Biggs (14:03):
you can’t get some big advantage by claiming early. I could think of some conceivable possibilities, but I still would not encourage people to claim early.

Susan Pendergrass (14:14):
Okay, I want to talk about two more things I read in the last week. One was a letter from Tim Kaine about his idea with Senator Cassidy. What’s that idea for fixing it?

Andrew Biggs (14:24):
The interesting thing is people say Social Security reform has to be bipartisan. So we have two bipartisan ideas. We have Moreno and Elizabeth Warren, a Republican and a Democrat. They’ve got one idea, eliminating the payroll tax ceiling.

Susan Pendergrass (14:39):
Third rail.

Andrew Biggs (14:49):
Cassidy, a Republican from Louisiana, and Tim Kaine, a Democrat from Virginia, they’ve got a bipartisan plan. And guess what? Their plan is also terrible. If there’s any lesson from this, it’s that bipartisan doesn’t mean good.

Susan Pendergrass (15:00):
Bipartisanly terrible.

Andrew Biggs (15:04):
Yeah. Look, ultimately Social Security reform is going to have to be bipartisan, given the way the political system works. On the other hand, there is some lesson that if both Republicans and Democrats can agree on something, it might be a terrible idea. With Cassidy and Kaine, they are explicitly, and Cassidy said this, solving a political problem. The political problem is that neither Republicans nor Democrats want to vote for either tax increases or benefit cuts. You’d think Democrats want to raise your taxes and Republicans want to cut your benefits. The reality is they don’t want to do either of those things because they realize both are politically unpopular, which is why we’ve gone 40 years literally doing nothing. So their solution is that we don’t have to make these difficult votes. Instead, the federal government will borrow about $2 trillion, invest that money

Susan Pendergrass (16:02):
Tough.

Andrew Biggs (16:04):
in stocks and private equity, high-risk, high-return stuff. Then they claim they’re going to hold this fund for 75 years so it can build up value. In the meantime, when Social Security’s trust fund runs out in 2032, the federal government will borrow against the assumed gains on this investment fund.

Susan Pendergrass (16:06):
Right. Mm-hmm.

Andrew Biggs (16:29):
They say the borrowing will be at a lower rate because it’s the federal government. And they say after 75 years, all the gains in this investment fund will pay back all the borrowing and we’re all good. And let me count the ways there are problems with that. If you work at the state level,

Susan Pendergrass (16:45):
It’s just kicking the can.

Andrew Biggs (16:52):
state-based think tanks almost know more about this than federal people. A lot of underfunded state pension systems do things called pension obligation bonds. Their pension system is underfunded, they don’t want to raise contributions or cut benefits, so they borrow and invest in the stock market and hope it works. The pension obligation bond is the hallmark of a poorly funded, poorly run pension system. Think New Jersey, Illinois, things like that.

Susan Pendergrass (17:21):
Yeah.

Andrew Biggs (17:23):
There’s a national group of state budget officers that has come out and basically said as an institution, don’t do this. Borrowing for your pension is a bad idea. So it really is fitting for the times that the Cassidy-Kaine plan says, let’s take this worst idea from state and local government

Susan Pendergrass (17:45):
Yeah.

Andrew Biggs (17:47):
employee pensions, which has been condemned as bad practice, and put it on steroids and do that for Social Security. And what it really gets to is they just don’t understand the finances of it. And to be frank, they won’t listen. They have talked to every pension expert I know, and this Social Security world is pretty small. We all know each other on both sides. We may not agree on everything. Literally every pension expert I know says this is a terrible idea.

Susan Pendergrass (17:54):
Yeah.

Andrew Biggs (18:17):
But their political considerations are more important than policy, and that’s the problem with all of them.

Susan Pendergrass (18:24):
I mean, it feels free. They’re basically saying it’s like a timeshare. It just feels free right now. We just borrow the money. Okay, so

Andrew Biggs (18:31):
It’s been pointed out to them that if you can fund Social Security this way, you could fund the entire federal government this way and never collect any taxes. At one point Senator Cassidy was quoted in a newspaper article saying, well, yeah, sure, in theory you could. And I’m like, if something implies there’s a free money machine, maybe you need to question your assumptions.

Susan Pendergrass (18:38):
Sure. Okay.

Andrew Biggs (18:54):
I could give you a whole variety of reasons why this doesn’t work, but one macro point that’s come to me: I’ve been doing Social Security for a long time. I worked in the Bush administration in 2005 when they tried and failed to do Social Security reform. One of the problems we face today is that your elected officials understand Social Security policy much less well than they did 20 years ago. They just don’t understand how the system works. Going back to the Moreno-Warren idea of applying the payroll tax to all earnings,

Susan Pendergrass (19:22):
Yeah.

Andrew Biggs (19:37):
okay, you’re adding 12 percentage points to your top tax rate. There’s a reason Sweden and France and others don’t do this anymore. They used to have incredibly high tax rates. They don’t now. We would end up in many cases with a higher tax rate than most European countries. We have some philosophical dedication to small government and things like that. They don’t. And so if they’re not doing it,

Susan Pendergrass (19:43):
Yes. Yeah, yeah.

Andrew Biggs (20:02):
it’s because there’s a practical reason this isn’t a good idea. The same applies to wealth taxes. That’s been tried in Europe. They’re like, yeah, we’re not doing that anymore because it doesn’t work. But your average senator now

Susan Pendergrass (20:14):
It is happening around the country, the billionaire tax. What happens in 2032 if no one is either brave enough or smart enough to take this on in the next six years?

Andrew Biggs (20:17):
They’re just not aware of these policy issues, and that’s a real problem. It’s like having a guy fix your car who doesn’t know how to fix cars. 2032 is the date. If you have a recession, it might be 2031. It’s not certain, but it is certain it’s happening soon.

Susan Pendergrass (20:47):
Yeah. Okay.

Andrew Biggs (20:53):
There’s a literal reading of the law, which is that Social Security can’t pay out benefits it doesn’t have dedicated resources for. Once the trust fund runs out, the only dedicated resources are mostly the payroll tax, plus a little bit of money from income taxes levied on retirement benefits. And those were cut as part of the One Big Beautiful Bill. So if the trust fund runs out, they’d have to rely on the money they have on hand, which implies around a 22% benefit cut.

A lot of times people assume that benefit cut has to be across the board. If you did it that way, you’d throw a lot of people into poverty. I did some work a year or so ago with a lawyer in DC named Kristen Shapiro, and what we found is that the legal precedent shows the executive branch, meaning the president working through the Social Security Commissioner, would have some discretion. What we found is you could maintain full benefits for about 50% of people, the poorest 50% of seniors, and then cap benefits above that. If you cap the maximum benefit at about $24,000 per year for a single person or $48,000 for a couple, that is enough to make Social Security solid without raising taxes. So the point is simply you have some discretion.

The reality is Congress isn’t going to allow big benefit cuts, for political reasons. On the other hand, are they willing to have the size of tax increases needed, all in one go, to keep Social Security paying full benefits? I don’t think they want that either. So the reality is probably they’re going to borrow a lot of the money. And that’s where you get to the issue of how much more borrowing the financial markets will swallow. We effectively borrow from the public to repay the Social Security Trust Fund, but there’s an end to that. You say, okay, 2032, we have to do something. We have to raise taxes or cut benefits. If in 2032 the stated policy of the federal government is, well, we’re just going to keep borrowing to pay Social Security even though we have no prospect of paying it back, you wouldn’t blame some big market players for saying, yeah, I’m out, because you don’t want to lend money at low interest rates to someone who says they can’t pay it back. Then you start getting a couple of things. One is more federal borrowing squeezes out capital in the rest of the economy, and so interest rates naturally rise.

Susan Pendergrass (23:18):
Right.

Andrew Biggs (23:31):
But then there’s a second element: if you’re afraid the federal government can’t pay you back, over and above that natural increase in the interest rate, you’d apply a risk premium to treasury debt. You’d say, look, Treasury is not this rock-solid investment anymore. It’s more like a junk bond, or like borrowing from Illinois, and you make them pay a premium. That’s going to drive up

Susan Pendergrass (23:43):
US government borrowing. Yeah, yeah, yeah.

Andrew Biggs (24:01):
interest rates, and that makes it tougher not just for the federal government but for everybody. If you want to buy a car or a house, all your interest rates rise. There’s also going to be real temptation to inflate away the debt. The federal government doesn’t want to default on its debt, but

Susan Pendergrass (24:24):
Yeah, yeah.

Andrew Biggs (24:25):
historically the way you deal with this is inflation. Think about all the debt we took on during COVID, shoveling money out the door to everybody, and then we had massive inflation after it. A lot of those people who bought treasury debt didn’t get a good deal, because if you get 20% inflation on

Susan Pendergrass (24:34):
Absolutely. Yeah.

Andrew Biggs (24:47):
a treasury bond with a nominal fixed interest rate, that’s a real problem. So inflation becomes increasingly tempting. You look at this scenario and you’re like, can’t anybody here play this game? Every other country is not going bankrupt. We just have to do what they do.

Susan Pendergrass (24:51):
Yeah, yeah. So could we, if we really got our heads around it and started today or next year, incrementally raise the 12.4%, or incrementally get people used to lower benefits after a certain income or wealth level?

Andrew Biggs (25:18):
Sure. Yes. The way I think about it, there are two ways people think about it: the wrong way and my way. The wrong way is, let’s just pick from this menu of options to make Social Security solvent. We can raise the payroll tax a bit, raise the retirement age a bit, cut cost-of-living adjustments a bit, raise the tax cap a bit, and do these things until the system is solvent.

Susan Pendergrass (25:34):
Yes. Yeah.

Andrew Biggs (25:54):
That’ll get you a solvent program, but it won’t be a program that particularly works very well or is good for the economy. A more effective way is to ask, what do we want this system to do? If you talk about Social Security reform, what you hear is that it’s a social insurance program, a safety net, an anti-poverty program. Okay, it has to do that. And that part is really very cheap, because we don’t literally have that many poor seniors, their benefits aren’t very high, and it’s not a problem to maintain benefits for low-income seniors. When you ask what Social Security should do, nobody is saying we need to be paying high-income seniors $100,000 a year. There’s no public purpose for it. Nobody thought it out in advance. It was simply an unintended consequence. So if you’ve got things that are really costing a lot of money and have no public purpose, and those people can save for retirement on their own, you start scaling that back. The distinction I’m making is between policy changes simply for the purposes of keeping Social Security solvent, and policy changes for the purpose of making Social Security do what it needs to do, the real public purpose, and not doing things that serve no public purpose. My point is the things I’m talking about are things you should do whether Social Security is insolvent or not.

I’ll give you an example: Australia’s retirement system. Australia is a lot like us, not particularly more conservative or liberal, just sort of normal. Their Social Security program essentially is targeted at eliminating poverty in old age. It’s actually a better safety net than Social Security provides, but the benefits decline down to zero once you get above the poverty level. And to help people above that level save for retirement, everybody is enrolled in a 401k-type account. What that says is, if everybody’s participating in retirement plans as they should, the government’s job becomes easier. Their Social Security system costs about two percent of GDP. Ours costs about six percent. It’s a third as costly, provides a better safety net, and it comes because they’re actually thinking about what they’re doing.

Susan Pendergrass (28:18):
Mm-hmm.

Andrew Biggs (28:26):
We’re literally not thinking about what we’re doing. There’s a saying in business: the worst reason to do something is because we’re already doing it. That is literally how Social Security policymaking works. Nobody knows why our benefit formula is what it is or why the tax max is what it is. It’s all just stuff we inherited from the 1970s from people who were not in any way thinking clearly about what they were doing. It was people in the 70s trying to win elections, and we end up with the bag.

Susan Pendergrass (28:52):
Speaking of 2005, there was an attempt to offload a small portion of people’s contributions into the market, right? That failed.

Andrew Biggs (29:09):
That was the Bush proposal. I was in the White House then, kind of in a number-cruncher role, so I knew that stuff pretty well. I did a lot of events with President Bush around the country. When we came up on the 20th anniversary of Bush’s proposal in 2025, I started thinking to myself, what if his plan had passed? What would have happened? So I built a model. Back then they were saying, okay, you’re going to have some reductions in traditional Social Security benefits for middle and high-income people, and then you’re going to have a personal account where you can invest part of your existing payroll tax in stocks and bonds. The total benefit you get at retirement is a combination of those two. People were speculating. Well, we don’t know what the stock market’s going to do. But 20 years later, we’ve got some data, so let’s just see what happened. The results were that for people

Susan Pendergrass (30:01):
Now we do.

Andrew Biggs (30:07):
retiring today, low and middle-income people would have had higher total benefits by a little bit. The very highest-income people, their benefits would be down by a couple percent because the cuts to their traditional benefits would be larger than the gains from their personal account. But even they would be fine; it’s not a big deal. Going forward, it looked like people would do a little bit better with the Bush plan than with the traditional system. But here’s the important thing: the traditional system is broke. We just talked about how it goes broke in 2032, with huge deficits. The Bush proposal wouldn’t have made Social Security totally solvent, but it would have addressed half or two-thirds of the long-term funding gap. So you’d get a system that would have paid you benefits around the same as, or maybe a little bit better than, Social Security, but would be in much more solid financial shape. Today the times are different, and I don’t think personal accounts are really viable. But the point is, if they had done something back then, everything could be easier today. But members of

Congress were just too afraid. Republicans were afraid of taking the political hit. For Democrats, it was too tempting to give the political hit. They knew they had to do something, but they couldn’t swallow hard and say, look, let’s just go in on this thing together. They didn’t want to give Bush the win because by that point Iraq was going badly and they really didn’t like him. So they beat him up. But the problem is Bush served his term and is happily retired in Texas. The people who really got screwed were the ones who depend on Social Security, because we didn’t fix it. And you just hope that’s not what we do again.

Susan Pendergrass (31:42):
Yeah. Somebody not us in 2045 could be having the same conversation, right? Like, if only in 2025 or 2026 we’d gotten serious. And I do think people mix up the trust fund with the whole program. A lot of people think all of Social Security is going to be bankrupt in six years, versus the reality that we’re still taking in a trillion dollars, we just need about 22% more than what we’re taking in.

Andrew Biggs (32:14):
Yeah. If you go back 20 or 25 years, there were all these arguments about whether the trust fund is real or fair or whatever. The trust fund is essentially IOUs written from one side of the government to the other. I thought at the time the trust fund is not real in an economic sense. It doesn’t make it easier for the government to pay Social Security benefits. It is a pledge that we will pay them, but it doesn’t make it easier to pay them. But here’s the interesting thing:

Susan Pendergrass (32:25):
Right. Al Gore. The lock box.

Andrew Biggs (32:50):
if having a trust fund doesn’t make it easier to pay benefits, then not having a trust fund doesn’t make it harder. The trust fund runs out, we still have taxes coming in, we can still pay 80% of what is owed. If we retarget that, you can maintain the safety net. It’s not like you’re totally insolvent or broke. All those long debates over whether the trust fund is real get resolved because the trust fund itself is gone in six years. So that doesn’t matter very much anymore. But I do hope that, as you said, we’re not in 2045 looking back on a solution of just borrowing $500 billion a year or whatever it’s going to be. People in 2045, when the federal government is bankrupt, the dollar is dropping, and all these financial crisis things we think only happen to other countries are happening to us, they would look back and say, I wish those people were more responsible. The Social Security problem, in a sense, if we went back 25 or 30 years ago, was a manageable problem. The real issue is not the demographics or the benefit growth or whatever. The real issue is just poor stewardship of this program by Congress and respective presidents. It is absolutely a governance problem. It is not a problem of economic or demographic fundamentals. All of that can be handled.

Susan Pendergrass (34:19):
Everyone wants to be Santa Claus, right? No one wants to be the Grinch.

Andrew Biggs (34:22):
It’s very true, but leadership is about giving people bad news. Good news kind of tells itself. Bad news has to be told and people have to be convinced that this is going to hurt, but we’ve got to do it. And we just didn’t have the willingness. President Clinton in the late nineties tried to do some stuff, but he didn’t deliver much bad news because we had surpluses. President Bush was willing to tell people, okay, look, you’re not going to get every penny you’ve been promised. Beyond that, the level of leadership has been very poor.

Susan Pendergrass (35:01):
Hasn’t been good. All right, well, next year when the trustees report comes out, come back and give us more bad news.

Andrew Biggs (35:09):
Yeah, until then, things are looking up. But no, it’s something people want to be aware of, and I think that’s the key thing.

Susan Pendergrass (35:13):
Well, I think one of the more important things you said is that no one understands it. People are upset and arguing over something they don’t understand the mechanics of. I do know people who think they have an account with their name on it that their Social Security taxes went into, and they’re just going to start taking the money out.

Andrew Biggs (35:23):
I have some bad news for that. Your taxes go into Social Security and go straight out the door to pay for your grandmother’s benefits. If you want to know where your taxes are, they’re in your grandmother’s bank account. So go ask her.

Susan Pendergrass (35:45):
That’s right. That’s right. All right, thank you so much. I really appreciate the time.

Andrew Biggs (35:51):
Thank you, Susan. It’s a pleasure to be with you.

Produced by Show-Me Opportunity

The post The Social Security Crisis Is Worse Than You Think with Andrew G. Biggs appeared first on Show-Me Institute.

There is a lot of ongoing discussion about eliminating personal property taxes. There have been bills introduced to eliminate them. It’s a major topic of debate around the state, particularly in St. Charles County.

Personal property taxes are the taxes levied on your car, boat, livestock, business equipment, farm equipment, and more. (Thanks to data centers, the business equipment part has become much more important in the past year or so.) Missouri indeed taxes personal property more than most other states. I am perfectly fine with eliminating the tax. But people should understand that if personal property taxes were eliminated, the Hancock Amendment would allow local governments to then raise real property taxes by the amount lost in personal property taxes.

So, if the state eliminated all personal property taxes statewide, it would likely end up as a revenue-neutral switch where we taxed land and buildings slightly more and taxed mobile assets not at all while removing a tax that most people find particularly annoying. I think that would be a modestly beneficial switch; I just don’t want to sell it as a tax cut.

But could counties on their own eliminate personal property taxes? Yes, every county and taxing district in the state could eliminate personal property taxes if they wanted to. They just don’t want to and I understand why.

Currently, St. Louis County is the only county that is required to set different tax rates for different classes of property. RSMo §137.073 requires every local government within St. Louis County (including cities, school districts, streetlight districts, etc.) to set a property tax rate for each subclass of property. This means that there are different tax rates for residential, commercial, agricultural, manufacturing, and personal property. The requirement to break down the tax rate by subclass was originally intended for the entire state, but eventually the rest of the state was given the opportunity to opt out if their county commission chose to, which every county in the state did. As a result, the rule currently only applies within St. Louis County and (for an unknown reason) the city of Gladstone in Clay County.

In the rest of Missouri, every government with property tax authority sets one tax rate, which is then applied to all subclasses of real and personal property. There are a few exceptions to this (primarily cities that have never taxed personal property, such as Independence), but almost all governments outside of St. Louis County set the same rate for all real and personal property. But here is the key: Any county in Missouri can adopt different tax rates for different property classifications whenever it wants to.

County officials could require all the taxing entities within their county to set different rates, and then county officials could set the county rate for personal property at zero. But county officials could not tell other taxing districts within the county to apply those new, variable rates. Would any of them choose to set the personal property tax rate at zero? Well, let’s just say that since this switch was made in St. Louis County, I know of no taxing entity that has voluntarily set the personal property tax rate at zero (other than some municipalities that don’t have property taxes at all, such as Chesterfield, or had never set a personal property tax, such as Westwood).

What would happen if a county set its personal property tax rate at zero and no other governments followed? In St. Louis County, the county portion of the tax bill is about five percent. It is a largely similar percentage around Missouri (varying slightly, of course). If St. Louis County government set its personal property tax rate to zero tomorrow, the average car and boat owner would see a five percent reduction in their annual car or boat tax bill. That assumes no other local taxing districts got approval from voters to raise their rates at the same time, which would more than offset it.

The fact is that unless school districts agree to also lower personal property tax rates, any attempt by counties to end personal property taxes will produce underwhelming results. I still think it would be a good thing. We should tax fixed assets like land and buildings instead of mobile ones like cars. It would be a general improvement in tax policy and remove a minor annoyance for most people (i.e., their annual car tax payment).

Let’s just not pretend it would be a large tax cut.

The post What If You Eliminated Personal Property Taxes and Nobody Noticed? appeared first on Show-Me Institute.

Susan Pendergrass speaks with Tim Carney, senior fellow at the American Enterprise Institute, about why American culture may be making it harder to have and raise children. They discuss the long-term consequences of the declining U.S. birth rate, how intensive parenting culture may be driving childhood anxiety, the “travel team trap” and the arms race of youth sports, what cities and communities can do to become more family-friendly, and more.

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Episode Transcript

Susan Pendergrass (00:00): I’m really looking forward to this conversation with Tim Carney. Thank you for joining us. You’re a senior fellow at AEI? I listened to a podcast the other day with a demographer from the University of Pennsylvania, and it was really good. I think they have a pretty strong department. He said that the United States reached peak child in 2012 or 2013, and basically

Tim Carney (00:06): That’s about right.

Susan Pendergrass (00:24): numbers have been going down on babies ever since. We definitely see that in Missouri. That was our biggest kindergarten cohort, and numbers are going down. I have five grandchildren under the age of five, and it seems to me this is going to be the policy conundrum of their generation. What do you think?

Tim Carney (00:44): It is certainly the biggest story of the next thirty years, policy, cultural, economic, everything. Another way of putting it: the number of births in the US peaked in 2007. Those kids born in 2007 either graduated last year or are graduating this week. Colleges know this very well. They’re all bracing for it. What about ten years from now when the workforce starts significantly shrinking?

Susan Pendergrass (01:03): Yeah.

Tim Carney (01:11): What about the towns that are built around a public school, elementary school, middle school, high school, and those start shrinking? Particularly in rural places, they’re seeing consolidation, two different public schools or two different Catholic schools consolidating. Can schools adjust to being small? How much is this a self-reinforcing spiral? When there are fewer kids, people aren’t used to seeing kids around. Yes, absolutely. It’s the biggest story of the next thirty years.

Susan Pendergrass (01:37): In your new book, Family Unfriendly, I think it’s interesting to juxtapose these two things. At the same time, we’re making it so much harder to raise kids in our culture, and we’ve raised the expectations for each and every one of them so high that people who are considering having kids find it daunting. It used to be, when I was young, people had six or seven kids and just hoped for the best. Everyone did okay. But now every child has these insane expectations, and I sympathize. If your child doesn’t roll over by six months old, they need occupational therapy now. That did not used to be the case. Doesn’t that work against it?

Tim Carney (02:12): Yes. A lot of economists have been praising quality over quantity parenting for years. Isabel Sawhill is an economist I’ve worked with for years, but I think she’s dead wrong when she says this is good, that people are choosing fewer kids so they can invest more in each one. That sounds right, but then you realize

Susan Pendergrass (02:33): Okay.

Tim Carney (02:53): the American Pediatrics journal says the number one cause of the epidemic of childhood anxiety we’re facing right now is lack of unsupervised play. So parents who are giving their kids the best of everything, making sure they’re not just wandering around the neighborhood, making sure they’re safe and busy with violin lessons and enrichment activities and a special private pitching coach for softball, that’s supposedly high-quality parenting. But it comes with low-quality results, which is very anxious kids, as well as stressed-out parents. People ask how my wife and I do it with six kids. I like giving answers about the special cool systems I have, but the real answer is a lot of times we just don’t.

Susan Pendergrass (03:41): Yeah. I feel like I’m probably going to say a lot of unpopular opinions on this. I never liked elite sports or travel sports, but I see travel sports going nationwide now. People from Texas are going to Florida, going to California for travel sports, which I always thought was kind of insane because it didn’t work for my family. We would normally have tournaments at Fourth of July and Thanksgiving. I also see kids being absorbed into the adult world more. Craft breweries have children trying to find something to do there, which is not a very normal environment for them. High-end restaurants have little kids in them, and I just feel like that takes away from the time when they’re supposed to just be kids.

Tim Carney (04:28): I actually think mixed-age mingling is something we need more of. Sometimes when I need to get work done, I’ll go to the local craft brewery to get away from my kids, and then somebody else has all their kids there. But those kids aren’t asking me any favors, so I’m fine with it. I think it’s good that we’re building places for parents to bring kids. The way I put it, though, and again

Susan Pendergrass (04:35): Okay. Yeah. That’s right.

Tim Carney (04:58): my local brewpub allows for this, but we need places where parents can bring kids and ignore them. I brought my kids to the brewery on a cold winter day when they couldn’t be outside because it was ten degrees and forty-mile-an-hour winds. I start the book with a story, in contrast to

Susan Pendergrass (05:05): Yeah. Yeah.

Tim Carney (05:27): high-intensity travel sports, of a program that we saw and then emulated in the Catholic parishes when we lived in Maryland, which was called Friday Night on the Field. There was T-ball and coach-pitch baseball, so this was kindergarten, first grade, second graders. Maybe 10 percent of the dads were coaching. The rest of them, if they were there, were hanging out with other dads. And the kids who were older

Susan Pendergrass (05:53): Yeah.

Tim Carney (05:56): were running around or playing wall ball. The kids who were younger were on a playground. When my wife found out what was going on there, she said, you are bringing all six of the kids to this while I stay home and rest. So I brought the kids there. I maybe had a baby in my carrier, ignoring the other four while one of them played T-ball. And that was exactly what suburban parents needed. Not this high-intensity mom and

Susan Pendergrass (06:08): Yeah, sure.

Tim Carney (06:22): child attached at the hip, but the whole family is there, it’s mixed age, and the children have freedom. This is a really important part of it in so many ways. One, that childhood is expansive and not just intensive. Two, that raising kids isn’t this hyper-intensive, constant thing. There was a commercial I cite in the book about Mother’s Day and how we need to honor mothers more. But it goes way overboard. It says they pretend they’re hiring for a job, and the requirements include you’re never allowed to sit down and you don’t get to eat meals until all of your colleagues are out for the evening. Being a mom is exhausting, and there are days where you don’t sit down, but come on. This is just not true.

Susan Pendergrass (07:00): The hardest job in the world. Yeah. I have three kids that are pretty close together. It was rocky there for a while, but I wouldn’t trade it for anything. As a practical matter, how do you change culture? If the prescription is to back off on intensive parenting, it feels more like an arms race where people say, maybe I don’t even agree with it, but if every other kid is going to Kumon Math, my kid has to go to Kumon Math. What do you do?

Tim Carney (07:36): It’s a tragedy of the commons sort of thing. I discuss it particularly in sports. In chapter one I call it the travel team trap. The reason it’s a trap is you get stuck without wanting to. I know lots of people whose kid just wants to play JV baseball, but the coach says they have to play fall baseball too. But I’m a football player. If you’re saying I’ll miss some reps and the other guys might get ahead of me, well

Susan Pendergrass (07:57): Yeah.

Tim Carney (08:05): that’s one thing. But then the coach says you’re shirking if you’re not playing year round. We have sought out schools and programs that explicitly do not do that, but we had to seek them out. It’s harder to be a backup point guard on a varsity basketball team if you’re going to play three sports, so you might get cut from the team. To some extent the parent is just saying, I really just want them to make the team, and that’s why I’m doing this.

With the academics, there’s a similar dynamic. We put our daughter, who was struggling in math, in a remedial program, something like Kumon. When we showed up, we realized, this was in Northern Virginia, specifically McLean, which is a wealthy area. Nobody else there was remedial. Everyone else there was an A student whose parents wanted their third grader

Susan Pendergrass (08:52): I see. Okay.

Tim Carney (09:03): to be at the sixth-grade level so they could get into Thomas Jefferson, the special super-magnet high school.

Susan Pendergrass (09:08): Yeah. If kindergarten is the new second grade and preschool is the new kindergarten, where does it end? I just feel like we’re overwhelming parents. You said it’s raising anxiety in kids. It’s definitely raising anxiety in parents too. It’s making people not want to be parents. It feels very stressful right now. There are books and apps, and there’s even a book on how to be a more free-range parent, which is strange to me. Does somebody need to be told how to do this? You just let them go outside.

Tim Carney (09:46): No, it does take work. And another thing is, to quote what a wise woman once said, it takes a village to raise a child. Being free-range is easier when other people are doing it. We used to back up to a big playground, and nine times out of ten my kids were the only ones there unsupervised. I actually got an email from a neighboring parent. It wasn’t criticism. It was saying your kids are great and it’s great that you let them run free, and asking if I could talk to them about letting their own kids run free. If you’re in a neighborhood where there are kids but they don’t come out, you might have to build organized activities. We didn’t do that growing up. We just played stickball. My mom wouldn’t organize it. We did it on our own. But now parents might have to be more involved. It’s a little bit of labor, but you connect the families, connect the kids, build the trust.

Susan Pendergrass (10:19): Yeah. Yeah.

Tim Carney (10:44): The community, and we talked about policy. I’m in DC. Everybody wants it to be a federal bill, this or that. The fact is it’s a cultural thing, as I said, and the community is going to have to have these organic, or sometimes deliberate and intentional, structures to help parents raise kids. The more parents who are walking around the neighborhood, the safer the neighborhood is. The more parents making it clear that their kids are going out and should come home when the streetlights turn on, the more that’s known, the safer it is. Remember when you and I were young, other people’s parents would correct us when we were wrong? Now, I have close friends I know I can do that with, but a lot of parents say they’re terrified of correcting someone else’s kid because they’ve been screamed at by the other parents. Your kid was

Susan Pendergrass (11:25): Mad at us. Yes.

Tim Carney (11:41): about to shove gravel down the throat of her two-year-old sister at the playground. And that’s my job too, if I’m right there. That social trust and community takes work. There are people who say it takes a village, and they can’t find their village. You have to build your village. I’m one of those conservatives who really believes that.

Susan Pendergrass (11:54): Are we willing to do the work? Do you see people doing it?

Tim Carney (12:09): We’re too individualistic, and that’s part of all of this. But I’m also one who believes the burden is really on you. You can’t wait for somebody else to do it. You build the community, and then you can sit back and bear the fruits of your labor as a neighbor yells at your kid so you don’t have to.

Susan Pendergrass (12:25): You’ve also talked about building family-friendly communities. There’s a conundrum we face in Missouri: no one wants to live in downtown St. Louis. A lot of cities face that, and St. Louis is probably at the forefront. We’re in the top five for cities in decline, and St. Louis and Pittsburgh are going to serve as examples, because

Tim Carney (12:28): Yes. Mm-hmm.

Susan Pendergrass (12:53): we hit that death spiral with more deaths than births a while ago, and all of our demographic trends are going to be out ahead of everyone else. People are going to look to us. But parents don’t want to raise their kids in the city of St. Louis. And if you don’t have children, you just keep getting older. Tell me a little bit about what has happened to make cities unfriendly to families and what they could do to change it.

Tim Carney (13:19): I’m a believer that we need all of the above. I’m very pro-suburbs. That’s where I raised my kids, that’s where I went to high school. But before high school I grew up in Manhattan, and I’m very pro raising kids in cities if you can do it. The number one thing is crime, or crime and disorder. You saw this a lot during the 2020s when people would say, who cares if people are hopping over the turnstile, so what if people are smoking pot, that homeless guy sleeping on the corner isn’t going to do anything. All those little things that adults can, maybe they shouldn’t but can, turn a blind eye to are disturbing to kids and disturbing to parents. Crime and disorder needs to be put in its proper place.

But then also, this is something where liberals tend to be better than conservatives: walkability and public amenities. I don’t mean my ability to walk to work or to my favorite cocktail bar. What I really mean is my ability to walk my baby in a stroller somewhere nice, and my eight-year-old and ten-year-old’s ability to walk together to a cool park, and more importantly to walk together to their friend’s house. Cities can actually do that better than suburbs to some extent, because they can put in those amenities, which are playgrounds, parks, and other things. That means traffic. Cars have to slow down. This is something I’m really studying now at AEI. The federal government has a walkability index, and it’s laughably bad. It’s published by the EPA, so it doesn’t actually show you

Susan Pendergrass (14:45): It’s about car exhaust.

Tim Carney (15:10): whether your kids can walk somewhere without getting run over by a car. We’re trying to see if there’s a way to improve this. That’s part of the built environment. That’s explicitly a government duty. Are the roads too wide? Are the cars too fast? Are there crosswalks? Are there trails? Because once you can let your kids walk around without getting run over by cars and without running into meth heads, their childhood is so much better. And your family life is so much simpler.

Susan Pendergrass (15:41): What about safety? I think it was you mentioning something like setting up safety zones within which families could have some reasonable degree of comfort that police respond and that crime is being attended to.

Tim Carney (15:58): A big part of raising kids, in my view, is you want to give them a sort of walled garden and let them be free in that garden. Every year that garden gets bigger, and at some point you realize the walls are gone and they’re out in the world. For me, this was a back campus at St. Bernadette’s and St. Andrew’s, the parishes where we had these programs. The kids were running free, but unless there was a kid who was going to run into traffic, and there are those kids, and probably some of your viewers and listeners have one who they know is a flight risk, in general they were going to be safe. When I would leave my kids alone in a museum, I tell the story of my son Sean, who three times I’ve totally lost him, but it was always in a botanical garden or a museum or someplace similar,

Susan Pendergrass (16:33): Yeah.

Tim Carney (16:55): where someone would say, hey, who are you with, four-year-old? And then slowly expanding that realm of freedom. You can walk around the neighborhood but can’t cross over Route 50, and then slowly it gets bigger and bigger. Community norms are really what make that possible. That two-year-old shouldn’t be walking down the street alone. That six-year-old is fine.

Susan Pendergrass (16:57): Yeah. Who are you with? But haven’t we kind of ruined that with the twenty-four-hour news cycle where everybody believes their children are at risk of being abducted by a stranger at every moment?

Tim Carney (17:35): Yes, and this is part of the problem I run into. When I say we need to let kids be free to run around like we Gen Xers were, people say it’s so much more dangerous now. It’s not. Statistically, almost the whole country has gotten over the violent crime wave that came with the George Floyd unrest and COVID lockdowns. That caused a spike in all the cities, and every place in the country right now is much, much safer than it was in 1984 when I was six. By a long shot. Every parent’s worst nightmare is their child getting abducted by a stranger. These cases happen, they end up in the news, and so we all think they’re happening all the time and all around us. Evolutionarily, we don’t have a brain that can understand a country of 340 million people.

Susan Pendergrass (18:08): Yeah. Yeah.

Tim Carney (18:32): So if there are three major cases a year and people talk about it for a few weeks, it seems like there’s some kid who got kidnapped half the year. It happens fewer than a hundred times a year. If you see numbers saying children are abducted ten thousand or a hundred thousand times, those are bad situations, but they’re not stranger abductions. In almost every case, the boyfriend goes off with the kid without the mom’s permission, or the grandparents have custody and then the mom comes and takes the kid. These are not good situations, but they’re not a kid who was left alone at a playground and then shoved in the back of a white van.

Susan Pendergrass (19:20): To the extent that we could bring any of that back, and this is where I’m a little pessimistic, I think kids learn decision-making in a way that isn’t being taught now, so that we end up working with people who never made an independent decision in their life. I certainly was out and got hurt and had to figure out: am I hurt enough to go home? Am I hurt enough to keep going?

Tim Carney (19:37): Ask a boss who has hired somebody right out of college recently. Yes.

Susan Pendergrass (19:45): Got a flat tire or whatever, we had to make decisions on the fly. I just don’t think we’re building that type of independence and resilience into our kids, and it’s a loss at the global level.

Tim Carney (19:58): Absolutely. Employers should all really be getting behind what you and I are saying right now, because if they want to hire a kid out of high school or college who can make a decision. I always remember the time I used to mow lawns in high school. Once I showed up at a lawn across town, used his mower, and it just didn’t start.

Susan Pendergrass (20:05): Yes.

Tim Carney (20:21): He was not home. He had a number on the fridge. I called and said, Mr. Zellinger, your mower’s not starting. And he said, good news is I don’t come home until Monday. So you have between now and then to get the lawn mowed, and I’m confident you’ll figure out a way to do it. It wasn’t an assignment. It was a responsibility. The best way to give your kids a responsibility that’s not an assignment they can just beg out of is to let them be free. And all of a sudden they’re like, wait a second.

Susan Pendergrass (20:40): Yes. Right.

Tim Carney (20:51): I need to be there in twenty minutes. How do I make that happen? Or I’m lost, how do I get unlost? And again, the children suffer. It’s not just that they go through life happy and dumb. They end up more anxious because life will inevitably bring them these problems. There is an epidemic of childhood and adolescent anxiety, according to

Susan Pendergrass (20:56): Yeah.

Tim Carney (21:19): HHS, and it’s caused by the fact that kids don’t have enough freedom in childhood.

Susan Pendergrass (21:29): I want to circle back to actionable items. What can we do about it, realistically?

Tim Carney (21:33): On the parental freedom side, there’s not that much the government can do except build better sidewalks, crosswalks, and pathways. Housing reform is interesting here. I’m a big believer in suburbs, but that doesn’t mean they can’t be more dense. One thing that’s really freeing is when you can buy a house in the neighborhood you want to live in,

Susan Pendergrass (22:01): Yeah.

Tim Carney (22:01): because your mom lives there and you have grandma to babysit. That’s a huge predictor. So many people in Washington think everybody needs universal daycare paid for by the government. Most people want mom to work a little less and grandma and grandpa to chip in, with neighbors to fill the gaps. More housing is what enables that to happen. But for the most part, we need more robust community institutions and more robust community connections. And every parent out there has to think: maybe I’m going to be the one who does this. There’s a field across the street from your house. Start a soccer league, bring food, run a grill. This is exactly what we did with T-ball. Throw in some money to pay for it. Buy the burgers at Sam’s Club or Costco and feed everyone. Bring your six-year-old to play soccer. This is not his or her path to a college scholarship. It’s a fun thing for the families to do. But you have to start it. We started it because we saw somebody else had started it. A lot of this is going to be on an individual level. On the policy side of supporting families, there’s a lot of debate about a child tax credit, a baby bonus, universal child care, and requiring employers to give parents parental leave.

Susan Pendergrass (22:58): Yeah. A lot. Leave.

Tim Carney (23:22): I write about that a lot at AEI. AEI scholars disagree about it. In the book, what I argue is we need a child tax credit, and it needs to be a little bigger. A family of eight making a hundred thousand dollars should not be paying the same taxes as a family of two or three making a hundred thousand dollars. That should be reflected in the tax code, because this isn’t just some consumer thing. It’s not like saying, I bought a Tesla, I deserve a tax credit. It’s saying, we’re eight people, we need to eat eight people’s worth of food, and the tax code should reflect that. But on the other programs, forcing employers to offer certain benefits or creating government-run childcare, I don’t think any of that works.

Susan Pendergrass (24:02): I mean, the Nordic countries do all of it and they have population decline.

Tim Carney (24:05): They have worse population decline than we did. There was a slight uptick, and one of the arguments I make is that subsidized childcare is not really a family subsidy, it’s a work subsidy. Notice who’s lobbying for it as these things bubble up. It’s going to be the Chamber of Commerce. I’m fundamentally a family guy. I think we need work. Part of fulfilling our human dignity is doing work. But that doesn’t always have to be paid work. In the book I defend stay-at-home moms and dads. I really think our society should be oriented around families. Now that’s a little heretical these days because, well, what if you choose not to have a family? Fine. There have always been people who chose not to have families. But that doesn’t mean families can’t be the central organizing principle of our culture.

Susan Pendergrass (25:04): More people now are choosing not to have families. And a lot of cities are pursuing those people, the childless professionals with Top Golfs and loft apartments.

Tim Carney (25:10): I quote a local official in Family Unfriendly saying families are a cost and businesses are an asset. Families come in, they pay income taxes and property taxes, but then they require sewage, they require schools, they complain that the playgrounds and the sidewalks are in bad shape. Businesses are mostly revenue. Washington, DC has explicitly said they don’t just want anyone to move in. They want the college-educated 22-to-28-year-old, meaning a person who gets to spend every dime of disposable income in the restaurants and bars and shops in DC. And if you look at the housing being built in Falls Church, right near me, it’s all studio and one bedroom, because that’s what the local government wants: more singletons who go out and spend their money. Sometimes we do things that are really bad for the economy. My wife makes homemade dinner. We almost never go out. A lot of our activity doesn’t involve paying anyone. The kids are just playing wiffle ball. All of that is horrible for the economy.

Susan Pendergrass (26:19): Yeah. Falls Church used to be such a big attraction for young families because of the schools. I’ve seen the shiny buildings going up recently, and I’m shocked by it. That’s interesting to me.

Tim Carney (26:44): I think it’s good to build more housing. But if it helps boomers sell their single-family homes to move into apartments, then it frees up family housing. This is a really complicated thing. We need more housing, but so many of the YIMBYs just want massive apartment buildings with as many apartments as possible, and that’s family unfriendly. What we really need, in my opinion, is slightly more dense suburbs,

Susan Pendergrass (26:54): Yeah. Yeah. Yeah.

Tim Carney (27:14): a starter home that somebody can buy. That’s basically impossible to build, especially in a high-cost area like this, or in the nicer suburbs around St. Louis and Kansas City. You’re not going to build them because of the regulatory overhead. If I build a single-family house and sell it for two hundred thousand dollars, that’s not worth it. I’m either going to build a McMansion or an apartment building.

Susan Pendergrass (27:26): They’re not building them. No. They’re doing the six hundreds. Yeah.

Tim Carney (27:41): Getting rid of a lot of the regulations that make it impossible to build a starter home is one of the best things that states and counties can do.

Susan Pendergrass (27:49): I really appreciate you coming on to talk about it. It’s a thorny issue. Countries that have really tried their best to encourage people to have more children haven’t been successful. This is going to be one of the biggest policy conundrums of the next few decades. The earlier we start talking about it, the better. I’ve been talking about it for at least five years in Missouri. We just had our smallest high school graduating class two years ago. People ask, where did the people go? They didn’t go anywhere. The babies haven’t been born, and we need to get used to it so that we can start thinking about how to solve it. I love a lot of your ideas. We have to think about solutions to this because if it feels overwhelming to have children, then people won’t have them.

Tim Carney (28:41): That’s exactly right.

Susan Pendergrass (28:42): Family Unfriendly. And your other book was Alienated America.

Tim Carney (28:44): Family Unfriendly. And Alienated America, which is about the collapse of community, which is upstream from this problem.

Susan Pendergrass (28:53): Lack of social capital and all of that. I think these are going to be some of the most important issues we can think about going forward. I really appreciate you coming on to talk about it.

Tim Carney (29:00): Thank you, my pleasure.

Produced by Show-Me Opportunity

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While guest-hosting Mundo in the Morning on KCMO Talk Radio, Patrick Tuohey is joined by Elias Tsapelas to discuss the Missouri legislature’s effort to begin eliminating the income tax. They break down why Missouri’s tax climate is holding back economic and population growth, how a gradual phase-out could work, and why concerns about sales tax rates may be overblown.

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On June 5, Patrick Tuohey, senior fellow at the Show-Me Institute, guest-hosted Mundo in the Morning on KCMO Talk Radio, where Terrence Wise of the Missouri Workers Center announced the organization had collected over 4,500 signatures, more than double the roughly 2,000 required, to force a public vote on any taxpayer subsidy of the proposed downtown Royals ballpark. The city clerk has 10 days to validate the signatures, after which the city council has 60 days to act, with a public vote expected in November.

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FORWARD MOVEMENT

INCOME TAX REFORM: HJRs 173 AND 174

Lawmakers approved a constitutional amendment for voter consideration that would authorize the eventual elimination of Missouri’s individual income tax. The measure represents the most significant advancement of income-tax reform in Missouri in years and ensures that the future of the state’s tax system will ultimately be decided by voters.

• Asks Missouri voters to decide whether the state should pursue eventual elimination of the individual income tax
• Allows lawmakers to modernize Missouri’s sales tax system as part of future income tax reductions
• Requires local governments receiving additional sales tax revenue to reduce other local taxes

OCCUPATIONAL LICENSING: SB 1233

Expanded opportunities for experienced professionals moving to Missouri by creating a pathway to temporary licensure for individuals with at least three years of work experience in a profession from a state that does not require a license for that occupation.

HEALTH CARE: HB 2372, HB 2974, SB 878, AND SB 1233

• Removed outdated barriers, allowing more patients to establish provider relationships remotely
• Eased restrictions on prescribing medications through telehealth
• Expanded access by allowing providers licensed through reciprocity to serve Missouri patients statewide
• Expanded pharmacist authority to test and treat for common illnesses and prescribe certain medical devices

MORE WORK TO BE DONE

Despite extensive discussion, several major policy proposals were left unresolved at the close of the 2026 legislative session.

EDUCATION REFORM

Legislation intended to address Missouri’s reading crisis passed in the House but died in the Senate. Meanwhile, 42 percent of the state’s fourth graders can barely read—the worst results in 20 years.

• Literacy reform
• A–F school accountability grades

TAX AND BUDGET REFORM

• Property tax reform
• Spending restraint

The debate over Missouri’s future did not end with the adjournment of the legislative session. Voters will soon weigh in on income tax reform, and lawmakers will return next year facing unresolved questions about education, taxation, and government spending. The most difficult reforms still lie ahead.

Download a copy of the report here.

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Susan Pendergrass speaks with Judge Glock, director of research and senior fellow at the Manhattan Institute and contributing editor at City Journal, about the growing debate over data centers in Missouri and across the country. They discuss why some communities are banning data centers while others are welcoming them, how Loudoun County, Virginia became the global epicenter of data center development and what it has meant for local tax revenue, whether concerns about noise, aesthetics, and energy use are valid, and more.

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Episode Transcript

Susan Pendergrass (00:00): Thank you for coming on the podcast again, Judge Glock. We’re going to talk about something that is certainly in the news and certainly good and bad for Missouri in the past week. We’ve had stories about both new data centers being announced and more communities banning them. What’s your take on that? You live in Virginia. In Missouri, we are certainly at odds with each other between one area that is going to have both a massive Amazon and a massive Google data center and then very close to that a large county that just banned them. Where do you think this is going?

Judge Glock (00:36): In some sense, it’s going the way of a lot of American projects in that there’s going to be a diversity of local responses to them, which I think is actually quite OK. One of the things I gather when I talk to some of my friends across the pond in the UK or in Europe is that they basically have to have this grand national debate about data centers, whether to allow them and where to allow them. That’s obviously an important and worthwhile debate, but in America what we’re going to have, and what we’ve already had, is a near infinitude of local debates about data centers. I think that’s the right path. When you nationalize or centralize these issues, you create more veto points for people who want to refuse any sort of growth. You also force certain kinds of growth on people in areas that aren’t necessarily favorable to them or most likely to benefit from them. The American system of fairly decentralized governance, combined with a fiscal horse-trading side where the main benefit of local data centers is the fiscal bump local communities can get, I think is going to lead to a more positive outcome than a more centralized system that tries to create a single answer for a whole country or state.

Susan Pendergrass (02:07): But we have at least one county in Missouri that within the last few days said, regardless of the money, we’re a community and these things ruin towns and communities. I wonder if it isn’t going to be like driving across some states like West Virginia where the biggest, ugliest, most pollution-spewing plants are there. I wonder if it’s because Virginia was willing to have them. Now you have these communities in Missouri that are like, we’ve got acres and acres of land and we don’t care what it looks like, versus these other communities that are saying we don’t want big white buildings everywhere. That to me is a very interesting dynamic, because I feel like they’re going to end up in places where nobody wants to build anything else.

Judge Glock (03:02): Yeah, and that might not be the worst outcome. Can I give a quick segue into the history of something called environmental racism? This was a movement started to some extent in the South in the 1970s and 1980s to meld general anti-industrial, pro-environmental sentiment with the burgeoning civil rights movement. The argument at that time was that evil polluters were forcing their factories into places that were poor and largely Black or minority-majority areas, and that this was a travesty because it was burdening people with increased environmental harm, pollution, and factory soot. The problem with that analysis, which has been carried out by the federal government for decades, is that a lot of times poor and minority communities really, really wanted these factories. They were willing to accept the trade-offs of the environmental harms for the fiscal and monetary benefits in a way that wealthier communities were not. Precisely because they were poor, they usually put a lower value on the environmental concerns that exercised a lot of high-income people and put a much higher value on getting good jobs and all the rest. There’s a famous case from the 1990s where I believe the Clinton administration sued a Louisiana parish and a company that was trying to place a factory in a majority-minority district, claiming it was an example of environmental racism. It actually turned out that the largely Black politicians in the local area were saying this was insane, that they were being sued by the federal government for being racist against themselves when they wanted the factory. That’s a long segue into environmental racism, but I think it’s the sort of analysis we should apply to data centers. There are going to be some areas that put a higher value on the fiscal benefits of data centers than others. On the whole, I imagine those will be poorer areas that care a bit more about reducing property taxes and perhaps the fairly small but not insignificant job benefits of data centers. Estimates suggest a finished data center will create around 50 or so permanent jobs, though certainly hundreds during construction. Some of those communities will be more likely to accept them than maybe wealthy suburbs or other areas that don’t want them for various reasons. Now there are exceptions to that general framework, and I’ve written a bit about Loudoun County, which is a very strange case study.

Susan Pendergrass (06:02): Tell me about that, because I’m surprised that it’s the data center capital of the world given what I’ve seen in Loudoun County.

Judge Glock (06:08): I happen to live in Fairfax, Virginia, in part of the suburbs, and grew up in the general area. So it surprised me to learn not too long ago that Loudoun County, just a little further west from Fairfax, a county generally considered ex-urban and rural, and by one measure, median income, the richest county in America, with a median household income of around $170,000 a year. And yet despite this reputation as a wealthy Northern Virginia ex-urban community, what Loudoun has actually become is the global epicenter of data centers. By some measure, the amount of gigawatts used by data centers, the only place close is Beijing, and they’re not even close, at about half the level of what Loudoun and Northern Virginia have. As I showed in an article I wrote for City Journal that got some attention, that came from a particular confluence of events, a history of Defense Department buildup that left a lot of what’s called dark fiber in the area, which created what’s known as low latency, meaning data centers there could communicate with each other very quickly. That made it a good place to locate internet and communication-focused data centers, and today data centers focused on inference for AI, that is the answering of AI queries. That history made it a particular location. But the other side of the Loudoun story is that for decades, and especially in the last decade, the county just recognized the fiscal benefits. Right now data centers are paying for 45% of all taxes in the county, which is pretty remarkable.

Susan Pendergrass (08:12): How much are they taking in from data centers in person?

Judge Glock (08:15): For the next fiscal year, the estimate is that data centers will bring in $1.3 billion in county revenue. That’s about 45% of all local tax revenue. But maybe an even more startling way to frame it is that all local government uses and projects outside of schools are a little less than what Loudoun raises from data centers alone. So the local residents of Loudoun County effectively get free police, free firefighters, free animal control, free roads, and so on.

Susan Pendergrass (09:00): Have they lowered their property taxes?

Judge Glock (09:02): Yes. Thanks to this absolute boom in data center revenue, Loudoun not only has very well-appointed and well-funded schools, roads, and police departments, but they’ve also lowered their property tax rate pretty continuously for over a decade. It’s about 40% lower than it was in the early 2010s. Now that’s offset to some extent by increases in assessments and other rates, but it is much lower than what I pay over here in Fairfax, about a third lower. So data centers for Loudoun, which can kind of be seen as the first area to really embrace them, and home to one of the first significant data centers in America built by a now large firm called Equinox in the late 1990s, has worked really, really well for that county. I don’t think it’s necessarily going to work as well for every possible county that doesn’t have the same advantages Loudoun does, but it does show that for those that embrace them, there can be real benefits. It clearly hasn’t hampered the ability to attract high-income, well-funded residents with good jobs and a nice community. On the whole it seems to have been beneficial, even if you’ve seen growing opposition there as you’ve seen elsewhere.

Susan Pendergrass (10:46): Virginia horse country. But now it feels like the word is out and people are hearing that there could be health risks, that the buildings buzz, that they use all the water. I’ve seen some recently that have like some blue stripes and stuff on them, but the originals were pretty plain. The latest vote in Missouri was in St. Charles, and people cheered and wrote all these emails saying we don’t want them in our backyard because of health risks and noise. How valid are those concerns?

Judge Glock (11:22): Before I was celebrating the local diversity of responses to data centers relative to the alternative, but I don’t want to slight the classic concerns with local NIMBYism, the not-in-my-backyard movement, or the idea that local governments often try very hard to restrict new development of housing or other projects in their area, which can be a substantial burden for people looking for housing or hoping for jobs and fiscal revenue. On the whole, I think the competitiveness of local governments will help wash that out. If St. Charles or another county refuses to build a data center, it’s often not too difficult to find another county willing to accept one. But I do think a lot of this anti-data center hysteria is driven by people with not just local concerns, which can be legitimate though to my mind often vastly overblown, but with a general anger at technological civilization and AI writ large. A lot of that has been strangely channeled into specific local opposition to data centers. That old leftist slogan of think globally and act locally presents a problem here: a lot of local issues don’t really map well to global concerns about climate change or AI. If someone has an issue with AI and they ban a local data center, that is in no way going to stop AI. Stopping a data center nearby is not going to stop the revolution. It will barely even slow it down. There is a lot of generalized opposition to modernity and technology that gets channeled into opposition to local data center construction, which is totally irrelevant to that debate. As for the actual local concerns, when I was reporting on the story for Loudoun, I spent some time driving around and checking out these data centers. For those who have not seen one, or frankly a park of them, it’s a pretty amazing sight. These things can be huge, nearly approaching a hundred feet tall, very solid concrete boxes, not often the most beautiful structures you’ve ever seen. The trend now is placing blind windows in them randomly to make them look better, though depending on your preference that may or may not help. I think a lot could be done to address the aesthetic concerns. Those are real. If you look at some parts of Loudoun and elsewhere, there are data centers built right next to housing subdivisions, and it can feel uncomfortable to have a looming concrete block right next door. The other local concern I think is somewhat legitimate but again overblown is the noise. Data centers, mainly because of their cooling systems, emit a fairly regular hum. It’s a low frequency, low decibel hum, but at a low frequency it can go through walls and subtly shake things. It can be irritating. I personally would not like a low frequency hum right next door. But the solution, as with the visual impact, is simply to push them back a bit. This is not like a local school that needs to be right next to a subdivision. If you’re talking a few hundred yards down the road, you’ve pretty much solved most of the hum and visual impact issues, especially if you surround it with some trees or berms or other methods to both hide the structure and limit the noise. Those two issues, the noise and the visual impact, are real. I understand why people are concerned, but they can be and have been easily addressed. In most of the debates you see, that’s not really the issue. It’s these generalized concerns about AI or false concerns about water.

Susan Pendergrass (16:03): What about the use of energy?

Judge Glock (16:19): Again, to some extent this is another local versus global problem where the local energy use of a data center is not really going to change the price people pay on their local residential energy bill. Most energy here in Virginia and elsewhere is part of a big interconnection, which is a market where different energy producers and power plants share electricity across large transmission lines. The price for electricity, besides state-level mandates, laws, or environmental regulations, is usually determined in that general market. Yes, a data center will drive up electricity costs somewhat in that general market, but it’s not necessarily a substantial driver of that. One new data center will have a very minimal impact on anybody’s bills across the whole region and will have no real effective impact on somebody’s local energy bills. To some extent, data center builders have also been doing a lot more work to construct what’s called off-the-grid or behind-the-grid energy production attached to the data centers. That can be problematic because of increased noise, even in Loudoun and elsewhere where a lot of places just have backup diesel generators that can produce a loud crack when the backup energy turns on, since data centers want to be running constantly. But in general, as before, you have very localized concerns about noise that you want to address with very localized attempts to limit those impacts, either through distancing the data center or finding ways to cover it and limit the noise it emits. The electricity issue is real in the sense that demand for electricity is going up because of data centers, and as economists like to say, supply is inelastic, meaning supply of energy is not going to ramp up as quickly as demand. That means prices are going to go up a little bit nationally because of that. But as long as the value of these data centers is there and people are going to build them, they’re not really going to have a meaningful impact on local electricity prices, and the data center builders are going to find other ways to get electricity and make sure that generation capacity comes online.

Susan Pendergrass (19:28): Missouri is building these two massive data centers not far from our one nuclear plant, and I know that’s something that has been discussed. When I hear that Loudoun County was the first to do this in such a massive way that they could bring in half of their income from data centers, it feels to me like when Colorado legalized cannabis and was the only state to do so. They took in so much money that residents got money back on their income taxes, and every other state said they were going to be just like Colorado. But Colorado was the one that did it first. Maybe Loudoun is the one that did it first with data centers. So now when a community brings in a data center, it’s not going to have the same impact it had in that first wild test case that was Loudoun County, right?

Judge Glock (20:18): I think that’s correct. I would note though that for some smaller communities, especially small rural communities with relatively small populations, such as some of these Texas counties, a single data center can become a third or more of the city’s or county’s budget overnight. So they can have a huge impact on smaller and poorer areas. But do most data centers as they’re built today have the huge fiscal impact that Loudoun got? Absolutely not. The other side of the fiscal story, though, and one that will apply more universally, is that data centers require very little in the way of services. When a city allows a new subdivision or apartment building, it gets more property taxes but also has to pay for schooling for the kids, roads, fire departments, and all the rest. When a city allows a new office park, there are similar property tax benefits but fewer service costs than residential development. According to one estimate I saw, for every dollar a typical office building or commercial retail project generates, a city spends about 25 cents on actual services to it. For data centers, because there’s basically no one in them, that number drops to about four or five cents. They basically need nothing. As I talked to some of the local officials in Loudoun, they said these things don’t send kids to school, they don’t even put cars on the road. There’s basically no impact on anything else. Once it’s built, it just sits there and throws off property tax revenues. No trash pickup, no breaking up fights at a local bar. It’s just money that keeps flowing in. So even if the property taxes aren’t as massive as they are in Loudoun, local communities still aren’t going to have to worry much about services, and they’re still likely going to see a big net benefit. Some people point out that data centers don’t offer many jobs over the long run, and a lot of industrial projects get approved because of job creation. But the flip side is that very few jobs also means low services and low impact. A big concern with local communities approving projects is traffic, and data centers just don’t create much of it for their size. So yes, other counties are not going to get the kind of deal Loudoun got and still is getting, because it remains the epicenter and data center builders want to build next to other data centers. But they are going to get a project that really doesn’t cost much of anything, still throws off at least some money, and doesn’t really burden local communities as long as it’s placed ever so slightly out of the way.

Susan Pendergrass (24:16): That brings me to another point. I’ve read that there are a lot of very smart engineers working on the problem of AI inference and how much energy and space it requires, and how to make it more productive. Eventually I think they’re going to solve this. We used to have server rooms that every business kept cool, and then everyone ended up with a laptop or even a phone. Eventually I think people are going to address this problem of requiring so much physical space to do what we need to do. I wonder if in a decade we’re just going to have empty white blocks sitting around because it’ll be too expensive to demo. What do you think?

Judge Glock (25:08): It could happen. You mean the data centers will be depopulated of their servers because they’ll be so miniaturized. That’s true, and it could be. To some extent, counties like Loudoun that have benefited massively from these data centers can and have set up rainy day funds, similar to counties that get a sudden oil influx, to say that if this ever starts to peter out, they’ll still have a long-term benefit they can continue placing into their budget and at the service of their residents. Right now I think we’re so far away from a potential data center bust that it really shouldn’t be a concern. As I’ve also pointed out, right now about one and a half percent of our whole economy is spent building data centers. This is just from basically zero just a few years back. This is a wild building boom, absolutely wild. We’re talking hundreds of billions of dollars a year. We need, if anything, to make sure that people can build out those data centers to do the other things that the AI revolution is going to require and demand, no matter what local opposition one county or another expresses. When you talk to people in the industry, the consensus is that we just can’t even build them fast enough. If very smart companies and very smart people are willing to invest hundreds of billions of dollars a year in data centers, and when I say data centers I mean mainly the servers and computers in them, I think they know it’s going to be a good return.

Susan Pendergrass (27:09): Well, it’s going to be interesting to see it play out in Missouri, because there’s definitely been backlash coming through the local town councils and the voters have been pretty loud in some areas. Have any Virginia counties banned them that you know of?

Judge Glock (27:29): Virginia has not only been the epicenter of the growth of data centers, it has been the epicenter of the opposition to data center movement as well. There is a group, something like Data Center Reform Watch, that has been monitoring local opposition. You’ve seen a bunch of counties take pretty strong steps against new data center construction. I forget if they’ve gone all the way to a formal and complete ban, but you definitely have votes in major counties either to block individual sites or to ban them from large swaths of the county. My take is that some other county is going to want and find ways to get those data centers, and when some of these counties realize they may have gone a little too far, they’re going to look at ways to pare it back and focus more on where to place the data centers rather than banning them outright and everywhere. I really struggle to find the logic in a local community banning a data center that’s going to be two and a half miles from anybody else. Frankly, as weird and big as they are, are they that different from, say, a local warehouse? A warehouse has trucks coming in and out all day, spewing pollution. One of these fulfillment centers is a big concrete box just like a data center, but with all that traffic on top of it. Data centers just seem much less problematic in that regard. In some sense they’re like a warehouse without all the trucks. If not for this huge generalized concern with AI, which is a separate debate, there doesn’t seem to be a lot of logic to just banning them completely.

Susan Pendergrass (29:42): Well, it is early days. I would love to have you come back again to talk to us when the dust settles a little bit, especially in Missouri. One of the first places I remember reading about a ban was Festus, Missouri, and now there are more. I’m also hearing about some of the biggest data centers going in there. So we’d love to have you back.

Judge Glock (30:02): That’d be great. I look forward to it.

Produced by Show-Me Opportunity

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