The last year and a half has been a tumultuous time for Mizzou and the University of Missouri system as a whole. The appointment of a new president and the desire for a new direction for the university system give us an opportunity to step back and look at how well Mizzou is performing—how it stacks up to schools across the state, region, and nation—and to offer ideas to help make it stronger. This presentation will begin with a discussion of data on the university’s performance and will also offer reform ideas from other universities.
Development Can Happen without Subsidies
It is a sign of how bad the subsidy culture is getting when Kansas City Star reporter Diane Stafford has to mention that a proposed Country Club Plaza apartment building plan, “calls for no public incentives.” How did we get to the point where the mere fact that private developers are developing privately is noteworthy?
Back when City leaders referred to themselves as “geniuses,” City Hall was handing out subsidies to everyone. H&R Block kicked off the feeding frenzy with their downtown office building, followed by the financially disastrous Power & Light District deal that has taxpayers footing the bond payments. In recent years taxpayers have chipped in for wealthy corporate headquarters for Burns & McDonnell and Cerner, and subsidized luxury high-rise apartment buildings. Even The Star itself has received a tax abatement. Once taxpayers and parents raised an objection to a subsidy for architectural firm BNIM to build in a hip part of town, the Council considered some reforms. Mayor Sly James would have none of it and complained that “we may as well put up a sign that says Kansas City is once again closed for business.”
Obviously, James is wrong. As Kansas City contemplated subsidizing a Hyatt hotel downtown, Marriott was building two on their own dime a few blocks away. The owners of Ward Parkway Mall are building a restaurant plaza without any subsidies. And now we learn of this proposed 13-story, 257-unit apartment building just west of Country Club Plaza. This is great news, not just because someone wants to invest in Kansas City, but because they are willing to invest their own money rather than seek taxpayer subsidies.
As Show-Me Institute writers have pointed out for years, not only do subsidies starve cities, counties, schools, and libraries of the revenue they need to provide basic services, subsidies also pervert developers’ incentive structure. And all this for projects that research shows likely would have been built anyway.
Real private investment—without taxpayer subsidies—is a true sign of economic health. City leaders need to put the brakes on handing out subsidies and let more private investment come.
Fuzzy Thinking on the “Price” of Doing Business
As someone who ran his own business for many years, I am aware of the difference between cost and price, even if it is something that eludes many political leaders and more than a few businesspeople with their noses in the public trough.
Cost is the expense that a business incurs in making a product or performing a service. Price is the amount of money that a customer pays for the product or service. The difference between the two is the business’s profit or loss.
In an article that appeared in the St. Louis Post-Dispatch on Dec. 24, Missouri Gov. Jay Nixon spoke in favor of awarding $120 million in subsidies to a group of wealthy businessmen who want to build a brand-new stadium and bring a Major League Soccer (MLS) franchise to downtown Saint Louis.
“It’s the price of doing business,” Nixon said, adding: “Folks may want to anguish a little bit” over the ladling out of such a large sum of public money to underwrite a private venture, but not to worry – because, “quite frankly,” this is a necessary and “cost-effective” way of putting a new business (the MLS franchise) on its feet.
The suggestion here is that the city of Saint Louis and the state of Missouri must be willing to part with $120 million – that being the price demanded by the group of businessmen (with the enthusiastic support of MLS Commissioner Don Garber) – in order to have a good chance of landing the soccer franchise.
But wait a minute.
If this was such a great business opportunity, why were these self-described businessmen and the MLS panhandling for public support? Why didn’t they think they could cover their costs – including the cost of building the stadium – through the sale of tickets, merchandise, and TV rights?
Running a business isn’t supposed to be easy. If misguided or self-interested political figures try to make it so (through public subsidies to private ventures), they inevitably divert scarce resources to less productive uses.
They make it possible for those without a solid business plan, and without any real appetite for innovation or risk, to enjoy an undeserved moment in the sun – at taxpayer expense.
At the same time, they encourage others to eschew enterprise for the seemingly easy but dead-end path of cronyism.
In short, they only poison the well that produces prosperity under the free market system.
What our outgoing governor called “the price of doing business” has nothing to do with business in any serious sense. Incoming Gov. Eric Greitens called it by its proper name.
It is “corporate welfare” for the idle rich.
Happy New Year from the Show-Me Institute
Happy Holidays from the Show-Me Institute
As we ring in the New Year the Show-Me Institute will continue to fight for liberty in Missouri. Enjoy a prosperous 2017 and check out our Blueprint for the New Year.
Happy Holidays from the Show-Me Institute
Patrick Tuohey Discusses Right to Work on KCPT’s Ruckus
On Thursday, December 22, the Show-Me Institute's Patrick Tuohey appeared on KCPT's Ruckus to discuss right to work and Kansas City's upcoming $800 million bond issue. Click on the link to watch the entire episode.
City of Saint Louis Joins Charter School Fight
Saint Louis charter schools received good news earlier this month: the City of Saint Louis is taking their side in a lawsuit with the Saint Louis Public Schools regarding more than $50 million in local tax revenue.
In the lawsuit, which was filed in April, SLPS contends that charter schools should not have access to funds from a special sales tax levied for school desegregation programs because they were not mentioned in the original agreement when the tax was passed. You can read Mike McShane’s full explanation of the lawsuit here. As Mike wrote in April, “Depending on the outcome, this case could financially cripple the city’s charter schools and jeopardize the education of the more than 10,000 students who attend them.”
According to the Post-Dispatch, the city’s brief argues that the 1998 law authorizing charter schools and the law authorizing the sales tax were both a part of the state’s efforts to desegregate public schools. Thus, the revenue from the tax was intended to fund traditional public schools and charter schools alike. While there has not been a final ruling on the lawsuit, the support of the City of Saint Louis is a big win for charter schools.
Missouri Should Not Stop at a State EITC; Larger Entitlement Reforms Are Needed
This month the Show-Me Institute was proud to publish our 2017 Blueprint for Missouri government, a document that catalogues fifteen state-based reforms to make Missouri more competitive and her citizens more prosperous. Included among the suggested reforms is transitioning some of the state’s welfare spending toward an earned income tax credit, or EITC. Apart from the well-documented economic benefits of the program, the EITC offers other benefits as well, including the promotion of work. As my colleague Michael Austin and I wrote in the Blueprint,
[t]ransitioning current public welfare dollars to an EITC will help foster a culture of self-reliance among the state’s poor while also restricting growth in public welfare spending. Not only does the EITC help working families make ends meet, but it also encourages recipients and families to find jobs and increase hours worked.
The EITC bills that appear to be next year’s legislative frontrunners are encouraging. Longtime readers know that Show-Me Institute writers have long supported unloading destructive income taxes; that the proposed EITCs can help achieve this for the poor is an added bonus to the work incentives embedded in the program.
But for the EITC to do the most good, policymakers should work toward a “transition” to it, not simply an implementation of it. Rather than viewing the program in isolation, EITC supporters should have an eye toward parallel reforms and work requirements in existing entitlement programs as well. That could mean a dollar-for-dollar downsizing of other entitlement programs to make room for the EITC, or the passage of other work-related reforms for able-bodied enrollees in Missouri’s entitlement programs.
A straight up expansion of entitlements, however, should be a non-starter for supporters of small, efficient, and effective government. The EITC should be part of a larger government push toward offering an effective hand up out of poverty, not just a new state program in addition to countless others already in existence. Without that conversation and action toward reducing the costs of other programs, the state risks undermining the good that can come from an EITC—for beneficiaries and taxpayers alike.
