Missouri’s Most Valuable Export Continues to Grow. . . . and That’s Not a Good Thing

If you had to guess what Missouri’s most valuable export was, what do you think it would be? Beer? Cars? Professional football teams? The answer might surprise you—read on while you ponder.

In 2014, Missouri saw record dollars in exports of goods. In addition, the state has enjoyed high levels of exports since 2012. Growth like this shows a strengthening ability of Missouri businesses to provide goods to consumers outside of the state. In return, it brings new money and investment to Missouri that can foster more private sector growth. On the net, Missouri saw a trade deficit of goods to the tune of 4.2 billion dollars. However, this is also a positive, because if Missourians buy more goods and services than they sell, then Missourians are promoting more outside investment in Missouri.

OK, so have you had time to reflect? Missouri’s most valuable export is . . . people. According to the IRS, Missouri is also seeing near-record exports of people. In 2014, nearly 65,000 tax filers left Missouri to live somewhere else. In fact, Missouri has been exporting more than 60,000 persons a year since 2011. Moreover, unlike exporting goods, exporting people could restrict Missouri’s economic performance.

If exports of people were counted and ranked among Missouri’s total exports, it would be the largest-valued loss in the state. This is because when people leave, they take their income with them.

 

Missouri's Export Profile to the World (Annual 2014)
Product Value to Missouri
IRS tax filers leaving Missouri ($3,364,024,000)
Transportation equipment $3,354,290,712
Chemicals $2,422,193,118
Machinery (except electrical) $1,601,938,524
Food manufactures $1,473,625,427
All other merchandise exports $6,806,684,695

(Source: Internal Revenue Service and U.S. Department of Commerce International Trade Administration).

In 2014, exports of people took a potential 3.4 billion dollars out of the economy. That amounts to about 24% of the benefit Missouri gets from exporting goods. In terms of net migration, the number and income of those fleeing residents is strong enough to eclipse what we get from incoming residents by around 4,700 returns, or 309 million dollars of income.

Missouri’s economic environment, whether it’s tied to taxes or regulations, is costing us the very thing that their growing goods exports are supposed to reel in: people and their income. While strong exports of goods is a positive sign, Missouri exporting too many people can become a drag on the economy if not addressed.

Personal Income in Missouri Continues to Lag

Recent economic data reinforces an old story:  Missouri’s economy is not expanding fast enough to substantially raise its citizens’ income. 

The Bureau of Economic Analysis (BEA) data on personal income across states and metropolitan areas (http://www.bea.gov/newsreleases/regional/rpp/2016/_images/rpp0716.png ) shows that real per-capita personal income for the state of Missouri—personal income adjusted for inflation and measured on a per-person basis—increased at a rate of 2.1 percent in 2014.  That puts Missouri squarely in the middle of the pack, with the 26th-fastest growth among states.  Several neighboring states fared worse: Iowa, Illinois, Kansas, and Nebraska all registered slower growth rates. 

Because the state is a mixture of rural and urban areas, it’s worth asking if this middling record is reflective of all areas in the state?  To answer this question, we use BEA data for metropolitan areas in the country to see how real per-capita personal income grew in Missouri’s metropolitan areas.

The table below lists the name of the metropolitan area (metropolitan statistical area, or MSA as defined by the BEA), each MSA’s growth in real per-capita personal income and the MSA’s national ranking based on that growth rate.  For some perspective, the average growth rate in real per-capita personal income across the 381 MSAs nationwide was 2.04 percent in 2014.  The Hanford-Corcoran, California, MSA had the highest growth rate at 7.5 percent; the Danville, Illinois, MSA the lowest growth rate at -3.1 percent.

From the table we see that real per-capita personal income growth in Missouri’s MSAs lags behind most of the nation’s other metro areas.  Only Springfield and St. Louis are at or above the national average, though Cape Girardeau and Kansas City are close to the average.  Columbia basically saw personal income in 2014 remain at its 2013 level. 

The upshot is that the majority of the MSAs in the country had better personal income growth in 2014 than Missouri’s metro areas.  It might not be wise to look to urban growth to raise the state’s average.

 

Growth in Personal Income, 2013-2014
Metropolitan Statistical Area (MSA) Growth Rate (%) Rank
Springfield, MO 2.7 100
Saint Louis, MO-IL 2.0 210
Cape Girardeau, MO-IL 1.9 213
Kansas City, MO-KS 1.8 231
Jefferson City, MO 1.6 261
Saint Joseph, MO 1.4 291
Joplin, MO 1.0 327
Columbia, MO 0.1 365

(Source: Bureau of Economic Analysis)

Think Fewer Insurers is Bad? Wait Until We Have Just One.

One of the biggest problems with American health care has been the fragmentation of our health insurance market. Long before Obamacare, it was already difficult to sell insurance across state lines because of state-based insurance regulations that often had specific coverage requirements. Regulations governing what must be covered can add to the cost of coverage and compliance and thus make it difficult for an insurer to justify entering a state’s health care market.
 
More insurers offering more insurance products would be good for consumers. Unfortunately, we’re getting less and less of that today. And like millions of other Americans across the country, Missourians shopping in Obamacare’s insurance “marketplace” have realized over the last few months that their options in 2017 will once again be more limited than before. In April, we found out that United Healthcare would no longer be offering many of its insurance products to Missourians, including products sold in the government market. In August, we learned that Aetna, by way of subsidiary Coventry, would be exiting as well.
 
It is the largest insurer of individuals in Missouri, holding a 38 percent market share. It’s not clear what part of Aetna’s individual business in the Show-Me state is based on exchange-based individual plans versus plans off the exchange, primarily through brokers. Aetna declined to provide that information.
 
Retreating from that customer base is confusing to some policy experts.
 
“Overall, I think you’re giving up a lot of customers. It doesn’t seem to compute,” Meuse said.
 
Aetna, however, says it needs to reduce its participation on exchanges to stem losses. The insurer earlier this month said it expects to lose $300 million this year from individual coverage it sells on the exchanges, or triple what it lost last year. Earlier this year, Aetna had said it hoped to break even in 2016.
 
Supporters of Obamacare are already trying to use the failure of their own creation as a justification to move to a single-payer, government-centric health care system—to effectively go from not enough insurers to one, with that “one” being the government. In the context of what we already know about insurance market fragmentation and reduced choice, reducing insurance choices to effectively no choice makes, appropriately, zero sense.
 
We need more competition, not less, and that means allowing for more insurance competition across state lines and focusing on bottom-up patient-focused reforms, not top-down government-centric approaches to health care policy. 

Mizzou Researchers Blind and Kill Puppies, University Demands Tens of Thousands for Related Records

And no, the headline isn't an exaggeration.

As reported in the Riverfront Times, four University of Missouri researchers blinded a half dozen beagles, who "were just nine to twelve months at the time they endured the experiment." The researchers then killed the dogs and harvested the eyes after the study (published this past April) proved inconclusive. While it seems like an open question in the media, why the researchers didn't try to adopt out the dogs seems pretty straightforward: that is, they probably couldn't have kept the dogs' eyes if the dogs were alive. Yes, explaining blind dogs to potential adopters isn’t easy, but it’s doable. Explaining dogs whose eyes have been surgically removed? That’s a public relations lift that the University probably wanted to avoid if it could. 

As a dog owner and supporter of a local rescue, I find the entire story gross and grotesque. But the problems don't stop there. A nonprofit that works on behalf of beagles like these wanted to get records related to the University's testing on these dogs and others, but the University wants to make that nearly impossible

Kolde had previously filed a lawsuit against Mizzou on behalf of the Beagle Freedom Project, seeking records relating to the university's care of beagles. The non-profit sought basic records that Mizzou is required by law to maintain. Yet the university sought to charge it $82,222 — as much as $7 a page. [Emphasis mine]

The University of Missouri is a public institution, so it should be easy for taxpayers to access both the details of courses the University teaches and the research its employees conduct. I appreciate the value that can come from research with live animals, and I am not suggesting that it all stop. But if the University is going to conduct this sort of research, it should be done transparently so that taxpayers can judge whether they think that money, spent in their name is being wisely and ethically invested. In this case, taxpayers have ample cause for concern, and Mizzou once again isn't helping its cause.

Heritage Study: $15 Minimum Wage Would Wipe Out Equivalent of 218,000 Missouri Jobs

Show-Me Institute analysts have written for years about the economic research on—and the damaging effects of—mandating a higher minimum wage in Missouri, particularly if the increase is radically above the current floor of $7.65 per hour. That fact hasn't stopped some activist groups from trying to double Missouri's minimum wage to $15 per hour, which we've argued again and again would cost many of our state's workers their jobs.

But exactly how many Missourians would be put at risk if the state actually went through with such a hike? In a recent study, the Heritage Foundation puts a number to the cost of a $15 minimum, suggesting that the full-time equivalent job losses in Missouri could reach a staggering 218,000 if such a wage became law. The problem isn't just that a massive hike would imperil the jobs of the lowest-paid workers; rather, every worker paid a wage between the old wage and the new one would suddenly be put at risk by the government, as well.

Fifteen-dollar-per-hour mandatory starting wages would cover roughly one-third of U.S. wage and salary workers—considerably more than the minimum wage has ever covered.[6] Existing minimum-wage studies shed little light on the number of jobs a $15 mandate would cost, as they examined much smaller minimum-wage increases that affected relatively few workers. In fact, most of the studies look only at sectors significantly impacted by past increases, like teenage employment or the restaurant sector. These studies provide little guidance on the effects of a minimum wage covering one-third of the workforce.

However, economists have extensively studied how businesses respond to higher wages overall, not just minimum-wage increases.[7] On average these studies find a 10 percent increase in labor costs causes firms to reduce employment of less-skilled workers by 6.8 percent in the long run.[8] This is not a precise estimate—some studies find greater job losses, others find lower. This figure does indicate, however, the approximate magnitude of job losses that occur when labor costs rise.

Contrary to what "Fight for $15" supporters might suggest, simply raising the government-imposed minimum wage for the employed isn't an effective way to help our poorest citizens. Rather, such a move could dramatically harm them, thousands of others in Missouri, and millions nationwide. There are many ways to improve the lot of low-wage earners, but government tinkering in the labor market with minimum wage manipulations is neither a serious nor effective means to that end.

The EDC Gets It Wrong

Last week we published a blog post in which we explained how Kansas City’s Economic Development Corporation (EDC) benefits from the TIF projects it administers. In the piece, we asserted,

The potential for conflicts of interest here is obvious. The EDC doesn’t just have financial relationships with the organizations they regulate—they depend on those relationships for over half of their budget. Worse yet, the more subsidies that are awarded, the more money they collect in fees. While TIF Commissioners—who make the final determination on the awarding of subsidies—are appointed by the mayor and are themselves unpaid, they rely on recommendations from EDC staff.

Then we issued a press release bringing attention to the post. Rob Roberts of The Kansas City Business Journal received our release and wrote about it. But apparently neither he nor EDC CEO Bob Langenkamp, who was quoted in his piece, clicked on the link in the email or read the actual post to which the release referred. That’s a shame, because Langenkamp was made to look foolish. For example, Roberts wrote,

As EDC CEO Bob Langenkamp pointed out, the Tax Increment Financing Commission of Kansas City recommends approval of TIF projects to the City Council, which makes the final decisions.

This is exactly what we assert in our post, as cited above. Roberts also wrote,

Langenkamp also corrected Tuohey’s claim that the majority of the EDC’s funding comes from administrative fees associated with TIF projects.

“If you look at the current EDC budget, you’ll see we’re not receiving any administrative fees,” Langenkamp said. “They’re collected by the city.”

Yet in an August 23 email to me, Langenkamp wrote that $3 million of the EDC budget is from “the annual admin fee on active/approved TIF projects.” Langenkamp may respond that his email refers to previous years and not the current budget, but the distinction is largely meaningless. Due to the TIF Commission’s dissatisfaction with the quality of financial management by the EDC, the TIF fees now go to City Hall, which assesses a fee for outside bookkeeping and then channels the remaining funds back to the EDC. The City is merely a pass-through; the EDC still gets funds generated from TIF fees. If anything, this makes the process more questionable because now the city administration also gets a cut.

The Show-Me Institute is not the only one to question the nature of EDC funding. In 2010, one outlet published a piece that included this passage:

Among the options the EDC executive committee has explored are consolidating boards that deal with tax incentives—the Tax Increment Financing Commission, Land Clearance for Redevelopment Authority and others—and having the city finance the agency to remove the potential for conflict that exists because the EDC is partly financed by revenue and fees from development projects.

The author of that piece? Rob Roberts of The Kansas City Business Journal. The difference now is that the portion of the EDC funding generated by fees has grown immensely—even if it is filtered through City Hall along the way.

Mizzou’s Loss Is Other Schools’ Gain

2,373 students. That is the difference between last fall’s and this fall’s enrollment at Mizzou.  It is worse than what was projected in March, when the university said that it expected around 1,500 fewer students this year. On top of that, as the Columbia Daily-Tribune reports, this drop is particularly acute for high-performing students. Mizzou reports 19% fewer students who scored higher than 30 on the ACT, and 13.9% fewer Bright Flight scholarship recipients.

At the same time, every other public university in Missouri is reporting enrollment growth.

Just a few weeks ago, I highlighted research on the effects of scandals on universities. We’re seeing it play out right in front of us.

So what is to be done?

On one level, this is a case of reaping what has been sown. You can’t un-ring a bell (and you can’t un-mix a metaphor, either). The leadership of the university patently failed at dealing with unrest on campus, and they have tarnished the school’s brand. That is something they simply have to live with now.

But on another level, this shows the necessity of improving Mizzou. If changes aren’t made, there is serious risk that Mizzou will continue to decline in stature both within the state and across the region and nation. Seeing that the best and brightest are choosing other schools (quite possibly outside of Missouri) to attend raises serious concerns about brain drain and the long-term economic and social health of the state.

Finally, while I don’t think we’re there yet, a conversation about Mizzou’s role as the state’s flagship might not be as far over the horizon as we might think. If students decide to vote with their feet and attend other universities, moving to a Kansas- or Iowa-like model of twin flagships might be in our future.

We’ll be watching these enrollment trends closely and offering some ideas for reform. Stay tuned!

A Labor-Day Salute to the Missouri Mule

Everyone knows the expression “stubborn as a mule.” More than a tired cliché, however, that is a doltish misperception, foisted upon us by the least adept of mule-handlers. In the words of a real expert, it is “a classic example of man ascribing stupidity to the beast instead of to himself.”

On this Labor Day weekend, think of the great labor that Missouri’s official state animal—the plucky, hard-working mule (not to be confused with the donkey, the symbol of the Democratic Party)—performed for our nation in the opening of the west.

Setting out in covered wagons from Saint Joseph, Independence, and other Missouri cities, more than 400,000 pioneers made their way to the Pacific during the 1840s and 50s. Most people have a mental picture of horses pulling the load. But mules did most of the work, even if horses got most of the credit, thanks to later Hollywood westerns. Movie-makers repeated the mistake in their depiction of stagecoach travel in the 1860s and 70s. In reality, once again, the indefatigable mule, not the more fragile and easily tired horse, was the draft animal of choice.

The above-quoted Rinker Buck tells these stories (and many more) in his book The Oregon Trail: A New American Journey. In 2011, Rinker and his brother Nick stopped in Jamesport, Missouri, to purchase three Missouri mules. Having also acquired a rig (a genuine prairie schooner), they then hit the trail—travelling the whole 2,100-mile length of the Oregon Trail from St. Joe to the Willamette Valley. The two brothers were the first in more than a century to complete the journey.

Just over the Kansas border into Nebraska, a fierce storm forced the brothers to camp in the equipment shed of an abandoned farm. In a book filled with hair-raising (and often hilarious) adventures, this was a fairly commonplace occurrence. It might have gone unremarked except that the same storm system that passed over their heads levelled Joplin, Missouri, a few hours later.

I have my own tenuous connection with mules. In his 16th summer, my brother Harry worked in the Bootheel—driving a team of mules in clearing tree stumps from a field. He was mule-struck upon returning home . . . telling stories that filled me, the younger brother, with a mixture of envy and awe. For his 71st birthday this June, I gave Harry the Oregon trail book. He returned it to me no more than a week later—saying it was wonderful. He wanted to be sure that I read it as well.

A cross between a female horse (mare) and a donkey (jack), mules combine the greater size and strength of the mother with the lighter weight, agility, and more feral instincts of the father. Mules require only half the feed of horses. They can travel long distances without water. Most of all, as Rinker Buck writes, “They love to work.”

With a keen sense of smell, they are uncommonly alert to danger. On the trail they saved countless lives in picking up the scent of buffalo herds and packs of coyotes long before they became visible to people. At the approach of predators, mules sounded the alarm, perking their long ears forward, staring in the direction of the threat.

As for their supposedly difficult behavior, or “mulishness,” that too, is a product of superior instincts. Unlike the happy dog or the pliant horse, the clever and independent-minded mule will not plunge willy-nilly into a rushing stream. It prompts the muleteer to show that the next step is safe by riding a horse across or wading in himself. “Mules ponder matters a lot,” Buck writes.

This Labor Day, let’s thank the mule for its super-human (and super-smart) efforts on our behalf. It played a critical role in uniting our country from sea to shining sea.

CEO Defends Centene Clayton Expansion

Last week Clayco CEO Bob Clark made a guest appearance on KTRS to discuss the Centene expansion being proposed in downtown Clayton.  The discussion touched on zoning and planning issues between the Fortune 500 Company and local residents, but the heart of the broadcast explored the reasons that Centene should receive tax incentives for the project.  To pull a few quotes from Clark:

“Incentives are kind of a funny thing to get your head around…we don’t get a check, we actually get a small increment, a small discount on the overall taxes that we pay.”

The small discount mentioned is quoted at $78 million from property tax abatement and another $35 million off of income tax bills.  There may not be a check in the mail, but public funds would go towards the development’s costs all the same.

“Centene has shareholders; they have a responsibility to be responsible with their dollars and with their investment.”

I absolutely agree, and it seems that the company is doing an excellent job of growing and increasing revenue, but the City of Clayton also has “shareholders” (aka taxpayers) and a responsibility to be responsible with public dollars.  If an expansion might take place anyways, then does it make sense to spend tax dollars on attracting it to an already successful business environment?

“This is a company that is growing really, really rapidly, and so in the long term it’s highly likely and most possible that Centene will occupy these buildings completely”

In 2015 Centene was named the 4th fastest growing corporation in America, and it’s great to hear that the company is interested in such an extensive expansion in the Clayton community.  However if the plan is to occupy their buildings completely, then why is there a proposed expansion on the table while the current headquarters still leases out about half of its office space?

“There’s very, very low vacancy in the market right now, the market has done extremely well.”

Clayton has been a very successful city when it comes to attracting developments.  The area has recently been referred to as the St. Louis region’s new downtown.  Still the question is posed that if the area is successful and is experiencing a low vacancy rate, is spending millions to subsidize a large development really the healthiest use of taxpayer dollars?

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