Know-it-all Government Undermines Growth and Jobs

Posted on by Andrew B. Wilson

With strict new rules mandating overtime pay for aspiring professionals and others in mid-level managerial positions, the Obama administration is asking employers to hang out a sign that says, in effect: “We don’t want any go-getters around here. You are strictly forbidden to make any special efforts for this company on unpaid time.”

The U.S. Labor Department has extended mandatory overtime pay to more than four million white-collar workers, including some 100,000 workers in Missouri. A new ruling from the department more than doubles the weekly threshold for salaried workers exempt from overtime pay to $913 a week (or $47,476 a year), and it requires employers to pay time and a half to employees at or below the threshold for any week in which they work more than 40 hours.

With five hours of overtime pay, a salaried worker at the threshold level will go from making $913 in a week to $1,172.

That may sound good, but it reflects a fundamental lack of understanding of what leads to wage and job growth and upward mobility for workers. It sets a new high-water mark in government meddling in other people’s business—or businesses.

As the CEO of one restaurant chain points out, the new ruling will demote thousands of mid-level managers into “glorified crew members” whose overriding incentive is to log more time rather than get results and be rewarded with bonuses and promotions.

In calling for cumbersome timekeeping systems that will rein in those who see showing initiative and always doing more than the required minimum as a ticket to success, the new ruling restricts the freedom and flexibility of employers and a large portion of their front-line managers to come to mutually beneficial agreements on compensation and working hours.

Other unfortunate side-effects will also follow. According to a National Retail Federation study, the rule will cause employers to move about a third of salaried retail and restaurant workers to hourly status. Further, it will lead to reduced hours for many of those workers and a shift to hiring more temps.

The idea that government can force businesses to take money out of profits in order to pay more to different classes of workers is itself delusional. To force any business to pay more to a worker than his or her value to the enterprise is to ensure that the business will do its best to keep employment of such workers at an absolute minimum. Unlike governments, companies that can’t make money are unable to expand, and are subject to extinction. That is especially true for low-margin, hypercompetitive businesses such as hotels, restaurants, and retailing that have been especially critical of the ruling.

The White House is saying that millions of salaried workers will get a raise under the new overtime rule. However, according to the Federation of Independent Businesses, that is contradicted by the Labor Department’s forecasts of a decline in average pay rates of newly covered salaried workers of about 5.3% in 2017.

To paraphrase Churchill, the Obama administration’s plan to order up a raise for middle-class Americans through an administrative edict is as foolish as the man who stands in a bucket and expects to lift himself up by pulling on the handle.

In fact, the administration’s plan is worse than that. At least the man who pulls on the bucket handle does not descend to a lower level. But that is exactly what will happen through the ministrations of our know-it-all government.

Missouri State Parks Floating the Idea of Crowding Out Private Enterprise

Posted on by James V. Shuls

Small business owners are used to competition.  Most know who their main competitors are. They also know that if they do not continue to offer a great service or a great product, they will soon lose customers to their competition. What most small businesses don’t expect—or at least what they shouldn’t have to expect—is competition from their government. Yet, tax-supported competition is what canoe-rental companies in southern Missouri will likely be facing soon.

As the Associated Press reports, Missouri State Parks is planning to open a $52 million facility in Shannon County, and the parks department would like to provide canoe-rentals to park goers. The department purchased a piece of property formerly known as Camp Zoe. The campground was seized by the DEA in 2012 and later sold by the Department of Natural Resources to Missouri State Parks for $640,000.

Launching canoes into the river is not as simple as buying a piece of land at an auction. Businesses must have a permit for each canoe, and the number of canoes is limited. Therefore, the parks department will either have to purchase an existing canoe company and take over the company’s permits or attempt to wrestle permits away from an existing company. In either scenario, the government is poised to crowd out private enterprise with the financial backing of state taxpayers.

It is quite possible that the family-owned canoe rental place you love (Mine is Windy’s) could be put out of business by the good intentions of public servants. While parks and recreation may seem like a natural place for the state to offer services, it is important to realize that when the state takes on a larger role providing recreational activities, it crowds out private businesses that are already providing these services.

Is a New Mississippi River Bridge Worth $60 Million?

Posted on by Joseph Miller

Plans are underway to replace an aging bridge that carries US Route 54 across the Mississippi River at Louisiana, Missouri. The existing bridge (the Champ Clark Bridge) was built in the 1920s and is in such poor shape that MoDOT has placed extensive weight and speed restrictions to ensure safety. Under a new proposal, Missouri, Illinois, and the federal government would spend $60 million on a replacement, with split of $25 million, $25 million, and $10 million, respectively. But is such an expenditure justified for Missouri?

To explore this question, we first need to look at traffic on the bridge. Before MoDOT placed weight restrictions, about 4,000 vehicles used the Champ Clark Bridge every day. That’s about as much as a lightly used urban street, and it’s low for a Mississippi River crossing. For example, bridges at Hannibal and Quincy each carry between 15,000 and 17,000 vehicles per day. Also, according to the Census Bureau, only four Missourians living in Pike County, Missouri (where the bridge is located) commuted to work in Pike County, Illinois. Actually, that estimate was within the margin of error, meaning it is possible that no one who lives in the county on the Missouri side of the Champ Clark Bridge works in the county on the Illinois side. About 500 residents of Pike County, Illinois, work in Pike County, Missouri. This low traffic makes sense when one notes that on the Missouri side there is only the small city of Louisiana (population 3,300) and the Illinois side of river is primarily farmland. Additionally, commodity flows are generally routed to the north or south of the Champ Clark Bridge.

Given the low traffic level on the Champ Clark Bridge, and the very few commuters who live in Missouri and commute to Illinois, a new Mississippi River bridge is likely to have limited positive impact for Missouri. The bridge’s replacement, therefore, is a perfect opportunity for Missouri to explore the option of tolling. Assuming the $60 million cost estimate is correct, a toll of around $2.50 per vehicle would be able to pay for bridge in 30 years, assuming existing drivers were willing to pay for the convenience of a Mississippi River bridge in that area. And if they are not, it calls into question the need for a bridge, with or without a toll. By placing a toll on the bridge, those who benefit greatly from the new bridge can fund its replacement without much, if any, additional strain on MoDOT’s or IDOT’s finances. It would be a fair way of funding a new bridge, and was in fact the method used to fund the construction of the Champ Clark Bridge in the first place.

The bottom line is that paying a new bridge on US Route 54 may not be worth it for Missouri, but it may be worth it for those who would actually use the bridge. The best way to find out whether that is the case is to explore the tolling option.

No Issue at MCI for American Airlines

Posted on by Patrick Tuohey

Multiple news outlets have reported that passengers at airports across the country have seen increased wait times due to short-staffing at the Transportation Security Administration (TSA). We addressed this matter in a post just yesterday.

On Thursday, according to Reuters, an American Airlines executive testified before a congressional subcommittee that “airport screening delays have caused more than 70,000 American Airlines customers and 40,000 checked bags to miss their flights this year.”

Kansas City International Airport (MCI) uses a private security firm rather than the TSA, and I wrote to American Airlines to ask if they tracked the number of flights missed as MCI due to security. Their media representative quickly responded that they do track it, “but at the current time, we haven’t seen an issue at MCI for American.”

Proponents of building a new, $1.2 billion terminal at MCI are going to show pictures of as many long lines as they can at MCI to justify the expense. But there are long lines all over the country—even in new, single-terminal airports. At least for one airline, MCI is not seeing the problems that are occurring elsewhere.

Long Security Lines? Not at MCI

Posted on by Patrick Tuohey

The Transportation Security Agency (TSA) has been telling travelers to expect longer lines at the airport this summer. Lines at security checkpoints have been longer than usual across the country, but not at Kansas City International Airport (MCI).

Why not? Certainly, size is a consideration. MCI is a mid-sized airport and not a hub like Chicago’s O’Hare airport. But there's more to it. According to The Chicago Tribune (emphasis added):

Private contractors also work well for certain types of airports—Kansas City, for example, has a terminal with multiple checkpoints, and workers can be shifted quickly depending on need, the [airport management consultant Steven] Baldwin report found. Neither San Francisco nor Kansas City has reported the lines seen at O'Hare and Midway.

This should not be surprising. Regular readers of this blog know that we’ve been impressed with private screening and the multi-terminal design for some time. And we suspect most people who fly share this view.

An expensive new terminal may be popular among Kansas City political leaders and their developer cronies, but it is unlikely to improve wait times, convenience, or safety.

Session Notes: TIF Reform Gets Approval, But More Needs To Be Done

Posted on by Patrick Ishmael

In a victory for good governance, the Missouri legislature passed important tax increment financing (TIF) legislation, which I wrote about at some length before. Congratulations to all the stakeholders and policymakers who have pushed for changes to the state's local tax incentive laws for years, including current and former Show-Me Institute staff members. 

The TIF reform passed here deals primarily with St. Louis region tax incentive practices, which—while a step in the right direction—do not represent the sort of comprehensive, statewide tax incentive solution that Missouri ultimately needs. As my colleague Patrick Tuohey would remind us, TIF abuse is a problem that permeates all parts of the state, including and especially Kansas City. While restricting the geographic scope of this measure may have been the only way to ensure any TIF reform passed this year, we hope that broader changes to TIF are in the offing next year.

That said, the law's passage marks an important moment in the fight for tax incentive reform. Missouri and its localities have a long way to go to curb the cronyism embedded in the state's tax incentive culture, but it's encouraging to see progress being made on the issue.

End of Session Puts the Brakes on Transportation Reform in Missouri

Posted on by Joseph Miller

At the beginning of this year’s legislative session, there were high hopes that Missouri’s legislators would focus on major transportation issues affecting the state. Concerns over funding problems at the Missouri Department of Transportation (MoDOT), which we’ve discussed many times before, appeared to be on policymakers’ radar. In addition, local regulatory intransigence toward ridesharing services like Uber and Lyft prompted calls for simpler statewide regulation. Leadership in Missouri’s legislature claimed that fixing these issues would be one of the main priorities of this year’s session.

Unfortunately, nothing was accomplished. On the issue of MoDOT funding, many reforms were proposed, such as reducing the size of the state highway system, increasing the state fuel tax, and allowing for public-private partnerships for tolling I-70. None of these proposals became law, although a proposal to increase fuel taxes by 5.9 cents came very close to going to a vote of the people.

As for ridesharing regulation, bickering over the exact level of safety regulation in the Senate was enough to scupper a promising reform bill. Until lawmakers are convinced that Missourians can choose for themselves the level of security that they consider adequate, the chances are slim for further regulatory reform in the state.

The only major transportation bill that passed the Missouri legislature was SB 861, which started out as a port improvement measure but ended up as a grab bag of corporate welfare measures. For instance, the bill would authorize tax deductions to lure back jobs that have gone to other states, whether or not these jobs have anything to do with ports.

While the legislature may have left transportation in the lurch, the news is not all bad. The recent passage of more funding at the federal level (through the FAST Act) and increased revenue at the state level has placed MoDOT on firmer financial footing, at least for the near future. This has led MoDOT to add 855 projects to its 2017–2021 state transportation improvement program, providing more than $700 million in new construction awards every year through 2021. As the threat that MoDOT will be unable to maintain the state highway system recedes, so does pressure to do anything to increase MoDOT’s funding.

However, major projects, like the rebuilding of I-70, remain out of reach for Missouri. And access to ridesharing services in Missouri’s largest metropolitan area (St. Louis) is still in legal limbo. It would be a mistake for Missouri’s policymakers to think they can continue to put off making sound policy reforms and hope outside circumstances continue to break in our favor. 

The Missing Element in the 2016 Legislative Session

Posted on by Andrew B. Wilson

In the 2016 session of the Missouri Legislature, our lawmakers expended millions of words on dozens of issues – everything from guns to fantasy sports, from medical marijuana to opioid abuse, from limits on lobbyists’ gifts to lawmakers . . . to a “cooling off “ period for lawmakers before they become lobbyists, and much else besides.

It was indeed a busy session. When it ended on May 13, people on both sides of the aisle congratulated themselves on the good work they had done.

But there was a disconsolate creature that wandered back and forth between the Senate and House chambers that nobody seemed to notice.

This was the elephant that everyone chose to ignore: the Show-Me State’s far-below-normal economic growth going back more than a decade.

From 2001 to 2014, Missouri’s annual output of goods and services grew at an annual inflation-adjusted rate of just 0.85%, compared to the national median for all state of 1.57%. In average real GDP growth, Missouri ranked 45th among the 50 states.

With average economic growth over that time, state GDP would be 10.4% higher than it is today, and median household income would be up 9.8%, or $4,739—at $53,102.

Before adjourning on Friday, May 13, our lawmakers sent a total of 139 bills to the governor, compared to 130 in 2015 and 190 in 2014.

Without arguing the merits of any of these bills, I would point out that none of them was directly related to anything that would spur economic growth . . . and few were even tangentially related to that issue.

That sets this session of the legislature apart from the previous two sessions.

Two years ago, the Missouri Legislature took at least one step in the right direction when it overrode Gov. Jay Nixon’s veto and passed the first reduction in Missouri income tax rates in 93 years (albeit a small reduction that will not begin to take effect until 2017).

A year ago, the legislature passed a bill that would have made Missouri the 26th “right to work” state, meaning that workers would no longer be required to join a union or pay union dues to qualify for many private and public sector jobs. Nixon vetoed the bill, and its supporters were unable to override the veto.

This year, the would-be champions of greater freedom in the workplace passed a watered-down “paycheck protection” bill to allow workers to opt out of the campaign contributions and expenditures of most government labor unions (excluding fire and police unions). Again, Nixon vetoed the bill. On the last day of the session, the effort to override the veto failed by a single vote.

In any event, the “protection” offered to workers under the so-called paycheck protection bill was highly dubious. As it was written, the bill did not require government unions to make financial information publicly available, and it would have painted a bullseye on the back of any union member who dared to request union financials as a basis for opting out of some portion of dues.

I am hoping that in the next session of the Missouri Legislature, we will see much more of a pro-growth agenda—with a concentration on cutting taxes, reducing regulation and red tape, and doing more to secure greater freedom in the workplace.

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