Show-Me Minutes

Posted on by Rick Edlund

Listen to these all new audio clips from the Show-Me Institute about free-market ideas:

  • Medicaid: Medicaid expansion sounds like free money, but after three years, Missouri taxpayers will have to pick up a $3 billion tab. Reform Medicaid, don’t expand it.
  • Common Core: One size for kids doesn’t fit all, whether it’s shoes or schools. Why use centrally imposed standards that don’t meet the individual needs of local schools or students?
  • Minimum Wage: We’d like to see everyone get a raise, but a government mandate is the wrong way to go. Raising the minimum wage will only hurt the very people it’s intended to help.
  • Accounting: Missouri is behind in funding its public pensions because of flawed accounting assumptions.
  • Tax Credits: Elected officials gamble your money on their favored corporations. Let’s end corporate welfare.

 

Another Push for Rail Transit in Kansas City

Posted on by Joseph Miller

Recently, Jackson County Executive Mike Sanders announced that the county had received a $10 million federal grant to buy just under $60 million of right-of-way from Union Pacific. The county wants that right-of- way for a $490-600 million commuter rail system. Jackson County officials are eager to move forward with the purchase, but they have not secured a funding source for the plan or resolved issues with freight rail companies over access to downtown Kansas City.

Jackson County and Union Pacific came to an understanding on purchasing the 15.5-mile Rock Island Corridor and two smaller spurs between Kansas City and Lee’s Summit for $59.9 million earlier this year. With the $10 million federal grant, the county residents will still need to fund a $50 million purchase.

Jackson_Co_Transit_Map

But as the map above demonstrates, those purchases still leave the county well short of functioning commuter rail lines, without additional right-of-way or agreements with freight rail companies.

It is not simply a matter of purchasing track. The city has an ongoing dispute with freight companies over how commuter trains will arrive in downtown Kansas City. Regional planners are pushing for a connection with the streetcar at River Market, but Kansas City Southern Rail (KCSR) opposes this idea because it would jeopardize operations at Rock Creek Junction. KCSR suggests a connection at Union Station, but that could raise construction costs to $1.5 billion.

Using freight rail lines to get commuter rail into downtown Kansas City is no small problem, as the city is the country’s second largest freight rail hub, and rail lines downtown are already congested. Aside from providing a source of employment, having such a large freight rail hub has positive benefits for Kansas City’s manufacturing competitiveness. It would not be economically sound for the county to jeopardize freight efficiency to heavily subsidize the commutes of fewer than 4,000 residents.

While the county does not know how it will connect commuter rail to the city center, it is clear how it will pay for it: higher taxes. The county already has a plan to implement a county-wide 1 cent sales tax. But sales taxes are already very high in Kansas City. With the city still not giving up on a more expansive streetcar network, also to be funded with sales taxes, the increased tax burden may harm the city’s competitiveness. A yes vote is certainly not guaranteed.

The county does not yet have a plan for a functioning commuter rail system, and implementation depends on a tax that voters have not yet accepted. County officials should recall this before spending $50 million on right-of-way. They should also consider that Saint Louis is implementing Bus Rapid Transit, which can easily handle 4,000 commuters a day, for under $40 million. As for Kansas City residents, they should ask why city planners waste millions of dollars planning rail plan after rail plan without the approval, or even in the face of explicit disapproval, of voters.

Where Is Kansas City’s Recovery?

Posted on by Joseph Miller

Whither Kansas City? According to local media outlets, the city is clearly on this rise. Millennials are moving downtown, residential developments are multiplying, and new sources of employment are entering the city. Capping it all, the Royals had a fantastic season, which was enough for the Kansas City Star to roundly praise past public subsidies for Kauffman Stadium. The story is clearly growth.

But census data paints a different picture of the metropolitan area and the city itself; a picture of falling income, rising poverty, and slow population growth. Kansas City was hit hard by the recent recession, and simply put, the city has not seen a recovery in terms of income.

Census data shows that employment is increasing in Kansas City since the recession, but total employment is still significantly below prerecession levels. That may be partially explained by lower labor force participation and fewer households. The income data is more troubling. The median household income from 2010 to 2013 is still almost $3,000 lower than it was from 2007 to 2009, not accounting for inflation. When that adjustment is made, real income has been on a continuous decline in the city since 2009.

MeanMedianKC

A similar trend exists in Johnson County and the metropolitan area as a whole.

The recession caused poverty levels in Kansas City and surrounding areas to spike, and they have yet to significantly recede. Poverty levels were actually higher from 2011 to 2013 than they were from 2009 to 2011 (which includes the recession). As with income, Kansas City has yet to see anything that could be described as a healthy recovery. The following chart demonstrates recent trends:

PovertyKC

There’s plenty of excitement and optimism in Kansas City, and that’s no bad thing. But much of the excitement seems to be for prestige projects, entertainment venues, and young people in the downtown area. If that attitude allows people to forget that for most people in Kansas City there really has not been a recovery, much less a renaissance, then the optimism may be counterproductive.

Haven’t Been Able to Get Uber in Saint Louis? Blame the Taxicab Commission

Posted on by Joseph Miller

When the St. Louis Metropolitan Taxicab Commission (MTC) altered its regulations in the past month to allow Uber, we warned that the rule changes did not go nearly far enough. We wrote:

. . . the MTC still plans to tightly control the supply of premium sedans available to Uber through the issuance of permits. Initially, the MTC will only issue 26 permits for premium services, and only five will be rewarded to new, single-vehicle operators. The rest will go to existing sedan companies that can afford three or more sedans. These smoke and mirror tricks, designed to make it appear that the MTC is becoming friendlier to other services and companies, are in reality reinforcing the restrictions on the entry and pricing of the taxi market.

As a result, Uber cannot hire new drivers as demand dictates; it can only use the limited pool of existing MTC-approved premium sedans.

The result, predictably, is that people who want to ride Uber’s premium service are often unable to. This mismatch between supply and demand hurts both Saint Louis residents hoping to use a service they want as well as Uber. MTC Director Ron Klein is unconcerned, stating, “We’re very flexible. . . . We just didn’t want to go out there and say, ‘Let’s add 100 [permits for black cars],’ and then have 75 guys standing around.” He stated that the MTC will vote on adding 26 cars next month, and might add more if Uber can prove there is a demand.

It should be readily apparent that demand exceeds supply if people are demanding Uber and there are no cars to send. Furthermore, why should the MTC, like a cabal of Gosplan apparatchiks, think it is appropriate for them to attempt to match supply and demand? Why should Uber have to prove demand before the MTC will consider allowing more black cars? When does it become obvious that MTC policies, far from ensuring safe taxi service, are limiting consumer choice and making the city a less attractive place to live?

If the MTC is so concerned about the quality of for-hire vehicle service in Saint Louis, they should limit the supply of regulations, not the number of premium sedans in the city. And if they can’t do that, perhaps residents should reduce the area’s supply of taxicab commissions. To zero.

Saint Louis City’s Growth: Trickle-Down Urbanism?

Posted on by Joseph Miller

A look at the latest American Community Survey data confirms that income growth in Saint Louis City has been lackluster for the past decade. Since 2005, median income growth has lagged inflation by 6 percent, indicating falling real wages. But at the same time, some are proclaiming the return of the city, with new developments on Washington Avenue, Ballpark Village, and the Central West End pointing to a bright future.

These contradictory accounts of the city’s performance point to a more complex reality, a tale of different populations and neighborhoods. The bad news is that wages are stagnant and the poor and middle class continue to leave the city. From 2005 to 2013, Saint Louis City households whose income was less than $75,000 per year (more than twice the city’s median income) fell by 7.8 percent. But the good news is that wealthy households (earning more than $100,000 per year) increased by 78 percent. Households earning $200,000-plus per year more than doubled over the same period.

But as the map below demonstrates, lower income residents are most predominant in North and South Saint Louis City, while the very wealthy are most populous in the central corridor. That means increasing growth where growth is most visible, and stagnation and decline where it is out of sight, out of mind.

city_income

Saint Louis City’s planning strategies may have contributed to this bifurcated outcome. We have written before about the city’s attempt to generate density, walkable neighborhoods, and a vital downtown through lopsided investments to the central corridor. The city also uses tax incentives to subsidize high-end living and entertainment districts. Instead of fostering economic opportunity, which draws residents who will generate local culture from the bottom up, the city instead will become an entertainment machine, which will draw the creative class, who in turn will create jobs.

Even where this upended model succeeds (and there is no guarantee of that), there are questions as to whether this actually helps middle-class or poor residents, or simply makes them former middle-class or poor residents. Urban “renewal” in boutique cities like New York City and San Francisco has resulted in a displacement of the poor and middle class and rapidly rising income inequality. Although Saint Louis City is not NYC, income inequality is rising quickly. From 2005 to 2013, the city’s median income fell from 75.3 percent to 69.6 percent of the city’s mean income, indicating an increasingly top-heavy income distribution. This trend, compared to that of Saint Louis County, is shown below:

medincome_percent

 

If leaders focus on making the city a safe, affordable, and easy place to live and do business, it is possible Saint Louis City could enjoy an expansive resurgence. But as things stand, the city is pushing more publicly supported bar districts, luxury apartments, and expensive amenities to draw the rich into the city center and hope the wealth trickles down to the rest. For areas like North Saint Louis, that could be a long wait.

Ridesharing an Option Regulators Want to Keep from Residents

Posted on by Joseph Miller

Recently, Ray Mundy, a professor at UMSL (also the head of a consultant group that works for the nation’s top taxi companies and part of the staff of Airport Ground Transportation Association, an airport taxi lobbyist group), was interviewed on a local radio station. While Mundy failed to state his conflict of interest, he lost no time accusing ridesharing companies like Lyft and Uber of having improper background checks, using inadequate insurance, price gouging, and destroying the cab industry that the needy rely on. But in reality, his statements are misleading, and his recommendation to ban these services will only serve to hurt Missouri residents. I will take his issues point by point:

  1. Lyft and Uber have insurance gaps.

This statement may have had validity a few months ago, but this is no longer the case. In July, both Uber and Lyft changed their insurance policies so that cars operate under liability insurance whenever the ridesharing apps are activated. Commercial insurance becomes primary (not secondary as Mundy stated in the interview) when a passenger has been accepted. Both Lyft and Uber detail their policies, and no driver or customer needs to use these systems if they find them inadequate. But regulators and those of Mundy’s persuasion would rather legislate additional insurance (shown not to improve safety) or ban ridesharing.

  1. Every time the taxi industry has been deregulated, it’s been reregulated.

This statement is empirically false, as a Reason study demonstrates.

  1. Ridesharing companies do not perform adequate background checks.

Mundy claims Uber and Lyft drivers might be dangerous because they do not use the same type of background check as most cab companies. Peruse Uber’s qualifications for yourself:

UBER BACKGROUND CHECKS Uber Blog

According the Mundy, these tests do not go back as far as taxi checks and do not include arrests where there are no convictions. That seems like a contrived standard, and once again, customers can decide whether they feel Uber or Lyft drivers are safe. But Mundy and other regulators would rather residents did not have such options.

  1. Uber and Lyft use price gouging.

Mundy, and other defenders of taxi regulations, do not like Uber and Lyft using variable pricing, such as charging more money at different times of night or when demand is higher. In reality, allowing for higher fares means drivers have a larger incentive to take fares at 2 a.m. or on New Year’s Eve. It allows the price mechanism to match supply with demand. But Mundy and other regulators would rather Saint Louisans wait hours for cabs that don’t come rather than have the choice to pay a higher fare.

  1. Uber hurts the poor, because cab companies cannot cross-subsidize service.

It is well known that, despite stringent regulations, taxis around the country refuse fares and avoid depressed neighborhoods. The best protection against fare refusal and more service is a large, diverse supply of for-hire vehicles, which ridesharing can help provide. And what’s more, cities like Saint Louis spend hundreds of millions of dollars a year on extensive public transit and para-transit services to serve the poor and the disabled. The for-hire vehicle market should not be regulated in order to duplicate those efforts.

If there is a common theme to Mundy’s and regulators’ arguments, it is that city officials, and not city residents, should decide whether ridesharing companies are safe enough, charge the right amount, and provide the right kind of service. But in reality, the corrective action of riders and drivers making their own decisions regarding Uber and Lyft are a far better test of all those criteria, and even Mundy admits the popularity of ridesharing where it has not been quashed by city government. The reality is that most Saint Louisans don’t see cabs as an option, because the service does not meet their needs. That’s a shame, because that hurts residents and hurts the city. But Mundy and the taxicab commission would rather keep it the way it is than let residents make their own choices.

Our Take on Amendment 3

Posted on by Brittany Wagner

There’s been a lot of talk about Amendment 3, which limits teacher contracts to three years and ties evaluations to personnel decisions. Some arguments against Amendment 3 are rational, evidence-based, and well thought out; others are not. In this post, we present our analysis of several arguments that have been made regarding Amendment 3. We conclude with some final thoughts on the matter.

(1) Amendment 3 will mandate more standardized tests.

Analysis: False.

Here’s what the ballot language says:

The majority of such evaluation system shall be based upon quantifiable student performance data as measured by objective criteria.

The St. Louis Post-Dispatch claims:

. . . the worst thing about Amendment 3 is that it imposes an untested experiment on all local school districts in the state, requiring them to devise a new standardized test for students that becomes the primary evaluation tool for teachers. Don’t our children take enough standardized tests these days?

This is a tremendous overstatement. With the state tests that students already take and the multitude of internal assessments that districts already administer, there is no need for additional tests under this amendment. Moreover, there are other types of performance data, such as districtwide common assessments, which could fit within the Amendment 3 language.

(2) Amendment 3 takes away local control.

Analysis: Both true and false.

If we were moving from a neutral system to an Amendment 3 system, it would be a loss of local control. Of course, we are not moving from a neutral system. Current Missouri tenure laws grant teachers a permanent contract after five years within the same school district and prescribe the exact steps that districts must undertake to remove a tenured teacher. This is a clear loss of local control. Amendment 3 would remove these centrally imposed mandates and would also remove the disastrous “Last in, first out” provision.

Under an Amendment 3 system, contracts would be capped at three years. Amendment 3 would also mandate that districts make staffing decisions based on teacher evaluations. A majority of such evaluations must be based on student performance data. Aside from this provision, districts would largely get to shape their evaluations.

(3) If there is a problem with the new system, Amendment 3 would make it difficult to change policies in the future.

Analysis: True.

How much of a teacher’s evaluation is tied to quantitative data should not be in the state constitution. Ideally, policies such as this would be determined as close to home as possible. That is, authority to determine contract length and evaluation practices should be devolved to the local school district or set in state regulations that could be changed when necessary. Even statutory changes would be preferable to a constitutional change.

Final thoughts:

Proponents argue that Amendment 3 will lead to better teacher evaluations and more recognition for great teachers. Ultimately, they hope this will create an improved teacher workforce. There is just one fundamental problem with that argument—when it comes to teacher quality, we have what is known as a principal-agent problem. That is, we as citizens (the principal) want great teachers in our schools and we hire school administrators (the agent) to make sure this happens. If the agent does not do his or her job, there is little we can do about it. Ultimately, we are dependent upon the school administrator for hiring the right people, evaluating them effectively, and retaining the most effective teachers. If a school administrator lacks the will to remove low-performing teachers, there is little that parents can do about it. Amendment 3 does not change our fundamental principal-agent problem. It may remove tenure restrictions, but if school administrators lack the will, then nothing will change.

The only way to change this dynamic is through greater school choice. With school choice, a parent does not have to depend on an administrator to remove an ineffective teacher. The parent can simply choose to go somewhere else. This places pressure on school administrators to take a more active role in managing the teacher workforce. School choice is the answer to our principal-agent problem. School choice is the answer for improving the overall quality of the teacher workforce.

James Shuls contributed to this post.

Indebting Missouri’s Children and Expanding Government? That’s Just Wimpy

Posted on by Patrick Ishmael

Although the Popeye the Sailor cartoons were made long before I was born, I was a connoisseur of the VHS copies I had as a kid. Along with Popeye, the shows typically featured his nemesis, Bluto, and his love interest, Olive Oyl, but perhaps the most memorable character from the series outside of Popeye himself was his companion J. Wellington Wimpy. Unfortunately, he’s memorable for all the wrong reasons.

Wimpy is soft-spoken, very intelligent, and well educated, but also cowardly, very lazy, overly parsimonious and utterly gluttonous. He is also something of a scam artist and, especially in the newspaper strip, can be notoriously underhanded at times.

In the animated cartoons, Wimpy comes off as someone who not only is unreliable in his words but, ultimately, self-aggrandizing in his behavior. His signature phrase, “I’ll gladly pay you Tuesday for a hamburger today,” hints that Wimpy will never pay you at all.

Even as a kid, Wimpy’s character was troubling because, like most children, I was well-acquainted with the idea of “fairness.” Wimpy was always willing to make others worse off for his own immediate benefit, and because of Wimpy’s generalized character issues, it was just hard to like him.

Wimpy would make you worse off . . . and he’d do it with a smile. When I think about how government and its politicians operate, that is, unfortunately, one of the images that comes to mind.

Perhaps this Wimpy image is most appropriate when it comes to the Obamacare debate in Missouri. On the one hand are the true believers who, despite evidence to the contrary, believe that government health care is the best health care. On the other hand are the Wimpys of the debate, whose support of Obamacare’s Medicaid expansion has more to do with their near-term interests than the long-term consequences of their actions. Those consequences include billions of dollars in new spending and debt saddled on future generations to fund a failing and flailing health care program, meant to explicitly benefit the well-connected and highly profitable hospital industry. So before we pick up the Obamacare expansion fight in 2015, let’s be clear: that’s just wrong.

I have no problem disagreeing with and debating folks who have a worldview that expanded government is better policy than small government. We can win that debate on the facts. But I have a serious problem with those out there who have concluded that expanded government is better politics—the contingent that’s calculated that they won’t be paying for their hamburger when the bill comes due.

That’s just Wimpy. Missouri needs genuine Medicaid reform. Fix Medicaid. Don’t expand it.

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