Let Market Guide Us To Prosperity In ’14

Posted on by Andrew B. Wilson

As first appearing in the January 7, 2014, Columbia Daily Tribune:

Here are five market-oriented resolutions for a more prosperous 2014:

1. Privatize the United States Postal Service (USPS). The United States should follow the lead of other Western nations, including Finland, Sweden, the Netherlands and Britain, in deregulating and privatizing mail service. It is a form of economic insanity, which can only be explained by the power of the postal union and its political friends, to require daily delivery of mountains of mostly junk mail to U.S. households. The USPS should have to compete with FedEx, UPS and other private concerns in the delivery of first-class mail.

2. Follow suit with other public services. Look for other ways to benefit consumers and taxpayers by deregulating or privatizing other public services, with airports, roads and public utilities at the top of the list. There is a reason vacation travel is much cheaper and more convenient within European and Mediterranean countries than it is in North America and the Caribbean. Europe has widespread airport privatization and greater reliance on market forces to allocate scarce resources. As travel writer Rick Steves says on his website, “Ryanair routinely flies from London to any one of dozens of European cities for less than $20” (through its most heavily discounted fares paid weeks or months in advance).

3. Do not buy the “living wage” rhetoric. Recognize the folly of calls to increase the minimum wage — now $7.25 nationally — to $10 or more at a time of sky-high youth and minority unemployment. Why would a fast-food restaurant — or any other business — want to hire someone for $10 an hour who adds, say, only $6 an hour in additional profit, before counting the cost of his or her wages? To do so would be to accept a $4-an-hour loss. Raising the minimum wage thus has the perverse effect of causing unemployment. It artificially reduces the demand for labor and makes the first rung on the job ladder higher than it ought to be for young and unskilled workers.

4. Break the health insurance oligopoly. The next stage in the seemingly never-ending debate about health care, now entering its sixth year, might be between full-scale nationalization — as one way of rescuing the Affordable Care Act from going into a full-scale “death spiral” in 2014 — and the creation of a much more market-oriented system than the status quo ante. The starting point for a market-oriented approach should be in freeing — and, indeed, forcing — insurers to compete across state lines on both price and range of product offerings, without a great assortment of government dictates or mandates at either the state or federal level.

That would give individual consumers the right to buy low-cost, low-price health insurance — from a far larger universe of sellers. And it would cause big insurers to lose the monopolistic or oligopolistic positions they have built up over the years through assiduous lobbying at statehouses around the country. Their cozy arrangements with state regulatory offices have resulted in mandates to cover everything from hair pieces and contraceptives to acupuncture and marriage counseling. Opening the insurance market to open-ended interstate commerce will cause all producers — both insurers and health care providers — to reduce costs and look for more and better ways to satisfy the health care customer.

5. Choose growth over class warfare. Be prepared for the proponents of big government to try to turn every debate — whether it is about health care, privatization, the minimum wage, entitlement reform, curbing the power and privileges of public sector unions or any other issue — into another rant on what President Obama has called “the defining issue of our time”: namely, income inequality. However, the president and others greatly exaggerate income disparities between different quintiles in the distribution of income by ignoring the effects of high taxes on high earners and, for lower earners, the effects of income tax rebates, food stamps and other welfare. One study finds that income inequality actually declined between 1993 and 2007, after adjusting for taxes and transfer payments.

But the real takeaway here is what the poor and the middle class really need to achieve a better life for themselves and their children. That is faster growth, not more income redistribution. It is the opportunity for self-improvement, not the fallback of welfare dependency.

Andrew B. Wilson is resident fellow and senior writer at the Show-Me Institute, which promotes market solutions for Missouri public policy.

What It Takes To Get Rid Of An Airport

Posted on by Joseph Miller

The City of St. Clair, located in Franklin County, has an airport problem. Namely, the city is losing money on its small, general aviation airport. As the St. Clair Missourian reported last week, the airport has only four remaining tenants and use of the airport is at an all-time low.

So why not simply put up the “for sale” sign? For the last five years, the city government has been trying to do just that. But due to stringent federal regulations, the sale of even a miniscule airport can be an odyssey for local governments.

In theory, when a municipality builds and maintains an airport, whether that be Lambert-St. Louis International Airport or St. Clair Regional Airport, that government is free to do what it pleases with its property, including selling it. However, if a city has accepted federal money to upgrade its airport, as St. Clair has many times, federal regulations, known as the FAA’s grant assurances, tightly restrict that freedom.

Two of the more cumbersome assurances for a city like St. Clair are Nos. 5 and 25. Assurance No. 5 obligates St. Clair to maintain it as a public airport and not dispose or sell any part of the airport without FAA approval. The FAA will only give approval if St. Clair can show that closing the airport improves aviation in the area. In addition, the dispensation to sell the airport does not free St. Clair from reimbursing the federal government all recent federal grants. This will cost the city more than $750,000.

Assurance No. 25 prevents any revenue from the airport from being used for non-aviation purposes. According to the assurance, money from the sale of an airport is airport revenue. So to sell, St. Clair will have to submit a report on fair market value of its airport to the FAA, and put all sale proceeds from the sale into an escrow account for other regional airports to use on aviation-related purposes. The FAA has already rejected a number of St. Clair’s valuations as too low, further delaying any possible sale.

St. Clair’s experience trying to sell its own money-losing airport should act as a reminder to Missouri municipalities on the complications of having a public airport and accepting federal dollars. It is better to support the development of private airports or lease existing airports to private owners than to spend money and time begging the federal government to let them get rid of a bad investment.

Kirkwood Says ‘Yes!’ To Actual Capitalism

Posted on by David Stokes

Tax Increment Financing (TIF) usage in Missouri is so out of control that we have actually witnessed cities reject proposals precisely because they did not ask for subsidies. You read that correctly. Developments have been killed due to their lack of a subsidy request, as cities want the subsidy because it gives them more control over the project.

So it has been with great interest that I have followed the debate in Kirkwood over the intersection of Kirkwood and Manchester Roads. Kirkwood asked for redevelopment proposals, and received two proposals without a TIF (one does have a smaller Community Improvement District), and one major development proposal using a large TIF package. In a normal world, it would be assumed the city would take the projects asking for either no subsidies or greatly reduced subsidies instead of the huge TIF, but Saint Louis does not operate under normal standards of free markets.

But, in excellent news, Kirkwood is going with the two proposals that did not ask for a TIF: a CVS pharmacy and a farmer’s market. Good for Kirkwood to say “yes” to free markets, competition, and actual capitalism.

The only good thing that would have come from the TIF is that I would have enjoyed the city having to declare “blighted” an intersection two-tenths of a mile from the richest city in America. That would have been fun to watch…

Advisory Group Leader Meets With Airport PR Folks

Posted on by Patrick Tuohey

The Show-Me Institute has detailed conflicts and other problems with the Kansas City Airport Terminal Advisory Group’s credibility. To make matters worse, we just learned that one of the group’s leaders has been secretly meeting with the airport’s public relations firm.

On a Sept. 30 invoice obtained through an open records request, Global Prairie listed this item: “Discuss ongoing community dialogue opportunities with Bob Berkebile and team.” Berkebile, the co-chairman of the Advisory Group, leads the architecture firm BNIM and is clearly a fan of the new terminal proposal. He did not invite other members of the advisory group in on this meeting; they are not the “team” mentioned in the invoice. Berkebile did not even inform members of the Advisory Group that he was meeting with the airport’s public relations firm. We don’t know what was discussed.

A few months before, Berkebile and co-chair David Fowler asked Advisory Group members not to engage in public forums. On July 11, 2013, KCPT and the Citizens Association partnered with the Kansas City Library to host a panel discussion on the proposal to build a new airport terminal and Kansas City International Airport (MCI). Members of the Advisory Group were invited to participate, but received an email the day before from Fowler and Berkebile stating that:

Participating in forums, like this one, might unintentionally give the perception that the Advisory Group has taken a hard position and, as such, devalue the work of the group as a whole.  Therefore, Bob Berkebile and I, as co-chairs, are asking the members of the Advisory Group not to hinder these groups from having forums but not to participate on those forums at this time.

It is a fair request that Advisory Group members not partake in matters that might impact the groups’ legitimacy. Unfortunately, Berkebile’s subsequent surreptitious meeting with the airport’s public relations team gives exactly “the perception that the Advisory Group has taken a hard position and, as such, devalue[s] the work of the group as a whole.” That is unfortunate.

Oregon Study: Medicaid Expansion Increases Emergency Room Use

Posted on by Patrick Ishmael

One of the big arguments for expanding the Medicaid program in Missouri has been the notion that by doing so, wasteful emergency room use would decline. In fact, Missouri Gov. Jay Nixon released a statement on New Year’s Eve that suggested this precisely (emphasis mine):

Tomorrow, businesses in these states [that expand Medicaid] will have a significant competitive advantage – because as more people get health coverage, fewer people show up in emergency rooms, putting downward pressure on private health premiums.

But a “gold standard” study out of Oregon — released just two days after the governor’s statement — suggests that’s not true: that rather than decrease emergency room usage, a Medicaid expansion may actually make the problem worse. (Emphasis mine.)

Writing in Science, the Oregon Health Insurance Experiment researchers found that Medicaid did increase the use of preventive and primary-care services, but emergency-room use rose as well. Over an 18-month period, 100 low-income, uninsured adults in the Portland area would visit the ER about once each, on average. When Medicaid made health care “free” [for] these households, they made an additional 40 visits over that period — a 40-percent increase.

The increase was entirely comprised of people using the ER either for non-emergency medical needs, or for emergencies that could have been prevented with primary care. “Emergency department use increases even in classes of visits that might be most substitutable for other outpatient care,” the authors wrote, “such as those during standard hours (on-hours) and those for ‘non-emergent’ and ‘primary care treatable’ conditions.”

It’s irresponsible to expand a broken Medicaid program. That irresponsibility is accentuated when expansion proponents push arguments — like, “Medicaid reduces emergency room use” — that tend to fall apart when investigated. We all agree that Medicaid is in dire need of reform. It would be nice for policymakers to start recognizing reform as its own, superseding good, rather than just as a convenient rhetorical tool with which to repackage a Medicaid expansion.

It’s Official: Boeing To Keep 777X Construction In Washington State

Posted on by Patrick Ishmael

The story speaks for itself. (Emphasis mine.)

The 51-to-49 [%] ratification of the contract [by Washington’s machinist union] ends a nationwide search by Boeing for a new manufacturing home for the planned 777X, a 350- to 400-seat jetliner scheduled for delivery in 2020, and its carbon fiber composite wings. Twenty-two states had offered 54 sites for Boeing to evaluate, each hoping to win potentially thousands of high-value aerospace jobs.

With the approval of the union, the chief executive of Boeing’s commercial unit, Ray Conner, confirmed that the 777X and its wings would be built in Washington state.

“The future of Boeing in the Puget Sound region has never looked brighter,” Conner said. “This will put our workforce on the cutting edge of composite technology, while sustaining thousands of local jobs for years to come.”

The Missouri Legislature opened a very special session just for Boeing to lure production of the 777X to the Show-Me State, and the state and Saint Louis County together offered more than $3 billion in tax incentives to the aviation giant. Although the Left was largely silent on the matter, the Show-Me Institute repeatedly criticized the cronyism of the proposal — a proposal that followed hot on the heels of a failure to pass broad-based tax cuts only months before.

If the state has billions just lying around for economic development, then the case for cutting taxes in 2014 is even stronger than it was in 2013. And thanks to the special session, practically every policymaker in Jefferson City is now on the record as endorsing tax cuts for businesses to spur economic growth. If big tax cuts are good enough for Boeing, big tax cuts are good enough for the rest of Missouri’s job creators.

Show-Me with McGraw Monday Mornings 550 KTRS

Posted on by David Stokes

 In the February 24, 2014, segment with McGraw Milhaven, David Stokes talks about the tax-exempt status of hospitals.

David Stokes’s previous appearances with McGraw Milhaven:

 

 

 

Traditional vs. Alternative Teacher Licensure: What Does The Data Say?

Posted on by James V. Shuls

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The journal Educational Policy recently released my latest academic paper, “Teacher Effectiveness: An Analysis of Licensure Screens.” My co-author, Julie Trivitt, of the University of Arkansas, and I examined whether teachers who were traditionally certified are more effective than teachers who were alternatively certified, as measured by their ability to increase student achievement on Arkansas’ standardized tests. Traditionally certified teachers typically graduate from colleges of education and have student teaching experience whereas alternatively certified teachers often enter the classroom with little to no classroom experience. What we found might surprise you— the two groups of teachers performed at very similar levels.

How could it be that teachers who have gone through education programs and student teaching are no more effective than teachers with little to no experience? It seems a large factor in teacher effectiveness is a teacher’s academic capability. In our sample, there were significant differences between the traditionally and alternatively certified teachers in this regard.

The individuals entering the profession via an alternative route score higher on licensure exams. This is not out of the ordinary. In New York, “only 5 percent of newly hired Teaching Fellows and TFA teachers in 2003 failed the LAST [Liberal Arts and Sciences Test] exam on their first attempt, while 16.2 percent of newly hired traditional teachers failed the LAST exam.”

Opponents of alternative teacher licensure programs often lament that the new teachers will be “experimenting” on students. There is certainly something gained from experience, but the academic literature consistently shows that the difference between traditionally and alternatively certified teachers in terms of effectiveness is negligible.

Trivitt and I concluded that “Quality teachers simply cannot be identified exclusively by their licensure route or exam scores.” Therefore, there are really only two options: “improve licensure screens to the point that we can identify teacher quality very accurately or allow schools to use reasonable screens and identify quality teachers in practice.” To me, the latter sounds like a better policy — let local schools hire the individuals they think are the best for the job, regardless of certification.

Start The Conversation With The New School

Posted on by James V. Shuls

The New School: How The Information Age Will Save American Education From Itself
By Glenn Harlan Reynolds
Encounter Books, 2014

The New Year provides a time for people to set new resolutions and to strive for new achievements. That is why it is a fitting time for Glenn Harlan Reynolds, founder of Instapundit, to release his latest book The New School: How The Information Age Will Save American Education From Itself. The book describes how America’s K-12 and higher education systems must change. However, unlike our new year’s resolutions, which are more often than not bound to fail, Reynolds believes a reinvention of education in America is inevitable. Indeed, the theme of the book — taken from economist Herbert Stein — is, “If something cannot go on forever, it will stop.” Our current methods of educating students cannot go on forever; therefore, they must stop and The New School must emerge.

Reynolds, like many others, believes a bubble has formed in higher education. The bubble was caused for a variety of reasons, most notably government subsidies. “As with any subsidized product, prices rose to absorb the subsidy,” Reynolds writes. However, rising costs are only half of the problem. The real problem is that, for many, the costs of college are surpassing the value that the degree provides. “The generic college degree is today what a high school diploma used to be: a bare ticket to potential entry-level employment, even in fields that used to not require a college degree at all,” he writes. Costs are surpassing benefits. This will cause the higher education bubble to pop because what can’t go on forever will stop.

The K-12 problem is very similar. Our current model was built on an industrial model and “Unsurprisingly, the industrial model of public education has led to an industrial model of labor, complete with powerful unions that make many changes more difficult.” For years now, costs for K-12 education have continually climbed, but outcomes have been stagnant. Reynolds argues that this model is unsustainable. We cannot continually pump more money into education and receive the same results; therefore, this model will stop.

In Reynolds’ view, a time of change is coming to higher education and K-12 education because it must. We simply cannot keep going with the systems the way they are. What will the New School look like? Reynolds believes it will undoubtedly be shaped by technology and the new era will be all about customization, but he refrains from expounding at length. He also eschews policy recommendations that would spur these changes. As he states in the preface, The New School is “more of a conversation starter than a conversation ender.”

Overall, The New School is a great intro to the problems with the American education system. It is short and easy to read, but it only begins the conversation. It is up to us to continue the conversation. We need to discuss how to improve school staffing policies regarding tenure and teacher pay. We need to address the problems that defined benefit pension systems create. We need to look for ways to expand educational options for students. And as I have said before, we need to redefine public education.

I highly recommend you pick up a copy of The New School, continue the conversation, and promote policy solutions for these education problems.

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