Lee’s Summit And The Road Not Taken

Posted on by Patrick Tuohey

The Lee’s Summit City Council voted overwhelmingly to end its consideration of Enhanced Enterprise Zones (EEZs). This is a good thing, and it is a credit to the members of the City Council who were intellectually supple enough to reconsider something that as recently as two months ago seemed a fait accompli. It is also a great credit to activists and residents who attended meetings and hearings about the matter — making sure city leaders knew their concerns.

The Show-Me Institute testified before the City Council in April that EEZs are as effective at creating jobs and economic growth as doing nothing. The data simply doesn’t support EEZ supporters’ claims. In fact, when questioned at a subsequent informational meeting, the consultant the city hired had to admit that numbers showing the success of EEZs don’t take into account what the growth may have been without EEZs. Basically, the whole program is built on the logical fallacy knows as Post Hoc Ergo Propter Hoc — after, therefore, because of.

Figures showing how many other places in Missouri have adopted EEZs did not sway residents. They were skeptical of claims of growth as a result of EEZs, and they were hostile to the claims that blight would do no harm. They wanted none of it.

Lee’s Summit has a lot going for it. As we wrote in our guest commentary in the Lee’s Summit Journal:

In 2006 and again in 2010, Money Magazine cited Lee’s Summit as one of the 100 Best Cities in the United States. The Lee’s Summit Chamber of Commerce boasts on its website: “Lee’s Summit is an ideal place to live and work, providing a desirable lifestyle that everyone can enjoy — high-quality, affordable housing in safe neighborhoods endowed with fine schools and excellent health care facilities.”

Governing a city is difficult, and my guess is that it’s even harder than it need be because everyone is trying to second-guess the free market to get ahead. City officials don’t want to just create jobs, they want to create the right kind of jobs, whatever that means. But the truest path to success in Lee’s Summit and elsewhere is to do less. Keep taxes low for everyone, streamline the bureaucracy, and let the free market thrive.

When it comes to EEZs, Lee’s Summit has chosen the road less traveled, and that will make all the difference.

Missouri House Bill 253…Vetoed! (Part II)

Posted on by Michael Rathbone

Let’s make one thing clear: The state is required to have a balanced budget. If revenues do not meet current expenditure levels, then there will have to be cuts to the budget in order to match revenues. Governor Nixon fears that HB 253 will force deep cuts that will affect vital services. Governor Nixon’s fears are overstated.

First, there are revenue triggers in the bill that would prevent the full tax cut from taking affect if revenues did not grow. Governor Nixon warns that if the Marketplace Fairness Act is enacted and the top rates drop by one-half percent, then state revenues will suffer. If this did occur; however, then the rest of the individual and corporate tax cuts would be stopped and only the business tax deductions would continue.

Second, the state is looking to have a $300 million surplus at the end of the year, which means it currently has more than enough revenue to fund its current operations. Now whether we have a surplus next year depends on what the state plans to spend and the state of Missouri’s economy. However, right now, Missouri has a cushion to absorb a decline in revenue.

Third, the Governor’s analysis (at least in the veto message), does not consider the dynamic effects for lowering the tax rates. According to a paper by Mathias Trabandt and Harald Uhlig, increased economic efficiency can make up for some of the revenue lost due to a tax cut. I’m not saying this tax cut will pay for itself, but the economic research by Trabandt and Uhlig suggest that it is not unreasonable to suggest that the loss in revenue will not be as large as opponents fear.

It is also important to note that if the state kept to tight expenditure limits for future years, like increasing spending only by inflation and population growth, then it would be easier to live with diminished revenues. For example, the Show-Me Institute published a policy study by Stephen Moore and Richard Vedder on how Missouri could eliminate the income tax entirely by 2020 if it adhered to these expenditure limits.

Governor Nixon’s veto will hurt Missouri in the long run and I’m sure Kansas is grateful for his actions. However, the reasons behind Governor Nixon’s veto are flawed and if Missouri is to remain competitive, it needs measures like HB 253 to become law.

Dismantling The Post-Dispatch’s Piece About Education (Part 4 of 4)

Posted on by James V. Shuls

The St. Louis Post-Dispatch editorial board recently issued an opinion piece riddled with errors, faulty assumptions, and half-truths. This post is the fourth of four posts (part 1, part 2, and part 3) that aims to point out where the editorial board got it wrong.

Fallacy 4: State-by-state comparisons need not adjust for the cost of living

Teachers in Missouri are among the worst paid in the nation, right? That is what the editorial board of the Post-Dispatch would have you believe. As evidence, they link to a piece in The Atlantic, which lists the 10 best and 10 worst states in terms of teacher salaries. Missouri ranks 3rd on the 10 worst list.

As with almost everything else written in the editorial piece, there is a huge problem with this comparison — the cost of living.

The average teacher salary listed for Missouri is $46,411. This seems much lower than the $72,708 salary listed for New York or the $69,434 salary listed for California. Of course, it costs much more to live in those places.

A quick visit to a cost-of-living calculator can help us understand the difference between Missouri’s teacher salaries and those of the highest-paying states.

A salary of $45,000 in Saint Louis, Mo., would be approximately equal to:

$90,246 in Brooklyn, N.Y.

$108,079 in Manhattan, N.Y.

$67,821 in Boston, Mass.

$65,598 in Long Beach, Calif.

$74,242 in San Jose, Calif.

$64,807 in Newark-Elizabeth, N.J.

$61,152 in Hartford, Conn.

$72,810 in Stamford, Conn.

It is disappointing that the Post-Dispatch piece misses the mark on so many levels, because there is room for good debate on these issues.

Because I have spent the past four blog posts explaining where the Post-Dispatch went wrong, I think I should close with an area of agreement. The editors note that the legislature is not meeting its obligation because they are under-funding the foundation formula. To that, I agree.

Dismantling The Post-Dispatch’s Piece About Education (Part 2 of 4)

Posted on by James V. Shuls

The St. Louis Post-Dispatch editorial board recently issued an opinion piece riddled with errors, faulty assumptions, and half-truths. This post is the second of four posts (part 1, part 3, and part 4) that aims to point out where the editorial board got it wrong.

Fallacy 2: Real spending on Missouri’s education system has been decreasing

The editors of the Post-Dispatch wrote: “Almost every budget in Missouri produces more education dollars than the one the year before. Mostly that’s because of the realities of inflation. If the education budget is measured in constant dollars, the story is entirely different.”

The editorial board is implying that real spending on education has not been increasing. In fact, they say “schools have less buying power nearly every year.”

According to data from the Missouri Department of Elementary and Secondary Education, state and local dollars in 2008 kept pace with inflation in 2009, but dropped off with the recession in 2010. Since then, state and local spending has increased approximately 5 percent. According to the U.S. Bureau of Labor Statistics, state and local spending fell off the pace of inflation by just three-tenths of a percentage point.

So yes, if we look at the facts with blinders on, it does appear that legislators are not keeping pace with inflation.

This, however, is a short-sighted analysis and ignores the long-term reality. From 1992 to 2008, we increased spending on education in Missouri by nearly 40 percent in inflation-adjusted dollars. These data come from the Digest of Education Statistics Table 194.

MO_Baumols_disease

Real spending on education has taken a slight hit in recent years due to the recession, but over the course of the past 20 years, the state has continually increased education spending.

Going Pee-Wee: Missouri Dailies ‘Boldly’ ‘Eviscerate’ Tax Cut, Laud Veto

Posted on by Patrick Ishmael

As expected, the Kansas City Star and St. Louis Post-Dispatch have come down in support of the governor’s veto of the Broad-Based Tax Relief Act of 2013. Given the choice between spending taxpayers’ money and returning it to them, the governor will gladly spend it; the state’s major dailies were only too happy to support him in that strange odyssey.

Of course, their verbiage could have been a little more diverse. Under the headline, “Jay Nixon boldly rejects destructive Missouri tax bill,” the Star declared:

This is what a strong-willed, plain-spoken governor fighting for what’s best for Missouri looks like.

Speaking Wednesday in Kansas City, Jay Nixon eviscerated and vetoed a tax bill approved by the General Assembly.

Meanwhile across the state, the Post-Dispatch declared under the headline “FAIR: Nixon eviscerates GOP arguments for ‘ill-conceived’ tax cut bill”…

In an unusually long veto message that absolutely eviscerated the arguments the GOP made in passing the bill, Mr. Nixon called it an “ill-conceived, fiscally irresponsible experiment,” and that was just for starters. It was among the boldest, clearest and most significant actions the usually cautious governor has taken.

Noted. The approved adjective for the governor’s actions is “bold.” The approved adverb is “boldly.” The approved verb is “eviscerate.” Reminds me a bit of the “secret word” they used to use on Pee-Wee Herman’s show years ago.

Of course, there is nothing surprising about two of the state’s major dailies getting foursquare behind the governor spending more and returning less to taxpayers or even — intentionally or unintentionally — coordinating editorial language. The Star and Post-Dispatch‘s proclivities are well known, and while the words they’re using these days may be “secret” in the Pee-Wee sense, the newspapers’ politics are as transparent as they could possibly be. This is just another exhibition of the point.

Dismantling The Post-Dispatch’s Piece About Education (Part 1 of 4)

Posted on by James V. Shuls

After reading “Reality of school funding in Missouri? It gets worse every year” by the St. Louis Post-Dispatch editorial board, I’m left with one conclusion: The board should stay out of the number-crunching business. The piece is so riddled with errors, faulty assumptions, and half-truths that it will take multiple posts to address all of them. So, that is exactly what I am going to do.

Fallacy 1: Percent of general revenue spent on education is the most important comparison

It’s one thing to make bold claims that you can back up. It’s another thing entirely to make a bold claim that you yourself probably don’t actually agree with.

The Post-Dispatch editorial board stated the “amount of general revenue dollars the state is investing in schools, compared to how much money they spend on everything else” is the most important comparison.

Really?

You would be hard-pressed to find anyone else who agrees with this sentiment. Would the editors be fine with a tax cut that led to across-the-board cuts to every spending program, as long as the percent of the pie spent on education increases? Not likely. In fact, the editors deride policymakers for passing a “bill that cuts Missouri’s already very low taxes even lower, thus starving the schools of future revenue.”

It seems obvious that the Post-Dispatch editorial board cares about the percent of the pie spent on education and the size of the pie.

Nevertheless, the editors continue with their overemphasis of the “slice of the pie” analogy and make an incorrect statement: “In fact, as a percentage of the overall general revenue pie, the slice devoted to education has been shrinking since 2002.” They note that in 2002, the state spent 37 percent of general revenue on education. The budget for 2014 calls for 35 percent to be spent on education. They claim this is a “historic” low. But, the historic low that the Post-Dispatch is reporting doesn’t really seem that historic. In fact, in 2010, education was just 32 percent of the budget and in 2011, it was just 34.73 percent of the budget.

On this matter, the Post-Dispatch was simply wrong, and there is more of that to come.

Analysis continued in part 2, part 3, and part 4.

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