David Stokes has a recurring spot on McGraw Milhaven’s KTRS radio program. In this appearance, Stokes and the host discuss topics such as the Missouri road funding foofaraw, the nuts and bolts of transportation funding bonds, which funding methods make the most sense, whether a gas tax is a form of social engineering, the funding of the Saint Louis Zoo, how charter schools might improve education on the whole.
View the video here:
The St. Louis Post-Dispatch published an editorial this weekend that attacked the Show-Me Institute and one of its founders, Rex Sinquefield, calling Show-Me a “believe-tank” (contrast to “think tank”) whose purpose is to propagate the “free-market gospel” of Mr. Sinquefield. Presumably a follow-up to a story published last week in Gateway Journalism Review (GatewayJr.org), the Post-Dispatch’s editorial exhibits the sort of ill-considered economic assessments that have become the hallmark of Saint Louis’ daily in recent years. The Editorial Board’s latest addition to this unfortunate pantheon can be read here.
But the Post-Dispatch’s readers deserve better than what the newspaper delivered Saturday. There is nothing “theological” about the proposition that income taxes are destructive to growth. For the sake of transparency, I encourage the Post-Dispatch to point its readers to a report summarizing the academic literature on taxes and growth that the Tax Foundation published last year. Notably (emphasis mine):
So what does the academic literature say about the empirical relationship between taxes and economic growth? While there are a variety of methods and data sources, the results consistently point to significant negative effects of taxes on economic growth even after controlling for various other factors such as government spending, business cycle conditions, and monetary policy. In this review of the literature, I find twenty-six such studies going back to 1983, and all but three of those studies, and every study in the last fifteen years, find a negative effect of taxes on growth. Of those studies that distinguish between types of taxes, corporate income taxes are found to be most harmful, followed by personal income taxes, consumption taxes and property taxes.
The Show-Me Institute will continue to advocate for substantive reforms to improve the economic fortunes of this state. Instead of deriding that movement, the Post-Dispatch should join the good-faith effort — which a constellation of countless citizen activists are spearheading in Missouri with assistance from Show-Me Institute research — to translate the outcomes of decades of economic research into a robust and prosperous economic reality. We invite the Post-Dispatch to join us in this pursuit.
The St. Louis Post-Dispatch editorial board recently wrote a piece in favor of spending more money on early childhood education. The board noted that many states are cutting early childhood funding and declared, “This is a step backward, and it goes against all of the academic evidence on the subject. Study after study has shown that spending money on early childhood education is one of the best investments a parent or a state can make.”
There is just one problem with this statement: it is wrong, or at least misleading. For starters, the study referenced in the editorial suggested we could expect an $8 return on every $1 invested in early childhood education. The results they are citing come from a 1960s study that has been wrought with criticism. Moreover, the pre-school program in the study does not even resemble most of today’s early childhood education programs.
A good example of a failed modern early childhood program is Head Start. A recently released U.S. Department of Health and Human Services study of Head Start found that academic gains do not last, fading out by third grade. Add that to a growing list of evaluations of Head Start that have the same findings. The Wall Street Journal editorial board concluded that Head Start “. . .wastes taxpayer dollars at a time when the country is running trillion-dollar deficits.”
The evidence is simply not as clear as the editorial board has made it out to be.
We all know that corruption is a threat to our government. And, the less transparent a governmental body is, the more likely it is that corruption will occur. Aren’t we all more likely to steal the last cookie if no one can see us doing it?
The U.S. Public Interest Research Group (PIRG) revealed unsettling results for Saint Louis in its report on the largest cities’ spending transparency websites. Saint Louis City received a grade of ‘F’ in spending transparency, and ranked 28th lowest on the list of 30 cities.
Other cities provide valuable “checkbook-level” information online. But Saint Louis fails to provide this information, keeping us in the dark on expenditures. This means we cannot easily track who receives taxpayer dollars.
Tax Increment Financing (TIF), tax credits, exemptions, incentive-based abatements, and other tax subsidies all affect the city’s budget the same way as direct spending. But cities can more easily hide these types of indirect spending.
The Saint Louis Development Corporation (SLDC), which supports the city’s TIF commission, provides almost no TIF information on its website. And, the SLDC fails to provide financial information for the other economic development authorities it supports.
As a result, it is challenging to track the details on Saint Louis tax expenditures. And if we cannot easily track spending details, we have a limited ability to hold recipients accountable for delivering on their promises. Without providing this information online, it is unnecessarily difficult to scrutinize the city’s decisions and to determine whether our tax money is being spent wisely.
No one could argue that this is a good thing — yet we see no attempts from Saint Louis City to provide more transparency.
Wouldn’t it be nice to have a lot of money? So much money that you could do everything you want to do without worrying about the cost. Of course it would, and it would also be nice to have a unicorn; but we live in the real world, with resource constraints. For most of us, that means making decisions about what works best and putting our money into those things, rather than wasting our money on things that do not work. The one thing we know from the field of education is that what we are currently doing has not been working and we cannot afford to continue down the same path. Rather than throw good money after bad, we need to rethink how we operate public education in Missouri.
By many measures of academic achievement, Missouri ranks near the middle of the pack when compared to other states. On the best state-to-state comparison, the National Assessment of Educational Progress (NAEP), Missouri fourth graders ranked 28th in math and 32nd in reading in 2011. Missouri’s eighth-grade students ranked 33rd and 25th in math and reading, respectively. At the high school level, the state’s average ACT score has remained unchanged at 21.6 for the past eight years.
We are stuck in the middle with no signs of becoming “un-stuck.” Using data from NAEP and several international comparison tests, notable education scholars Eric Hanushek, Paul Peterson, and Ludger Woessmann analyzed national and state level trends in achievement. They found United States performance to be middling in comparison to other countries. From 1995 to 2009, 24 countries had educational gains larger than the United States and 24 had smaller gains. In their analysis, Missouri once again appears average when compared to other states, ranking 27th in the annual rate of growth in math, reading, and science achievement. Missouri does not seem to be improving rapidly in comparison to other states or other countries.
The answer to our apparent inertia is not simply more money. Many rigorous studies have shown, including the one cited above, that increased funding simply does not buy higher achievement. From 1992 to 2008, real per-pupil spending on K-12 education increased by nearly 40 percent. Last year, Missouri spent approximately $9,600 per student. For a class of 25 students, that equals $240,000. And that figure is just for current operating expenditures, which typically does not cover the cost of buildings and classrooms. For the 2013 fiscal year, spending on elementary and secondary education will consume more than 36 percent of the state’s general revenue operating budget.
Freedom, not money, is the answer to Missouri’s education problems. Our education system is rife with burdensome regulations and limitations that inhibit teachers and school leaders from addressing the most pressing needs at their schools. At the same time, most families lack the ability to express any meaningful choice in where their child goes to school. We need to allow school officials to innovate and we need to empower families to choose.
The state cannot afford to continue the path we are on, but we can certainly afford to dole out more freedom. Arizona lawmakers have discovered a way to promote freedom while saving money, with the use of education savings accounts. Families who wish to homeschool or place their child in a private school can now receive a portion of the funds that would have been spent on their child. They can use these funds for approved education purposes, including textbooks, tutoring, and even tuition. Because students only receive a portion of the funds, the state saves money and families have more options. In my book, that is a win-win.
James V. Shuls is the education policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.
On Tuesday night, the Shrewsbury Board of Aldermen approved a $15 million tax subsidy for the construction of a new Walmart Supercenter, which will be located on Watson Road. In its request, G.J. Grewe, the commercial real estate company overseeing the store’s development, said the subsidy is needed to “grade the topography at the site.” Despite the manifest drawbacks of such schemes, the board overrode the recommendation of the St. Louis County Tax Increment Finance (TIF) Commission with a 4-2 vote.
Hence, we observe one of the more unsettling hallmarks of statist intrusion into the market: the spectacle of multi-billion-dollar corporations successfully offloading costs onto everybody else. German sociologist Franz Oppenheimer referred to this as the “political means” of wealth acquisition, a process involving “the unrequited appropriation of the labor of others.” This is to be contrasted with the “economic means” of earning wealth, which stems from the “equivalent exchange of one’s own labor for the labor of others.” The former is only made possible by the latter; one cannot confiscate that which has not been created.
Walmart is in an interesting category. It often benefits greatly from public money, but it is also on the receiving end of hostile state regulation. This is also problematic, not least because the company has proven itself to be a force for positive change.
But that is beside the point. A free market, properly conceptualized, is nothing more than the institutionalization of voluntary interaction among economic actors. It constitutes the only politico-economic system that legally enshrines the rights of consumers and producers to live in accordance with their values. And such a system has immensely greater potential to improve our standard of living than any state-administered subsidy program for politically connected enterprises.
Last year, Saint Louis County officials decided to revive the moribund Aerotropolis project, a part-cargo, part-real estate tax credit boondoggle which in 2011 nearly received hundreds of millions of dollars from the Missouri Legislature. The County’s resurrection in 2012 of Aerotropolis, which was targeted for development at Lambert-St. Louis International Airport, was considerably smaller in scale than the original, with funding to come from (of all things) $3 million in gambling tax revenues.
So it is not surprising that Aerotropolis supporters are coming back to the state for more moolah in 2013. On Saturday, the St. Louis Post-Dispatch reported that Lambert would now be gunning for a new $60 million cargo tax credit from the legislature this session.
Gone this time are $300 million in credits to fund real estate development around Lambert. Gone, too, is the lofty name; this version is dubbed the bureaucratic Missouri Export Incentive Act. What remains is an eight-year, $60 million tax credit strictly for air cargo flights from St. Louis.
“We want to keep it simple, and focused,” said Dan Mehan, chairman of the Midwest Hub Commission. “It’s very much slimmed down from what you’ve seen in the past.”
I’ll say it is slimmed down. Back in 2011, Aerotropolis supporters told the legislature that they needed nearly a half-billion dollars in state support for the project to work. When that failed, supporters came back and said $360 million in state funding would be enough to get the project off the ground. (Pun intended.) When that proposal failed in the face of fierce opposition, supporters revised their figures again and concluded that $60 million would do the trick. They received nothing.
The only reason the Midwest Hub Commission has resigned itself to delivering a “slimmed-down version” of Aerotropolis is because no one in Jefferson City has an appetite to fight another long battle for this handout. Audrey Spalding and I were deeply critical of the Aerotropolis plan two years ago because its economic arguments were highly flawed and its marketing was highly questionable. Case in point: some legislators who supported Aerotropolis were talking up Missouri beef exports to China as an Aerotropolis selling point — despite the fact that American beef is banned in China. Indeed, the organization Mehan leads, the “Midwest Hub Commission,” was formerly called the “Midwest China Hub Commission.”
New bill name, new organization name . . . same stuff.
Supporters can call Aerotropolis whatever they want, but it is still Aerotropolis. Now on its third time before the legislature, and after an utterly failed dry run for Saint Louis County to fund it, it is time for Missouri to close the book on Aerotropolis. Instead of centrally planning Missouri’s economy, the legislature should focus on broad-based tax reforms that reduce taxes for all businesses, not just the chosen few. Enough is enough.
Crowds of parents and students rallied at Union Station in Kansas City to celebrate school choice, as part of the National School Choice Week Whistle Stop Train Tour. Students sang, danced, and cheered as speakers drove home the message that students are all different — but they share one thing in common. They all deserve a quality education.
Few intellectuals have articulated the virtues of the free economy as lucidly and persuasively as 19th century French economist Frédéric Bastiat. Bastiat is perhaps most famous for his “broken window fallacy,” a classic parable illustrating the concept of opportunity cost. Let’s suppose that a shopkeeper’s window is broken, which requires her to hire a repairman to fix it. Those who fall prey to the fallacy argue that the window breaking should be considered a welcome development. After all, the repairman has earned more money than he otherwise would have and he will subsequently spend this on other products and services. This will marginally increase the revenues of other businesspeople as well.
But we must not ignore the shopkeeper’s opportunity cost of fixing the window, namely those products and services that she had to forgo. The businesspeople selling these forgone items take a hit as a result of the broken window.
I was reminded of all this while reading a recent report from goodjobsfirst.org. One section outlined the subsidy programs offered to incentivize private enterprise to move from Kansas to Missouri. The Show-Me Institute’s Patrick Ishmael and Michael Rathbone have expressed concern about such programs over the past few months (here and here). In 2012, Freightquote moved its headquarters from Lenexa, Kan., to Kansas City, Mo., which landed the company $64.3 million in tax incentives. In 2011, North American Savings Bank received almost $6 million in subsidies to relocate to Missouri. Velociti benefited from $1.6 million in corporate welfare for moving to Riverside, Mo. The list goes on . . .
Such programs are defended on the grounds that they bring much-needed jobs to the state, but one cannot ignore the means by which they are financed. The government is not an exogenous entity, magically creating wealth out of nothing. (Trillion dollar coins notwithstanding.) To provide anything, it must first take from others. This confiscated wealth constitutes revenue that would have otherwise been spent, invested, or saved in the private economy. Accordingly, it is not a stretch to contend that the state creates jobs only by means of destroying them. Bastiat’s sage advice unfortunately seems to have been lost on many of our public officials.
