One Step Closer

Posted on by Michael Rathbone

Facing a potential stampede of businesses heading across our western border, the Missouri Senate came one step closer to lassoing some of them back. The Senate Ways and Means Committee recently approved proposed legislation that would reduce individual and corporate income taxes by 1.5 percentage points. This is great to see. If a major tax cut bill can get out of committee, it has cleared a major obstacle toward becoming law.

My colleague Patrick Ishmael and I have written about the benefits for Missouri if corporate income taxes are cut. Considering that Senate Bill 26 (SB26) proposes reducing the corporate income tax, it seems the Senate Ways and Means Committee agrees with our assessment. Allowing businesses to keep more of their money will enable them to reinvest their earnings into expanding their facilities, hiring employees, or lowering their prices to consumers.

Patrick and I have also talked about the need for Missouri to respond to the Kansas tax cut. Lowering our tax rates will minimize the  advantage that Kansas has over us and potentially keep Missouri businesses from moving across the border. With other states moving toward serious tax reform, it is encouraging to see Missouri move in that direction as well.

SB26 is not a perfect piece of legislation. Like the Kansas law, it does not include any alternatives to offset the lost revenue from the tax cut. A previous version of the bill included a hike to the state sales tax. Capping or eliminating economic development tax credits would also serve to offset some of the lost revenue. However, the perfect should not be the enemy of the good.  The fact that the Senate has come this far in getting tax reform passed is encouraging and I hope some kind of tax cuts are enacted. Missouri cannot afford to wait.

Springfield School Choice Kerfuffle

Posted on by James V. Shuls

On Feb. 17, the Springfield News-Leader published an article I wrote about private school choice. In that piece, I tell the story of parents who are not satisfied with the quality of education their child is receiving. They would love to have their child in another school, but that is not possible because Springfield lacks school choice options unless parents are willing to move, can afford private school, or can take part in the district’s intra-district choice program. The parents in the story applied for a transfer within the district, to no avail.

In the article, I mention that their child attends a school where only one-third of all students are reading on grade level. Today, the paper ran a letter from the school’s principal, Adam Meador, which takes issue with my statements. “[W]e use many tools to measure student success. . . . James Shuls chose to focus on only one — MAP data . . .,” Meador wrote.

I need to say two things about this:

1. My calculations were based on the only publicly available data that I have access to, the school’s performance on the MAP (Missouri Assessment Program). The MAP is a standardized test that was developed with input from Missouri teachers. The scores on the MAP represent what Missourians have deemed that students should know or be able to do. If there is an issue with that, it should be taken up with the Missouri Department of Elementary and Secondary Education.

2. This argument misses the point. The bottom line is not whether the school is doing poorly or well, but that the family is not satisfied. I have yet to see one argument against the actual crux of the article, that the private school choice programs can give parents the opportunity they deserve to send their child to a school that meets their unique needs at a cost savings to taxpayers and the public school district. By my calculations, the district could save more than $1.6 million if it contracts with private schools in the area.

Transforming Vacant Land

Posted on by Kacie Barnes (Galbraith)

Usually, food on trains is nothing to brag about. A quick Google search showed that Amtrak actually has a chicken menu item called “Choo-choo Chewies.” They say it tastes like chicken. I hope they are correct.

Eating inside a cargo container sounds even less appealing than Choo-choo Chewies. (Unless it means I get to hang out with the Boxcar Children.)

As difficult as it may be to believe, there is a new project in Saint Louis that could make dining in cargo trendy and charming. Washington University in St. Louis and the City of Saint Louis named Bistro Box, “a small business incubator that transforms surplus cargo containers into a compact restaurant and culinary destination,” as one of the finalists in Washington University’s Sustainable Land Lab competition.

The Sustainable Land Lab competition invites teams to design innovative projects that transform vacant lots into assets. The City of Saint Louis owns more than 8,000 vacant lots that are just sitting there, deteriorating and underutilized. Show-Me Institute policy analysts have offered suggestions in the past about how the city can work to get more of those lots back into productive use. The Sustainable Land Lab competition is a great method to put these vacant parcels in the spotlight, and proves that innovators and entrepreneurs have exciting ideas to utilize this vacant land.

This is the first year of the competition. I hope that it will be successful in transforming vacant land and will shift the way Saint Louis treats that land. The best outcome of this project is that it would not only help improve blighted areas of the city, but encourage others to take on similar projects. Revitalization lies in the hands of eager residents who care about the community. In the past, the Saint Louis Land Reutilization Authority (LRA) has not been willing to allow development to occur organically, preferring to hold land for development that the agency chooses. But the government cannot predict what will be the best use of the land (remember Pruitt-Igoe?), nor will it come up with the most creative solutions.

Anything — including eating train-track chicken in an abandoned cargo container — is preferable to the city holding the land for decades.

Volunteer Health Services Act Returns To Legislature

Posted on by Patrick Ishmael

We often write about innovative reforms on this blog, and last year, I highlighted the proposed “Volunteer Health Services Act,” or VHSA. The act would have ensured that licensed out-of-state doctors who wanted to provide Missourians with free health care could do so without unnecessary government interference. Missouri’s current licensing laws make such activities nearly impossible — keeping charitable groups such as Remote Area Medical out of the state. The VHSA, which would have reformed the law, was on track for passage until it was unexpectedly derailed in the waning days of the 2012 session.

The good news? The proposal is back. To be clear, this is a reform that allows doctors to make a difference in the lives of Missourians without unnecessary interference from state bureaucracy — and would not impose a cost on the state.

Suffice to say, I am following the trajectory of this bill with great interest and will update our readers on its progress.

February Book Club Recap – The Road to Serfdom

Posted on by Josh Smith

The Road to Serf City by Mary Chism
Drawing done for the February book club meeting by former SMI intern Mary Chism

Last night was obviously Snowmaggedon, and I hope everyone is staying safe out there as some of the roads are still nasty. The previous night, Wednesday, we hosted the second Show-Me Institute Saint Louis Book Club meeting of the year. We discussed the classic The Road to Serfdom, by Friedrich Hayek. The central theme of the book is that fascism is a natural outgrowth of socialist central planning. Hayek’s desperate wish was to warn the western nations, especially England and the U.S., not to pursue the path of central planning. Hayek believed that a descent into fascism was more likely than it seemed to his audience: the citizens of non-fascist western nations in 1944.

But all that just makes the book sound like a dated warning against something no one really advocates anymore, right? Well, the book has staying power because of two timeless features which are perhaps separate sides of the same coin: Hayek explains why the price system not only works, but is the best system possible for maximizing individual welfare while also making a strong case for individual liberty and limited government, which Hayek calls (using the connotation of his time), liberalism.

It was a wonderful meeting and a rousing discussion. Book club meetings start at 7 p.m. and usually wrap up about 8:30 or 9 p.m. But Wednesday’s meeting did not end until shortly after 9:30 p.m. — we all had so much to discuss. Here are some of the topics and ideas we discussed:

  • Whether a person’s concept of what is possible constrains their action.

  • The important distinction between freedom and power: what it is and why it is important that they not be confused.

  • This wonderful quote from Adam Smith (introduced roughly by Hayek): “[the regimentation of economic life puts governments in a position where] to support themselves they are obliged to be oppressive and tyrannical.”

  • Where Hayek drew the line on the proper role of government and how that might undermine his overall message of liberty.

  • Whether market competition is inherently violent (hint: it is not).

  • Whether a legal system is necessary for competition, and David Friedman’s “the discipline of constant dealings.”

  • The contradiction and ugliness of “competitive socialism.”

  • An extended interlude about “Little House on the Prairie.”

The reading for next month is The Machinery of Freedom, by David Friedman, another classic. Friedman is an economics and law professor with a Ph.D. in physics, and the son of free-market titan Milton Friedman. From the Amazon description: “This book argues the case for a society organized by private property, individual rights, and voluntary co-operation, with little or no government.” I am looking forward to some excellent discussion on this one at our March meeting, so please join us if you can (date of meeting to be announced, check here).

The Questionable Economics Of Building Around Light Rail

Posted on by Kacie Barnes (Galbraith)

There has been a lot of talk in the community about transit-oriented development (TOD) and its supposed benefits (which I contest). If you want to hear about these supposed benefits, a second round of public meetings regarding future Saint Louis TOD projects are scheduled over the next week.

Citizens for Modern Transit recently hosted a luncheon with national TOD expert Dena Belzer on the Economics of Building Around Light Rail. I had an opportunity to review her Powerpoint presentation, which did not convince me of any such economic benefit.

Granted, I have to hedge my comments with the fact that I did not physically attend the presentation. That being said, the most outrageous trend running throughout the presentation is that TOD will save money. It will save money for the government, it will save money for households, employees, employers — pretty much everybody.

The presentation suggests that compact development helps municipalities save money. Just like you save money at Jos. A. Banks buying two suits to get the third one free, when you did not even need a suit. Spending money just to get a “good deal” is not always a good justification for spending that money.

And what about households? Belzer’s presentation suggests that TOD can save households billions of dollars and that money can be reinvested in the community. First of all, TOD will not save us money when we are paying for it in our taxes.

Secondly, she cites figures that suggest Portland’s transit policies save residents $2.6 billion per year. However, more than half of that imaginary figure comes from the estimated value of commute time that has been reduced due to transit options — the opportunity cost. I do not know about you, but I have not found a way to manufacture gold coins from the time I save on days that traffic is light. Nor do I mind my commute to work. Many people choose to spend more time commuting in favor of lower housing costs, community preference, or a variety of other factors.

Other people prefer to use transit or live near a Metro stop and enjoy a predictable commute. There is nothing wrong with that. However, it is not a sufficient reason to compel all taxpayers to subsidize housing, retail, and office facilities around transit stops so that planners can impose their views on the rest of us.

It Just Ain’t So

Posted on by James V. Shuls

Mark Twain once said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Someone needs to get the message to President Barack Obama, Missouri Gov. Jay Nixon, Missouri Commissioner of Education Chris Nicastro, the St. Louis Post-Dispatch, and the St. Louis American that what they believe about early childhood education “just ain’t so.”

All of the above have been pushing increased funding for early childhood education on the basis that it will provide a great return on investment, up to a stratospheric level of 8–1 in the widely-criticized study the Post-Dispatch cites. (And they accuse us of being a “belief” tank?)

The folks at the Cato Institute have been doing a great job covering the topic of early childhood education. In a recent post, they state that the large returns on investment often cited do:

. . . not in fact refer to the typical return from federal or state pre-K programs. It refers to the findings from a single intensive 1960s early childhood experiment that served 58 children in Ypsilanti, Michigan- The High/Scope Perry preschool program. Out of the literally hundreds of preschool studies conducted in the past half-century, the Perry results are not representative and have never been reproduced on a national or even a state level. In fact, an earnest experimental effort to reproduce them for just a few hundred children at eight locations failed despite an annual investment of $32,000 per child, adjusted for inflation . . .

I have written about these claims.

Spending money on children is appealing and it is something almost everyone agrees is a worthwhile endeavor. I am not opposed to spending tax money on early childhood education, but I am opposed to universal pre-school programs or systems that put the private market at a competitive disadvantage. I am also opposed to selectively using the research to advance a point, when the data simply do not bear out. The Post-Dispatch would, no doubt, call us out if we did that.

As Cato puts it, “What we have here, in other words, is a monumental act of cherry picking rather than an example of scientifically grounded policymaking.” In other words, it “just ain’t so.”

This photo was originally posted at http://www.cato.org/blog/one-nation-under-informed
This photo was originally posted at http://www.cato.org/blog/one-nation-under-informed

One Day Down, Five To Go!

Posted on by Alex Schroeder

The United States Postal Service (USPS) recently announced that it will cut Saturday delivery in August. The post office has been in the financial doldrums over the last few years, not least because of onerous pension obligations and a reliance on an increasingly obsolete service. The USPS is a government-sanctioned monopoly, largely insulated from competition. Its decision is consistent with this privileged status; in the face of financial difficulties, it simply reduces the quality of its service.

There is nothing wrong with a business manipulating its prices and practices when it is confronted with a budgetary dilemma. But there is something wrong when it fails to adequately serve customers while the state prohibits competition. In the private sector, businesses compete to provide the best for the least. In the case of the USPS, however, customer satisfaction can simply be sacrificed for financial health. After all, why worry about quality customer service when a competitor cannot put you out of business?

The least weak argument in favor of public mail delivery is that private enterprise could not profitably serve rural areas. For example, my grandfather often patronizes the post office in Centertown, Mo., a small town in Cole County. He prefers it to the one in Jefferson City, as there is never a wait. My guess is that the privatization of the USPS would spell the end of the Centertown branch, as well as countless other small town post offices across the state. Or perhaps they would remain, but mail delivery to and from such remote locations would be significantly more expensive.

Public support is likely necessary if many rural areas are to maintain their post offices, but this is not a justification for such support. Many things are relatively expensive for rural dwellers (e.g., Internet, gas to get to the grocery store); others are comparatively cheap (e.g., land).  The reverse is true for urbanites. What sense does it make to subsidize something simply because it is comparatively expensive in a given area?  The bottom line is that living in a particular locale comes with its unique set of costs. The most sensible route to take is to stop artificially reducing the cost of mail service in rural areas; let those who remain in these areas face the commensurate costs.

Privatizing the USPS, in short, makes both practical and moral sense.

Three Ways Bad Public Policy Hurts Missouri

Posted on by David Stokes

In this February 2013 Show-Me Forum, Policy Analysts David Stokes and Patrick Ishmael detail some of the specific bad public policies that are hurting Missouri. Of particular focus are corporate handouts in the form of development tax incentives, governments lobbying other governments for a larger share of taxpayer money, and Enterprise Zones (plus EEZs). Like all the Show-Me Forums, this event was held in Columbia. On the following day, Stokes and Ishmael reprised this presentation for an audience in the Show-Me Institute’s office in the Central West End of Saint Louis.

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