Shrewsburying The Free Market

Posted on by Alex Schroeder

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.

Part 1: It Is Time To Close The Book On Aerotropolis

Posted on by Patrick Ishmael

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.

The Cost Of Ignoring Opportunity Cost

Posted on by Alex Schroeder

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.

Changing Children’s Lives: A Rally for School Choice

Posted on by Kacie Barnes (Galbraith)

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.

State Of The State Address: Simply Irresponsible To Propose Medicaid Expansion

Posted on by Patrick Ishmael

It was no surprise that Missouri Gov. Jay Nixon expressed his support for expanding the state’s Medicaid program during his State of the State Address last night. When he introduced the idea in November, he called expanding Medicaid “the smart thing to do” and “the right thing to do.” At the time, I noted a glaring omission from his announcement: how he would pay for the expansion over the long haul.

He did not even bother to pay lip service to the weighty question of how he would fund it in his nearly 6,000-word address. He argued that the federal government — you and me — would pick up the entire tab until 2017, as if splitting the expansion across public credit cards mitigates the cost. That is some creative accounting that conceals an awful reality — that we would be expanding an entitlement today out of debt imposed on our children and grandchildren tomorrow. Simply inexcusable, and not addressed in his speech.

The governor cited the fact that the Missouri Chamber of Commerce supports his Medicaid expansion plans, but just because the Chamber of Commerce supports expanding Medicaid it does not make it the “right thing to do.” The Chamber’s imprimatur does not imply that the conscience of good government has been satisfied; in fact, it sometimes expresses the opposite. Lest we forget, the Chamber also endorsed Aerotropolis and later savaged legislators who have vehemently opposed corporate welfare in the state. The Chamber endorses bad policy all the time, and make no mistake, it has done so yet again with the Medicaid expansion.

Let’s be clear here:

  • According to Missouri’s Office of Administration, services for newly eligible Medicaid enrollees would cost the state $54 million in fiscal year 2017, $124 million in fiscal year 2018, $155 million in fiscal year 2019, $212 million in fiscal year 2020, and $258 million in fiscal year 2021.

  • In a report released last November, the Kaiser Family Foundation (KFF) found that Missouri could expect to spend more than $1.15 billion between 2013 and 2022 just on these newly eligible enrollees.

  • Moreover, those figures do not account for growth in the current Medicaid population and the attendant costs of that growth. As a result of the Patient Protection and Affordable Care Act (PPACA), states can expect to see increased enrollment in their current Medicaid programs as federal promotion of the expansion ratchets up and potential enrollees find out they qualify for state assistance. KFF found that between 2013 and 2022, Missouri could expect to pay an additional $1.6 billion for those enrollees.

If the state expands its Medicaid program, from now through 2022, Missouri would have nearly $3 billion in new Medicaid expenses — the cost of services for newly eligible enrollees plus the cost of services for currently eligible enrollees joining the program. Unfortunately, the governor chose not to address this reality.

You can read the governor’s speech here. Your thoughts are welcome in the comments.

An Impromptu Follow-Up To ‘Responsible Bidder’ Blog Series

Posted on by Patrick Ishmael

I recently wrote a two–part blog series about new Saint Louis County regulations that would prevent most non-union contractors from bidding on county construction projects. The County Council redefined what a “responsible bidder” is for county construction projects, adding provisions (1) that were purpose-built to get union contractors special treatment, and (2), which had nothing to do with the “responsibility” of contractors who would bid on the projects. At the time, I criticized the move as one that subverted the public interest of getting the best deal for construction projects for taxpayers, and instead changed the law to benefit a narrow private interest.

How narrow of a private interest? Last Wednesday, the U.S. Bureau of Labor Statistics released new data showing that of all construction labor, only 13.2 percent is unionized, a drop from 14 percent last year, and a near-record low. Put another way, Saint Louis County rewrote its “responsible bidder” definitions to protect the one-eighth of the national construction industry that is unionized, leaving the vast super-majority of labor —which is non-union — basically in the lurch for county contracts. As the St. Louis Post-Dispatch‘s Dave Nicklaus reported, union rolls in the state dropped by 51,000 members over the last year, putting overall Missouri union enrollment at “8.9 percent [of the workforce], down from 10.9 percent in 2011.” That fits the national trend lines.

Saint Louis County is trying to direct more money to fewer people, and the special interest nature of the change in the law is accentuated by last week’s construction employment data. Saint Louis County officials should reconsider their decision.

McGraw Milhaven – David Stokes on KTRS

Posted on by David Stokes

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 recent argle-bargle surrounding private water company Veolia being selected to provide consulting services to Saint Louis City’s water service, the outdated system for water billing in the city of Saint Louis, the promise of updated parking meters, and the Show-Me Institute’s study on water privatization in the city of Saint Louis.

 

Tragedy Of The Cape Commons

Posted on by Kacie Barnes (Galbraith)

The Cape Girardeau County Commission made a smart move last week to maintain the operations of the county park.

The commission voted to establish reservation fees to use park shelters for events. The county was having trouble keeping up with high park clean-up costs, so a nominal $15 daily fee for shelters will go into effect this year. It may seem like a small deed, but the county’s park superintendent estimates fees will cover about 70 percent of annual shelter maintenance costs. Why didn’t they start charging sooner?

Some people may not like the idea of paying to use a public amenity, but everyone can still enter the park free of charge. Imposing a small fee on a special amenity should help remind park users that it does cost a significant amount of money to keep the park beautiful and well-maintained. It also encourages them to book only the shelters that they will use. Groups holding large events often reserve every shelter but use only one or two, preventing others from using the empty ones. (A classic example of the “Tragedy of the Commons.”)

Ultimately, county officials made a smart business decision. Asking shelter users to contribute toward maintenance costs can prevent future needs to increase taxes on county residents, or to cut services.

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