The War on Prices with Ryan Bourne

Posted on by Susan Pendergrass

In this episode, Susan Pendergrass speaks with Ryan Bourne, the R. Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute and editor of the book The War on Prices: How Popular Misconceptions about Inflation, Prices, and Value Create Bad Policy. They discuss the effects of price controls, recent interventions in the economy, how to remind people about free market principals, and more.

Ryan Bourne occupies the R. Evan Scharf Chair for the Public Understanding of Economics at Cato and is the author of the recent books Economics In One Virus, and The War on Prices. He has written on numerous economic issues, including fiscal policy, inequality, minimum wages, infrastructure spending, the cost of living and rent control.

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Produced by Show-Me Opportunity

Legislature Playing with Fire

Posted on by Elias Tsapelas

Missouri’s general assembly flirted with disaster on this year’s budget. Not only did state lawmakers barely pass the budget before the constitutional deadline, but they also failed to reckon with the serious budgetary woes that lie ahead for our state. Instead, they chose to continue the trend of spending too much money. How much longer can this recklessness continue?

After passing the enormous budget, lawmakers declared mission accomplished. While it is true that the approved total budget will be the first in a decade that is smaller than the previous year’s, that is less of an accomplishment than one might initially think. Missouri’s budget has almost doubled over the past five years, from approximately $27 billion in fiscal year (FY) 2019 to nearly $53 billion today. Going into next year, the federal funds that helped make this budgetary growth possible are drying up, and state tax revenues are expected to stagnate or decline. In other words, due to Missouri’s balanced budget requirement, a smaller budget was all but assured before our elected officials took any action.

What is surprising about the budget is the way state tax dollars are spent. The approved budget calls for approximately $15.3 billion in general revenue spending (the fund where state tax dollars go). To put this number in context, in FY 2019, Missouri only spent $10.8 billion in general revenue, and we’re on track to spend about $15.8 billion this current fiscal year. To make matters worse, we’re only expecting to collect about $13.2 billion in net state tax dollars next year. To put it plainly, we’re planning to spend more than we take in. See the table below.

To spend more than we take in, the legislature will have to pull from reserves to make ends meet. Fortunately, the state does have some money set aside that could be used for this purpose, but using those funds may not be the best idea. The current year’s budget relies on spending down the state’s surplus. Doing so again would leave little excess funds left for future years, which is worrisome considering the financial headwinds our state is facing.

All told, Missouri’s budget for FY 2025, which begins on July 1, 2024, plans to spend about 90% more than the state government did in 2019. This level of spending should not be celebrated and is simply unsustainable. It’s time Missouri’s elected officials stop playing with fire, because it’s state taxpayers who are going to be the ones who ultimately get burned.

New Policy Playbook May Help Cities Realize More and Better Housing

Posted on by Patrick Tuohey

My colleague David Stokes recently testified that housing in Kansas City and St. Louis is pretty affordable:

St. Louis was ranked as the fourth-most affordable housing market in the country in one survey, and Kansas City ranked 13th. Another study ranked St. Louis as the third and Kansas City as the 11th-most-affordable metro area out of 94 major metros internationally.

Nevertheless, there are plenty of things those cities—and all cities across Missouri—can do to keep costs low and encourage housing construction. The Housing Supply Accelerator Playbook, a collaborative effort by the American Planning Association (APA) and the National League of Cities (NLC), provides some solutions. It is designed to support local governments and community planners in developing effective strategies to increase the quantity and quality of housing.

Key recommendations (with some of my own thoughts) include:

Model Practices and Ordinances: The playbook provides detailed policies that support housing construction. These include zoning reforms, land use policies, and development regulations aimed at reducing barriers to development.

Innovative Financing Solutions: The playbook encourages public–private partnerships for using federal funds to finance housing projects. Any approach like this would need to be well defined and limited—too often we’ve seen these so-called public–private partnerships devolve into either crony capitalism or operate in a way that protects developers from market forces.

Regulatory Reform: Existing regulations impede housing development and drive up costs. The playbook recommends removing barriers through reforms such as streamlining permitting processes and revising outdated ordinances.

Collaboration and Partnership: The authors place a significant emphasis on the importance of collaboration among local governments, community planners, builders, financial institutions, and housing policy associations. Of course, collaborations should not undermine market forces.

Community Engagement: The playbook stresses the importance of engaging with community members to ensure that housing policies benefit all residents. As with financing, this can be a thorny issue. Community engagement should not be used to limit anyone’s property rights or blunt the market forces that spur innovation and bring prices down.

Kansas City and St. Louis do not have many of the housing challenges other cities have, thankfully. But where barriers exist, this report can help identify opportunities to improve housing policy.

Chronic Absenteeism in Missouri

Posted on by Avery Frank

With the removal of the minimum school day requirement beginning in the 2019–2020 school year and the rapid rise of the four-day school week, Missouri schools have been scheduling fewer days of instruction. In the 2017–2018 school year, students were in school an average of 171 days. Fast forward to 2022–2023, and that average is now 162 days. It should be noted that instructional hours have not declined by as great of an amount.

Missouri students not only have fewer days of school, but they have also been missing more days of school. Chronic absenteeism has become a major problem in our schools. Students who miss more than 10% of school days in a year are considered chronically absent.

If a student was at the minimum threshold of being chronically absent—missing 11% of school days every year—by the end of their K-12 experience they will have missed well over a full year of instruction.

Below is a graph that displays attendance trends broken down by demographics in Missouri. The graph uses proportional attendance rates. Proportional attendance rates measure the number of students who attend school 90 percent of the time or more. Let’s say a district of 10 students has a school year of 100 days. Then, let’s assume that 6 of the 10 students attend more than 90 days of school, and that the other four students attend school for 82 days. The district’s proportional attendance rate would be 60 percent.

Figure 1: Missouri Proportional Attendance Rates by Student Group

Source: Department of Elementary and Secondary Education: Current and Historical Missouri State Report Card

While COVID-19 certainly hurt attendance rates, they have not bounced back in the years following. In the 2012–2013 school year, all Missouri students had a proportional attendance rate of 88 percent. Free or reduced-price lunch students were at 83 percent, White students were at 89 percent, Black students were at 82 percent, Hispanic students were at 87 percent, and Asian students were at 94 percent. Today, the gap between all students and free or reduced-price lunch students has doubled. The gap between white students and black students has tripled.

Changing the funding formula to diminish the importance of attendance could make this problem even worse. Would giving families the option to pick the school that best meets their needs increase attendance? It is clear that state officials need to do something, and fast, before too many of our students fall too far behind.

How Missouri and Other States Can Foster Entrepreneurship by Reforming Local Regulations

Posted on by Patrick Tuohey

Entrepreneurship is the backbone of vibrant local economies, yet many cities unintentionally stifle this vital engine of growth through cumbersome regulations. And if Kansas City and St. Louis hinder their local economies, all of Missouri is affected. A new playbook, “Cities Work,” created by the Institute for Justice (IJ), outlines the pervasive regulatory barriers faced by entrepreneurs and provides a comprehensive guide to reform.

The playbook highlights how excessive occupational licensing, convoluted permitting processes, and outdated zoning laws create significant hurdles for small business owners. For instance, starting a barbershop often involves not only obtaining city permits but also navigating state-mandated requirements such as barbering school and licensing fees, adding unnecessary time and cost. Punitive late fees, illogical license renewal cycles, and restrictive home-based business rules further complicate the landscape for aspiring entrepreneurs.

One major recommendation is the establishment of one-stop shops for business registration, such as KC BizCare, which can streamline the process by allowing entrepreneurs to complete all necessary steps in one place. This approach reduces confusion and inefficiencies, helping business owners navigate regulatory requirements more easily. Additionally, the playbook suggests cities adopt more flexible licensing terms and graduated fee schedules to lower initial costs for new businesses, particularly those started by lower-income residents.

A separate policy report written exclusively for Kansas City, Missouri, included conversations with a number of local entrepreneurs to determine the most significant barriers facing business start-ups. The report made several recommendations—including improving the KC BizCare program—and the IJ Cities Work team pledged to remain involved in Kansas City’s efforts, including collecting feedback on the success of reforms and even drafting ordinances.

The playbook underscores the importance of reducing regulatory barriers to foster a thriving entrepreneurial ecosystem. By adopting its recommendations, cities in Missouri and elsewhere can create more dynamic environments for small businesses to flourish, ultimately contributing to stronger local and state economies.

Prime Examples of Bad Government in St. Louis County Cities

Posted on by David Stokes

In case you needed it, reason 8,191 why Missouri should not allow municipalities to just do whatever they want—local control and all that—can be found in some recent north St. Louis County news.

First, Ferguson has decided that it is going to pull the business licenses of businesses that are behind on their property taxes. America learned in the late 1700s that it was a bad idea to throw debtors in prison because, well, how can they pay their debts if they can’t work because they are in prison? Robert Morris—one of the underappreciated founding fathers—was the poster child for these changes. If Ferguson policymakers were only considering pulling the licenses of businesses that owned their property, they would at least have an argument. But Ferguson has decided to pull the licenses of businesses that rent their space, meaning they aren’t late on their taxes at all because they don’t owe any property taxes—their landlords do. So, if the landlord doesn’t pay the tax, the rent-paying business will lose their license. That is, to put it bluntly, an atrocious policy.

Nearby in Bellefontaine Neighbors, the city has decided to address a budget deficit by instituting a fee to be a landlord in the city. It is a $300 annual fee per home or apartment being rented charged to every landlord. The fee was enacted in late 2022, but is in the news now because a landlord just sued over it. This fee is on top of the existing—and more understandable—inspection ($75) and occupancy permit ($40) fees that landlords and tenants already pay. Of course, they pay property taxes, too. The city was facing a projected budget deficit of a few hundred thousand dollars when it created the fee. I guess the easiest solution was to just stick it to landlords.

I hope both of these bad policies will lose in court. Ferguson shouldn’t deny a business license to people (the renters) who don’t even owe the property tax in the first place. Bellefontaine Neighbors’ voters did not approve the new tax, and I don’t know how the city can call it a fee when it already charges existing fees to cover the costs imposed by landlords and renters.

The Missouri Constitution says all local taxes have to be authorized under state law. Thank God for that. Cities, as seen in these two examples here, are constantly looking for opportunities to raise revenue improperly even with the state law (as the City of St. Louis successfully did with its payroll tax). I can’t imagine how bad local taxes and fees would be without it. We would probably be an entire state of Macks Creeks.

Missouri Court Rules in Favor of Remote Workers Against St. Louis Earnings Tax

Posted on by David Stokes

On May 29, David Stokes joined Mike Ferguson in the Morning on NewsTalkSTL to discuss a Missouri appeals court decision exempting remote workers from St. Louis’ 1% earnings tax, ruling that the tax doesn’t apply to work performed outside the city.

Why Exactly Do Food Truck Workers Need a Passport Photo?

Posted on by David Stokes

One of the staunchest opponents of limited government is often the government itself, in the form of the bureaucracy. Complicated codes and rules may be bad for society, but they are great for government workers. The City of St. Louis just held a hearing on food truck regulations, and members of the board of aldermen seemed genuinely surprised to hear how overly burdensome the rules are for food trucks in the city.

For example, why do all food truck employees have to wear an ID badge with a passport-quality photo on it? Restaurant employees don’t have to do that. That regulation seems insane, and at least some members of the board of aldermen appear to agree. As a Riverfront Times (RIP) reporter described it:

Committee members were shocked. When it was time for questions, Ward 8 Alderwoman Cara Spencer began with this: “My first question is, are you — and then there’s an expletive — kidding me.”

Show-Me Institute analysts have been writing about food regulation issues for years. In fact, we may have done more videos on food trucks than any other topic. It’s a great topic for us because it perfectly encapsulates how entrenched interests (in this case, restaurants) and their allies in government have worked together to stop a popular new way of doing business.

But back to the city. I think one of the reasons why the aldermen were so surprised by the level of red tape food trucks deal with is that they didn’t intend for it to be this difficult. But when you read the current legislation, one thing jumps out at you. The current ordinance governing food trucks gives the street director, the parks director, and the license collector authority to institute further rules they deem necessary. Here is one example from the ordinance (section 5.M):

The Director of Streets shall formulate any additional rules and regulations necessary for the proper administration of this chapter. Rules and regulations shall be maintained in the office of the Director of Streets and shall be available for public inspection during ordinary business hours.

This isn’t a hypothetical issue. The question of how legislators grant authority to regulators to set law is the subject of a major supreme court case right now. President Eisenhower stated that engineers went far beyond his original intentions with the Interstate Highway System by including intra-city highways without his knowledge, as just one example of this problem.

It may sometimes be necessary for elected officials to trust regulators to set rules under wide authority. However, there is serious risk to this approach. The idea that regulators are setting these rules fairly outside of their own system of pressure, bias or favoritism is hard to believe.

I hope the city will address the overregulation of food trucks with this excellent, newly proposed bill. After, all, it’s probably time for us to make another video . . .

Think Twice before Supporting a New Tax

Posted on by David Stokes

A version of the following commentary appeared in the Platte County Landmark.

Everyone wants to help kids thrive, right? Who could be against a new tax in Platte County to help kids get more mental health services? Well, we are. Politicizing charity and mandating it through law is a dangerous path to take. Platte County citizens would be well served to think twice before going down this road.

There is an ongoing petition drive in Platte County to create the Platte County Children’s Services Fund. If approved by voters, the plan would institute a new sales tax to fund mental health services for children in Platte County. It would create a new board in charge of overseeing the collection and distribution of the funds as grants to eligible children’s charities.

Charity should not be politized, yet that is exactly what this proposal will do in Platte County. Several years ago, the children’s service fund in St. Louis County became a flashpoint in the county executive’s race. The fund was slow to distribute money and had grown to a balance of $78 million. That large balance became a point of contention in the campaign, made worse when questionable activities with the funds led to the firing of the children’s service fund director and an FBI investigation. Even without that level of controversy, charities will still be forced to play politics. Board members of various Platte County charities that might receive funds will have to start taking that into consideration when they decide whom to support in various county political races. One can’t risk backing the wrong horse and putting the charity’s funding in jeopardy. It’s machine politics at its most insidious.

Any future Platte County Children’s Service Fund would be a special taxing district, and the last thing Platte County needs is another obscure taxing entity with little accountability and even less oversight. The children’s service fund in Lafayette County, on the eastern edge of the Kansas City region, provides a useful case study for those problems. The fund had operated for years with almost no oversight. Those operating it routinely engaged in improper activities, including funding charities that were affiliated with board members, funding charitable activities that were not eligible for funds in the first place, and funding a private business that wasn’t a nonprofit. After a whistleblower brought this to light, the state auditor investigated and referred the fund to authorities for possible Medicaid fraud. If you think the future Platte County children’s fund will be immune from these incidents, you should disabuse yourself of that notion.

If Platte County voters pass the new tax and create a children’s service fund, will some kids benefit? Of course some will. But citizens need to consider all the possible effects of this endeavor. Creating a new taxing agency with no oversight, entangling philanthropy with politics, and making charities dependent on government largesse is not a recipe for making life better in Platte County. Let’s allow these charities do what they were intended to do—help kids—without the heavy hand of government involvement.

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