Freedom vs. Fairness: Will America Succumb to the Politics of Envy?

As the third of seven children, I grew up in a family where
fairness issues were constantly bubbling to the surface. It did us no
good. Each of us pleaded in vain for relief from the unequal
division of household chores and duties. And complain though we
would, we could not stop the uneven distribution of presents or
rewards. Our parents did more than reject complaints of unfairness;
they were quick to condemn any display of self-pity.

“Life’s not supposed to be fair,” my father said. “Stop
measuring,” my mother said. “You’re not supposed to measure.”

But this was before a new obsession in American political
life: rising concern over the issue of fairness. Many people have
started to measure – and they are plainly envious of the good
fortune of others. To borrow the words of a Japanese proverb, they
have come to think that the nail that stands up is the nail that should
be hammered down.

That was the spirit of the Occupy movement – on Wall
Street, in Oakland, and many places in between, including four
Missouri cities. Those claiming to be the 99 percent railed
incessantly against the 1 percent. In setting out to make a public
nuisance of themselves, the pity-me protest brigades let the world
know how fed up they are with the unfairness of life.

President Barack Obama has nursed and cultivated this same
sense of grievance. In a speech in Osawatomie, Kan., he invoked
fairness no fewer than 16 times. In one staccato burst, he called for
“a tax code that makes sure everybody pays their fair share . . .
(and) rebuilding the economy based on fair play, a fair shot and a
fair share.”

How fair is that?

Let me put the question another way.

How fair is it to fritter away hundreds of millions of dollars
of taxpayers’ money on green energy companies like Solyndra
which have gone bankrupt?

How fair is it to launch a trillion dollar “stimulus” program that
actually depressed the economy – leaving unemployment higher than it
was before – and then turn around and demand a whole new stimulus
program?

How fair is it to go on the greatest federal spending spree in
modern history – quadrupling the size of the annual deficit and raising
serious concerns about the creditworthiness of the United States – and
then go about the country accusing critics of your profligacy as being
solely concerned with promoting the interests of “millionaires and
billionaires”?

How fair is it to use hard times to promote the politics of envy –
when it is your own reckless rhetoric that has done so much to unsettle the
business community and your own policies that have prevented a normal
cyclic recovery from occurring?

The president and others calling for more “fairness” through
bigger government and higher levels of spending seem to have little or no
concern at how their policies and ideas are eroding economic and political
freedoms.

  • They are calling for the government’s right to claim more of
    your income to spend any way the government sees fit (e.g., on
    silly “job creation” programs that wind up going bust and
    leaving taxpayers on the hook).
  • They are using “fairness” and allegations of corporate greed
    and irresponsibility in order to justify a vast expansion in
    regulation and government control over business and
    commerce.
  • And everywhere – including here in Missouri – they aim to
    enlarge the public sector, even though that drains money and
    jobs out of the private sector.

No one would pretend that the ultimate goal of free-market
capitalism is equal outcomes for different people, regardless of talent,
effort, or sheer luck. That is a socialist agenda. But neither is the free
market – as our president suggests – a place where the rich prey
ceaselessly upon the poor and “everyone is on their own.” That is an
absurd caricature of free enterprise and more than 200 years of American
history.

In fact, the essence of free-market capitalism is voluntary
exchange for mutual benefit. People satisfy their own needs by competing
to satisfy the needs of others.

My parents understood that. They expected their children to
compete and enjoy the benefits of living in a country that has produced
unparalleled wealth and opportunity for its people. But they did not want
us to go about our lives with misplaced expectations of fairness – or to fall
prey to the diseases of envy and self-pity.


Andrew B. Wilson is a resident fellow and senior writer at the Show-Me
Institute, which promotes market solutions for Missouri Public Policy.

Gasoline, Cigarettes, Alcohol and Taxes: When Less Is More

Do people visiting Missouri take advantage of the Show-Me State’s lower excise taxes? Right now, the state of Missouri earns tax revenue by having comparatively lower tax rates than neighboring states. Lower tax rates lead to lower prices on gasoline, tobacco, and alcohol — and Missouri’s many regular visitors can and do take advantage of this.

In this video, the Show-Me Institute’s David Stokes and Amy Lutz interviewed several Chicago Blackhawks fans visiting for a Saturday night hockey game against the Blues. Many, but not all of them, knew that Missouri’s tax rates were lower. But after learning of the lower tax rates, all of them planned on purchasing items such as gasoline while in town.

Lower taxes can lead to higher revenues — and keeping taxes low will keep the money flowing into the state of Missouri.

The Gateway City, The ‘Possibility City,’ And Hope For The Future

The guard is changing at Saint Louis’ regional chamber of commerce, the St. Louis Regional Chamber and Growth Association (RCGA).

Dick Fleming, the group’s longtime head, is stepping down from the organization he has helmed since 1994, and his replacement will come from a city just a short drive east on I-64: Louisville, Ky., also known as the “Gateway to the South.” Joe Reagan moves to Saint Louis from Louisville’s equivalent of the RCGA, the Greater Louisville Inc., or GLI. Marketed during Reagan’s tenure as “Possibility City,” Louisville will have to find a new chamber head for the first time since 2005. Louisville is already writing the postscript to Reagan’s legacy.

But the fact of the matter is that no man, or government, or organization, or even coalition of organizations, can plan an economy, or at least plan it well. That is an incredibly important point to highlight and probably the fairest thing that can be said as Reagan joins the Saint Louis community; it also is probably one of the most damaging points one can raise about how the RCGA and organizations like it behave.

Our local chamber loves to get the pat on the back for positive economic news and to pump “public-private partnerships,” oftentimes fueled with tax credits, that fail to substantively move the economic needle in the region’s favor. Meddling in the economy, local or national, destroys wealth more often than it creates it, leaving taxpayers with the promise of prosperity but little else. And it is no secret that Saint Louis city has languished for decades under one failed economic plan after another, compounded by the exodus of residents into nearby counties and driven by the continued intransigence of the city’s political class to step away from its cronyistic tendencies. In short, the economic development status quo is not a blueprint for a prosperous future for this region, and has not been for some time.

Which is why I hope that Reagan’s arrival in Saint Louis is not just more of the same. More precisely, I hope that Saint Louis — and Kansas City, and the state of Missouri — at least return to some sense of regional economic normalcy, if not runaway growth in the coming year. That is a Christmas wish of sorts, I suppose, but a wish that the RCGA, GLI, or any similar organization has limited or no power to bring to fruition.

Maybe a New Year’s resolution for the state and the city is in order instead: To simply let the market work. It does not matter if it is Saint Louis’ chamber hawking Aerotropolis, or Moberly’s chamber hawking Mamtek, or a political class increasingly disconnected from the electorate hawking Solyndra. There are no easy, centralized solutions to our economic woes. Acting like there is in Saint Louis only prolongs the municipal pain. Like all taxpayers, Saint Louisans cannot depend on a small group of decision-makers to make their lives better.

Free markets make genuine and sustainable economic growth possible, and if there is going to be a “Possibility City” in this region, let it be more than just another marketing slogan with another cartridge of development silver bullets as its driving force. Reduce taxes and regulation, get out of the way, and let the free market flourish. May RCGA’s new administration regain its faith in that formulation.

Show-Me Institute Book Club: Join Us This Wednesday

Frederic Bastiat once wrote:

Now, legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole — with their common aim of legal plunder — constitute socialism.

Provocative enough for your tastes? Do you vehemently disagree? Is Bastiat a kook? Come join us for spirited discussion and snacks this Wednesday; Bastiat is our topic.

The Show-Me Institute’s Book Club meets the second Wednesday of each month at our headquarters, located at 4512 West Pine Blvd. in the Central West End. Meetings begin at 7 p.m. and typically last until 8:30 or so. See link for more information. 

Please bring a friend. Hope to see you there.

Stokes on Jaco Report – Minimum Wage

Show-Me Institute Policy Analyst David Stokes recently appeared on
Channel 2’s Jaco Report in Saint Louis in support of the idea that the
minimum wage is harmful for the Missouri economy. Appearing opposite Stokes and arguing in favor of the minimum wage was Lara Granich, Director of the Missouri Jobs with Justice coalition.

View the video on Fox 2’s website by clicking here.

Related Links

Policy Study: The Economic Effects of Minimum Wages: What Might Missouri Expect from Passage of Proposition B?

Policy Study: The Impact of Missouri’s Proposed $6.50 Minimum Wage on the Labor Market

Commentary: Minimum Wage Hike Is Poorly Targeted at the Poor

Commentary: The Minimum Wage Hurts Those It Is Designed to Help

Ceux Subventionnes (The Subsidized Ones)

It is not our intention to be the Inspector Javert to the Jean Valjean of Winghaven, constantly chasing Paul McKee’s proposals around to criticize them like the fanatical French cop pursued the reformed Valjean. Nonetheless, bad proposals for Saint Louis keep coming from Paul McKee, and if it falls to us to keep saying “stop,” then so be it. (Thanks to johncombest.com for the link, and to Victor Hugo for the references.)

The latest proposal is to transfer the bottle district TIF (tax increment financing) from the original developers to the control of Mr. McKee and his entities. To be clear, McKee and his groups were not involved in the original TIF proposal, so we cannot pin all of this on him. However, unlike tax credits, the TIF law was not drafted with the intention of TIF being transferable. I do not think it is right for one stalled TIF proposal to just be assigned to someone else – and I do not care who that someone else is. (Note: I am not saying transfering the TIF is illegal, just improper.) At least some people in city government seem to be aware of this issue:

[Saint Louis Development Corporation Executive Director Rodney] Crim wouldn’t specify what, exactly, the city objects to. But he suggested officials have concerns about using TIF for one project to help fund another.

“My focus is on what can and cannot be done with the Bottle District TIF,” he said. “We just have some more talking to do.”

I think it is especially wrong to continue to subsidize property that at this very moment is being made more valuable because of major public improvements. Here is one description of the property:

Located just north of the Edward Jones Dome (home of the Rams) along Interstate-70, the site is one of the most desirable development locations left available Downtown. Once the new Mississippi Bridge is complete,  its location next to the bridge will make the site even more visible and accessible than it already is.

Former longtime New York Sen. George Washington Plunkitt would have fully understood developers seeing their opportunities and taking them, but even he would never have asked for the new land to be subsidized on top of it. If this land at the base of a major new bridge has to be subsidized, I guess we are at the point where we just admit everything gets a tax subsidy, unless, of course, you are just a small entrepreneur without political connections.

A Heavenly Deal?

Right now, if you are a St. Louis Cardinals baseball fan, you are probably in a state of shock, anger, or melancholic resignation. El Hombre has decided to leave Cardinal Nation behind for the riches of the Golden Coast. Yes, Albert will sign with the Angels. The deal reportedly is above the Cardinals’ latest offer (allegedly 10 years and up to $220 million) and from every indication, an unforgettable era in Saint Louis baseball is over.

Just how rich does this make Albert? Well, one local sportscaster estimated today that if Albert bats five times each game next year for the Angels, he will be raking in a cool $30,000 each time he steps into the batter’s box. Not bad, huh?

But if it makes you feel any better, it may not be all win-win for our legendary No. 5. Consider income taxes. Missouri’s top personal income tax rate is 6 percent, which kicks in at $9,000 (he would have also paid an additional 1 percent earnings tax [click on policy study and scroll down to page 46] in Saint Louis). In comparison, California’s top rate is 10.3 percent for incomes above $1 million (of course it might not STAY that way). I am not the only one to notice the possible influence that income tax rates could have had on Albert’s decision (this was regarding the offer from the Miami Marlins).

However, at the margins, how much of a difference would these tax rates have made on Albert’s decision? First, consider that Albert will only have to pay this 10.3 percent top rate for games played in California. He will play a good chunk of his games in states with NO personal income taxes (Washington and Texas). Now, I am not an economist and there are other factors involved here, but just doing some back-of-the-envelope calculations for the home games, I found that Albert would pay slightly more than $4.6 million more in taxes over the life of his contract in Anaheim than Saint Louis. Considering the supposed $30 million to $40 million difference in value of the contracts, would the tax factor make that much of a difference? It is certainly possible (even though Albert did decide to leave). If the Angels had offered him the same amount as the Cardinals, the tax difference would cost Albert approximately $3.7 million.

Who is to say if the difference would matter, especially for a single individual who has to weigh many factors in his decision to move. However, if you are a business, that tax difference could influence a decision between paying taxes or hiring a couple of new employees. Just some things to ponder while Albert packs his bags.

Sometimes Old Law Is Good Law

I once drafted a legal brief for the dismissal of a lawsuit. While the legal arguments were nuanced, the crux of my case rested on a single decision from the 1940s. This worried me, so I vetted the argument with a firm partner. His advice, after reading the brief: Sometimes old law is good law. My client won the motion and the case was dismissed.
 
The Missouri Supreme Court recently heard oral arguments in the case of American Federation of Teachers v. Ledbetter. At issue is whether a public school district has a legal “duty” to collectively bargain in “good faith” with a teachers’ union. 
 
Back in 1947, the Missouri Supreme Court, in City of Springfield v. Clouse, held that Springfield could not collectively bargain employment contracts with public employee unions. The reason was twofold. First, the Missouri Constitution’s clause guaranteeing the right to collectively bargain did not apply to public employees. Second, public entities such as cities act on behalf of the general public and therefore only elected legislators, as the peoples’ representatives, may set the terms of employment for public employees. Non-elected public officers lacked the requisite authority to collectively bargain with labor unions. 
 
Fast forward 60 years. In Independence-NEA v. Independence School District, the Missouri Supreme Court overruled Clouse and held that the collective bargaining clause extended to public school teachers. The court rested its opinion in large part on the modern trend recognizing a legislature’s power to delegate its decision-making authority to administrative agencies. Because a legislature “may” delegate its power to establish the terms of public employment, the constitution’s collective bargaining guarantee was held to extend to all public employees, including teachers. 
 
But did the Missouri Legislature specifically delegate this authority to public school districts? And how can one reconcile the majority’s broad recognition of the power to delegate with its stern rejection of the legislature’s discretionary choice to exclude public school teachers from its grant of collective bargaining rights? 
 
Specifically, the Missouri General Assembly enacted the Public Sector Labor Law in 1965. The Act empowers certain public employees to join labor organizations for the purpose of negotiating terms of employment. But the legislature expressly excluded school teachers from its provisions. By exercising its power to delegate, the legislature “selectively” delegated its powers by withholding collective bargaining rights from teachers. But does the power to delegate not imply the power to withhold? 
 
Unfortunately, the court wants to have it both ways. First, the collective bargaining guarantee is extended to public employees because of the legislature’s broad power to delegate. Yet the legislature may not limit its delegation by excluding school teachers. The Court is torturing the constitution and the statutes to get the results it wants, wielding unauthorized power as a supervening legislative authority. Perhaps we should recall James Madison’s astute observation (quoting Montesquieu): 
 
Were the power of judging joined with the legislative, the life and liberty of the subject would be exposed to arbitrary control, for THE JUDGE would then be THE LEGISLATOR.
 
Aubuchon is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri Public Policy.
 

 

A Tale Of Two County Executives (More Similar Than Different)

Last month, I attended a tax increment financing (TIF) commission meeting in Saint Charles. Last Wednesday night, I planned to testify before the Saint Louis County TIF commission meeting in Shrewsbury, until it was abruptly cancelled on short notice. Both meetings involved TIF applications for retail centers (among other things) in Saint Charles and Shrewsbury. Both are terrible ideas. Both have the support of cities seeking (understandably) their narrow self-interest over the interest of the county or region. The respective county executives oppose the two plans, although I must be clear that I know Saint Charles County Executive Steve Ehlmann opposes the Saint Charles plan and I believe Saint Louis County Executive Charlie Dooley opposes the Shrewsbury plan (based on history, which I will detail more in-depth later).

Ehlmann gave an excellent talk at the TIF hearing last month. Here is his stated opposition to the TIF:

However, he said a city tax-increment financing subsidy would be “bad public policy” because it would channel into the project some of the new property tax revenue generated that would otherwise go to the St. Charles School District and other governments.

“If the city can do a TIF to make others pay for what is their responsibility, when are we going to start using city money for schools?” Ehlmann said.

Ehlmann and his predecessor, Joe Ortwerth, have been leaders in calling out the fact that these TIFs do not do anything for our economy. They inefficiently redirect activity based on who is giving out the most tax dollars. Saint Charles County has put its money where its mouth is regarding TIF, and actively fought prior TIFs in court, although the rulings have always favored the cities. It is great to see Ehlmann is still fighting that fight against these abuses.

Charlie Dooley has also been leading the fight against these TIFs in Saint Louis County. He has not made a statement directly on the Shrewsbury TIF, so I do not know exactly how he feels about it. But based on his opposition to the last Walmart TIF in Bridgeton, and the comments of the county reps on the current TIF commission, I think he likely is opposed to this one as well. (Someone should feel free to correct me if I am wrong.) Dooley made public comments about the Bridgeton TIF between the TIF commission process and the city council decision. I think that is perfectly appropriate, and I hope he leads the opposition should the Shrewsbury City Council attempt to override the decision of the county TIF commission.

One of the most important legislative changes we need in Missouri is eliminating the ability of cities to override TIF commissions. Cities can approve a TIF even if the commission defeats it. That is an atrocious law that empowers small groups to abuse the tax system at the expense of many other people and entities (such as school districts). Both county executives – Ehlmann and Dooley – deserve great credit for thinking about their whole county (and region) first, and opposing these types of tax abuses.

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