We Must Go to War With Brazil Over Ethanol!

Posted on by David Stokes

Among the mandates, tax credits, and tariffs that are all used to prop up an ethanol industry that depends on government support like a tick to a dog, which is the worst subsidy? I would say that the tariff is the worst of the three, followed closely behind by the mandate here in Missouri that a 10 percent ethanol blend be included in all gas sold in the state. I don’t like the tax credit, but without the mandate and the tariff, ethanol’s credit is no worse than other farm subsidy programs. So, the blender’s credit might be the least bad of the three, but it is still absurd.

Why is the tariff on sugar cane ethanol from Brazil the worst of the three? In my opinion, it is because it directly contradicts the main reason politicians say that we should be supporting ethanol in the first place. Of all the arguments for ethanol subsidies, the one that hits the hardest is that we need to do all we can to end our reliance on oil from the Middle East. Using American gas dollars to support governments that (directly or indirectly) fund terrorists to kill Americans is something I recoil from. So, in order to stop relying on Middle Eastern oil, wouldn’t we want as much ethanol as possible being used in the United States?

Well, apparently not, because we have this stupid tariff on sugar cane ethanol from Brazil. Perhaps Brazil is actually an enemy of ours and we can’t possibly allow American gas dollars to benefit the Brazilians.

I, for one, would gladly welcome war with Brazil. I think it would go down a lot like our war with our supposed “ally” England in the early 1960s. During that British invasion, our hearts and ears were conquered by English rock stars. I think the same thing would happen here, except that we would be invaded by supermodels instead of rockers. We’d probably have to arrest both Tom Brady and Leonardo DiCaprio because of their conflicted loyalties, but let’s all admit that should probably be done anyway.

If the ethanol industry is to be believed, the unstoppable Brazilian supermodel army would do little environmental harm to our country because their tanks probably run on green ethanol fuel. I don’t think it would be a particularly violent war, either. I think a lot of American soldiers would be more than happy to surrender to the attacking supermodels.

War with Brazil in 2012. Fought over energy. Powered by ethanol. Conquest by Gisele.

Could a Longer Yellow Mean Less Green in City Coffers?

Posted on by Patrick Ishmael

More importantly, could it mean more green in your wallet? As the Riverfront Times notes (emphasis added):

Motorists driving along roadways maintained by the Missouri Department of Transportation could receive fewer red-light camera tickets if preliminary reports from Arnold ring true statewide.

Beginning in February, MoDOT began changing the yellow-light signal times throughout Arnold, where all the city’s red-light cameras happen to be along state-controlled roads. In general, the change to the signals has lengthened the amount of time for yellow lights.

For example, motorists traveling southbound through the intersection of Highway 141 and Astra Way now have 1.6 seconds more yellow time — from 4 seconds to 5.6 seconds. MoDOT has also changed the length of time that all signals at an intersection appear red, generally giving intersections a bit more time to clear all cars before changing lights.

In so doing, Arnold has experienced an unintended consequence — the number of red-light runners has plummeted since MoDOT made the changes.

In January, the city issued 691 red-light camera citations, according to information obtained from a city council member. By March, the number of citations had dropped to 263. Last month, the vendor that operates Arnold’s red-light cameras — American Traffic Solutions — confirms that it issued just 198 citations. That’s a drop of 72 percent from the number of citations issued in January.

The Show-Me Institute has a long history of opposing red light cameras, particularly given the cameras’ questionable effectiveness in preventing accidents yet prodigious aptitude for raising money for cities. Lately, though, Missouri’s red light camera industry has been traversing rocky judicial and legislative roads. Earlier this month, policy analyst David Stokes astutely reviewed one court ruling in Saint Louis that could very well cripple the use of red light camera systems in the city. His analysis:

It will probably take an act of the legislature to declare unequivocally that red light camera programs are invalid as a matter of state law, but the red light camera issue may, for all practical purposes, be resolved by adjusting the signals where the cameras sit. The roads in Missouri may be getting a great deal safer, just by adding a little more time to yellow lights — a simple, nearly costless solution to an important issue of public safety.

Cities must be elated. After all, “safety” was the driving purpose behind their use of these cameras anyway, right?

Right?

Do You Take Sugar With Your Ethanol?

Posted on by Alex Bluestone

Brazil: A land entailing natural wonders, a powerhouse economy, and sugar cane ethanol? Yes, that’s right. Ranked second in terms of production and first for exporting, Brazil has long been a pivotal mover and shaker in the global ethanol industry.

Together with the United States, Brazil produces nearly 88 percent of the world’s ethanol supply. However, Brazil uses sugar cane as a preferred alternative to corn in its ethanol production.

With an annual yield of nearly 370 million bushels of corn, many Missourians are deeply connected to the corn-based ethanol industry. If the industry were to dry up, thousands stand to suffer in the short run. Even so, could there be a sweeter alternative?

Well, quite literally, yes. The Brazilian sugar cane industry is said to be seven times more efficient than that of the United States, and less expensive, too — nearly 30 percent cheaper, in fact. Regardless, it appears that the federal government has little interest in the more viable Brazilian blend.

In order to offset a federal tax credit targeted to ethanol blending companies, the United States has levied a tariff on Brazil’s ethanol, perhaps as a way to keep the international market out while spurring on its own domestic product.

Current and past administrations have vowed to reduce foreign oil imports, claiming that we have become too dependent on them. So, why a virtual ban on Brazilian imports? If ethanol is federally promoted as a solution to the so-called national security issue of dependence on Middle Eastern oil, why wouldn’t cheap, clean-burning ethanol from friendly Brazil be satisfactory? If officials are serious in addressing this as a national security issue, they would invest in other forms of energy — namely, those which are not harmful to our country’s environment and well-being.

Thankfully, it appears that lawmakers might be making a move in a better direction. Last week, Sen. Tom Coburn (R-Okla.) fathered an amendment that would slash government subsidies of the corn industry while also lifting the tariff. Unfortunately, Coburn’s amendments may never become actual laws. Nonetheless, the Senate has shown an ever-increasing readiness to bring ethanol subsidies to the curb.

So, is investing in the precarious, ever-expanding corn-based ethanol industry worth the higher food prices, loss of necessary agricultural groundwater, and increased pollution that result? Well, some would argue that the aforementioned are a small price to pay to support an industry. I contend the contrary. Surrounding Missouri’s ethanol industry, we have corn farmers benefiting from subsidies, cattle farmers suffering from feed shortages, and mandates that often require we burn at least 10 percent less-fuel-efficient ethanol in our cars.

When subsidies are involved, benefits for some lead to costs for others. So, who’s right? You be the judge.

Less for More

Posted on by Bruce Stahl

Have you ever heard of a property developer spending more to rehab a building than he expects to make from its sale? Thanks to Missouri tax credits, some developers are doing just that. These developers are only able make an after-tax profit because of the tax credits awarded to them. At a board meeting of the Land Clearance for Redevelopment Authority (LCRA) on Tuesday, one applicant said that he planned to spend $340,000 to redevelop a property that he expected to sell for $140,000. He told the LCRA that he would make up for the difference with tax credits. I couldn’t discern the amount by which a second developer expected to sell his property below redevelopment costs, but he too said that tax credits would make up the difference.

The LCRA reviews applications to designate properties “blighted.” This designation allows property taxes to be frozen at some base level, while development increases the property value. Many of the projects reviewed Tuesday were for development activities costing millions of dollars. Who is to say whether such projects are more worthy than smaller projects of receiving tax abatement? Why don’t people receive tax abatement for marginal projects, such as maintaining their lawn or washing their windows? Surely, the property would not be as developed if property owners never engaged in these routine activities. I can only imagine how blighted my house would be with an unkempt lawn, dirt-covered glass, and a broken fence. What about all the times I spent hedging the bushes and vacuuming the floor? Why doesn’t everyone receive abatements?

Tax credits and abatements have two types of effects: the observed and the unobserved. We all see the developer who builds a beautiful house using the tax incentives. We see the lumber producers selling more wood and the tool manufacturers selling equipment. We see the businesses and the jobs created and maintained from the endeavor. But we don’t see what does not happen because the tax incentives were awarded. We don’t see the local school that would have received additional revenue, the relatively lower taxes that would have been levied for everyone else, or the forgone purchases these taxpayers would have made. We don’t the additional teachers that could have been hired in school classrooms, or the taxpayers who could have purchased another gallon of gas. We don’t see all the jobs that would have been created and new purchases that would have been made if the money to fund those tax incentives had not been taken away from the people who would have otherwise used it. We are only able to observe the activities that have been granted official approval by the state and the LCRA.

The unobserved effects of the tax credits are that the people paying taxes are less able to purchase what they like most. Instead, they pay relatively higher taxes in order to fund incentives that generate undesirable products, such as subsidized homes costing $340,000 that will fetch only a $140,000 price.

Tax credits and abatements award businesses with revenue disproportionate to the value that consumers would place on their product. These are poor government policies, and ought to be abandoned.

Rebuilding, Not Rebranding

Posted on by Patrick Ishmael

“Extreme Makeover,” indeed. After previously likening the project to a “developer’s relief act,” last Friday it appeared that the St. Louis Business Journal had reversed its position on “Aerotropolis,” hinting in a staff editorial that it supported having the legislature go into a special session to take up the project’s tax credits.

The editorial was in fact one of a battery of at least five neutral-to-positive stories that dealt directly or tangentially with Aerotropolis that week, a strange reversal by the Business Journal but coming only a week after Saint Louis Mayor Francis Slay’s chief of staff, Jeff Rainford, wrote a letter to the paper in support of the project. (My response to Rainford’s letter appears here.) It’s of course one thing for the Business Journal to change its mind on such an enormous budgetary issue, and present a united front in its support; it’s another thing to do it all without substantial justification, which the publication unfortunately did not provide in any of its five stories touching on the subject.

Still more unfortunate is the manner in which the Business Journal mused that Aerotropolis could make it to the special session: by hitching it to the tragedy in Joplin (emphasis added):

The view from St. Louis looks directly at China. Those who represent Aerotropolis as Joplin’s lifeboat are just silly. We need to respect the severity of their plight and not tie it to anything but the survival of their community.

It would be great for lawmakers and the governor to brand this session the economic development moment for Missouri: investing in Joplin and supporting a China hub while reorganizing (read “shrinking”) tax credits.

That could make for a truly special session.

The Business Journal lectures that Aerotropolis supporters should “respect the severity” of Joplin’s tragedy, but then basically says that if proponents play their cards right, maybe — just maybe — there will be something in it for Saint Louis, too … just have to “brand” it right. Keep in mind that Joplin is set to get about $50 million from the state. Under the Business Journal‘s plan, Saint Louis would receive more than seven times that amount in such a “truly special session.”

Sad? Yes. “Truly special”? No.

The path of devastation caused by the EF-5 tornado that ripped through Joplin does not lead all the way to Saint Louis, and it was wrong for the Business Journal to suggest that the tragedy should be lined up with unrelated pet projects, and the session “rebranded,” to benefit Aerotropolis.

The Business Journal was right the first time: Aerotropolis is a developer’s relief act. It’s sad that the newspaper and others would attempt to pair their project with genuine relief efforts.

Pop-Tartocracy

Posted on by Patrick Ishmael

As labor unions shrink, new and exciting ways of promoting union membership are springing up all over. In April, I wrote about one university course in Missouri that delved into the finer points of using thug tactics in labor disputes, which is a pretty terrible threat to democratic principles on its own. Yet the threat of physical violence isn’t the only effective means of coercion available to the labor movement, or to any movement, or the most powerful tool in that tool kit.

After all, the government is well-equipped to bust some proverbial knee caps of their own, and it looks like the National Labor Relations Board (NLRB) and the Labor Department are taking out the big bats. First, it was Boeing’s decision to move some of its operations from Washington state to South Carolina, which the NLRB is now trying to block. This week, it’s the Labor Department’s turn to do some damage, tightening requirements on employers to report their anti-unionization activities. And today, the National Review editorial board lays out the NLRB’s latest plan to help organized labor and make employer attempts to dissuade employees from unionizing that much more difficult.

It is truly worrisome that the small, ideological leadership of these bureaucracies can so easily, and unilaterally, craft American labor law and interfere with the movement of labor without even a contemporaneous, affirmative act of Congress compelling these fresh rule-making activities. We already know that Obamacare didn’t empower the administration to offer waivers to the law. We know that the Obama administration wants to enact gun control through administrative procedure. Is there anything federal bureaucrats can’t do? If not, isn’t that an enormous problem?

National Review‘s Kevin Williamson puts the problem this way (emphasis added):

If you are an entrepreneur thinking about starting a large industrial enterprise, or an incumbent firm thinking about building a new factory or launching a new line of production, you want to know that your tax and regulatory environment is livable — and that it is not going to change at the whim of one or two or three people in Washington, D.C. The NLRB has five seats (and four members serving; there’s a vacancy at the moment). The fact that such a tiny group of unaccountable political appointees can just wake up one fine morning, have some Pop-Tarts, and then decide to rewrite the nation’s union-election rules is terrifying. Such changes ought to require an act of Congress.

Roll out of bed, toast a pastry, pass a rule. Maybe a bat isn’t necessary after all.

Eco-Devo Mad Libs: So, Are 5,000, 29,000, or 37,000 Jobs Being Saved or Created With “Aerotropolis”?

Posted on by Patrick Ishmael

This is one of the biggest supposed selling points of spending $300 million on warehouses, and yet apparently none of the proponents can agree on what one third of a billion dollars buys taxpayers.

From Wednesday’s Patch, which seems to be a very pro-“Aerotropolis” publication (emphasis added):

Mike Leblanc, co-chair of the Northwest Chamber’s economic development committee, said if the legislature waits until September to look at the issue, the Chinese may discover Kansas City, MO or Memphis, TN are more serious than St. Louis about establishing a partnership.

Leblanc said establishing the China Hub would create 5,000 jobs in the St. Louis area. He wondered how the legislature would leave the 2011 session without addressing the issue.

“To leave session without addressing this issue and the possible creation of 5,000 jobs is unacceptable to most of the voters in a nonpartisan way,” Leblanc said.

“Possible creation.”

Then, from Thursday’s St. Louis American, which also seems to be a very pro-Aerotropolis publication (emphasis added):

On May 13, the last day of Missouri’s 2011 legislative session, the so-called “Aerotropolis” proposal died when legislators couldn’t resolve their differences on tax credit reforms to a larger economic development bill. Aerotropolis had been bundled as part of that development package.

Advocates of Aerotropolis claim its tax incentives would spur the creation of 23,000 construction jobs and 13,800 new permanent full-time jobs.

It appears that the St. Louis American‘s numbers originate from a St. Louis Regional Chamber & Growth Association (RCGA) study dated April 19, claiming 23,325 construction jobs and 13,844 full-time “operations” jobs would result from the project, or 37,169 jobs total.

Two Saint Louis chambers of commerce, two radically different answers for the job impact of Aerotropolis, one 700 percent greater than the other.

The RCGA on Friday produced even more recent numbers than those cited by the American, in response to Michael Webber’s piece in Air Cargo News. The difference? The newer analysis, apparently dated April 27, now says that the project will lead to 18,468 construction jobs and 10,941 full-time “operations” jobs, or roughly 29,000 jobs, a reduction of more than 20 percent from the original numbers.

So, now we have three figures for the number of jobs promised, two of them originating from the RCGA.

Perhaps worse? The RCGA repeated their larger April 19 job numbers in their May 2 Monday briefing, after they apparently had new jobs numbers to distribute. Before it released these April 27 numbers to Air Cargo News, had the RCGA made these downwardly revised numbers available to the public? We know that the St. Louis American certainly relied on long-outdated information.

More importantly, are supporters just making up these jobs figures as they go along? None of the proponents seem to be able to keep their job numbers straight.

Gooooooaaaaaaaallllll!!!!! Supply-Side Economics, 1; Missouri, Nil

Posted on by Turner Trapp

As Americans, we often don’t enjoy hearing how some country in Europe is doing something better than the United States. We certainly don’t like hearing how European football stars are better athletes than our own players. All grudges aside, though, an interesting study detailed in the June 20 edition of the National Review suggests that American government could learn a thing or two from studying European soccer leagues.

In his article “Supply-Side Soccer,” economist Kevin A. Hassett describes the findings of a new study published by the National Bureau of Economic Research, “Taxation and International Migration of Superstars: Evidence from the European Football Market.” The report, by economists Henrik Kleven, Camille Landais, and Emmanuel Saez, studied the top soccer clubs in 14 European countries from 1980 to the present, exploring how changes in tax rates affected players changing teams, and to what extent player mobility affected club performance.

To break the results down simply, countries such as Spain, which lowered income taxes for the highest tax brackets, ended up attracting the best players. This, in turn, led to higher performance in the European soccer leagues. In order to compete with the lower-taxing countries’ offers, high-tax-bracket countries would have to offer much larger salaries for the players to obtain equal standards of living.

At the end of his article, Hassett points out that this same principle stays true for business climates between political jurisdictions. This is a point that Missouri should take under advisement, for businesses often follow the same trends between states.

As seen in the Show-Me Institute case study examining the differences in tax policy between Tennessee and Missouri, while Missouri instituted and then raised an income tax, our southeastern neighbor remained income-tax free. The study found that this difference in policy is positively correlated with Tennessee, historically our economic lesser, rising above us in terms of population and economic prosperity.

Attracting new business is a crucial part of ensuring future economic prosperity, and revitalizing the economy. Instead of offering giant multi-million-dollar tax credits to developers or specific businesses in efforts that rarely if ever deliver on their hoped-for success, why not cut taxes across the board to create a climate conducive to all businesses?

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging