We’re Not in Kansas Anymore

Posted on by Bruce Stahl

On Wednesday, June 1, the Kansas City Star reported that Applebee’s will receive tax breaks to move its headquarters from Kansas to Missouri. For those of you who aren’t familiar with the area, this particular move will involve a distance of less than 15 miles. Our Department of Economic Development (DED) has agreed to award $12.5 million dollars in tax breaks for this move. Is it really worth that price?


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Missouri’s economic development officials claim that the tax breaks will create a net gain for the state. According to the best estimate I could come up with, the state can only expect to receive a total of $838,000 over 10 years. And, starting with a figure provided by Applebee’s itself, a second estimate predicts a loss of $1.1 million.

Why is the state choosing to award Applebee’s? Why not lower the tax burden across the state by $12.5 million? And what of Applebee’s competitors? Are they receiving a tax break? Will the subsidy allow Applebee’s to outcompete other companies? If the answer is yes, we must ask ourselves if the state should be the one picking winners and losers in the economy.

It is perplexing that the DED is awarding millions of dollars to move a company 15 miles across the state border. Clearly, this does not improve the Missouri-Kansas economy; it merely helps an individual company. Again, why Applebee’s? Why not spread the millions in aid across the entire state of Missouri in the form of lower taxes?

Even if it weren’t for the fact that the state is taking a huge risk by awarding a tax break to Applebee’s, we all need to wonder why the state doesn’t instead simply lower the tax rate for everyone.

“Hope Is Not a Policy”

Posted on by Patrick Ishmael

So says National Review’s Kevin Williamson about planning for and predicting economic growth. Williamson’s column was a riposte to Forbes magazine’s Ralph Benko, who criticized Williamson as a “Prosperity Denier.” Why? Williamson had told Larry Kudlow on CNBC that the expectation, or hope, that real national economic growth will rise from 2 percent to 5 percent was “a plan for magic unicorns.” (I should note, however, that even if magic unicorns existed, we probably shouldn’t trust them, or their plans.)

Williamson summarizes his Kudlow exchange thusly (emphasis added):

Jack up economic growth, Mr. Kudlow argues, and all this budget-balancing stuff gets easier. Not so fast, says I. If we had the ability to know in advance how much growth particular economic policies would produce — or even whether they would produce growth at all — then we would never have a recession. We would always be at the sweet spot of maximum real growth. But we are limited and fallible creatures, and right-wing political macroeconomic management is no more reliable, or predictable in its outcomes, than is Keynesian political macroeconomic management. The economy is not a machine, and any time a politician says, “If we will adopt Policy X, we are sure to achieve Statistical Abstraction Y,” he is talking through his hat. The best government can do is maintain stable rules and liberal institutions and try to stay out of the way.

Williamson is right on. The moment a politician thinks she can plan an economy is probably the moment she should no longer be presiding over it, and when your own politicians start talking up “economic multipliers” and “potential demand,” hold on to your pocketbooks, ’cause you’re about to be brought into a massive and expensive public experiment.

Or, put more succinctly, be very skeptical of the promises of economic growth that politicians make to you. Whether it’s magic unicorns or flying cows, hitching your fiscal destiny to the spirits of animal fiction is a plan for frustration, not a plan for the future.

Try Selling More Vacant City Property

Posted on by Audrey Spalding

Yesterday, Saint Louis city aldermen spent more than seven hours discussing cuts to the city’s budget. They made cuts to trash pickup, and to overtime pay. Then, Post-Dispatch reporter David Hunn dryly wrote, “they began transferring money into programs they preferred: for more lifeguards, building demolition and vacant-lot grass-cutting crews, as well as unspecified programs for the Affordable Housing Commission and crime prevention ‘professional services.'”

I know that there’s no simple solution to the city’s budgetary situation. If Saint Louis needs more money for building demolition and grass-cutting on vacant lots, though, perhaps the city should step up its efforts to sell its vacant property.

The city owns more than 10,000 vacant properties, and most of them are owned by the Land Reutilization Authority (LRA), an agency tasked with getting that property back into private productive use. Yet we found that the LRA had been rejecting roughly one out of every two offers to purchase vacant city property. Why? The most common reason was that the property was being held for “future development.” Unfortunately, the future development would frequently fail to materialize, and the city continues to hold these vacant lots (and pay to cut the grass).

Please, city aldermen, let’s try something different. If the city sells more of its vacant property, it will collect more in sales revenue, and more in property tax revenue. Additionally, the city won’t have to pay to cut the grass on the lots sold. Why not try? Why not take a chance on individuals with offers today instead of waiting for something “better” in the distant future?

“Speculating” is a dirty word in Saint Louis city. There is a fear that people will buy up city property and hold it vacant for many years. Unfortunately, though, when the city turns down offers today in the hope for something “better,” it is acting as a speculator itself. But a government speculator is worse — government employees deciding to hold land vacant for years don’t feel the financial consequences the way a private investor would, and so have much less incentive to find a productive use for the land. It’s time the city stopped speculating and instead let private individuals take on the risks and rewards of city development.

School Choice Continues to Succeed in New Orleans

Posted on by John Payne

New Orleans’ schools are improving, and they can teach districts in Missouri a valuable lesson about the importance of choice in education. When Hurricane Katrina turned the city upside down, New Orleans reorganized its school system by turning most schools into charters and giving more autonomy to those that remained traditional public schools. Furthermore, parents can now choose between these different models of schools thanks to largely open enrollment across the city. I have written about the successes of these policies before, and although New Orleans’ schools are still struggling, they continue to improve under this system of accountability through choice. From last Tuesday’s Times-Picayune:

Since 2007, the proportion of students in the district scoring “basic” — essentially at grade level — or better has now more than doubled from 23 percent to 48 percent, rising faster than any other district in the state.

Test scores from students that still fall under the Orleans Parish School Board, which held onto a small group of high-performing schools, improved as well, with 82 percent of students scoring basic or better, up 2 percentage points from the year before.
[…]
Still, the proportion of RSD students scoring at basic proficiency in state testing climbed 5 percentage points to 48 percent this spring from the year before. That figure combines results from state LEAP, iLEAP and graduation exit exams.

The latest results compare with growth of just 1 percentage point to 66 percent across the state as a whole.

The 16 schools that remain under the Orleans Parish School Board, some of them magnet schools with admissions requirements, continued to perform well above the state average.

This last bit undermines the oft-repeated notion that charter schools only prosper by “stealing” the best students from public schools. New Orleans’ experience shows that all schools can improve when parents are allowed to choose the schools that best fit their students’ educational needs. There’s a great deal of evidence that charter schools in Missouri improve educational outcomes, but in order to realize gains anywhere close to what New Orleans has witnessed, Missouri will have to allow for expansions of both the number and the geographic scope of charter schools.

Link via Marginal Revolution.

Don’t Nationalize Education

Posted on by John Payne

A number of educators, academics, and political figures recently signed a statement released by the Albert Shanker Institute favoring a “common content core curriculum” for all public schools in the United States. The idea has an obvious appeal: Simply select what students should learn and tell the schools to teach it. However, as H.L. Mencken wrote, “there is always a well-known solution to every human problem — neat, plausible, and wrong.” There is no single best curriculum for all students in all districts, and any attempt to create one at the federal level opens the door to political meddling in educational content.

Across the country, there is widespread disagreement among educators, politicians, and the general public about what constitutes a good curriculum. Even within districts, conflicting interest groups fight heated battles over curricular changes.

On April 26, a group of students took over a board meeting of the Tuscon Unified School District, protesting a proposal that would change the district’s Mexican American Studies program from a social studies credit to an elective. Student supporters of the program chained themselves to the board’s dais and could not be removed by security. Under a national curriculum, disputes such as this would have to be resolved at the federal level. Congress would determine what students should learn. Allowing Congress to serve as the custodian of truth in the teaching of history, social studies, and other subjects is asking for trouble.

In fact, our current system is already too centralized, with state legislators and boards of education committing new crimes against veracity every time curriculum design comes up for debate. Last spring, conservatives on the Texas State Board of Education pushed through a new social studies curriculum. Among other changes, the new curriculum required a greater emphasis on the “conservative resurgence of the 1980s and 1990s,” and excised the insufficiently religious Thomas Jefferson from a list of thinkers who inspired revolutions in the 18th and 19th centuries, replacing him with overtly Christian figures such as John Calvin and Thomas Aquinas. The left plays this game just as much as the right. California’s guidelines forbid textbooks to “cast adverse reflection on any gender, race, ethnicity, religion or cultural group.” That sounds well-meaning, but it has led to a whitewashed version of history for fear of offending any interest group.

We should return decisions about educational content to the local level. That would not make these arguments disappear, but it would give parents the greatest opportunity to find a curriculum that suits their educational preferences.

Furthermore, localized curricula would give teachers more flexibility in meeting students’ individual educational needs. When I pursued teacher certification, I encountered repeatedly in my coursework the idea that every student learns in different ways. Good teachers must vary the information they present and how they present it in order to appeal to the different aptitudes and interests of their students. A national curriculum may not completely strip teachers of the ability to tailor lessons for the particularities of their students, but every new mandate from on high removes a little more autonomy from the educators who know their students best.

Many American schools are in desperate need of reform, but more federal micromanagement is not the solution. We need more autonomy for schools to innovate and serve the individual needs and interests of their students, and greater choice for parents to hold those schools accountable. A national curriculum would take us in the opposite direction — toward heavily politicized subject matter and no alternatives for students whose needs are left out. Reforming education in this country is not one large problem — it’s millions of small ones, and a national curriculum would only make them harder to address.

John Payne is a research assistant with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy. He is a former high school social studies teacher, and an original signatory to “Closing the Door on Innovation,” a manifesto opposing a national education curriculum.

 

Defeat of ‘China Hub’ or ‘Aerotropolis’ Bill a Significant Victory for Missouri Taxpayers

Posted on by Audrey Spalding

It was the “Big Idea” that couldn’t — and didn’t — pass. The defeat of a bill calling for the creation of a heavily subsidized “Midwest China Hub,” or “Aerotropolis,” in Saint Louis represents a clear victory for common sense and limited government. Government should stay out of the business of using taxpayers’ money to try picking economic winners and losers.

In retrospect, the wonder is that so many legislators from across the state rushed to support the bill. As proposed, the China Hub legislation would, over a period of years, distribute some $360 million in tax credits and other subsidies to private developers in and around the Lambert–St. Louis International Airport. To what end?

Supporters of the legislation made wildly optimistic claims. They talked about how this was a can’t-miss proposition that would create “thousands of jobs” and “jump-start” economic activity.

But where was the credible evidence to support the giddy optimism? Short answer: There was none.

Legislators of both parties were prepared to overlook the absence of serious economic analysis. Still more, they were prepared to ignore the absence of any firm statement from the government of China or leading international carriers that they would send more flights to Saint Louis if granted substantial tax credits.

An eight-page “study” by the Regional Commerce and Growth Association (RCGA) was indicative of the slipshod thinking behind the so-called “Big Idea.” The RCGA paper did not attempt to show any real link between the tax credits and increased flights. It somehow assumed that those flights would magically appear.

In response to an information request, the Show-Me Institute obtained a review from the Midwest-China Hub Commission that revealed internal doubts and inconsistencies.

First, it showed that facilities around the airport were already on the receiving end of a surprisingly large and unreported amount of government incentives — $93 million had already been authorized or expended, and another $192 million was available for future use. Second, the review conceded that “Many unknowns remain such as: catalysts for increased flights, cargo market share capture, background analysis, etc.” The commission also noted that the China Hub legislation “may incentivize facilities that have only a limited relationship to the Air Cargo facility.”

In a series of commentaries, policy analysts at the Show-Me Institute showed how the proposed legislation was likely to lead to an underwhelming result — supporting existing operations at Lambert, and contributing to the growth of still more surplus or unneeded warehousing facilities in or around the airport.

In the end, Missouri lawmakers could not agree on a comprehensive set of changes that would both sunset tax credits in other development areas and still leave room for a fresh set of new tax credits for the China Hub in Saint Louis.

The Show-Me Institute instilled a badly needed sense of reality in the whole debate.

Tax credits are not free money. Our state government is already straining to meet its current commitments. Every dollar that is given away in tax credits is a dollar that the state government must replace with cuts in current programs, or — more likely — through increased taxation. There is a long and dismal history illustrating the multiple failures of heavily subsidized commercial enterprises.

Instead of awarding more tax credits to favored individuals and industries, legislators should do something truly innovative: They should lower taxes across the board for all Missourians. That way, economic growth can occur organically, and in areas that legislators might not expect.

Any attempt to call a special session of the legislature for the purpose of resurrecting the China Hub idea should be rejected. If this idea really is a can’t-miss proposition, entrepreneurs in the private sector will find a way to make it happen. Our state lawmakers are not equipped to pick economic winners and losers.

Andrew B. Wilson is a fellow and Audrey Spalding is a policy analyst with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

 

Ms. Harbin Goes to Washington

Posted on by Christine Harbin

Today is my last day at the Show-Me Institute. Beginning next month, I will work at the Center for Fiscal Reform at the American Legislative Exchange Council (ALEC) in Washington, D.C. I am thrilled about my new role, but I will miss working at the Show-Me Institute.

Missouri public policy has its problems. Lawmakers have a terrible habit of trying to pick winners and losers in the market, even though they have such a bad track record of doing so. We’re relying on government to make the choices that individuals should be making for themselves in the private sector. Lawmakers are addicted to targeted tax credits and tax-increment financing (TIF) — even though these programs repeatedly fail to deliver on their promises.

Despite this state’s problems, Missourians have a lot to celebrate in public policy. Many great things are going on here. Missouri has fewer occupational license requirements than other states, which means that Missourians are more free to earn a living. Plus, Missouri has low state taxes on booze, cigarettes, and gasoline. It also has the Hancock Amendment, which limits state spending and requires that voters have the final say on tax hikes. (Wouldn’t it be great if the Hancock Amendment existed at the federal level?)

We’re taking many steps in the right direction toward limiting government and protecting individual liberty. For example, Missourians were among the first to oppose the federal takeover of their health care, and we haven’t given up. As another thing I find promising, the Saint Louis Land Reutilization Authority (LRA) is accepting more offers to buy vacant property (thanks largely to the efforts of my colleague Audrey Spalding).

I’m confident that Missouri, and other midwestern states, will be leaders in limiting government and getting the economy back on track. This change will be driven by individuals acting entrepreneurially in the private sector, however — not by the hand of government.

See you later, Show-Me State.

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