In this June 2011 Show-Me Forum, two prominent Missouri free-market advocates, Ron Calzone and Steve Spellman, discuss their take on the outcomes of the recently ended legislative session.
A lively Q&A follows their in-depth analysis.
New Ethanol Mandates From Washington
My father founded and ran several area gas stations until his death. At first, he embraced the use of oil and gas mandates like those that regulate the ethanol industry — he saw ethanol as a possible revenue stream. However, optimism dwindled as each fall’s harvest brought bushels of despair, not what others had promised. He would one day realize the strife that comes with perverse government regulations.
Many have regarded ethanol to be the proverbial “fuel of the future,” claiming that it reduces the cost of gasoline at the pump while also emitting less pollution. Although ethanol can replace gasoline in some ways, it is less beneficial than many expect.
The Department of Energy began releasing data in 1997 determining that some of the benefits derived from ethanol don’t outweigh the costs, as researchers had previously believed. Ethanol may emit less pollution when burned in place of gasoline, but the Environmental Protection Agency reports that it releases carcinogens at far higher levels than they predicted when it’s created.
Despite the abundance of new testimonies and information, however, both the federal and state government continue to support ethanol ardently, as our country’s energy messiah.
Pointing to often-circulated claims of environmental friendliness and cost-effectiveness, Rep. John Shimkus from Illinois recently introduced new legislation that would impose further government mandates for the production of ethanol. Amid another distressing year for Detroit, this governmental decree would require that 50 percent of all new automobiles be capable of running on ethanol and other non-petroleum fuels by 2014. That number would stiffly rise to 95 percent just three years later.
So, do the advantages of ethanol outweigh the costs? The answer, simply, is no. Aside from its counterproductive environmental effects and proven efficiency loss for each mile to the gallon, ethanol is a precarious investment for the government to force on us for several reasons:
- First, it has been shown that increases in ethanol production are correlated with an increase in food prices. These effects can be felt not only statewide, but also nationally and internationally.
- Second, and as a direct result of government mandates, a cloud of pseudo–market demand now hangs heavily above the heartland. Simply put, the current supply/demand ratio did not arise naturally from the decisions of producers and consumers, interacting voluntarily in the market. Instead, the ethanol industry is artificially bolstered by government sanctions.
- Finally, both this mandate and others like it point to the essence of how government controls harm the economy. There are too many hands in the cookie jar, and, as a result, everyone’s hand gets stuck; the cookie crumbles. Automakers should not be burdened with absurd requirements such as this from legislators who seek to alter the free market for the sole benefit of their constituents, and at the expense of everyone else.
Don’t get me wrong, I support the development of renewable energies and green solutions. Markets reward efficiency. However, as both a Missouri resident and an owner of my father’s businesses, I find that legislation like our own E-10 mandate and the proposal advanced by Rep. Shimkus in Illinois are harmful — especially in the long run.
Neither supply nor demand would exist at anywhere near current levels without both federal and state mandates, both of which have propelled ethanol into the forefront of the American auto and oil industries. As it stands, the eagerly pushed supply of ethanol more than satisfies current market demand. And that, folks, is just basic economic principle.
Elsberry Votes Down a Gas Tax Increase
Elsberry, in Lincoln County, voted down a local gas tax increase proposal yesterday. Considering that the vote requires a two-thirds majority to win, it failed by a mile. I am embarrassed to admit I only recently became aware that cities in Missouri even had that option. According to the Post-Dispatch, only one small city in the entire state has implemented it — Matthews. See Article IV, Sec. 30(a)(3)3, aka page 67, of the Missouri Constitution for the applicable rules.
This is one local tax increase for which I could easily vote in favor. I prefer increased use of tolling to address most of our highway issues, but that is not realistic at the local road level. Per-mile charges raise serious privacy concerns for me, and although private local roads presently serve a worthy purpose, they have little chance of expanding beyond certain neighborhoods. That leaves us with gas taxes. I think most people would agree that the gas tax is one of the better taxes, from the perspective that the people who use the public asset end up paying for the majority of that asset.
If I lived in a community that was having legitimate issue with funding road maintenance, I could see myelf voting for a small, local gas tax increase.
We’re Not in Kansas Anymore
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?
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”
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
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.
An End to Red Light Cameras in Saint Louis?
Show-Me Institute Policy Analyst David Stokes weighs in on red light cameras in Saint Louis — the recent ruling that found such cameras illegal in Saint Louis, and the implications of the ruling for the city payroll tax.
School Choice Continues to Succeed in New Orleans
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
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.
