Judge in Florida Overturns Federal Health Care Law

Posted on by Christine Harbin

The judge in the multstate lawsuit struck down the individual mandate component of the federal health care regulation.

Twenty-six states were party to the lawsuit, but Missouri was not among them. Even though Missourians signaled their overwhelming opposition to the health care regulation by passing Proposition C, Missouri’s attorney general, Chris Koster, didn’t jump on board.

This ruling is good news for Missourians. If the Supreme Court upholds this ruling, Congress will not be able to force people to buy something that they don’t want.

Hopefully, this foreshadows success for Missouri Lt. Gov. Peter Kinder’s own lawsuit challenging the health care reform law. So far, two federal judges have upheld the law, but two have ruled that it is unconstitutional (a lawsuit in Virginia, and now this multistate lawsuit in Florida).

We have followed the Florida lawsuit very closely at the Show-Me Institute, and we will continue to track it as it progresses through the courts.

The full text of the Florida ruling is available online.

Government Grants Waivers to the Favored

Posted on by Christine Harbin

I highlighted previously how the federal government is arbitrarily exempting favored groups from the health care regulation. To date, the U.S. Department of Health and Human Services has granted waivers to 800 unions and companies.

These special exemptions encourage corruption and lobbying. This system rewards parties that make large campaign contributions in exchange for special favors. It also encourages private businesses to hire teams of lobbyists to ensure that new laws and regulations don’t put them out of business.

The Washington Times Water Cooler blog asks:

If the new health care act is so great why are companies applying for the HHS exemption waivers to avoid the mandate? And more importantly, if companies should be so excited about the health care law, why is HHS granting waivers to “90-plus” who apply for them?

My thoughts exactly. I also wonder: Won’t this push even more of the costs of the health care regulation onto the groups and individuals that aren’t issued waivers?

‘The Cartel’ School Choice Panel Discussion

Posted on by Administrator

Some 70 people witnessed a strong argument for school choice at a screening of The Cartel on Jan. 27 at the Tivoli Theatre in University City near Saint Louis. The documentary film, part of a forum sponsored by the Show-Me Institute, focused on floundering schools in New Jersey. Journalist Bob Bowdon vividly portrayed a system rife with overpaid administrators, ineffective union-protected teachers, and, worst of all, teens who can't read. A panel discussion followed the special screening. Moderated by the Show-Me Institute's director of communications, Rick Edlund, it featured two Missouri state representatives, both members of the House Committee on Elementary and Secondary Education. Rep. Scott Dieckhaus (R) heads up that committee as chairman, and Rep. Tishaura Jones (D) is also assistant minority floor leader. They shared their thoughts about the documentary and about the education issues that may come before their committee during the 2011 legislative session.

New Report: Tax Incentives Fail to Produce Results in Saint Louis

Posted on by Christine Harbin

The East-West Gateway Council of Governments released a report that largely confirms what the Show-Me Institute has been saying all along: State and local government incentives don’t deliver on their promises in Missouri. The local government has provided $5.8 billion in subsidies to private development in Saint Louis, but doesn’t have much to show for it.

The report found that local incentives haven’t encouraged job creation, consumer spending, or economic growth in the Saint Louis region, and concluded that the reporting requirements are “seriously deficient.”

The report also found that tax-increment financing (TIF) hurts neighboring municipalities. As I have discussed before, economic development is not a zero-sum game, and municipalities in Missouri can grow faster if they didn’t view their neighbors as competitors.

The editorial board at the St. Louis Post-Dispatch provides a great commentary on the report. The following is my favorite passage:

The money has moved around within the region, however, as vampire-like new developments suck the life out of existing ones. So publicly subsidized retail developments in Chesterfield and Fenton bleed business out of existing centers in, say, Ballwin. New big-box developments in Manchester drain the vitality out of older shopping centers in Crestwood, and so on. Net gain for the region: virtually zero.

If these local incentives don’t result in overall gain, why provide them at all?

Missourians would be better off if they were allowed to keep their earnings and spend them as they desire in the private sector. If the government were serious about encouraging job creation and productive economic growth, it would eliminate such market incentives entirely.

Real School Choice Options Would Help to Narrow Educational Achievement Gap

Posted on by John Payne

This week, organizations across the country are holding events to celebrate National School Choice Week, so it’s worth taking a moment to reflect on the benefits we receive from the educational options that most of us enjoy. The opponents of school choice often deride it, suggesting that it only serves as a means of undermining public education. Most middle- and upper-class parents, however, already exercise control over most aspects of their children’s educations. They choose their homes based in part on the quality of the school district they are located within, or, if they have the resources, they decide among a number of private and parochial schools.

These schools are not perfect — far from it, in some cases — but, for most of these students and parents, the system works relatively well. There is a well-known correlation between academic achievement and socioeconomic status, and students from higher-income families outperform lower-income students on practically every measure. This disparity is also reflected in the achievement gap between white and minority students. Tino Sanandaji, a Ph.D. student in public policy at the University of Chicago, recently compared the scores of non-Hispanic white American students with those of non-immigrant Europeans on the Programme for International Student Assessment (PISA) test, and found that the American students performed admirably. White Americans scored seventh out of 28 countries, beating students from Denmark, Sweden, and France, as well as an average of 15 European Union countries.

On the other hand, our educational system routinely fails poor and minority students — those least able to choose a different school by moving to another district. Although the racial achievement gap has narrowed somewhat in recent years, at age 17, black and Hispanic students still score about 10 percent worse on average than white students on the reading portion of the National Assessment of Educational Progress (NAEP). There a number of proven ways we can expand choice and improve academic achievement for those students.

Missouri has already experienced some success with charter schools. According to a 2009 study by the Center for Research on Education Outcomes at Stanford University, students attending charter schools in Missouri show more improvement in both mathematics and reading than similar students in traditional public schools, and this remains true when looking only at black and Hispanic students. Unfortunately, state statute limits the existence of charter schools to the cities of Saint Louis and Kansas City. If that restriction were removed, the gains of charter schools could be expanded to students in other struggling districts.

Furthermore, we could provide parents and students with more options in existing public school districts simply by restructuring how the schools are funded. Under a weighted-student-formula program (also known as “backpack funding”), students can attend any school within the district, and the schools are funded based upon the number of students they attract — with more dollars devoted to students who typically require more resources to educate (e.g., those with disabilities). Schools are then allowed more autonomy to experiment and compete for students — and for the money attached to them. In California, the cities of San Francisco and Oakland both implemented backpack funding and saw large gains in student achievement across ethnic and socioeconomic lines. San Francisco is now the top performing large urban school district in California. There is no reason, outside of political intransigence, that the Saint Louis and Kansas City school districts could not enact the same reforms.

It would be difficult to design an educational system worse for the disadvantaged than one that assigns students to schools based on the housing that their parents can afford. Although our best schools, public and private, are the product of parental choice, poor and minority students are frequently stuck in monopolistic urban school districts. School choice is not a panacea for this problem, but giving parents the power to choose is a necessary step toward ensuring a quality education for all of Missouri’s students.

John Payne is a research assistant for the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

Which Is Government Protecting: Consumers From Food Poisoning, or Existing Businesses From Competition?

Posted on by Christine Harbin

Apparently, Saint Louis isn’t alone in its issues with food trucks. The Institute for Justice launched a lawsuit challenging a mobile vending prohibition in El Paso, Texas, that prevents food trucks from operating within 1,000 feet of brick-and-mortar restaurants. The following is a video from KTSM NBC 9 about the lawsuit:

I recently highlighted how government can get in the way of a person and her pizza slice. A couple of Show-Me Daily commenters said that the food truck wasn’t banned from Edwardsville — its operators simply failed to apply for a permit.

According to a Riverfront Times article about the incident:

Reached for comment, Pi co-owner Chris Sommers forwarded us along to Fond owner and chef Amy Zupanci, who’d invited the pizza truck to park outside her restaurant. In return for her Welcome Wagon treatment, Zupanci received a call from the health department yesterday, and an in-person visit from an Edwardsville police captain.

“The Madison County Health Department says they don’t allow trucks of any kind to serve food,” Zupanci writes in an e-mail. “However, they also have a policy of no inspection necessary as long as you have a health certificate for ‘non-consecutive food events.’ This would include festivals, farmers’ markets, etc., which may happen once a week, but not back-to-back days.”

Reasoning that under that definition the Pi truck is an “event,” Zupanci inquired about a so-called Transient Merchant permit but hit a dead end: The health department directed her to the police department, which informed her that permits involving food must be approved by…the health department.

This doesn’t tell us that the truck is de jure banned, but it can be interpreted as a de facto bureaucratic ban if public officials refuse to award the certificate required to conduct business.

Enforcing food safety is the ostensible goal of requiring permits. Nobody’s arguing against food safety — I’m certainly not. I’ve contracted food poisoning before, and I felt like I was going to die. I wouldn’t wish food poisoning on anyone — not even on a Keynesian.

However, excessive permit requirements can create a barrier to entry in the market, and keeping a number of competitors out of the market may be the unstated goal of the regulation. My friend and colleague Josh Smith explains the negative effects of this in a comment on my previous blog post:

When a local government requires some level of oversight for vendors, can it be called a “ban”? Perhaps not. If it is the case, however, that the Pi truck is not allowed to sell food in Edwardsville without the approval (through a form, or some other process) of the government, this constitutes an infringement on the right of the Pi truck to sell and the Edwardsville pizza customers to buy.

Even if this layer of bureaucracy seems small, it’s often small changes that have unfortunate marginal effects on markets. What seems like a simple matter to some may be not worth it to others.

Reputation capital can serve as an alternative (and perhaps more reliable) means of signaling quality and safety than a certificate from a local health board — a certificate that likely doesn’t signal much of anything in the way of rigorous investigation of potential health hazards. Dan Klein at the Cato Institute has published a good piece on the subject, “How Trust Is Achieved in Free Markets.”

New Hotel Tax a Bad Idea for Jefferson City

Posted on by David Stokes

On Feb. 8, the citizens of Jefferson City will vote on a proposal to increase the city’s hotel tax. If the proposal passes, this tax would increase from 3 percent to 7 percent, with the increased tax revenues earmarked to fund a new conference center. These hotel tax votes are often an easy choice for voters, because it can seem like an attractive idea to tax somebody else to fund your own public service or community asset. Although it may seem to be an easy decision, voters of Jefferson City should think seriously about the downside to the constant quest by governments at all levels to raise tax revenues.

Hotels in Jefferson City already experience a high tax burden. They pay commercial property tax rates and the Cole County property tax surcharge. The hotels must obtain business licenses, liquor licenses, restaurant health inspections, etc., just to open and operate. Guests at the hotels pay the standard state and city sales tax of 7.725 percent for the rooms, as well as Jefferson City’s current 3-percent charge on top of that.

The question is not whether the current taxes are reasonable. In comparison with most other cities, they are. But the voters of Jefferson City should consider whether this is the time to tell their elected officials “enough.” Voters in three suburbs of Saint Louis did exactly that in response to hotel tax proposals in November. Voters in Clayton, Richmond Heights (both within Saint Louis County), and Saint Peters (in Saint Charles County) overwhelmingly rejected hotel tax proposals at the polls. The voters sent a message to local elected officials that they wanted difficult budget issues to be dealt with through greater fiscal discipline, not higher taxes. The voters of Jefferson City should give strong consideration to saying the same thing.

The private sector is capable of providing a conference center if there is a genuine market for one in Jefferson City. The taxpayers do not need to build one, even if the “taxpayers” in this case are mostly visitors from other areas. The city of Saint Louis used tax dollars to build a convention center hotel a decade ago, an investment that has worked out poorly. The hotel was unable to make its bond payments and was literally sold on the courthouse steps in 2009.

Nobody knows whether Jefferson City’s proposed conference center would also fail. It is reasonable to suspect that demand for hotels in Jefferson City is more inelastic than in many other Missouri locations, because many of those who travel to Jefferson City do so because they have matters that require the visit, regardless of the cost. However, although Jefferson City may face a lower risk than many other cities of losing business after a hotel tax increase, it does not follow that the tax should be increased.

Conference centers are not a core responsibility of local governments. There is almost nothing about a conference center that fits the economic definition of a public good. The hotel that developers plan to build next to the conference center is privately funded, and the backers of that project will undoubtedly direct their investment more efficiently than the promoters of a publicly funded conference center. Private investment in the conference center would have greater positive consequences than public subsidy, and taxpayers would not be on the hook if the hotel fails.

The voters and taxpayers of Jefferson City should think twice about assigning the role of developer to city government. Although hotel guests may be an easy mark for higher taxes, this does not mean that voters should use them to enlarge the portfolio of city hall. Rejecting this tax proposal would tell Jefferson City’s leaders that the residents want responsible, limited government, not government expansion and higher taxes.

David Stokes is a policy analyst for the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

“We Ran From It the First Time We Saw It”

Posted on by Audrey Spalding

The above is a direct quote from a potential investor about a stalled development project in northern Boone County. The project’s developers promised a large motorsports venue, and hinted that perhaps Missouri’s own Carl Edwards, Jr., endorsed the project.

As the Columbia Tribune reported:

[Developers Richard] Stone, Edwards, David Babel, Curt Hardin and homebuilder Tony Stuart dreamed of a $45 million venue that would break ground by fall 2008. Municipal leaders and the few merchants who remained in the little towns of Sturgeon and Clark were ecstatic, convinced that better times were just ahead.

That was three years ago.

The story, if you pay attention to the Tribune‘s detailed reporting, has all the sorts of twists and turns of a development drama: a developer charged with a dozen criminal offenses (the article goes to great length to detail those), a development proposal with financial projection numbers that appeared to be “scam quality,” a NASCAR celebrity, and — sadly but predictably — a push for public subsidy.

In this case, the public subsidy took the form of tax increment financing (TIF), a mechanism whereby the additional taxes generated by improvements made to the development (presumably the new racetrack) are instead kept by the company. Fortunately, this particular TIF district has not been created, meaning that the taxpayers of Boone and Randolph counties have not yet begun to foot part of the bill for this mess.

However, this particular instance illustrates a common problem of publicly subsidized development projects: Development projects with a higher risk of failure (or perhaps those that assuredly will fail) are more likely to seek out public subsidy. After all, it takes time, effort, and some money to petition for public funds; developers pursuing projects with high likelihood of success are less likely to seek public handouts, because their time is better spent bettering their projects in order to make even greater profits.

As discussed on this blog before, when it comes to trying to pick economic winners and losers, the government usually picks losers. The winners are too busy making a profit to bother applying for subsidy.

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