Alarming Increase in Monetary Base May Lead to Long-Term Inflation

Posted on by Joseph Haslag

Joseph Haslag, economics professor at the University of Missouri–Columbia and executive vice president of the Show-Me Institute, explains in this radio commentary for KBIA 91.3 FM in Columbia that, although Federal Reserve Chairman Ben Bernanke has been fretting about deflation, the real danger in current Federal Reserve policy is the potential for long-term inflation. By increasing the monetary base at an alarming rate, the Federal Reserve hopes to meet the existing rising demand for money over other assets. This is fine as long as money demand and supply both grow at the same rate, but if the Federal Reserve doesn’t contract the money supply as the economy grows, it could lead to high inflation rates and unstable markets. “Sound monetary policy is critical for a developed country to function at a high level,” Haslag concludes. “We have seen that reestablishing credibility can be unpleasant once the government lets the inflation genie out of the bottle.”

 

Stimulus Package Is an Income Redistribution Scheme, Not an Income Expansion Scheme

Posted on by Joseph Haslag

Joseph Haslag, economics professor at the University of Missouri–Columbia and executive vice president of the Show-Me Institute, explains in for KBIA 91.3 FM in Columbia that real economic stimulus comes from thousands of little things, a wide array of market actions and decisions that can’t be anticipated or controlled by a centralized plan. “It will take some time for balance sheets to heal,” Haslag concludes, “but it will happen. Citizens should refrain from idly waiting for the illusory salvation of the stimulus package.”

Witch-Hunting for Robber Barons: The Standard Oil Story

Posted on by Lawrence Reed

On Jan. 20, 2006, the Show-Me Institute sponsored this presentation by Lawrence Reed, then the president of the Mackinac Center for Public Policy, presently the president of the Foundation for Economic Education. Reed explains the many flaws with the prevailing theory that Standard Oil was a monopoly or that the company’s founder and president, John Rockefeller, was exploitative — or, indeed, anything other than a shrewd and successful businessman serving his customers well. Ethelmae Humphreys, at the time a member of the Show-Me Institute’s board of directors, introduced the speech.

Show-Me Institute Open House – Keynote Speaker Arthur Laffer

Posted on by Art Laffer

Dr. Arthur Laffer discusses his essay “The Missouri Compromise,” which examines the effects of a state income tax on various states across the country, with a particular focus on Missouri and the potential benefits of replacing the income tax with a revenue-neutral sales tax. Laffer’s essay can be found here.

Laffer was the keynote speaker at the Show-Me Institute’s Open House, held Oct. 21, 2010.

Gov. Nixon’s Sky-High Travel Expenditures

Posted on by Christine Harbin

While Missouri faces a $500 million budget deficit, Gov. Jay Nixon has increased his frequent flights around the state, hiding the cost of his trips by charging the expenses to various state agencies. Contributors to Show-Me Daily have highlighted this issue previously. According to an Associated Press article by David Lieb, the Missouri House leadership recently introduced legislation to end this practice.

The new policy would increase transparency in the state budget, which is clearly lacking. Taxpayers are picking up the cost of this travel, so the sheer amount of this line item should not be hidden from them. If the costs of these trips are diffused across the budgets of multiple government agencies, taxpayers will not have a clear picture of the real costs of Gov. Nixon’s travel. What good does the Missouri Accountability Portal provide if it is so disorganized?

According to Lieb’s article:

Nixon often bills a specific agency for his flights. But he sometimes splits his travel cost among about a dozen state offices when the trips have no direct connection to specific agencies, such as his attendance at sporting events.

Does anybody seriously believe that Gov. Nixon’s attendance at a sporting event generates an increase in economic output for the state economy? Additionally, when the governor travels around the state to announce a handful of jobs here and there, doesn’t that travel expenditure partly negate the ostensible benefit of the jobs?

Even though the state government faces a budget shortfall, and even though Nixon has made cuts in other agencies, he increases his own travel budget. If the governor were serious about promoting fiscal responsibility, he would take measures to reduce these expenditures, but he doesn’t. The fiscally responsible thing to do would be to seek out cheaper substitutes, such as videoconferencing, or to cease holding multiple ceremonies throughout the state for a single project.

Missourians would be better off if they weren’t picking up the cost of Nixon’s trips. These expenditures decrease the funds available in agency budgets by unexpected amounts, which means that the governor’s travel comes at the expense of other programs. If the travel expenditures were reduced, Missourians could keep a greater proportion of their earnings.

Show-Me Institute Free-Market Field Trip No. 2: Payday Loans

Posted on by David Stokes

In this video, policy analyst David Stokes, accompanied by two research assistants, endeavors to get to the heart of the payday loan debate by … actually getting a payday loan. In many ways, the experience is not what you might expect. In celebration of his success at this questionable financial decision, Stokes compounds his bad behavior by going gambling at the casino with his new money. The axiom “The house always wins” was in no danger of being toppled. Even though money was lost, lessons were learned and nobody was hurt. Filmed on location at Saint Louis–area payday loan stores and casino on April 1, 2010.

Needed: An Alfred Kahn for Health Care Reform

Posted on by Andrew B. Wilson

In the annals of progressive thought, there was a fleeting moment when Ted Kennedy, Ralph Nader, and other left-wing icons sang the praises of unfettered free-market capitalism. This happened with the passage of the 1978 Airline Deregulation Act during Jimmy Carter’s presidency.

The recent passing of Alfred E. Kahn is a reminder of that remarkable moment — when leaders on both sides of the political and ideological spectrum agreed to deregulate the U.S. airline industry. In 1977, incoming President Carter appointed the flamboyant and outspoken Kahn as chairman of the Civil Aeronautics Board, the agency responsible for setting airline routes, schedules and fares. Kahn set out on a mission of writing himself and his agency out of a job — opening the industry to real competition for the first time. Kahn gave airlines the freedom to enter (and exit) domestic markets and to price as they pleased. He also allowed new low-cost, low-fare airlines to challenge the incumbents.
Continue reading “Needed: An Alfred Kahn for Health Care Reform”

Worth the Cost? A New View of Ballpark Village

Posted on by Thomas Duda

This week, the long-stalled Ballpark Village came back from the dead, one decade after it was first announced. The new project, consisting of an office building that will soon rise north of Busch Stadium, takes a much-reduced form from its original conception. Tim Logan reports on the Post-Dispatch‘s Building Blocks blog that the City’s Missouri Downtown Economic Stimulus Authority voted Wednesday to recommend the project to the St. Louis Board of Aldermen, which will consider legislation authorizing the project in the coming weeks.

Ballpark Village, April 2010, View to Northeast
Ballpark Village, April 2010, View to Northeast

The anchor tenant for the development, Stifel Financial, will relocate from its present downtown St. Louis headquarters, which stands six blocks north of Ballpark Village. Tax dollars, in the amount of at least $35 million and potentially increasing to $188 million, are essential to the project’s financing. These monies will be spent up-front by the developers, assuming that the project’s bonds find willing buyers. Despite assurances that the city of St. Louis will not need to cover potential shortfalls on the project’s bond revenues, the St. Louis Comptroller’s Office has reportedly expressed concern about the size of the proposed financial package and its fiscal impact on St. Louis city government.

Taxing districts at both the local and state levels will forgo revenues that they would otherwise collect in order to fund this project. The Missouri Downtown Economic Stimulus Act, like Tax Increment Financing, allows an authorized project to capture revenue growth from activities on the site. Unlike TIF, however, MODESA funding allows a development project to capture state tax dollars in addition to local tax dollars. Keep in mind that this off-budget spending will come from a city government that claims its inability to provide basic services should the earnings tax go away!

In the absence of economic growth, publicly funded projects like Ballpark Village simply move economic activity from one site to another, which may cause governments to run deficits. Government, therefore, must either cut spending by $35 million or raise taxes and fees to cover this shortfall.

Is increasing bonded indebtedness by a minimum of $100 per city resident worth the cost? Is this what city taxpayers signed up for  a decade ago, when the city of St. Louis eliminated the “Amusement Tax” on Cardinals tickets?

You be the judge.

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