A Lesson From the Land of 10,000 Lakes and Cheeseheads

In the short run, government has three ways to react to a budget deficit: raise taxes, borrow money, or reduce expenditures. In the long run, the government has to increase taxes in order to pay back the loan plus interest, so government has only two ways to react: raise taxes or reduce expenditures.

According to a recent article in Governing, Minnesota and Wisconsin, my two home states, are choosing the second strategy. Their state governments are starting to share services as a means to cut expenditures. From the article (link via the Wall Street Journal‘s Real Time Economics blog):

The Gopher and Badger states are looking to find efficiencies and save money on everything from sharing amusement ride inspectors to buying ammunition and tires. The task has not been easy, but in the year and a half since the report’s release, Minnesota and Wisconsin have shared resources, consolidated services, bartered and even joined forces on contracts for package delivery, software and institutional food.

The Show-Me State would be wise to follow the example of the Badger and Gopher states. Missouri borders eight states, so certainly there exist many opportunities to consolidate services in the style of Minnesota and Wisconsin. Raising additional tax revenue may be a simpler strategy to implement, but it doesn’t result in the same long-term savings and efficiency gains as sharing programs across state borders.

“Oh, I’m Not Here With These Fellas; I’ve Got a Pig in Competition Over at the Livestock Pavilion, and I Am Going to Win That Blue Ribbon!”*

SEDALIA — I am writing this from the Show-Me Institute booth at the Missouri State Fair! We are talking about individual liberty and limited government with all of the fairgoers.

If you are in Sedalia, stop by the exhibition hall between corn dogs to talk to us about free markets. For those of you who haven’t had a chance to stop by, here is a picture of our booth!

Show-Me Institute booth at the Missouri State Fair in Sedalia

* Title quote: Lenny at the State Fair, from That Thing You Do.

Highly Recommended School Reform Piece in the Kansas City Star

I enthusiastically encourage you to read this op-ed in the Kansas City Star about school reform options and challenges in Missouri. It is written by our friend, Earl Simms, of the Children’s Education Council of Missouri. The op-ed focuses on the hotly contested issue of allowing and/or requiring children in unaccredited school districts to enroll in and attend public schools in neighboring, accredited districts. Enjoy and discuss, and thanks to Combest for the link.

The Spirit of Radio

At around 5:05 this afternoon, I will be on the Mike Ferguson show on 93.9 FM The Eagle in Columbia, talking about government-subsidized broadband Internet access for rural areas. If you are not in Columbia, but would still like to listen to the show, you can listen online — provided you have a fast enough Internet connection. The invitation was extended to me based on this post I wrote a couple of weeks ago.

(Headline reference here, which is meant both to celebrate the Rush concert in Saint Louis this Sunday, and to annoy my colleague David Stokes.)

Is a Trash Case a Precursor to a Health Care Decision?

Last month, the Missouri Court of Appeals ruled that a St. Louis man cannot be compelled to purchase trash hauling service after he was able to demonstrate that he is a very diligent recycler and does not generate any trash. The Post-Dispatch had a story about the ruling yesterday. The trash plan for unincorporated St. Louis County was incredibly controversial about three years ago. It, along with ticket scalping, was one of the first major issues we debated and covered closely on this blog.

This is a very interesting ruling. I’m aware this ruling won’t actually establish a precedent for courts hearing lawsuits about the federal health care mandate (they’re in different jurisdictions, etc.), but it is still intriguing to note that one court has decided that the government cannot compel someone to purchase something for the public good.

Prior to the county’s trash plan, the law specified that you had to have trash service, but it was left completely up to the individual or neighborhood to acquire it. So, the man who won the lawsuit was probably technically violating the old ordinance for a long time, but nobody noticed or cared because he didn’t produce trash. Now, the hauler that exclusively covers his area wants his money. Thankfully, the court ruled in favor of the individual and against the county.

I think nuisance laws against allowing trash to accumulate on your property are sufficient legal powers for the county to enforce basic health codes against trash. If this man does not generate any trash, he should not have to pay for trash service. I agree with the appeals court ruling, and I wonder if future judges will think the same way about other goods and services. Replace “man who does not generate any trash” with “healthy 25-year-old person who does not need or want any health care,” and it will be interesting to see how the relevant cases are ultimately decided.

Free-Market Field Trip!

Last Wednesday, Show-Me Institute staff and interns ventured on our third free-market field trip. We went to Busch stadium to interact with one of the freer markets available here in Missouri: ticket scalping.

We assembled into four teams, starting out with either Cardinals tickets (two tickets normally valued at $39, although we bought them for $20 each) or money ($60). We each competed to try to improve our situation by engaging in voluntary market transactions.

Even ticket scalping can leave both parties better off! Without giving too much away, the video demonstrates a few key economics lessons, like information asymmetry — where one party has better information than the other. In this case, the experienced sellers understood the market much better than some of our teams did. Another lesson that comes up in the video is the idea of value: A ticket’s face value does not necessarily reflect how another party will value it, and thus it may be difficult to recoup a ticket’s nominal “worth” when selling it. Issues of supply and demand also came into play, as we were at a game on a hot day when tickets were not sold out.

Further lessons can be gleaned from the free-market explanations interspersed throughout the video. I encourage you to watch it!

U.S. PIRG Publication Misrepresents Substance of Show-Me Institute Article

While looking for some academic papers on Google Scholar, I took a moment, as an afterthought, to see whether the search engine was picking up work produced by Show-Me Institute scholars (it is). To my surprise, a brief article that I cowrote with intern Abhi Sivasailam was the first delivered result in a search for “Show-Me Institute” on Google Scholar.

Normally, I would be thrilled. But, sadly, the study wildly misrepresents Abhi’s and my work.

We were cited in a study published by U.S. Public Interest Research Group (PIRG), an organization that initially began as a public interest law firm founded by perennial presidential candidate Ralph Nader. There are now many state-based PIRGs, who, according to the organization’s mission statement, stand up to powerful special interest groups in order to advocate for the American public.

In February 2010, U.S. PIRG published “The Right Track: Building a 21st Century High-Speed Rail System for America,” about the benefits of intercity high-speed rail. In 2009, President Barack Obama invited states to apply for federal funds that would be devoted either to updating railroads or to building entirely new rail systems. Authors Tony Dutzik, Siena Kaplan, and Phineas Baxandall argue in the paper that additional funding is necessary to bring America up to speed, as it were.

“The worst, most costly mistake America can make going into the 21st century is to not invest adequate resources in upgrading and expanding our passenger rail network,” write Dutzik, Kaplan, and Baxandrall (emphasis theirs).

This blog post is not to argue with PIRG’s conclusion — I believe others can, and have, argued persuasively that government-provided, high-speed rail is costly and usually doesn’t deliver what’s promised. Instead, this post is about academic integrity.

U.S. PIRG cites Abhi and me as the source for the following:

Missouri has applied for funding to pave the way for future 90 or 110 mph service continuing from St. Louis to Kansas City. The projects would reduce delays on this corridor by 48 percent, increasing the number of trains arriving on time from 19 percent to over 80 percent.

The cited source is an article we wrote titled, “High-speed rail predicted to travel much slower than advertised.” I re-read the article, hoping to find where Dutzik, Kaplan, and Baxandrall could have interpreted our work to indicate that “Missouri has applied for funding to pave the way for future 90 or 110 mph service continuing from St. Louis to Kansas City.”

I can’t find specific text that backs up the 90 or 110 mph service to which the PIRG authors refer. I did find the following in our article:

[…] trains traveling the route between Kansas City and Saint Louis would travel much slower. According to the state’s preliminary application for federal funding, those trains would travel an average of 55 mph after improvements, a 5-mph increase from the current average speed.

And:

In order for passenger trains to reach a maximum speed of 110 mph on the route between Kansas City and Saint Louis, a large portion of the track would need to be rebuilt as a double track, Union Pacific spokesman Mark Davis said.

“I don’t think anyone is seriously thinking of higher than 90 between Kansas City and Saint Louis,” said Randal O’Toole, a senior fellow at the Cato Institute, who studies transportation issues.

In fact, a takeaway point of our article was that there is a difference between maximum speed and average speed. Just because some state governors say that a high-speed rail train will hit speeds of 100 miles per hour doesn’t mean that your travel will remain at that constant speed. More than likely, your average speed will be much slower, with the train hitting that maximum speed for a short duration of time.

PIRG also notes, in the sentence attributed to us, that “The projects would reduce delays on this corridor by 48 percent, increasing the number of trains arriving on time from 19 percent to over 80 percent.”

According to the state’s application, we wrote in our article, trains were rarely arriving on time in Missouri:

According to the preliminary application, only 18.6 percent of trains running between Kansas City and Saint Louis arrived on time during the federal fiscal year of 2008.

So, I suppose that’s how the authors arrived at the figure of 19 percent. And we did write that the Missouri Department of Transporation (MoDOT) had estimated that, with improvements, the percentage of trains arriving on time would increase to 80 percent (we wrote that the estimated figure was 80 percent, not over 80 percent, as written in the PIRG paper). But Abhi and I also noted that trains had been arriving on time more than 90 percent of the time in recent months. And, to my dismay, I cannot find in our own work the 48-percent delay reduction figure that PIRG attributes to us.

Furthermore, it is strange that the PIRG authors attributed these figures to a brief article written by Abhi and me, rather than to the entities and published reports that are the direct source of the estimates we used. We simply reported what the transit improvement claims were; we did not verify them.

Finally, we represent merely one citation of 238 in this particular U.S. PIRG publication. If our work was misrepresented, it is certainly possible that other authors or facts were misrepresented, as well.

I will let Abhi have the last word, via this statement that he sent to me:

That researchers affiliated with the Show-Me Institute have been critical of high-speed rail projects in the state is readily apparent. In fact, pieces of published scholarship and blog content can be read as direct critiques of fundamental arguments that lie at the core of the paper released by PIRG. It is important to stress, however, that these disagreements are not on trial in this post.

This post was motivated not by an inclination to re-engage debate on high speed rail, but rather to offer a clarification of prior work and expound on a teachable moment: misrepresentation of this nature, however slight, damages the academic enterprise. Though the transgression was minor, such acts of misrepresentation represent a deficiency in either academic integrity or academic rigor that can damage the credibility of all parties involved. Scholarship with such errors invites not just skepticism on the quality of sources, but on the quality of the contentions they support.

How “Sinful” Budgeting Hurts Business in Missouri

Hiking tax rates on cigarettes and alcohol would negatively affect businesses in Missouri, so the fact that the editorial board at the St. Louis Business Journal is promoting this paternalist policy is perplexing.

Raising the tax rates on “sin” products would be particularly harmful to convenience and grocery stores close to the state border, because they would lose business to states that assess lower tax rates relative to Missouri. As a similar consequence of this policy, fewer people and businesses would locate to Missouri because the costs of living and doing business would be higher here. By keeping its tax rate low relative to other states, Missouri can help ensure that its residents will shop within the state, and it can incite individuals located near the border to shop here, as well. As a consequence, Missouri can generate a higher amount of revenue.

Missouri residents and businesses would be better off if the state government pursued alternative strategies to address the budget deficit than increasing selective sales taxes on cigarettes and alcoholic beverages (or on fatty foods, soda, and tanning). If it created a low-tax environment instead, Missouri would attract more businesses and individuals to the state, and they would contribute additional tax revenue. Alternatively, if the state government stopped carving out large sections of the tax base and subsidizing the favored few, it would have fewer expenditures to cover.

Walk This Way, Talk This Way

As we’ve discussed before on Show-Me Daily, Missouri residents enjoy lower tax rates on “sin” products (e.g., beer, wine, spirits, cigarettes, and gasoline) than residents in neighboring states. In an editorial published on Friday, the St. Louis Business Journal editorial board argued that Missouri should increase its tax rates on these products as a means to cover its $600 million budget deficit.

Although I disagree with many of the points made in the editorial, and intend to address them in a future blog post, I find the following to be particularly egregious (emphasis mine):

This is more than a matter of budget balancing: It’s sound public policy. Higher taxes are meant to be a deterrent to behaviors that harm individuals and society as a whole.

Laws and the judicial system — not higher taxes — exist to deter individuals from harming others and society as whole. If a person causes physical harm to another person or property, then he or she gets sent to jail. If a person happens to view a behavior (i.e., smoking, consuming alcohol) as destructive, then he or she can choose not to engage in this behavior and perhaps persuade others to abstain also.

Every activity is associated with some level of risk, and individuals must weigh the costs and benefits of these activities. If I chose to engage in an activity, I accept the risk as a free adult. If I drive my car to work, I could crash into another car. If I walk instead, I could fall through an open manhole and break my leg. If I frequent the beach, I may get skin cancer. If I eat fatty food, I could develop heart disease.

As Peter McWilliams argues in Ain’t Nobody’s Business If You Do (which we read recently in the Show-Me Institute’s book club), it’s not the role of the government to protect individuals from risk or negative outcomes. He argues:

As we take risks, bad things will occasionally happen—that’s why they’re called risks. At that point, we must learn to shrug and say, “That’s life,” not, “Why isn’t there a law against this? Why isn’t the government protecting me from every possible negative occurrence I might get myself into?” When we, as adults, consent to do something—unless we are deceived—we become responsible for the outcome.

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