Not Against Children With Autism ? Against Mandates

Posted on by Caitlin Hartsell

As the legislative session comes to a close this week, a number of bills have supporters who are eager to see them passed. Two of those bills, H.B. 1311 and H.B. 1341, would succeed in raising the cost of health insurance for all Missourians by requiring state-regulated private health insurance companies — those covering small- and medium-sized businesses — to cover up to $55,000 annually in screenings and therapy for children with autism spectrum disorders. I explained in a previous post why mandates raise the cost of health insurance for everyone, pricing some people out of the insurance market. As of this afternoon, these bills will be advancing to conference and will be subject to one final vote.

This morning, I received an email message from a group that supports the autism bill urging its supporters to contact the House speaker, who they believed had been preventing the bill from reaching conference for a final vote. The email mentions that the speaker’s family is involved with the Ozark Center for Autism in Joplin, and questions how he can support causes that help autism spectrum people, yet also oppose the bill.

There is a disconnect in that logic. Opposing the insurance mandate does not indicate a lack of caring about autistic children and their families. Instead, it may follow from a recognition that government mandates necessarily increase health insurance costs for everyone. This hurts the families and children who suffer from conditions that are not state-protected. It also hurts individuals who can no longer afford their insurance premiums because increased premium costs have priced some marginal number of them out of the market. Opposing the bill demonstrates an understanding that the proposed legislation has effects other than the immediately foreseeable subsidy for autistic children, but also the unseen effects for individuals who have not been granted the protection of a similar state mandate.

This example clearly demarcates the differing approaches taken by competing political ideologies. The Ozark Center for Autism is a private charity that specializes in providing the applied behavior analysis therapy that the mandate seeks to cover. Supporting this group is an active measure to help autism-spectrum children without creating a government mandate. Supporting the activities of a private charity does not increase the costs of health insurance for other individuals.

Government mandates, on the other hand, raise health care costs for the rest of the population — even when those mandates are targeted to disabilities or disorders that we particularly hope will be supported. It would be prohibitively expensive to mandate coverage of every potential health problem, but increased competition in health insurance markets would allow families to choose the coverage that best suits them. Individuals who feel strongly about helping those who are afflicted with a certain condition can donate to a private charity that provides services to assist those who can’t afford treatments on their own. Involving the government is not the only solution to such problems, nor the most effective one.

Ethics Reform and Constitutional Principles

Posted on by Dave Roland

One of the hot topics in Missouri policy debate over the past several days has been Senate Bill 844, the legislature’s current attempt at ethics reform. Patrick Tuohey over at the Missouri Record just published a column I wrote assessing the constitutional questions raised by the bill that passed the House of Representatives last week. You’ll have to read the column to get the details, but suffice it to say that the bill merits some of the criticism that various media outlets have leveled against it.

Illinois Legislature Voting on Increasing Tax Collections in Missouri

Posted on by David Stokes

Illinois is voting tonight on whether to raise their cigarette tax by a full $1. If this passes — and I don’t care either way, as a non-smoker who doesn’t live in Illinois — there can be no doubt it will be good for tobacco tax collections in Missouri. Nobody can doubt that at least a small portion of Illinois residents will shift their tobacco purchases to Missouri and other nearby states, leading to more business and higher tax collections here, but without any increase in Missouri smokers’ costs.

I would guess that most Illinois residents who can easily purchase smokes or gas in Missouri — such as the many St. Clair and Madison County residents who work in downtown St. Louis — already do so. The current tax difference on cigarettes is large enough to distort economic decisions. If the Illinois legislature increases it by another $1, the marginal changes might not be as large as one would expect, but they will certainly exist, and to Missouri’s benefit.

A Minor Point About Minimum Wage

Posted on by Josh Smith

The first job I ever got paid for was probably mowing lawns in the ’90s when I was a teen. Earning $10 per lawn sometimes didn’t seem worth it while pushing the mower in the sweltering heat — but I had a friend named Jonathon who, with a ton of initiative and some help from his dad, started a small operation where he mowed several lawns every weekend all summer long to begin saving for college.

The first job for which I ever received a paycheck was developing photos at Walgreens, right around the time I turned 18. I made $6 per hour, and developed lots of photos and stocked lots of sodas and milk during my time there. I never felt entitled to any more money than the people I worked for back then felt inclined to pay me, and I now understand the economic rationale for my relatively low pay back then: I wasn’t very productive.

Compared to Jonathon, or even to the photo clerks who had been there longer than me, it was obvious that I couldn’t do what they did in the same period of time. Jonathon mowed several lawns every week because he made it a point to develop relationships with customers that would last all summer, and touched base with them to make sure they were getting the service they wanted. More senior Walgreens clerks were better at juggling many tasks and completing all the little tasks that needed doing, often because they had both experience and initiative.

By and large, people earn in proportion to what they produce. The Post-Dispatch ran a very well-written op-ed today by 17-year-old Miles Larson, which seems to lack this insight (link via John Combest). Larson argues from an assumption that, given the opportunity, businesses will pay their employees as little as possible. This is true in a sense, but ignores the fact that businesses employ people at all because they produce something valuable. If the value of their production is much higher than the wage they are paid, it creates an incentive for competing businesses to offer to pay them more, and steal them away as an employee. Usually employers are smart enough not to let that happen — not least of which is because they don’t want to have to train a replacement. Most of the time, they just pay employees what they are worth.

There’s a reason that so many teenagers earn minimum wage: They are simply less productive than older, more experienced workers. As one study from the Show-Me Institute pointed out, most workers who earn minimum wage are young and still in school, while older workers — even poor ones — tend to earn well above minimum wage.

Younger workers earn less because they are less productive, not because employers are predatory. Minimum wage is not a refuge for the poor and underprivileged, it is a barrier preventing people whose labor is worth less than $7.25 per hour from selling their time to employers, leading to greater unemployment among the very demographic that minimum wage laws are ostensibly designed to protect.

Coming Soon: Using Tanks to Collect on Parking Tickets!

Posted on by John Payne

Video of a February SWAT raid in Columbia was recently released and has been causing something of an uproar. The article accompanied by the video on the Columbia Daily Tribune‘s website currently has over 450 comments, most of them disapproving of the police officers’ tactics, which included shooting suspect Jonathan Whitworth’s two dogs while his wife and young son were present. I doubt many people would complain if the police employed such aggressive tactics in response to a hostage situation or a bank robbery, but all the police had to show for the violence was a misdemeanor amount of marijuana and paraphernalia.

Regardless of your opinions about marijuana, I think we can all agree that it is an inappropriate use of force to call out the SWAT team for misdemeanor offenses. Granted, the police argue that they suspected Whitworth was selling marijuana, and it is certainly possible that they were right but happened to raid his house when he was essentially sold out. However, the fact that the police department’s intelligence indicated that Whitworth’s son was not present when, in fact, he lived there suggests that they did not really do their homework on the case.

This case highlights the need for greater information about the use of SWAT raids in Missouri, but it is hardly an isolated incident. Cheye Calvo is the mayor of Berwyn Heights, Md., and in 2008 the Prince George’s County Sheriff’s Department deployed a SWAT team to his house after a package containing drugs meant for someone else was delivered to his house. In that case, as well, the officers shot and killed Calvo’s dogs, two Labrador retrievers. (They always seem to shoot the dogs.) Calvo fought back and was instrumental in passing a law in Maryland that requires all police departments in the state to report when and why they deploy SWAT teams. The results so far in Maryland have not been encouraging:

Over the last six months of 2009, SWAT teams were deployed 804 times in the state of Maryland, or about 4.5 times per day. In Prince George’s County alone, with its 850,000 residents, a SWAT team was deployed about once per day. According to a Baltimore Sun analysis, 94 percent of the state’s SWAT deployments were used to serve search or arrest warrants, leaving just 6 percent in response to the kinds of barricades, bank robberies, hostage takings, and emergency situations for which SWAT teams were originally intended.

If Missouri police uses SWAT forces for similar purposes, we have a right to know and a duty to do something about it.

Matt Holliday, Truman Day, and “Freakonomics”

Posted on by David Stokes

This post actually has nothing to do with Matt Holliday, but it does regard holidays in general, and I thought adding him into the title of this entry would be good for the ‘ol Google hits. I love the Freakonomics franchise: books, blog, lectures, and all. But today I came across a post I thoroughly disagreed with, and one that also directly relates to a policy debate in Missouri.

Daniel Hamermesh, whose short posts on microeconomics-related subjects I really enjoy, writes that we need more national holidays because Americans deserve more time off of work, like Europeans. To this, I say: If you want more time off work, start your own business, hire employees who can do the work when you are out, and take as many — or as few — days off as you like. The idea that it is the role of the government to give us more time off just buys into the idea that the government should serve as mother-protector, and the rest of us as dependent children. (Yes, I do sometimes work on the national holidays that we have. At a prior job, I used to work on holidays regularly.)

This question applies here in Missouri because our state government has long taken off Truman’s birthday. That is one of the issues surrounding lesser national holidays (not naming any examples, lest I upset some overly profound interest group): In reality, legislating additional holidays would only lead to paid days off for government workers and bankers. Most of us would still have to work or use a vacation day if we wanted to take that day off, as well.

But back to Truman Day. It has been proposed that the state should cut its budget by eliminating Truman Day as a state holiday. It is my understanding that this would save money because some state workers are still required to work on that day (like prison guards and highway patrolmen), and they are currently paid time-and-a-half to do so. The Associated Press has reported that state employees will still get Truman Day off next week, no matter the final decision, but I support the effort to eliminate it as a state holiday. If state employees really want to take that day off, they can use some of their generous vacation time. Otherwise, go to work like the rest of us.

Thanks to Combest for the AP link.

State and Local Government Employment and Payroll Data in Missouri Follows National Trend

Posted on by Christine Harbin

This month, the Cato Institute published a bulletin titled “Employee Compensation in State and Local Governments,” in which the author examines state and local compensation costs:

State and local governments face large budget deficits as revenues have stagnated and spending has remained at high levels.

I used the Show-Me Institute’s newest web tool, Interactive Database for Economic Analysis by State, to isolate state and local government employment and payroll data from U.S. Census. Next, I used this inflation calculator from the Bureau of Labor Statistics to adjust the data to 2008 dollars.

The following graph shows this information for all states for 2008. Wyoming has the highest number of public employees per capita, at 927, and Nevada had the lowest, at 437. Missouri was in the middle — it was ranked the 29th highest (alternatively, the 23rd lowest) in this category:

2008 State Rankings
Click to enlarge.

The data for Missouri reflect the general growth in the size of government described in the Cato bulletin. From 1993 to 2008, the number of total employees grew by 29 percent, the number of full-time employees grew by 27 percent, and the number of part-time employees grew by 44 percent.

The data also show that payroll is growing at a faster rate than the number of employees. From 1993 to 2008, after adjusting for inflation, total monthly payroll grew by31 percent, full-time payroll grew by 30 percent, and part-time payroll grew by 55 percent:

Payroll 1993-2008

  

FTE&PTE_Number
Click to enlarge.

Given this rate of growth in monthly payroll and number of employees, Missouri’s present budgetary problems are no surprise to me.

Dreadful Assessment Lawsuit in Platte County

Posted on by David Stokes

A simply atrocious lawsuit has been filed in Platte County (which includes part of Kansas City), according to the St. Joseph News-Press, regarding the assessment of a power plant there. You might think, from the opposition, that the power plant had received a tax exemption, or a TIF, or a CID, but no. People are complaining — and suing — because the new plants were assessed at a reduced rate while they were under construction.

If you go out and build your dream home with a worth of $500,000, should your county begin taxing you at a rate based on a half-million dollar property as soon as you lay the cornerstone, or wait until the house is completed and you move in? I have to believe that every single person reading this (which is a very large number of people, I trust), thinks the full assessment should start when the house is complete. In Missouri, in fact, that is exactly how it works. The full assessment applies according to the date of the final passing inspection / occupancy permit / utility hookup, and the annual taxes are prorated for that year. (Unlike cars or boats, which are taxed as of Jan. 1, real estate can be prorated for taxes; also, the land would have been fully taxable during contruction.) Presumably, the land for the power plants was fully assessed during the construction, and the building was assessed at 50 percent (the article does not make a distinction). That seems perfectly reasonable to me. Now that the project is finished, the company is paying taxes based on its full assessment. Anyway, the final decision should rest with the voters who elect, or unelect, the assessor — not on a lawsuit.

The single silliest (putting it nicely) statement in the article belongs to one of the lawyers in the case:  

“It’s been difficult for school districts to have a voice in the assessment process,”

I will gladly stand corrected if anyone can show me one place anywhere in Missouri law that says school districts are supposed to have a voice in assessments — or any taxing district of any type, for that matter. TIF commissions and tax exemptions are not an answer to this challenge; they deal with rates and abatements, not assessments. Assessors are supposed to be independent, so that they can set market assessments as fairly as possible, from which various taxing districts can set their rates. School districts are in no way, shape, or form supposed to have a voice in those valuation decisions. It is just an unbelievable statement.

Monopolies Seek Further Rate Hike Legislation

Posted on by Caitlin Hartsell

The St. Louis Post-Dispatch editorial board wrote a piece yesterday about a number of bills in the legislature that would allow utility companies to request rate hikes every six months, as opposed to the current policy that limits a change to every 11 months. The Public Service Commission regulates the rates of investor-owned utilities, like Ameren electric and Laclede gas.

From the article:

Under the proposed new law, rate hike cases could last no more than six months, meaning utilities could file two requests each year.

That’s not just two rate hike cases for each electric company, including AmerenUE. It also means extra rate cases for water companies, including Missouri American Water, which is seeking a 21 percent rate hike, and for gas companies, including Laclede Gas, which has a $52.6 million rate hike request before utility regulators.

Last year, when AmerenUE raised its rates by 8 percent after a 12.1-percent increase the previous year, the utility’s president justified it in order to continue “maintaining reliable electric service.” He also said:

“Much of the increase covers the costs of projects initiated to improve the reliability of our electric system, the costs of environmental and efficiency improvements at our generating plants, and the costs of fuel for those plants.”

It is hard to evaluate the validity of these claims without a field of competitors providing greater incentives for efficiency and cost reduction. That competition doesn’t exist, though, because utilities are generally viewed as a natural monopoly, an industry that requires economies of scale so large that it is most efficient to have a single supplier. As a result, municipalities generally restrict entry into utility markets. In The Concise Encyclopedia of Economics, economist David Henderson pointed out that this restriction is probably unnecessary:

Economists tend to oppose regulating entry. The reason is as follows: If the industry really is a natural monopoly, then preventing new competitors from entering is unnecessary because no competitor would want to enter anyway. If, on the other hand, the industry is not a natural monopoly, then preventing competition is undesirable. Either way, preventing entry does not make sense.

In “The Myth of the Natural Monopoly,” Loyola University economics professor Thomas J. DiLorenzo cited economist Walter J. Primeaux’s findings from more than 20 years of studying electrical utilities and competition:

  • Contrary to natural monopoly theory, costs are actually lower where there are two firms operating;

  • Contrary to natural monopoly theory, there is no more excess capacity under competition than under monopoly in the electric utility industry;

  • The theory of natural monopoly fails on every count: competition exists, price wars are not “serious,” there is better consumer service and lower prices with competition, competition persists for very long periods of time, and consumers themselves prefer competition to regulated monopoly;

If a utility is providing the lowest price, a competitor’s challenge will not be a serious threat. Competition itself — or the potential for competition — can keep prices low. Regulatory boards, on the other hand, historically have not been successful in lowering prices, as DiLorenzo noted:

In one of the first statistical studies of the effects of rate regulation in the electric utilities industry, published in 1962, George Stigler and Claire Friedland found no significant differences in prices and profits of utilities with and without regulatory commissions from 1917 to 1932. Early rate regulators did not benefit the consumer, but were rather “captured” by the industry, as happened in so many other industries, from trucking to airlines to cable television.

If barriers to entry are low enough, the potential for competition can increase efficiency and cost reduction in existing utilities. Instead of a focus on how often a utility company can change its rates, Missouri residents would benefit more from lowered regulatory barriers to entry in utility markets. In that case, future rate increases — like the recent decision to increase rates by 3 percent in order to promote energy efficiency — will be weighed against the possibility of a competitor attracting market share through lower prices.

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