Is the Federal Stimulus Benefiting Missouri at the Expense of Wisconsin?

Posted on by Christine Harbin

The editorial board at my hometown newspaper, the La Crosse Tribune, is critical of the way that federal stimulus funds are being spent in Wisconsin. An editorial published yesterday, “They’re feeling the stimulus … in Missouri,” laments that public works projects in western Wisconsin are being awarded to out-of-state contractors instead of to local ones.

So here’s a scenario that’s a result of force-feeding the U.S. economy through the tube of federal agencies: While $12.5 million in stimulus money will fund projects on French Island and Brice Prairie, projects that local contractors say they could handle, only a handful of out-of-state firms are allowed to bid them.

In one case, a Kansas City, Mo., company got the nod to build a $6.1 million district office on French Island for the U.S. Fish and Wildlife Service. And only three firms, all out of state – one them a Missouri-based subsidiary of an Australian steel company – are in the running to handle two projects at the Upper Mississippi Environmental Sciences Center.

It’s rare that I read an article that interests me on a both a biographical and a public policy level. Initially, I feel compelled to pick sides — but which should I support: the state in which I lived for 20 years or the state in which I live presently? Ultimately, I must decide that my conflict of interest is false, because I disagree that the subject of the editorial is even an issue.

The purpose of the fiscal stimulus was to incite economic recovery on a national level, not for certain states on an individual level. Therefore, the La Crosse Tribune shouldn’t lament the fact that a project wasn’t awarded to a Wisconsin-based firm — instead, it should celebrate the fact it went to an American firm. Furthermore, federal money comes from taxpayers in all states, not just those who live in Wisconsin or in Missouri. State officials and residents shouldn’t feel that their companies are entitled to federal stimulus money simply because a project lies within its borders.

States win and lose business from each other all the time in response to supply and demand — this is the beauty of the interstate trade. Wisconsin lost at least one free-market research analyst to Missouri in the last year, along with other business, but the editorial board at the La Crosse Tribune didn’t write about that. Why, then, does it bring this particular project to light? There are probably many public works projects in Missouri that are bid on by out-of-state vendors, perhaps even from Wisconsin.

As some readers point out in the comment section, awarding the project to a Missouri-based firm may not result in as many lost jobs for Wisconsin individuals and families as suggested in the article. This is because the Missouri firm could use local laborers, including perhaps the employees of the Wisconsin-based firms that were outbid.

The practice of soliciting bids from many contractors, regardless of their origin, is very good because it encourages competition and its positive consequences. If many contractors bid for a single public works project, it drives down cost and taxpayers get more for their money.

A Tale of Two Courts

Posted on by John Payne

Barbara Geisman, an aide to Saint Louis Mayor Francis Slay has questioned whether the city needs a drug court and recommended cutting funding for the court by $325,000. Now, I’m all for cutting the budget of pretty much any government agency, but if this just shifts people that would be going to drug court into the more punitive side of our criminal justice system, it will likely wind up costing Missouri taxpayers more in the long run.

Geisman’s view has been challenged by William Ray Price Jr., Chief Justice of the Missouri Supreme Court, who last week called for increased drug court funding.

From the Post-Dispatch:

“We know drug courts work. We have more than 8,500 graduates,” said Price, who is seeking $2 million more a year for drug courts. “We know the tremendous savings that result from drug courts in Missouri.”

As for studies about drug courts, Price had this to say in his speech to the state House and Senate:

At one fourth to one fifth the cost of incarceration, more than one half of drug court participants graduate, and recidivism is only in the 10 percent range. The last five meta studies on drug courts, from all across the United States, have shown that drug courts reduce crime from 8 to 26 percent.

As the editorial board of the Post-Dispatch noted, this is the low-hanging fruit in our justice system. I will reiterate that the cheapest of all alternatives here is to not to criminalize the behavior of nonviolent drug offenders at all, but since that is not currently on the table, drug courts are an improvement over prison — even if you think people who consume politically incorrect substances should be forced by the state to change their behavior.

Know Your Farmer, Know Your Chicken

Posted on by Sarah Brodsky

An op-ed in the Daily Iowan refutes some arguments against urban chickens, including one I hadn’t heard before:

Bailey was quoted suggesting that urban chickens undermine local economies, saying, “We have a lot of small farmers around here making chickens and eggs available for sale. My fundamental question is: Why aren’t we supporting the regional economy?”

Here is the op-ed’s excellent response:

I would argue that urban chickens would in fact strengthen Iowa’s economy, especially when we consider unique and important businesses such as the McMurry Hatchery in Webster City, known nationally for its collection of rare chicken breeds. Likewise, I highly doubt Bailey would make such an argument when considering whether citizens ought to be allowed to have vegetable gardens.

City residents are also part of the economy, and they shouldn’t have to pass up opportunities to create value for themselves in order to protect people who are already farming. Transactions in which money changes hands aren’t the only economic activity that matters.

In fact, the freedom to raise your own chickens is an important check on the farmers’ power. When customers can build their own chicken coops, farmers aren’t able to overcharge them for eggs or sell lower-quality eggs than what the market demands. If farmers don’t offer acceptable price and quality, customers will walk away and raise chickens themselves.

Clarification in the Fair Tax Proposal Debate

Posted on by Christine Harbin

Today, the Missouri Budget Project published a piece that attempts to address the Show-Me Institute study about the “Fair Tax” by Dr. Joseph Haslag and Abhi Sivasailam. There are a number of points of contention that I will identify here.

  • The Missouri Budget Project misattributes numbers to the Show-Me Institute.

    The Missouri Budget Project claims that the Show-Me Institute revised its number to from 5.11 to 6.25 percent. This second estimated percentage belongs to former state Rep. Ed Robb, not to a Show-Me Institute publication. Furthermore, Robb’s calculations were his independent evaluation of a specific piece of legislation, not a reference to the Show-Me Institute study written by Dr. Haslag and Abhi Sivasailam.

  • The Missouri Budget Project takes the exemptions out of the tax base, but they do not take them out of the rebate amount. Also, they don’t communicate why these products and services are inappropriate to tax and should therefore be exempted.

  • The Missouri Budget Project ignores the issue of growth rate in its calculations.

    Assuming a rate of growth is standard procedure, and the Show-Me Institute study includes one, but Missouri Budget Project does not. Are they assuming a zero percent growth rate?

    Dr. Haslag elaborated on this point of contention in his comment responding to “Matt” on a recent blog post by David Stokes:

    The strongest case for PCE, in my view, is that reducing the tax rate on income results in faster growth. Neither MBP nor you have offered an alternative that increases the economy’s growth rate. No doubt, the tax on PCE is distortionary. To do the right experiment, we need a model of economic growth that accounts for facts observed in the world. The Ak model does so. Moreover, the economy’s equilibrium growth rate is a function of the income tax rate. By my calculations, reducing the income tax rate adds more than one-half percentage point to the state’s annual growth rate. This growth more than offsets the excess burden associated with the tax on consumer spending.

  • After taking exemptions out of the tax base, the Missouri Budget Project applies the the amount of the rebate to a broad base. This is a very big difference.

    Dr. Haslag responds to this in the same blog comment:

    Along those lines, every time something is exempted, the rebate must shrink since the rebate is based on the concept of a refund on things that people buy that are subject to the tax. If you want to talk about accuracy, you should be aware that MBP and others have fixed the rebate while shrinking the tax base. In other words, they change the definition of the tax base and apply that definition while keeping the old definition of the tax base when they compute the rebate. There are two equations in two unknowns and the definitions must be the same across the two equations. MBP, citing ITEP, violate this definition across the two equations.

  • The debate between the Missouri Budget Project and the Show-Me Institute concerns the size of the tax base and the size of the rebate, not the arithmetic.

    Dr. Haslag again:

    Since my calculations are made as transparent as possible, you can check my math. No one is questioning the accuracy of my arithmetic. Indeed, you are asserting my assumptions are wrong. Under your premises, my assumptions are wrong. I do not accept your premises. I digress, but I want things to be as transparent as possible.

It’s laudable that Missouri Budget Project is increasing its effort at making its analysis more transparent. At least its newest piece provides more detail about how the organization arrived at its estimate.

The Necessity of Art

Posted on by John Payne

Even in the midst of a huge budgetary crisis, it’s nice to see that Missouri taxpayers will continue to support the finer things in life:

In the budget proposed by Gov. Jay Nixon last month, the Missouri Arts Council, part of the Missouri Department of Economic Development, would not receive a direct appropriation from the state to fund nonprofit arts organizations, including the Allied Arts Council of St. Joseph.

However, Mr. Nixon has recommended that the agency be given the ability to spend $9.7 million in the next fiscal year, the same spending authority it was given during the current fiscal year. The agency is provided federal dollars and money it receives from a trust fund that collects tax revenues from out-of-state professional athletes and entertainers who perform in Missouri.

Supporters of this spending might point out that the money comes from the federal government, but I’m sure that money could be spent on more essential services and help bring Missouri at least somewhat out of its fiscal black hole.

Art is undoubtedly a wonderful thing, but it does not require government funding.  People who enjoy art — myself included — can continue to spend their own money on it. If artists and artistic institutions cannot attract such patronage on their own merits, then people clearly do not value it, and the government should not be funding it.

One Way to Get Rid of the Jennings School District’s Handheld Computers

Posted on by Sarah Brodsky

A school district in Florida found itself on the Drudge Report after it used stimulus funds to buy iPods. The iPods, which the district will give to parents in exchange for completing a survey, cost $350,000.

That’s a small sum compared to the $1.25 million the Jennings School District spent on hand-held computers for students. Most of those computers ended up in storage. Jennings is now selling some of the devices for a fraction of what it paid, and it plans to distribute others to graduating students over the course of a few years.

It would be wiser for Jennings to emulate the Florida district and give away whatever computers it can’t sell, as soon as possible. If the district gives them all out at once, recipients may be able to find some use for them. If it waits to hand them out to graduates in a couple of years, they’ll be completely obsolete. By then, graduates won’t want to do anything with the computers — except maybe to display them with their caps and gowns as mementos.

There’s no need to attach a survey; just get rid of the devices. But if Jennings does give them to survey participants, I can imagine what a common response will be: “Stop wasting money on gadgets that students don’t use!”

Serving Local Food Is a Daunting Task for School Districts

Posted on by Sarah Brodsky

As we saw in Columbia, Missouri school districts that search in vain for local food to serve are getting a lesson on “where their food comes from.” I’ll give you a hint: It’s not from the Midwest. Indiana is now running into the same problem:

Indiana school districts are lagging behind the rest of the country in procuring locally grown fruits and vegetables for students.

It turns out that buying local food just isn’t practical for Indiana districts:

“I don’t know what local farmers could grow that could last through a school year, but it would be nice if they could,” said Joanne Baierwalter, food service director for Muncie schools. “Potatoes, maybe, but where would you store them? Who would deliver them?”

Some local food advocates would respond that districts should buy up every local produce item when it’s harvested, then carefully preserve it to serve when school is in session. I’m left wondering: When did districts get out of the business of educating kids in order to become canneries?

Negative Consequences of Reviewing Tax Credit Applications in the Missouri Legislature

Posted on by Christine Harbin

As Ben Wieder reported yesterday in the Columbia Missourian:

Senators who would be responsible for reviewing tax credit applications under a proposed bill are mixed on whether they should have the authority to do so.

I hope that the Missouri legislature ultimately decides that it shouldn’t have the authority, because this policy would have several negative consequences.

First, the legislature would be committed to a time-consuming review process. If the legislature spends this much time determining whether it should even have the authority to review tax credit applications, it would spend at least as much time arriving at a conclusion when actually reviewing the applications.

Second, subjecting tax credits to the appropriations process would discourage businesses from relocating to Missouri. Wieder introduces this idea in the article. Businesses would locate themselves in other states out of fear that the Missouri legislature would ultimately deny their application, or because they are not recipients of targeted tax credits in Missouri.

“What businesses need is certainty,” [State Economic Development Director David] Kerr said. “If it’s not certain, they will go to a state where they know what they’re getting.”

Third, if the legislature has the authority to decide which specific applications receive tax credits and which don’t, then there is an increased incentive for applicants to seek the favor of elected officials. This would aggravate the already-uneven playing field and encourage special interests.

Instead of providing tax credits that are targeted to specific businesses or industries, it should work to create an environment that affects all parties equally, such as reducing corporate income taxes or eliminating the earnings tax.

Because We Haven’t Banned Enough Products Yet

Posted on by John Payne

Some legislators in Jefferson City are trying to ban a drug called K2. The Post-Dispatch‘s Political Fix blog explains the situation:

Legislators say the spread of K2, a “herbal incense” more commonly referred to as a synthetic marijuana, is an epidemic.

Missouri state Rep. Ward Franz, R-West Plains sponsored a bill that would add K2 to Missouri’s list of illegal drugs. That bill was heard before the House Public Safety committee Tuesday.

“There are so many people, including adults, saying its legal so we think it’s safe, and that is not the case,” Franz said.

West Plains Police Department Detective Shawn Rhoades said in West Plains, students as young as middle school have been experimenting with the drugs. Last month, a West Plains high school student was hospitalized after smoking K2.

The dried herbs come in 3-gram packages of various flavors, and are available online and in several stores in the St. Louis area for about $30 – less than the cost of a tank of gas.

“We don’t know much about this, but it’s going to end up killing somebody,” Franz said.

There are so many flaws in the reasoning behind this bill that it would take a lengthy essay to unravel them all — and the commenters on the post have made a great start — but here are some of the more rudimentary ones.

Judging by the fact that I have never even heard of K2, I doubt its use is all that widespread — but, even if it were widespread, it could not be considered an epidemic. Epidemics are diseases that are extremely communicable and infect others even when they take steps to avoid infection. K2 is a drug that people have to consume (voluntarily, unless someone forces them to do so, or they are tricked) in order to feel its effects.

Furthermore, it is a very foolish person indeed who believes that any product that is not illegal is therefore safe. Just to stay in the realm of drugs, drinking a fifth of whiskey and smoking three packs of cigarettes a day is hardly safe, but it is perfectly legal. A free society is supposed to allow people to take such risks, provided they do not harm anyone else in the process.

Next comes the appeal that we must ban K2 to protect the children, because some middle school students have used it and one high school student was hospitalized after using it (note that the story didn’t say the student was hospitalized because of K2; that’s a possibility, but the article does not confirm the scenario). Well, I got drunk for the first time in middle school, and high school students are hospitalized all the time for drinking. Does that mean we should completely ban alcohol?

The paragraph about the cost of K2 is essentially meaningless. Three grams costs $30, it tells us, but that’s completely useless information without knowing the active dose. If three grams is what it takes to get high, I sincerely doubt K2 will ever catch on in any major way.

Finally, the legislator who introduced the bill is convinced it will kill somebody if it is not banned, but given the fact that he just admitted he knows little about the drug, I’m guessing that his certainty is based on exactly zero toxicological evidence. I don’t know specifically how K2 differs from marijuana, but unless it is dramatically more dangerous than its organic cousin, it is — for all intents and purposes — impossible to overdose on the drug.

Later in the article, a different legislator claims, “This has no legitimate use in society that we’re aware of.” Well, that depends on your definition of “legitimate”. If people are buying it and coming back for more, they must be enjoying it. Is enjoyment not a legitimate use? If not, I wonder whether the General Assembly should next take up the issue of banning carnivals. After all, the Scat routinely makes people sick, and it’s only a matter of time before one of the carts flies off the Zipper.

Finally, there is a presumption on the part of supporters of a ban that the legislation will be effective. Perhaps they should reflect on the history of marijuana prohibition. Marijuana is far more popular today than it was when it was originally banned in 1937. That trend may not repeat itself if K2 is banned, because people might simply opt to smoke the already widely available original as opposed to the newly developed synthetic, but no ban will keep people from altering their consciousness.

Back in high school, I was a policy debater, and in policy debate, the affirmative team advancing a policy proposal had the burden of proof to show that the policy was necessary. Each plan had to meet five so-called “stock issues” to prove it was good policy. Foremost among those were “solvency,” “harms,” and “significance” — meaning that the plan had to solve a significant problem that had major harms. If this proposal to ban K2 were advanced in a high school policy debate, it would lose without the negative team having to say a word because those advancing it have not shown that there is a significant problem or harm associated with the status quo, nor that the policy would actually achieve its intended goal. It’s a pity that the ban proposal will inevitably receive more consideration (and likely pass) in the General Assembly than it would from a high school debate judge.

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