McCaskill Targets Earmarks, Again

Posted on by David Stokes

Combest has a number of links to articles today about Sen. Claire McCaskill’s repeated targeting of the earmark process in Congress.

Defenders of earmarks, which include Rep. Ron Paul and his fans (of which I am one, although I didn’t support him in the GOP primary in ’08), like to state that earmarking gives elected officials the power to distribute money instead of bureaucrats. For example, if Congress appropriated $10 million for widgets, it can either trust bureaucrats to determine who gets which widget, or the elected officials can decide themselves how to spend the $10 million on widget-related projects. Either way, $10 million is spent on widgets. With earmarks, they argue, voters can more easily render judgments upon the choices that were made.

That argument is valid, but only in a short-term sense: It holds true for the market day of whatever bill is being voted on. In the long run, however, the power to earmark a bill — which involves taking appropriated money and directing its use in a manner that does not get specifically debated or voted on — is a big part of the continuing pressure to spend more and more money every year. If members of Congress did not have the power to direct money quickly and easily back to their constituents, some of them would undeniably have more of an incentive to reduce expenditures. If they could not earmark, they would have to go through the longer and more transparent process of getting individual approval for each of their pet projects, with up and down votes for all of the various amendments and proposals. No doubt much of the spending would remain. At some point, though, when it becomes more difficult to get projects approved, there would be less spending. If the process became more open and obvious, some members of Congress might think twice about how self-serving their projects appear.

Earmarking is one of the central issues in the problem of targeted benefits and dispersed costs that is central to the phenomenon of pork barrel spending.

Once again, I commend Sen. McCaskill for her efforts in this regard.

“The Rest of Us Are Supposed to Join in a National Conversation”

Posted on by Sarah Brodsky

The above quote is from a post on Diner’s Journal about the federal government’s endorsement of locavores. Actually, it’s more than just an endorsement — we’re not talking about a little pat on the back or an official designation, like the honor that Missouri conferred on crayfish. It’s a concerted effort to impose the locavore ideal on unsuspecting taxpayers.

Public school districts, which have long been bastions of rent-seeking, play a key role in the plan. School districts buy lots of food to serve at lunch time; the federal government will give them more money, for the express purpose of buying local food. In case some district doesn’t get the hint, officials from the Department of Agriculture will visit its cafeterias and help it get with the program.

Federal support for locavores goes beyond public schools. It includes hefty subsidies for farmers:

This week, the top people at the U.S.D.A. announced they would be handing out almost $65 million to help connect small farmers — especially those using sustainable practices — with people who want to eat local food.

Does the government merely intend to create a market, to link sellers and buyers? I don’t think so, because that market already exists. Take a look at this instructive comment, which was posted in response to a YouTube video from the U.S. Department of Agriculture:

I am a local poultry and egg producer in Missouri. […] I think the biggest problem I am facing and others here in? my community is. There are a lot more people who would love to be able to buy locally but it is too expensive compared to the big producers.

And here’s another YouTube video, in which the Department of Agriculture interviews a consumer and asks her whether she knows where her food comes from and whether she knows her farmer. She says she would shop at farmers’ markets more often — if they weren’t so pricey! Farmers and consumers are already able to connect with each other. The reason we don’t see more transactions between local farmers and fresh-food eaters is that the price of local food is higher than the amount that most people want to pay.

By the way, “Do you know your farmer?” isn’t the most relevant question in a complex economy. It’s like asking, “Do you know the factory worker who supervised the production of your No. 2 pencil?” or “Do you know the computer programmer who wrote the word processor you’re using?” We can’t possibly trace the origins of all products we use.

The Power of Saying “No”

Posted on by Dave Roland

When we were still dating, my wife once said to me: “I don’t like to be told ‘no.'” “No” is a word that a lot of people dislike — we don’t like hearing it, and many of us also have a hard time saying it. From a free-market perspective, however, it is a word that can have tremendous power, especially when large numbers of people use it at the same time and in the same way.

Back in June, I heard a conversation on “Bob Edwards Weekend” with the filmmakers behind Food, Inc., in which they made a point about the power that food consumers can wield by virtue of the fact that they make choices every day about where and what they will eat. Consumers tell companies what they like and dislike by the way they spend. We don’t have to look to state or federal governments to accomplish change in the food industry. If consumers let companies know that it’s important enough for them to maintain certain standards for the way their food is raised or prepared that they will favor businesses that conform to their preference, eventually even corporations as large as Walmart or McDonald’s will take notice.

Just a month or so ago, this principle was on full (and ironic) display. Many patrons of Whole Foods shop there because of the company’s commitment to high-quality natural and organic products. But when the company’s CEO published an op-ed advocating a free-market approach to health care reform and opposing President Barack Obama’s proposals, many previously loyal Whole Foods shoppers decided to take their money elsewhere to communicate their displeasure. This sort of revolt can be incredibly effective, although bringing these issues into such high profile might also inspire (as it did in the case of Whole Foods) new patronage from a group of people who had otherwise been disinterested in a company’s goods or services.

Utilizing such a “boycott” strategy, however, means that those saying “no” must be willing to give up goods and services that they would really prefer to have — at least until the market responds to their demands. And, because these consumers don’t want to give up those goods and services, they all-too-frequently utilize the coercive power of government to force providers to offer those goods and services on the consumers’ chosen terms.

Examples of this mentality leap from recent headlines. Don’t like the limitations offered by insurance companies, but you’re worried about going uninsured? Get your state government to mandate the kind of coverage you want. Wish that your favorite restaurant didn’t permit smoking, but you can’t bear to go without their signature dish? Get your city or county to pass a smoking ban. Want to build a corporate headquarters, but you can’t get the current property owners to sell at the price you want? Get your city to use eminent domain. Want an iPhone or a Blackberry Storm, but you don’t want to sign a long-term contract with AT&T or Verizon? Demand that Congress outlaw exclusive service agreements.

In every one of these examples, consumers have the power to change the market as long as they have the willpower to say “no.” Think health insurance premiums are too high? Refuse to carry insurance until a company offers a deal that you think is reasonable. Want to enjoy your meals without a smoky environment? Tell that restaurant owner that you won’t be back until his establishment has gone smoke-free. Don’t think that a property owner’s asking price is reasonable? Choose a different location or figure out a way to build around them. Prefer to stick with your favorite wireless service provider? Tell Apple or Blackberry that you won’t purchase their products until you are free to use them with a carrier of your own choosing.

The challenge here is that realizing the power of “no” in this context requires a willingness to sacrifice having something that you like in the short term so that in the long term you will be able to enjoy it under more favorable circumstances. Our nation still has a fast-food mentality when it comes to our desires, which is why it is so tempting to use the government as a shortcut to get what we want. But giving the government the authority to destroy someone else’s liberty — to the extent that they must give you what you want on the terms that you demand — is a double-edged sword. That same power can (and almost certainly will) be turned back against you.

They’re Talking About Fat Taxes Assiduously at Slate

Posted on by Christine Harbin

On Monday, in “Let Them Drink Water!,” Daniel Engber talked about the regressive nature of selective taxes on soda and junk food.

Then, on Tuesday, William Saletan discussed his unease about the growing ambitions of the food police:

You can ban the Marlboros, tax the Cokes, and zone the Whoppers. But you’ll get [my] Fresca when you pry it from [my] cold, dead hands.

He argues that paternalistic tax policies concern the left and the right, except in different ways. While the right wants to regulate what you do in the bedroom, the left wants to regulate what you have long been allowed to do in public (e.g., smoking clove cigarettes).

Saletan observes that, in the context of the fat tax debate, the left and the right have swapped their usual talking points:

To justify taxes on unhealthy food, the lifestyle regulators are stretching the evidence about obesity and addiction. […] Liberals like to talk about a Republican war on science, but it turns out that they’re just as willing to bend facts. In wars of piety, science has no friends.

Both are interesting editorials, and they relate to my previous pieces about these taxes.

“Count the Day Won When, Turning on Its Axis …”

Posted on by Sarah Brodsky

“This earth imposes no additional taxes.” So wrote the prescient Franklin P. Adams.

The proposed soda tax is all over the media; here is a good summary article in the New York Times.

It’s interesting that no one suggests a soda buyback. Buybacks, I’ve been told, get guns off the streets. So, why not sodas? Because people would just go out and buy more sodas? Maybe they could do that with guns, too …

The buyback thought experiment illustrates that a soda tax is not really about saving people from the dangers of soda, power drinks, and fruit juice. If that were the goal, there are many possible avenues to reduce soda consumption other than buybacks, such as public service messages (like the ads in New York City) or soda-free zones around schools. The main purpose of a soda tax is to generate revenue.

If the tax passes, I wonder how long it will take before legislators call for a soda tax holiday?

What Would a Soda Tax Mean for Missouri?

Posted on by Christine Harbin

Twenty two states have already enacted selective taxes on soda. In two of these states, Virginia and Illinois, this tax is in addition to the general food tax.

Missouri doesn’t have a soda tax yet. We Missourians are fortunate to enjoy some of the most permissive sin tax policies, compared to other states. For example, Missouri has the second lowest state cigarette tax — it’s $0.17 per pack, compared to a national average of $1.30. Additionally, Missouri is tied with my home state, Wisconsin, for the second-lowest state beer tax — $0.06 per gallon, compared to to a national average of $0.28.

According to this revenue calculator for soft drink taxes from the Rudd Center for Food Policy and Obesity at Yale University, if Missouri slapped a $0.01 tax on sugar-sweetened beverages, the state would generate more than $285 million in 2010 alone. If this $0.01 tax were expanded to include diet beverages, this number would balloon to more than $460 million.

How high does the tax have to rise in order for consumers to be responsive (i.e., drink less soda)? Is the government legitimately trying to change consumers’ behavior, or is it simply trying to raise extra tax revenue?

SMI in the Springfield News-Leader Today

Posted on by David Stokes

A commentary in the Springfield News-Leader today cited a recent op-ed of ours (OK, of mine) about city utilities in Springfield. The commentary noted how, despite its pension issues, the Springfield city government is far from broke, and offered as one piece of evidence the value of its utility holdings. That is where we came in:

Further, the Show-Me Institute estimated that City Utilities’ water division alone could be sold for $75 million.

That was a very rough estimate, as I readily admitted in the piece on Springfield and City Utilities that this figure came from, but it is nonetheless based on reasonable calculations that I discussed in detail. The author of today’s piece is right on: Springfield is not broke, and it does have options in fixing the city’s pension problems. Those options may or may not involve a tax increase, but selling the municipal utilities is a very realistic option that has already been done by Florissant and Webster Groves here in Missouri, to give just two examples.

Things I Like About the BASIS Charter Schools

Posted on by Sarah Brodsky

I wrote in my last post about BASIS that the schools haven’t yet demonstrated the potential to scale up to a level that would change the education system. BASIS has helped small classes of motivated students excel, which is a praiseworthy accomplishment. But if the United States is to compete with India and China, the education system will have to find a way to reach the students who are several grades behind, who don’t speak English, or who aren’t on the lookout for accelerated schools that don’t advertise. And they will have to succeed with more than a few hundred students.

With that said, I agree completely with Bob Compton’s statement in the comments: “My conclusion is every community should have at least one BASIS Charter school.” I would be very happy for this choice to be available to parents everywhere. Even if BASIS fails to have a broad, transformational effect on American eduction, it’s still a good school, and the option should be there for people who want it.

These are some things BASIS does that I hope other schools will emulate:

  1. BASIS pays teachers according to their performance. This system attracts good teachers and rewards them for teaching well. Here, BASIS is a bright spot in U.S. education; the vast majority of schools instead reward seniority or other factors that are irrelevant to student learning.

  2. BASIS teachers are knowledgeable in the subjects they teach. Although I find the requirement that teachers have a graduate degree in their subject to be somewhat arbitrary — the most important qualification is that they have expertise, not a diploma — these teachers are better prepared than their counterparts in other schools, who often earn degrees in education theory without bothering to study the information they’re supposed to convey to students.

  3. BASIS doesn’t require a test for admissions, nor does it ask entering students to prove “giftedness.” BASIS reminds me of a gifted-and-talented magnet, with one important difference: The students don’t have to be gifted. Undoubtedly, the admissions process involves a lot of self-selection, but that’s a better form of selection than the one practiced by traditional accelerated schools. It’s unfair when a high-level middle school education is limited to those who passed intelligence tests. At BASIS, it may be that not all students can keep up, but at least the lottery winners can give it their best try.

St. Louisans Are Smarter Than the Post-Dispatch Implies

Posted on by Caitlin Hartsell

Last month, the St. Louis Post-Dispatch published an editorial critiquing the Show-Me Institute’s study of earnings taxes. It rejected both the type of study and its conclusions — which is unwarranted, on both counts. In taking issue with the model, the Post-Dispatch mentioned an alternate study as “proof” that the institute was wrong:

In 2005, the East-West Gateway Council of Governments actually asked area residents (what a research concept!) about their most important considerations in deciding where to live over the next eight to 10 years.

My graduate research methods class this semester allows me to apply some knowledge: The Post-Dispatch is referring to a qualitative research study, which is typically an initial model for a topic that has not been well studied, or something that cannot be captured with numbers. (One might conduct a qualitative study to get an idea of what needs to be studied more rigorously.) Qualitative studies are subjective, and are influenced by the researcher, the wording of questions, the population interviewed, and how honest the interviewee chooses to be.

Quantitative studies — manipulating data, like in an “abstract model” — are considered higher-tiered studies. That is not to say that quantitative studies are strictly better than qualitative; both have their purposes and their flaws. However, for something like a tax and housing decision, which involves both people choosing whether to live or not to live in an area, a model is better able to predict and explain phenomena. An interview study given to people living in St. Louis city excludes the data points of those people and businesses that have already lived there and chose to locate elsewhere — people that may be difficult to find.

There are some people who would choose to live in the city whether it has a 10-percent earnings tax or no earnings tax at all — but these are not the people at issue in an economic model. A model studies the people on the margin, the limited subset of people for whom that 1 percent is a tipping point between opportunity sets that otherwise have equal attractiveness. Some marginal group of people who weigh the pros and cons of each jurisdiction and find they add up to similar opportunities will choose to live or create a business in a suburb instead of the city, in order to capture that extra 1 percent. (And, although it may seem small, a 1-percent tax over the lifetime of a career adds up significantly.)

Another point of contention for the Post-Dispatch is the amount of money that the tax generates annually ($153.1 million in 2008). The article pointed out that this is similar to the size of the Metropolitan Police Department budget, and then conflated removing the earnings tax with getting rid of the police department — something that the Show-Me Institute never argued. At any rate, the Post-Dispatch seems unaware of our follow-up earnings tax study, which outlined a viable way to replace revenue lost from eliminating the earnings tax — a land value tax that would provide much less distortion of natural economic growth and development in the city, because of its fixed value.

St. Louis County and the entire metropolitan area is proportionally much larger than the city itself; in 2006, the city ranked 51st-largest in the United States, while the entire metropolitan area ranked 19th. People are not avoiding the St. Louis area in general, they are avoiding St. Louis city in particular — and with good reason. Good economists recognize that some people consider finances and tax rates to help them make rational decisions when choosing a residence or a business location. This confidence in people’s ability to weigh the incentives they face is well supported by actual data.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging