“Regard It as Just as Desirable to Build a Chicken House as to Build a Cathedral”

Posted on by Sarah Brodsky

St. Louis was mentioned as a city that allows urban chicken farming in this article about an Indiana neighborhood and its chickens. (Thanks to Drudge Report for the link.)

I liked this part:

The urban chicken movement has businesses that sell equipment and offer tips for raising the birds.

“There are even ‘stealth’ chicken coops that look like trash cans,” Stulp said.

Camouflaged coops are an amusing reminder that some activities are better left legal and regulated. If you’re concerned about chickens getting loose and wandering the streets, you’d prefer they be kept in secure enclosures. But if raising chickens is illegal, their owners will try to hide them — sometimes in specially designed hidden coops that are completely functional, but possibly in improvised cages that sacrifice practicality for covertness.

In case you’re wondering, the quote in the title of this entry came from Frank Lloyd Wright.

St. Ann Could Become a “Pool” Sales Tax City

Posted on by David Stokes

Not just anyone can come up with attention-grabbing headlines like that. You are either born with the talent or not. Seriously, though, the above headline has it all. Mid-size suburb, detailed local sales tax issues … who wouldn’t jump at a chance to read this entire post?

My Tim Hardaway writing skills aside (that reference will be lost on just about every one of my readers, except for one loyal dude who reads from London), we all know how the current economy has really hit the financial health of malls and the cities that depend on them. One such city in St. Louis County is St. Ann, home to Northwest Plaza, which will go into foreclosure soon, and has been in trouble for some time. This will have a significant impact on St. Ann’s finances, but the city does have options.

Option one, which it will likely follow, would be to pour even more tax incentives into the property in an attempt to revive it. The St. Ann city manager is quoted in this Post-Dispatch article:

Conley said the structure of the public assistance for mall redevelopment remains. He noted that city officials hope for an eventual revival of St. Ann’s largest commercial property.

“I don’t think there’s anybody who would disagree that something needs to be done up there,” he said.

Well, I disagree, for whatever that is worth.

Option 2, which is probably a long-term solution with short-term budget pains, would be NOT to pour more tax dollars into a failing developement, and instead just become another sales tax pool city within St. Louis County. I doubt anyone in St. Ann is seriously considering this, although I would love to be wrong. If St. Ann became a pool city, it would benefit from growth around the county, and would not be so dependent on one particular mall. This move would increase the total amount of tax dollars available in the pool, and with St. Ann’s large population, the city would get a significant amount from it each year — although not near what they used to get when Northwest Plaza was a thriving mall. Those days are gone, however, and an investment in public dollars might change things around, or it might not. A switch to “B” or “Pool” status would be in the long-term interest of the city and its people.

Lest you think I am picking on St. Ann, I think Crestwood should do the exact same thing.

How Online Courses Can Help

Posted on by Sarah Brodsky

From some of the feedback I’ve received on my writing about virtual schools, I get the impression that readers think online education is about supplanting traditional schools. For example, Million writes that “the digital realm is not going to and cannot replace the physical one anytime soon,” and equates online courses with “taking kids out of classrooms.”

Some students do enroll in virtual schools full-time, but that’s not the only possible model for online education. And while a mass exodus of students from brick-and-mortar schools would certainly spur competition, more realistic scenarios would improve the education market too.

Online courses came to mind when I read this article in the Post-Dispatch about the discrepancy between graduation rates and scores on state tests. High schools are graduating some students who score below proficient on core high school subjects like algebra and English. All high schools require those courses for graduation, but the content students learn varies from district to district.

Virtual schools could boost the achievement of students in districts with less rigorous courses. If everyone sees that a district’s curriculum for algebra doesn’t prepare students for the state test, the students could take that course after school or during the summer through the online academy. The district would have to bring its course up to the level of the virtual schools, or enrollment for that course would plummet.

If all else failed, it could schedule the class in a computer lab and enroll students in the virtual school during class time. Districts no longer have the excuse that it would take them years to design a new curriculum, because online courses are ready for use and available in all districts.

Payday Loan Regulations Are Misguided

Posted on by Abhi Sivasailam

The Post-Dispatch featured an article this week exploring how “Payday loan dispute does not slow use.” The article focuses on several anecdotes — a mother of small children facing cuts to her utilities, a young bachelor who simply spends too much, a woman who must borrow to cover gambling losses, and an ACORN organizer who was forced to borrow to pay for groceries.

All of the anecdotes produce a visceral reaction — either one of sympathy or of strong moral consternation. It is natural to feel strongly when presented with stories of human struggle. It is foolish to immediately react to such emotions by letting slip those words, “There should be a law …”

Supporters of tighter payday loan regulations are motivated by the best intentions. They fail to recognize a few key points:

First, rates are high for a reason; they are driven by market forces. Justin Hauke, former policy analyst at the Show-Me Institute wrote:

Payday lenders charge high fees to ensure that they collect enough money from borrowers who are able to pay to compensate them for loans that end in default. If the Legislature caps payday loan rates, lenders will be forced to issue fewer of them — and then only to lower-risk creditors. And since payday loan consumers have the highest risk of default, they are the people most likely to be priced out of the market.

The effects of curbing rates, an interference with the free market, would serve to lower supply. Hauke wrote:

Several states have passed legislation in recent years limiting payday loan interest rates. Oregon passed such a law in June, arguing that it would help save consumers millions of dollars in interest. But in subsequent months, payday loan revenues have dropped more than 70 percent, and more than 100 loan establishments have closed. The result has been less access to credit for the thousands of Oregonians who rely on payday loans to offset unexpected expenses — such as emergency medical care — forcing them either to forego such expenses or seek credit in the black market.

In this light, regulation amounts to allowing the mistakes of a minority to be held up as cause for minimizing the freedom and choices of the responsible majority.

Second, better options than regulation exist, and can be pursued. If interest groups are passionate about alleviating the burden of payday loan clients, they may be able to do more good by diverting resources to educating at-risk populations, showing them how to better organize their finances to signal credit trustworthiness, and explaining the other lending options that may be available.

Third, by lowering rates and reducing the prevalence of legal payday loan establishments, at-risk populations are opened to the dangers of predatory lending in the black markets. Justin puts it well: “At least with a payday lender, default is settled in court. In the black market, it usually involves a crowbar.”

Economics of Our Health

Posted on by Josh Smith

There’s been a lot of talk lately about health care, especially at the suddenly very popular town hall–style meetings, which have seen both violence and passionate debate. As both David Stokes and I have argued, we are better off remaining civil. And, because health care is so important to us here at the Show-Me Institute, I thought I’d weigh in with some thoughts on health care reform.

If it were the case that a government solution, in the form of any act of Congress or national board of medical care, could provide service better than an actual competitive system, I would support it wholeheartedly, and would advocate it strongly. It’s worth pointing out, though, that what we have now is not a free market — it’s not even close.

Because of economic reality, no act of government would produce something better than a competitive system would, so long as the good or service in question is excludable (and medicine certainly is). This is because the price system operates in a way that produces an optimum allocation of resources, given limited availability of goods and information.

Health care in this country is broken because government intervention prevents competition from fixing it. Alleviation of licensing, regulation, and other burdens would encourage entrepreneurs to innovate cheaper forms of care. This is true not only of the providers of health care services, but also of health insurance provision. Right now, we are lucky we aren’t all getting the kind of “care” they get in McAllen, Texas. That’s a place where doctors are really exploiting the market power they are granted by the AMA monopoly and the current level of federally funded medicine (Medicare and Medicaid). I definitely recommend this New Yorker article — which we’ve linked to before — even though I disagree with the author’s conclusions about how to proceed, policy-wise.

And, for the record, medicine is not the best way to improve health. Sound counter-intuitive? Well, check this out:

our main problem in health policy is a huge overemphasis on medicine. The U.S. spends one sixth of national income on medicine, more than on all manufacturing. But health policy experts know that we see at best only weak aggregate relations between health and medicine, in contrast to apparently strong aggregate relations between health and many other factors, such as exercise, diet, sleep, smoking, pollution, climate, and social status. Cutting half of medical spending would seem to cost little in health, and yet would free up vast resources for other health and utility gains. To their shame, health experts have not said this loudly and clearly enough.

I added the emphasis for the “other factors,” because it’s important to realize which factors may make more of a difference than increasing medical treatment, which, unfortunately, is getting all the attention in the current debate.

The above quote is from a fantastic article by Robin Hanson. I HIGHLY recommend it to anyone concerned with making this country healthier.

Or, if you just want the latest coverage of Missouri’s town hall meetings from the Show-Me Institute’s roving reporter Audrey Spalding, check out her article on Policy Pulse.

MoDOT and Quotas

Posted on by Sarah Brodsky

This Post-Dispatch article describes how well Gateway Constructors is meeting quotas for hiring women and minorities. The percentage of minorities hired to work on Highway 40 is above the target; the number of women hired is a little low.

What if there aren’t that many women who want to work on Highway 40? It’s obviously harder to find them — as we can see, the contractor didn’t meet the target. MoDOT is telling its contractors to hunt high and low to hire a certain number of women, while men who are eager to work are passed over. The search for women entails some cost, so the quota is basically a tax on everyone else to benefit a few women who work in construction.

It’s interesting that the public libraries aren’t pressed to hire more female librarians, nor are public schools measured by the percentage of their teachers who are women. For some reason, the state deems it necessary to encourage women who work on highways but not women who do other kinds of public work.

The Massachusetts Health Care Experiment

Posted on by Stephen Feman

The changes in Massachusetts health care fascinate me. A program that Gov. Mitt Romney created in an effort to help his state morphed into something else. From the middle of America, it looks like that state is performing a scientific economic experiment, and the “lab rats” are the people of Massachusetts. The independence of each state is a longstanding American ideal, and the modicum of autonomy that each state has from the federal government allows Massachusetts to experiment with a plan that we may not want to do elsewhere. By reading their lab notes, however, we may learn something that can help Missourians.

Since Romney initiated “An Act Promoting Access to Health Care” in 2006, there has been an expansion of health coverage in that state. Currently, Massachusetts has nearly universal health care (approaching 97 percent), most of it supplied by private health insurance and paid for by a combination of employees and employers.

As many expected, despite the best efforts of the brightest people, costs continue to grow. The report from the Massachusetts Commission on the Health Care Payment System indicates that, “While the U.S. has the highest health care expenditures per capita among other industrialized countries, Massachusetts has among the highest health care costs in the U.S. In 2004, health care costs per capita in Massachusetts reached $6,683, and based on recent history, are projected to grow faster than for the U.S. as a whole.”

Although the cost issues have become a part of the national debate about health care, what seems overlooked is whether these changes will improve health. People can argue about how to pay the bill, but what if the result is no better than what we have now? Recent studies found that throughout the nation, adults receive just 55 percent of recommended care. If that is so, it may not matter who wins the health care debate; the result will still be less than desired.

Some years ago, a RAND experiment found that, in the short run, there were no clinically significant differences between the outcomes of people given free health care insurance and the outcomes of people who paid for health care insurance. Although that study was undertaken with relatively few patients, researchers hoped to find how patient copayments influenced the use of services. Its results, however, included information about whether people did any better with different insurance formats. During the study’s three years, one could “rule out clinically significant benefits from the additional services in the fee-for-service free plan relative to” the other groups. That is, although use of health care systems was related to out-of-pocket costs, during the study’s brief interval the clinical results showed that each group had similar outcomes.

Since completion of the RAND study, numerous investigations have shown economic and biologic long-term benefits to both individuals and society when people have regular access to health care. As stated by the Institute of Medicine, “A robust body of well-designed, high-quality research provides compelling find­ings about the harms of being uninsured and the benefits of gaining health insurance for both children and adults. Despite the availability of some safety net services, there is a chasm between the health care needs of people without health insurance and ac­cess to effective health care services. This gap results in needless illness, suffering, and even death.”

If the data about increasing costs, limited short run benefits, and long term societal values are combined, it seems that current health care reform arguments are aimed wrong. In fact, the Special Commission examining the Massachusetts Health Care Payment System may have just stumbled upon this problem. Their analysis found that fee-for-service health care is a primary cause of increased health care costs. That is because the fee-for-service system rewards service volume rather than outcomes. In the current system physicians are rewarded for doing things to patients, and whether any one gets better has become a secondary goal. That emphasis is wrong.

Now the Massachusetts Commission is proposing further changes. They want to develop another way to pay physicians for the work that doctors do. The new goal is to reward physicians if the patient gets better, and not to pay just for doing tests and procedures. How they are going to do that still remains a mystery. But isn’t it nice that this experiment is being conducted a half continent away, so we can observe it from a safe distance. Maybe we can learn something from them?

The Dangers of House Bill 148

Posted on by David Stokes

Gov. Jay Nixon has vetoed House Bill 148, which is one of those “omnibus” pieces of legislation, in this case involving the rules and regulations for local governments. The gov’s reason for vetoing the bill relate to the following section, which would have been truly awful for Missourians:

(6) Authorizes political subdivisions, for tax year 2009, to levy a property tax rate sufficient to generate as much revenue as was produced in the 2007 tax year, excluding new construction and improvements, as long as the rate does not exceed the greater of the rate in effect for the 1984 tax year or the most recent voter-approved rate. Currently, if a political subdivision experiences a decrease in assessed value, the subdivision may increase its tax rate ceiling up to the most recent voter- approved rate in order to receive the same amount of revenue as allowed in the previous year. Beginning August 28, 2009, the bill allows a political subdivision which experiences a decrease in assessed value to roll-up its tax rate to the greater of the rate in effect for the 1984 tax year or the most recent voter- approved rate in order to collect the same amount of tax revenue allowed in the previous year;

Thank God for the veto. I was stunned to see the significant margins by which this passed. I honestly think that many of the legislators who voted for this were not aware of this part. This paragraph nullifies the great work done previously by Sen. Mike Gibbons and property tax activists like Sarah Haenni in 2008’s Senate Bill 711, which made important changes to our assessment system and ends the practice of back-door assessment tax increases. Some of the elected officials who helped lead the effort to pass Senate Bill 711 voted in favor of this bill, and, again, I have to hope that they didn’t know what they were voting on in this very large bill.

We have advocacy limitations here at the Show-Me Institute, so I can’t come out and say that a particular vote or veto should be passed or overridden or whatever. However, we’re entirely free to point out positive or negative consequences of proposed legislation — and the changes in H.B. 148 would have been a disaster for Missouri taxpayers and property owners. Why anyone in the legislature would want to give local governments a blank check to raise property tax rates back to 1984 levels is beyond me. Using 1984 as a baseline for those levels was not a coincidence; it predates the current assessment system, and many 1984 property tax rates were much higher than they are now, given that rates have been lowered over time as property assessments increased.

I don’t want to single anyone out, but I repeat that there some of the people who voted for this bill are those that I cannot fathom supporting the portion quoted above. I am proud that my state rep, Jake Zimmerman, voted against it, as did my friend, John Diehl, and a number of St. Louis County reps of both parties. I just hope that, before the votes on overriding the veto take place, every state rep and senator (this terrible idea passed unanimously in the Senate) knows how much this bill could increase local property taxes.

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