Ice-Cold Beer in a Red, White, and Blue Label

Posted on by Justin Hauke

One of the creators of the “SaveAB” website posted the following commentary on the Columbia Daily Tribune‘s blog:

“Americans don’t want the Statue of Liberty bought by the Saudis or the Washington Monument purchased by the Chinese. Shareholders should resist choosing dollars over American jobs. Selling out to the Belgians is not worth it ? because this is about more than beer: it’s about our jobs and our nation.”

While I certainly appreciate the sentiment and nostalgia surrounding the Anheuser-Busch drama, I cannot agree with the author’s logic. The InBev bid is a perfect example of what capitalism is all about — the migration of capital to the places where it can be used most productively. It is this free flow of capital that has powered the U.S. economy since its inception.

For example, during the past decade Toyota has created 36,632 new American jobs. Is Toyota destroying U.S. culture? No. It has been fundamental in fueling innovation in the automobile industry and ensuring that those 30-some-odd thousand families have a home to live in and food on their plates, and are able to contribute to the growth of the U.S. economy. In fact, there are currently more than 5.1 million Americans (4.4 percent of the entire labor force) employed by non-U.S. companies. If we deny Anheuser-Busch shareholders the right to choose whether to accept InBev’s bid, what are we saying about the long-term prospects of millions of Americans’ jobs?

Moreover, if foreign investment is such an “affront to democracy,” then why is the Missouri legislature paying Bombardier Aerospace (a Canadian airplane manufacturer) millions (of taxpayer money, no less!) to build a factory in Kansas City? If we rely on nationalistic sentiment, shouldn’t we demand that those jobs remain in Toronto? Or shouldn’t we demand that Anheuser-Busch bring back the jobs of the nearly 24,000 people it employs outside of the Saint Louis area? If we were to follow this kind of protectionist sentiment to its logical extreme, we would simply revert back to an economy of sustenance farmers, completely dependent upon our local economies for our entire means of production.

How “American” is that?

And the Award for Sensible Government Goes To …

Posted on by David Stokes

Alderman Anthony Smith of Bellefontaine Neighbors, come on down! You’ve won the June 2008 award for daring to ask just why the hell your medium-sized suburb in St. Louis County needs a full-time mayor with a full-time salary. The Post-Dispatch has the story here. My sharing of his concerns really has nothing to do with the questions about travel in the article; my question is, why is the mayor full-time to begin with? Full-time mayors are needed in large cities, not suburbs. As a fourth-class city, Bellefontaine Neighbors has the option to hire a city administrator to run day-to-day operations. As a larger-than-usual fourth-class city, it should do just that.

Suburban mayors should be part-time policymakers/cheerleaders for their community, not full-time economic development officers trying to give TIFs away like candy. It was stupid when Kinloch (population 449) made its mayor full-time last year. It was admirable when Frontenac ended its short experiment with a full-time mayor and went back to a part-time position with a qualified city administrator. Bellefontaine Neighbors would do just fine with a part-time mayor, and I wish Alderman Smith the best of luck in his efforts. I hope he at least gets a second next time he makes the motion.

Eminent Domain Decision Makes Economic Sense

Posted on by Dan Grana

Dave reported that the Missouri Supreme Court recently ruled in favor of property owners regarding the misuse of eminent domain. In addition to setting a much needed precedent, this ruling will have important economic consequences. Specifically, it promotes a slightly more equitable and efficient compensation procedure that, in turn, creates new disincentives for some unnecessary designations of blight.

Clearly, this ruling defends blight victims’ rights to just compensation. The owners of blighted properties are now armed to potentially claim
damages caused over time by the negative designation on their homes and
businesses. We can easily sympathize with businesses and homeowners who suffer for years from decreased revenues and property values because of the uncertainties inherent in owning "blight." Hopefully, deserving home and business owners will follow the Gladstone
Plaza Shopping Center’s lead by keeping the thorough financial records necessary to sue for damages. Although the court’s decision will by no means deliver fully the promises of the Fifth Amendment, it is a step in the right direction for a select group of property owners.

I contend that a move toward compensation at market value will permit greater economic efficiency as well. Simply put, if a development will be more beneficial to society than the current inhabitants of a parcel of land, its investors should be able to buy out this inferior market competition. Half-baked arguments about positive externalities and the failure of markets to deliver public goods should not suffice to construct legal barriers for a class of private conflicts that can usually be resolved by supply and demand. Even if the unavoidable difficulty of providing for public goods can theoretically be used as a justification for eminent domain, Missouri authorities have surely crossed the line from beneficial to harmful.

For the most part, current legal hurdles exist solely to favor developers (socially beneficial and otherwise) by allowing them to force away competition for property at inefficiently low prices. If those prices become less hampered by interference, society will better allocate its scarce resources into the most efficient avenues (see the Coase Theorem). Nonetheless, there are certainly cases in which eminent domain can be used for greater social efficiency, regardless of its moral ramifications. Because of these exceptions, I cannot provide a wholesale endorsement of the due criticism leveled at eminent domain abuses based solely on economic efficiency grounds. Even so, marginal decreases in the use of eminent domain would undoubtedly benefit society economically. A move toward market forces, then, is not only ethically right but economically sound. In a limited capacity, the recent court ruling represents such a move.

Additionally, this decision will cause some developers to think twice before seeking government assistance in dealing with resistant property owners. Faced with the threat of lawsuits, those developers who don’t intend to proceed quickly with their projects will be less willing to stake claims on other people’s property. Unfortunately, this specific case in Gladstone offers little promise to owners of property that is condemned so quickly that its initial blight designation causes no quantifiable harm. Nonetheless, the Supreme Court has offered a partial solution to one group of victims — individuals whose possessions hang in the uncertain limbo of pre-condemnation blight. This empowerment should at least deter future encroachments on property rights that won’t produce results within a somewhat reasonable time frame.

The recent court ruling is by no means a sufficient fix to Missouri’s struggle with eminent domain abuse. Because of its limited applicability, the decision will probably only benefit a handful of vigilant property owners. Nevertheless, those individuals will receive unprecedented relief that may establish a positive trend.

An Attempt at the Least Popular Post of All Time

Posted on by Patrick Eckelkamp

In case anyone in Missouri has been living under a rock recently, let me bring you up to speed. European beer giant InBev has made an unsolicited bid to buy St. Louis icon Anheuser-Busch for the small sum of $46.3 billion. As a native St. Louisian, and also a believer in free markets, my heart is really torn. As is the case with most Missourians, I believe St. Louis and Anheuser-Busch should and will be forever linked, but ultimately I trust in the free market and concede that a buyout may be in the best interest of both corporations. However, there has been some chatter that local and federal government officials may try to intervene to stop a local landmark from entering foreign hands.

Although I can understand where they are coming from (securing local jobs, pandering to voters, etc.) this blatant act of government interference is unnecessary and quite ridiculous. This is a possible acquisition between two publicly traded companies, and for government officials to even suggest impeding the process is outlandish. Officials even acknowledge there is nothing they can lawfully do, yet they insist on causing a commotion in hopes that InBev will retract its offer and ride off into the figurative sunset. There is no doubt that Anheuser-Busch has played an influential and charitable role in the development of St. Louis, but after all, it is a private corporation and if it decides selling to InBev is in the best interest of shareholders, no government official should try to obstruct the process. It is not the responsibility of government officials to determine what is best for a private entity, and they are grossly overstepping their boundaries in attempting to influence the outcome of this particular situation.

Personally, I hope the shareholders of Anheuser-Busch reject the offer and the organization remains a pillar of stability in St. Louis and throughout Missouri. After all, InBev Stadium just doesn’t have the same ring. With that said, if stockholders agree to a sale and the government continues to try invoking its (phantom) power to affect the outcome, it will just be another case of the government acting inappropriately and out of its realm of authority.

Ah … the politicking that takes place during an election year.

In Education Reform, Don’t Do More of the Same

Posted on by Sarah Brodsky

Massachusetts is experimenting with ways to improve academic performance, including expanding the school day. Roy Romer expresses his approval on Ed in ’08’s blog, commenting that this is the kind of reform Ed in ’08 is promoting:

If we’re going to give our students the tools necessary to compete in a globally competitive workforce, we are going to need to give our students more time and support for learning.

As we’ve seen, Ed in ’08 has great goals but tends to think inside the box. If schools are ineffective, then doing more of the same between the hours of 3:00 and 5:00 is not going to transform the education system.

On the other hand, a longer school day could work well if combined with other reforms. Some charter schools, such as KIPP schools, require students to attend class for extra hours and on Saturdays. And the Massachusetts school profiled in this article didn’t stop at lengthening the school day; it also added new art, music, and enrichment courses.

The advantage of combining a longer school day with parental choice is that the extra school time is targeted to the children who would gain the most from it. Parents might choose to send a child who’s struggling academically to a school with extra afternoon classes, but they might prefer a shorter school day for a child who’s already above grade level.

A Silver Lining!

Posted on by Dave Roland

Yesterday the Missouri Supreme Court issued an opinion that offers a glimmer of hope for the thousands of property owners across the state whose properties have been labeled "blighted" by local authorities.  The unanimous decision held that property owners have a right, under both the state and federal constitutions, to recover damages resulting from blight designations placed on their homes and businesses, even if the authorities have not proceeded with the condemnation. The court did say that it would be difficult for the owners to prove that the damages were the result of the blight designation, because it will (incorrectly) presume that cities only place blight designations on areas that are already in decline, but held that where a property owner can demonstrate that economic losses have resulted from the city’s action, both constitutions demand that property owners be compensated.

This decision is a welcome development. As we have noted before, Missouri has become the worst state in the nation in terms of abusing eminent domain, and thousands of property owners have suffered immensely because one government agency or another determined that their home or business was in a "blighted" area. Previously, the Missouri Supreme Court had suggested that those affected had no hope of recovering their losses unless the General Assembly passed laws requiring cities to compensate those whose property values were damaged by a blight designation, so it is extremely heartening to see that, when directly faced with the question, the Court recognized the constitutional imperative that cities must put property owners "in as good a position" as if the blight designation had never happened.

I regard this case as a strong step in a positive direction for folks in this state, as well as a sign that the Missouri Supreme Court may be warming up to the protection of citizens’ property rights, despite their decision earlier this year in the Tourkakis case.

Senators Stumble

Posted on by Patrick Eckelkamp

Just to follow up on Justin’s commentary …

Yesterday morning, after a heated struggle in the Senate, a bill that would have implemented a windfall tax on major oil companies was defeated. In typical fashion, oil companies were singled out for their "excess profit" by senators who are simply pandering to their constituents. In this time of economic trouble, it is not surprising that politicians are trying to deflect the spotlight from themselves and their failed policies onto the big oil companies by insinuating that they are doing something wrong by acting in a completely legal, free-market way. In no other profession is there such scrutiny for making a profit ?— in fact, we are generally encouraged to work hard and succeed. Isn’t that part of the American dream?

Also, our economy thrives when profits are up and people are working. However, it appears this is not encouraged when companies become increasingly wealthy. Rather than trying to stifle the profits of oil companies, as though it were some sort of deserved punishment, politicians (from both sides) should be focused on lowering gas prices and promoting energy alternatives. Even if a windfall tax were to be enacted, it likely would be counterproductive, with oil companies only increasing the price for consumers, to make up for the lost profits (Justin’s post is much more thorough on this economics aspect).

It really befuddles me that some members of Congress think that limiting profits for certain corporations is a good thing. If Congress wants a windfall tax for the oil industry, who’s next? My bet is on you, Warren Buffet. Perhaps some some comments by our neighbor to the east, Sen. Richard Durbin, are what really have me interested in this topic:

The oil companies need to know that there is a limit on how much profit they can take in this economy.

I didn’t realize that it was up to Senator Durbin to determine how much profit is too much. In a free-market economy, market forces will dictate when a consumer is no longer willing to spend. Can you imagine if Sen. Durbin were to say this to an average American family? There would be complete anarchy. If Durbin were to take this approach with the citizens in his state, I have a feeling he wouldn’t be reelected anytime soon. Thankfully, the bill didn’t pass and no one is going to be punished for doing something every American strives for: success.

To link this story back to Missouri (after all, we are Missouri-focused), as Justin pointed out, one of our state’s senators voted in favor of the windfall tax, but at least wasn’t quoted saying such outlandish things.

Populist Pontificating

Posted on by Justin Hauke

Claire McCaskill wants Congress to pass a windfall profits tax on oil companies.

What would be the effects?

Well, first of all, gas prices would be higher, not lower. Demand for gasoline is inelastic, at least in the short run. Gas station owners are already squeezing out a mere two cents in profit per gallon of gasoline sold. Therefore, with no real retail markup, the higher wholesale gasoline costs incurred by distributors would have to fall on consumers at the pump in order for the retailers to break even. So we’re worse off here. If you like paying $4.00 per gallon, how about if we add another 20 cents or so to that?

And which investors will pay for the tax — the rich or the broad middle class? Robert Shapiro, President Clinton’s former undersecretary of commerce, argues that ownership of industry shares is "broadly middle-class," with the majority represented by institutional investments in mutual funds, pension funds, and individual retirement accounts that are held on behalf of millions of ordinary Americans. This coincides with my previous post about energy investors and who benefits from oil profits.

And, lastly, the early 1980s experiment with a windfall profits tax suggests that tax revenues would be significantly lower than expected. When Congress passed the windfall profit tax in 1980, the Congressional Budget Office projected that it would raise $393 billion in tax revenues. According to Congressional Research Services, it only raised $80 billion. That would be enough revenue to run the government for about 10 days, based on the 2008 fiscal budget.

Remember, gas prices are about three times as high in Germany and other European countries, where combined excise taxes, fuel taxes, windfall profits taxes, and VAT taxes are passed on by oil companies to the consumers. Oh, and if you factor in the exchange rate, they’re about 4.5 times higher.

So why are we debating this, again?

You Can’t Sue Us … We Had No Right to Do What We Did!

Posted on by Dave Roland

Tomorrow morning, the Eighth Circuit Court of Appeals will hear arguments in a rather unusual case. Jim Roos graduated from Concordia Seminary in 1970 and eventually founded Sanctuary in the Ordinary, a unique sort of ministry that provides ultra-low-income housing for those who would otherwise have nowhere to go, and tries to teach tenants some of the basics about living as part of a neighborhood. Roos renovated a number of properties in the McRee Town neighborhood, which later came to be targeted for redevelopment by the city of St. Louis. When it became clear that the city intended to use eminent domain to tear down the buildings that Roos’ ministry was trying to use for good, he painted a huge sign on one of them calling for an end to eminent domain abuse.

As it turns out, the city — and especially the Land Clearance Redevelopment Authority (LCRA) — didn’t much care for the criticism. The government cited Roos for illegally displaying a sign without a permit. Even though his right to free speech means that the city had no proper authority to require Roos to seek their permission to express his opinion about eminent domain, Roos complied with the city’s directive and applied for a permit. The LCRA persuaded the city’s Building and Inspection (B&I) Division to deny the permit, because Roos had not first gotten the LCRA’s permission to file the application. When Roos then sought the LCRA’s permission to pursue a sign permit, the LCRA denied his request. With the help of the Institute for Justice, Roos sued to enforce his constitutional rights to free speech.

When the city saw that the lawsuit sought to hold the LCRA accountable for its role in denying Roos’ constitutional freedoms, officials argued that the court should not hold the LCRA accountable because it had no authority to deny the permit in the first place. In other words, the city argued (and, remarkably, the trial court agreed!) that Roos was not entitled to a judgment that the LCRA had acted unlawfully because … well … the LCRA had acted unlawfully.

It is important for all of us that the Eighth Circuit reverses the lower court’s decision. If judges refuse to punish (or even recognize) constitutional violations resulting from improper assertions of governmental authority, agencies such as the LCRA will be able to continue intimidating people without fear of reprisal. These agencies already bully too many people just by using the powers already given them under the law — they surely should not be allowed to get away with making up new rules in order to exercise even more control over our lives.

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