Show-Me Institute 2006 Annual Report
Tour of Missouri’s Value Yet to Be Determined
World-class cycling came to Missouri. For one week in mid-September, Missourians were offered an intimate look at the sport. Judging by the crowds and the enthusiastic press, the state embraced the Tour of Missouri and consumed the product of watching cyclists whizz by at 30 miles per hour.
There has been some criticism of state officials, including in this blog, arguing that the state’s return on its investment is negative. I have not seen the final tally, but suppose that Missouri State Government paid $1 million to sponsor the Tour. On average, between 3 and 4 cents of every dollar of Gross State Product (GSP) is received by Missouri’s General Revenue Fund. Thus, the break-even point is somewhere between $25 million and $33 million in additional GSP that would have to be generated by the Tour of Missouri. I have seen the estimated economic impact from the Tour de Georgia and am skeptical. The bottom line is that it is unlikely that the Tour of Missouri created enough new jobs or new physical capital to generate an additional $25 million of GSP. Nor were there enough idle resources — such as empty hotel rooms — used by out-of-state fans and participants to add that much to the Missouri economy. Rather, what we saw was people substituting the goods and services associated with the Tour of Missouri, displacing other forms of entertainment. As such, I would agree with the narrow economic calculation of the rate of return; it was probably negative.
Does this mean that the State of Missouri should not have sponsored the event with any funding? That answer is yet to be determined. Economic theory indicates that governments do improve welfare when they use resources to overcome coordination failures in the market. In this case, can one imagine that the Tour of Missouri would have been an entertainment offering without the state government’s sponsorship? No. It is difficult to coordinate the numerous activities necessary to put on such a cycling festival; profit-motivated entrepreneurs are probably incapable of solving the coordination problem. Hence, there is a role for government to solve these issues and provide its citizens with this form of entertainment.
The rate-of-return argument notwithstanding, stewards of the state resources must be vigilant. Over time, the justifiable size of state sponsorship will decline as the coordinating problems decline. There will always be issues with state roads and protection that require some state intervention. However, the initial mobilizing services will disappear in several years. If the Tour of Missouri is valuable enough to Missouri citizens, it will survive declining state sponsorship. Ultimately, market forces will determine the value to this enterprise just as it vets all goods and services that consumers choose from. It will take several years to assess the outcome, though there are hints from the revealed preferences of the thousands of people lining the Tour route.
Parents as Customers
A parent writes to the St. Louis Post-Dispatch that he’s upset the schools’ CEO isn’t attending the Parent Assembly:
As a parent of two children in the district, I have received dozens of automated phone calls and mailings over the past months informing me that parental involvement is the key to successful schools. The governor’s machinations with Mr. Sullivan’s appointment and Mr. Sullivan’s repeated failure to meet with district parents make a mockery of the idea.
The St. Louis Public Schools are right that parents need to be involved in education. But parents are most involved when they choose their kids’ schools themselves. If they have no option but a failing public school district, all the automated phone calls in the world aren’t going to make them more enthusiastic. This is especially the case when the district’s CEO doesn’t even appear at meetings he promised to attend.
If parents were customers with choices, schools would be more responsive to them. Back in June, Sullivan declined his salary to make a statement: The St. Louis Public Schools aren’t a for-profit business. Maybe he should reconsider that position. After all, what CEO earning a salary would skip shareholder meetings?
What, For Free? Gimme $78 Million Dollars
Can’t you just imagine seeing this scene playing out …
Cordish to Centene: "Excuse me, sir? What it is, Mr. CEO; we’re from out of town."
Centene To Cordish: "No s%!t."
Cordish: "We’d really appreciate it if you would move your corporate headquarters down to our brand-new downtown development instead of Clayton."
Centene: "What, for free? Gimme $78 million dollars in tax credits and incentives."
Cordish: "We’re not gonna give you $78 million on top of everything else the taxpayers have already paid for."
City of St. Louis (from passenger seat and reaching for checkbook / aldermanic approval): "I think that’s fair, Cordish."
Cordish: "Here’s $78 million, plus a brand new sales tax for your own sales tax district." (Pauses while Centene pockets it all.) "Keep the change."
Needless to say, I could go on and on. I would really have liked to work "a Torino with no wheels on it" into this, but I think I have made my point. The fact that the above scene actually takes place in St. Louis is all the better, in case you forgot that.
The move of Centene is just another insane example of businesses playing various cities against each other in order to get taxpayer money they don’t deserve. I may sound naive here (and I am not at all naive when it comes to government and politics), but if cities such as St. Louis would just improve their overall business climates, they would not have to give away the store to favored targets. These incentives and tax credits are necessary precisely because of the earnings tax and other disincentives for business in the city. Getting rid of those disincentives first makes giving away new incentives far less necessary.
Let’s Hope This Continues, Like, Forever …
Via Combest, may this “problem” continue for a very, very long time!
Truancy in Reverse
An article in this morning’s St. Louis Post-Dispatch details the rising trend in “educational larceny” — the term used for families who cross district boundaries to send their children to school. Over the past few years, the number of larceny cases has increased precipitously as families seek to escape troubled school districts.
Parents enrolling their children in better performing districts may use the address of a relative or friend, a business, or even a blank lot. But when school administrators uncover the truth, students are forced back to their home districts, often with legal ramifications for their parents. “Sometimes they’ll beg you to stay. It can be heartbreaking,” says Vershaun Howze, Director of Enrollment for the Hazelwood School District.
The University City School District investigated 113 suspected larceny cases last year, and found 82 violations, while Hazelwood School District reported 92 infractions. And the Ladue School District has uncovered 11 violations this year alone — the same number as the entire 2006-2007 school year.
Parents shouldn’t have to resort to fraud in order to provide their children with decent educations. The rising trend in educational larceny demonstrates the need for significant school reform in Missouri and the steps parents will take to provide their children with decent educations. How much more evidence does the Legislature need?
Direct Subsidy More Efficient Than Universal Insurance
Gov. Matt Blunt’s new low-income health care plan, “Insure Missouri,” may cover more than 100,000 people by the middle of 2008 by subsidizing insurance policies for working families. The plan includes some worrisome details that warrant careful study, but if the government is going to subsidize health care, the best way to do it is through direct subsidies to low-income recipients. Here’s why.
In any society, scarce resources will be allocated by a system of rationing. In ordinary retail markets, rationing is determined by price, ensuring that whomever most values a good will be the one who receives it. However, if government policy mandates that everybody is supposed to receive a share of some scarce resource, rationing will usually take a form that we don’t measure directly in dollars and cents. This might include waiting in a queue, bribing officials, nepotism, or some other form of competing for political favors.
If the scarce resource in question is health care, rationing is a matter of life and death. In a consumer-based market, people who can’t afford health care may succumb to untreated illness. Under universally mandated health coverage, which tends to bring lengthy waits for treatment, those who get stuck on the wrong side of a queue may be treated with insufficient haste. There’s a reason that cancer patients have a much higher survival rate if they happen to live in the United States: Treatments may be expensive, but they’re timely.
The United States has the highest quality of care available to those who can afford it because we have at least some semblance of a market pricing mechanism at work. Greater incentives exist for the health care industry to innovate and perform well, because more cash is at stake. It’s true, though, that this system doesn’t serve everyone.
Calls for universal health coverage are growing ever-louder. While reasonable people can debate the role of government, and the scope of its powers, it may well reach the point when society demands that government ensure a basic level of health coverage. Then the question becomes: How do we maintain health care quality and innovation when the government intervenes to make sure fewer people suffer from price-based rationing?
Universal health care subsidizes everybody, but also destroys the price-based system of incentives that both encourages greater quality and innovation, and discourages frivolous doctor visits. If the government instead offered direct subsidies to those who can’t afford service, the feedback loops that prices and markets provide would remain relatively intact.
Although such a subsidy — akin to a health care “voucher” — would raise all health-care prices, it would be more efficient than universal insurance. It’s easier to tell who needs the subsidy, and provide it, than it is to figure out who’s at the wrong place in a queue, desperately waiting for critical care. The system would have to be continually adjusted to give special favors to the right people at the right time, without a consistent method of figuring out who the right people are. This isn’t something bureaucracies do well.
Some argue that queues would disappear under universal care with adequate funding. But there will always be funding shortages. Even the oft-touted Canadian system is limited to a relatively small percentage of Canada’s GDP. The most generous taxpayers in the world will insist that universalized expenditures be balanced with other priorities.
One primary problem with “Insure Missouri” is that it treats routine medical care as an insurance matter. But insurance is designed to be a hedge against unforeseen problems, not a mechanism for paying ordinary health care costs. This is why the health insurance law passed this summer, HB 818, is so important. It makes pretax health savings accounts widely available to Missourians — especially those working for small businesses. The eventual goal of any health care entitlement program should be to move people from government-funded care to an HSA that can be used both to pay for routine care out of pocket, and to purchase a portable insurance policy.
Health care will always be subject to scarcity, and when government is involved there’s no avoiding some effects of the tragedy of the commons — people at the margin have a greater incentive to free-ride, commit fraud, and use resources capriciously. But, ultimately, direct subsidies that facilitate low-income participation in a market-based health care system would keep more people alive and well than universal insurance would. The devil is in the details, but if the goal is to cover more low-income citizens while staving off calls for a disastrous universal care system, “Insure Missouri” may be a successful — though fundamentally flawed — strategy.
Eric D. Dixon is the editor for the Show-Me Institute, a Missouri-based think tank.
Hannah Montana Tests New Scalping Laws: Some Parents Intimidated by Their 9-Year Olds
Both the Kansas City Star and KSDK – Channel Five in St. Louis are reporting on the difficulty of getting tickets to see Hannah Montana (whoever the hell that is) for fans and their exasperated parents. (I highly recommend the comments section after the Star article, by the way. The first commenter admits to almost getting cussed out by her children when she failed to get tickets. I don’t know if that is more hysterical or pathetic, but it’s clearly both.) Both stories report on scalpers/brokers charging upwards of $1,000 for a ticket to see the heiress to the Achy-Breaky fortune (I learned this from the article) sing about acne, or roller skating, or rainbows, or whatever.
Needless to say, people are outraged, as if there is some inherent right to concert tickets. Not surprisingly, some politicians are pandering to the parents:
“Rep. John Burnett, a Kansas City Democrat and an opponent of the law, had said legalizing scalping would permit price gouging. He tried to limit resale prices to no more than 20 percent of face value, but his amendment was defeated.”
Price gouging is when you raise the price of lumber fivefold the day after a hurricane. In a legal sense, it does not have, and should not have, anything to do with the price of tickets to a concert. Rep. Burnett is not alone (emphasis added).
“We’re getting calls about angry constituents,” Mayor Mark Funkhouser told Tinnen. “We want the level of unhappiness to go down and the level of happiness to go up, however you get it done.”
The honorable mayor seems to be confusing “promoting the general welfare” and “the pursuit of happiness” with the casual meaning of happiness as it relates to pre-teens. The role of government, at any level, is not to increase happiness for people. It is to perform basic functions that allow people to pursue their own happiness. And while governments do it all the time, they should still avoid interfering with the free market as much as possible. And the few exceptions to that should be in cases of war or natural disasters, not pop concerts.
Clay County Goes With Tax Option “B”
In order to understand the title, you may need to re-read (or just read for the first time, if you are one of the few people on earth who does not check our blog every day) my post from yesterday on this issue. The Kansas City Star reports that the Clay County Commission has elected to enact a tax rate of 24 cents per hundred dollars in order to fulfill the judicial order from the recent lawsuit. That rate has been set to meet the requirements of the judicial order, but to raise no more money than that. Well, it might be a little more than that, but not very much in the scheme of things for a fairly large county like Clay — so my point stands.
The key part of this choice is that Clay County will continue to rely on sales taxes to fund county services, except for the transportation issues that the lawsuit dealt with. The Clay County Commission deserves tremendous credit for making smart and responsible financial decisions for the people of Clay County. I think its decision to rely on the sales tax should be given strong consideration by other counties similar to Clay, such as St. Charles.
