End the Insanity!

Posted on by Maurice Harris

Today, the Cole County Circuit Court will decide if the St. Louis School Board deserves a restraining order against the State Education Board. According to the attorneys for the St. Louis School Board, one of the arguments that they make is that the State Board of Education has no right in appointing a transitional board.

The lawsuit makes more than two dozen claims, basically arguing that the state acted unconstitutionally in removing accreditation and setting up an appointed board.

Well, knowing as little as I do about the role of the State Board of Education, they do decide on accreditation of school districts. And under state law, they have the lawful right in setting up an appointed board as stated in Missouri Revised Statue section 162.1100. So if that is one of their arguments, it should be dead in the water. Overall, it’s time for the St. Louis School Board to stop trying to save themselves.  As a student who attended the St. Louis Public Schools for my whole life, I have never seen a school board that has acted against the students’ best interest, while claiming to do otherwise. Enough of the bickering and attacks that have taken focus off of the students, and time to put in a board that will focus one one thing: getting the SLPS back on track.

Recognition by the Columbia Tribune!

Posted on by Maurice Harris

Strolling through John Combest’s page, I found a blog on the Columbia Tribune‘s website that acknowledges the work of the Institute. The report on HB 327, written by Joe Haslag, Michael Podgursky, and Steve Bernstetter, entitled "Centralized Economic Policy Bad for Missouri," discusses the pitfalls of the economic development bill:

Although widely praised in the press and by favored industries, the bill — now awaiting the governor’s signature — has two crucial problems, first, it rests on the notion that Missouri bureaucrats need to become more involved in identifying industries, types of employment, and goods and services that should be encouraged. Second, the bill ignores the government budget constraint. Revenue lost to tax breaks for favored industries would need to be recouped by reduced government spending, or — more likely — imposing a higher marginal tax rate on other industries.

It’s great to see that our research and reports are being picked up by the media. Knowing that the public and decisionmakers are getting a viewpoint on the benefits and pitfalls of legislation and having an impact on them is a great sign that we are doing our job well.

Centralized Economic Policy Bad for Missouri

Posted on by Joseph Haslag

The 2007 economic development bill, HB 327, would enact a wide variety of tax credits and other subsidies. Although widely praised in the press and by favored industries, the bill — now awaiting the governor’s signature — has two crucial problems. First, it rests on the notion that Missouri bureaucrats need to become more involved in identifying industries, types of employment, and goods and services that should be encouraged. Second, the bill ignores the government budget constraint. Revenue lost to tax breaks for favored industries would need to be recouped by reduced government spending, or — more likely — imposing a higher marginal tax rate on other industries.

In addition to tax credits, the state has engaged in industrial policy by creating a panel to advise the Department of Economic Development. According to the February press release, the panel is organized to help direct the Missouri economy in certain key industries: life sciences, energy, defense and homeland security, transportation and logistics, and information technology. If allowed to spread, such target-industry policies will be the economic equivalent of kudzu — a fast-growing vine spreading through the southeastern states — choking off the real sources of economic development.

The existence of market failures may provide an economic justification for tax credits or industrial policy. However, no such arguments are made by those sponsoring this legislation. What market failures have affected beef cattle and aviation jet fuel? Rather, the subsidies and tax credits distort investment choices, so that resources will be artificially directed to these activities and away from economic opportunities that make real economic sense, and would result in faster growth.

Missouri has lagged behind other states since 1995, missing the productivity spurt that pushed the U.S. economy forward, but a centralized approach to economic planning is the wrong course to take. Efforts by other state governments to effectively “guide” economic policy have been largely ineffectual. Something as complex as an economy, even at state level, naturally resists any attempt at guidance by central planners. Remember the Soviet Union?

Economic growth doesn’t stem from bureaucratic control. Ultimately, economic development comes from the new ideas that are created and brought to the marketplace. The source of these ideas is as large as the earth’s population. Entrepreneurs step up to satisfy the market demands around them. These ideas come from a variety of sources, ranging from those cultivated by basic research and development undertaken by private firms to ones dreamed up in a household kitchen.

Luring this economic activity to Missouri requires a business climate that yields returns for successful ideas through secure property rights and low overall business transaction costs. Because of the incentives operating in the market, ideas will be vetted. The evidence is clear: the people in government have neither the information nor incentives to vet ideas as efficiently as the market. Trying to pick economic winners based on the experience and wisdom of a few state-appointed people attempting to guess the future demands of private citizens is a formula for failure.

Offering official encouragement to any set of groups or industries imposes economic costs that may not be immediately obvious. There is a fundamental tradeoff between tax credits and deductions for favored parties, and marginal tax rates. State governments face a budget constraint. Accordingly, the more deductions for one set of transactions, the higher the rates for unfavored transactions — a source of significant economic damage that tends to drive such activities out of Missouri to other states. To offset revenue lost to through tax credits, the state must raise revenue from other sources. Higher tax rates stifle economic activity that would otherwise have stayed in Missouri, thus resulting in lower income and growth in our state. This bill is misnamed. A better economic development bill would reduce these corporate giveaways, simplify the tax system, and reduce marginal tax rates. Missouri households and businesses can create their own “quality jobs” without the help of state government.

Government economic planners do not know what the next “big idea” will be, and any effort to find that idea through central intervention is likely to fail. The best way for Missouri to ensure future economic prosperity is to provide businesses with a climate favorable to developing those ideas, whatever they may be. State officials should step back from the belief that they can fix weak economic growth through central planning. Creating another layer of bureaucracy, no matter how well-intentioned, will only obstruct those developments and, like kudzu to southeast horticulture, choke off Missouri’s economic growth.

Joe Haslag is a professor of economics at University of Missouri-Columbia. Michael Podgursky is a professor of economics at University of Missouri-Columbia, where he served as department chair from 1995 to 2005. Both are Show-Me Institute scholars. Steve Bernstetter is an intern at the Show-Me Institute.

 

Getting Sauced on Liquor Licenses …

Posted on by David Stokes

The May edition of Sauce Magazine has a wonderful article on liquor licenses in the St. Louis area. I really enjoyed it and recommend it highly. It discusses the manner of local control over the number of licenses and how establishments go about receiving them. I have no problem with some type of licensing for substances that fall under the general category of "controlled"; nor do I think there is anything wrong with various cities having their own systems of licensing. Every city is different, and neighborhoods within cities are different.

The City of St. Louis uses a neighborhood approval process for granting liquor licenses. There is no limit on the total number of licenses that can be issued if neighborhoods approve the granting of one for their area. Obviously, neighborhoods like the Central West End and Soulard are going to be more generous in granting licenses than St. Louis Hills, and there is nothing wrong with that.

Ladue, on the other hand, strictly limits the total number of licenses. There are seven licenses available for restaurants, most of which have been held by the same places forever. You can probably name all of them if you try: Schneithorsts, Busch’s Grove, Sportman’s Park, Truffles (one of the new ones), that one place at Clayton and I-64 that has been like 12 different bars — I remember it mostly as S and P Oyster Company — does Women’s Exchanges still have a license? 

If I were going to recommend any changes it would be to get rid of state liquor licensing and leave all the regulation to local communities. The good news in St. Louis County for bar owners is that the county itself only regulates bars in the unincorportated area, so bars only need one local license to go along with the state license. I wonder how they do it in Jackson County. Do you need a state, county, and city license to operate a bar there? If you know, please feel free to e-mail me at [email protected].

Even More Traffic

Posted on by Eric D. Dixon

It appears I jumped the gun a little when I wrote my last blog entry, about our mention in Paul Jacob’s Common Sense radio commentary. It turns out that Show-Me Institute scholar R.W. Hafer’s op-ed on bridge construction and traffic pricing also inspired a much longer article by Paul, for his weekly Townhall.com column.

And, of course, a longer column deserves a longer excerpt:

As Hafer points out, if pricing “works for movie tickets, electricity, and seats at Busch Stadium, why not for space on the bridge during rush hour?"

Common sense tells me he’s right. But once you’ve been enticed by a commons, it becomes harder to see the sense in the non-commons way of organizing resources . . . even if every bit of our experience tells us that this way of doing things leads to disaster, and to further demands to set up more free institutions.” At greater expense.

I guess that’s why, when Hafer (or I) suggest that a bridge be priced, so to give all commuters better incentives to manage their own commutes, we’re just going to look like trolls to some folk.

But remember: the troll in “Three Billy Goats Gruff” was greedy. Had he settled for a small toll, instead of demanding to eat the fattest passers-by, he could have collected his earnings and gone to market for a meal. Instead, the biggest of the goats came along and shoved him into the river.

If anything, the opposition to tolls is trollish . . . but maybe we should forget fairy tales when thinking about bridges. Apply a bit of reason, instead.

Read It to Me!

Posted on by Sarah Brodsky

A letter in the Springfield News-Leader criticizes a recent editorial. The editorial argued against the proposed English-only amendment, stating that English is already Missouri’s common language. Here’s an excerpt from the letter:

It seems to me that we, the general public, could have been better served and educated by including a direct quote from the Missouri Constitution about official language. Yes, I can get a copy of the Constitution and read it. I haven’t done so. How many of us would you expect to do so?

It’s funny to hear this from someone who’s complaining that immigrants ask for everything on a silver platter, forcing us to translate official documents for them because they won’t take the initiative to learn English:

(I)t is a necessity for them to learn and use the English language if they are to become productive and successful citizens.

If they follow the lead of this writer, they’ll just sit around waiting to be "served and educated."

Trafficking in Good Ideas

Posted on by Eric D. Dixon

Paul Jacob has been writing and recording his Common Sense radio commentaries for years, first for U.S. Term Limits, then for Americans for Limited Government, and now for The Sam Adams Alliance. I mentioned a three-year-old Common Sense piece last week in a blog entry I wrote about term limits here in Missouri.

Now, the Show-Me Institute has turned up in Common Sense for the first time:

[A] suggestion by a think tank in Missouri might cause a few heads to shake. In disbelief.

The idea? Make the Poplar Street Bridge a part-time toll bridge.

Southern Illinois University economist R. W. Hafer, writing for the Show-Me Institute, argues that another bridge might not even ease congestion. Why? By making commuting easier it would effectively lower the cost of commuting. When costs go down, demand grows, in this case even taking people off of public transit to drive their cars.

Putting a price on bridge travel, on the other hand — especially if the prices rise when demand rises — would encourage commuters to economize, and thus make the trek over the Mississippi easier for all.

This Common Sense excerpt refers, of course, to an op-ed written last month by Show-Me Institute scholar R.W. Hafer. He takes price theory, which works so well for goods and services in the private sector, and applies it to roads and traffic patterns. It’s a good idea, too often overlooked by people who are used to using roads for free. But, as I pointed out last month in a piece about ticket-scalping, goods that are priced below market value still have a high cost — usually in terms of time spent waiting in line. In this case, it’s a high cost in terms of wading through rush hour traffic congestion. Ultimately, no goods are free. The important thing is not to make prices artificially lower, but determining the most efficient way to distribute real-world costs.

It’s against federal law to charge a toll on roads constructed with federal gax taxes, and the Missouri constitution currently disallows using state funds to build toll roads, so we can’t just slap a few toll booths on existing roads and bridges without somebody passing some legislation first. But getting legislation enacted isn’t our job — we simply conduct research and educate people about our findings, and the value of free-market mechanisms in public policy.

In other words, we traffic in good ideas. So does Paul Jacob.

No Pork for Claire

Posted on by Maurice Harris

In today’s The Hill, an article points to the excesses of pork barrel spending by Democrats and Republicans in the Defense Authorization Bill going through the Senate. Sen. Hillary Clinton (D-NY) and Carl Levin (D-MI), chairman of the panel, are on the top of the list of requesting pork projects.

Clinton received 26 earmarks worth about $148.4 million total…Meanwhile, Levin’s tally far exceeded Clinton’s take: 45 earmarks worth about $210 million.

The only two senators who did not request projects: Missouri’s own Sen. Claire McCaskill and Sen. John McCain (R-AZ). Both of the senators  have sponsored earmark-disclosure language as part of the bill’s markup. Luckily there are some senators that understand the problems of pork-barrel spending and the drain it is on the U.S. treasury. Good job, Sen. McCaskill, for refusing to include more pork projects that take money out of the pocket of Missouri taxpayers.

The Cycle of Regulation Never Ends…

Posted on by David Stokes

Those of us here at the Show-Me Institute have strongly supported the midwife legislation passed by the legislature. The various reasons for this were generally simple: Responsbile adults should have the right to choose who will assist them in the birthing process. To this end, the final legislation that made it through was great (how it made it through is another issue) — a simple rule allowing midwives certified by a national organization to work in Missouri. However, from this article in the Springfield News-Leader, it appears that Missouri midwifes might be looking a gift horse in the mouth, to use a related medical term:

This year we proposed a bill that would set up a comprehensive licensure board, modeled after many other states, for Certified Professional Midwives.

CPMs go through thorough [sic] pregnancy and birth education (the academic portion of their work takes two to six years) and rigorous training (including 1,350 clinical hours one-on-one with a senior midwife and attending a minimum of 40 births, 20 where they must act in the primary role under supervision in an out-of-hospital setting). Then CPM applicants sit for an eight-hour written exam and pass a skills assessment.

The bill would have allowed midwives with CPM certification to apply for a Missouri license. It would provide a regulatory mechanism to investigate and, if necessary, punish a midwife just as the Missouri State Board of Nursing does.

I hope that midwifes do not continue to push for this legislation in future sessions. As the world of government grows and turns, it appears that midwifes want to be regulated just as much as the doctors who fought against them are — and for the same reason every existing group likes its own certifications. That reason is to make it harder for newcomers to perform the same job, and to diminish competition. Being that midwifes haven’t even been allowed to start competing yet, it is unfortunate that they seem to be already trying to get a midwife monopoly going.

There are other amusing items in this article. How about the above line that learning to be a midwife can take up to six years? Why would you not just be a doctor if you are going to study obstetrics for six years? There is always a medical school somewhere willing to take you. Just as good is the description of the fear those using midwives have been living under:

For the first time in 48 years, mothers won’t have to tell their midwives to "park behind the barn" or worry that their home birth will be interrupted.

Birth being interrupted?  Do the cops bust in on midwives at home births like they are raiding a crack house?  Perhaps, since midwifery mostly occurs in rural Missouri, a meth lab metaphor would be more appropriate.

This is a good law that was passed to allow midwifery in Missouri. We don’t need silly exagerations by midwives to prove their point. And we certainly don’t need them, now that they have achived their goals, to try to practice the same exclusive regulation as other occupational groups.

Sarah Brodsky also contributed to this entry.

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