Ignoring the debatable merits of the bill, the 2009 American Recovery and Reinvestment Act (President Obama’s stimulus package), required reporting on every project down to the subcontractor level and taxpayers were supposed to have near-real-time ability to see how funds were being spent. This act spurred many states to enact increased transparency measures. It is disappointing to learn that Missouri took a step backward at a time when much of the country was moving forward. The auditor noted, “When there’s inadequate documentation, you don’t know if there’s waste, fraud or abuse.”

Has Missouri learned from its mistakes? Some governmental bodies appear to be transparent, if not exercising fiscal restraint, with their emergency spending. The State Treasurer’s Office is publishing CARES Act state government relief fund spending down to the vendor and item purchased. St. Louis County and City both have websites publishing their emergency spending, showing when, where, and on what the money was spent. The county also publishes future committed spending. Close-fisted spending habits have led some to question their emergency priorities, but it’s the transparency portals that inform such questioning. Franklin and Jackson Counties plan to release spending details in the future. However, no other major county or city has yet published such coronavirus-specific spending.

Some state agencies have published the amount of federal money they received but did not specify how they spent or will spend it. A few identified potential categories of expenses—such as the Department of Higher Education, Department of Elementary and Secondary Education, and the Department of Transportation—but did not provide details.

Why aren’t all state agencies and political subdivisions willing to show how they are spending taxpayer funds? Shouldn’t agencies receiving relief funds, i.e., taxpayer money, want to demonstrate that the money is being put to good use? With today’s technology, they can make such data easily accessible, complete, and accurate. If a county or agency is unable to publish this information on its own, it can send the data to the state for publication.

Show-Me Institute analysts have called for government transparency since the first relief funds rolled in. While some appear to be acting transparently, not all are. Isn’t it time for the rest to catch up and show us the money?

The post Don’t Repeat Mistakes from the 2009 Stimulus appeared first on Show-Me Institute.

While it is good news that MoDOT appears to use available funds efficiently, that does not mean it has enough money to cover all needed infrastructure repairs in Missouri.

MoDOT has been in the midst of a years-long funding strain (pages 33-38). Between 2000-2010, MoDOT relied heavily on federal reimbursements and issued billions of dollars of bonds to fund its projects. Both sources, however, began to dwindle in 2011. While Missouri has the seventh-largest highway system in the country, it has the second-lowest fuel tax. Multiplying the problem, a decrease in money raised in Missouri for transportation means a decrease in matching federal funding.

Federal money makes up 42% of MoDOT’s budget. The fuel tax is the second largest component at 23%. The gasoline tax was set at $0.17 in 1996 and is still $0.17, meaning the value of that money has dropped significantly due to inflation. Relative to the size of the highway system, the revenue Missouri brings in per mile is less than a quarter of the national average. Simultaneously, construction and upkeep-related expenses have significantly increased due to lower productivity and higher regulatory barriers, as well as asphalt, crushed stone, and paving mixtures being significantly more expensive than just a decade ago. Having less money to spend on more expensive projects has made upkeep more difficult.

The amount of money MoDOT spent fell in 2011 and has not kept up with inflation, as you can see in the graph below:

Source: Missouri Budget Fiscal Years 2003–2017. Graph made by author. https://www.modot.org/previous-reports-joint-committee.

The surge in expenditures in 2010 coincides with the passage of the American Reinvestment and Recovery Act (ARRA) in 2009, commonly known as the federal stimulus package. The ARRA added $400 million to MoDOT’s budget, which dissipated just as quickly due to the large number of projects for which it was needed. In 2014, ARRA funds totaled less than 1% of MoDOT’s revenues dedicated to the highway system (page 8).

Relying on large and sudden injections of federal money is not a viable funding solution, and any bonds that are issued face their day of repayment.

To raise the revenue needed to maintain our roads and bridges, a clear solution presents itself – increased use of user fees. The concept is simple and works in everyday life. Those who use a service pay for that service in return.

Numerous other states employ user fees in the form of more effective gasoline taxes and tolling, significantly boosting transportation revenue in a market-based way. Legal hurdles remain, though. Tolling interstates in Missouri would require federal approval, as Missouri turned down the opportunity to toll I-70, and questions remain regarding constitutional limits on where the funding to construct a turnpike authority can originate.

User fees may only be part of MoDOT’s solution, but they could increase its budget to meet current needs.

The post Show Me the Money appeared first on Show-Me Institute.

Pictured: Missouri’s Highway System – 8/6/2014

We have often commented that Missouri is “middle of the pack” in various state rankings. Not so with our state highway system. According to the Reason Foundation, our highway system is the eighth best in the nation, in part due to the good condition of our interstate highways and rural roads. The National Chamber Foundation has ranked our road quality seventh best in the nation, with only 6.3 percent of Missouri roads in mediocre or poor condition.

This is not surprising to those familiar with Missouri’s recent infrastructure expenditures. In the last 10 years, Missouri’s highway system added more lane miles while increasing the percentage of major highways in good condition to 88.5 percent and repairing a third of the state’s deficient bridges. And as transit supporters are wont to point out, Kansas City and Saint Louis hold first and second place on a list of cities with the most highway miles per capita. Missouri was able to perform so many projects in the last decade because it issued more than $3 billion worth of bonds and received more than $600 million from the federal Stimulus Act. That allowed the Missouri Department of Transportation (MoDOT) to implement the “Smoother, Safer, Sooner Road and Bridge Program” and the “Safe and Sound Bridge Improvement Program,” among other projects.

When we look at Missouri’s highway infrastructure today, the reasonable conclusion is that the system is in good condition, the best it has been in decades. While Missouri’s highway infrastructure has specific needs (I-70 rebuild, Broadway Bridge), by no definition is the system “crumbling.” MoDOT does have a funding problem, but there is time to select the right funding solution. There is no imminent crisis which would force us to accept an unfair, and economically unsound, transportation sales tax.

The post Are Missouri’s Highways And Bridges Crumbling? appeared first on Show-Me Institute.

The post shows that in Minnesota (the original focus), the number of vehicle miles driven has leveled off in recent years. This is true in Missouri as well, but some planners have consistently predicted a return to growth, despite low population growth, struggling economies, and increasing fuel prices. Missourians already clock a daily average of 32 miles; even if robust economic growth returns, it is not certain that they would choose to drive much more. Now that less than 3 percent of Missouri workers are carless, one of the largest drivers of traffic growth over the last few decades (more people with more cars) is almost tapped out.

The “more is better” approach to road building is rampant in Missouri, never more so than today. The state just finished a decade of unprecedented spending on its transportation system. Amendment 3 allowed the Missouri Department of Transportation (MoDOT) to spend billions improving the state’s highways and bridges, and the federal Stimulus Act pumped money into roads and everywhere else. Transit, too, has seen massive investment, with more than $2 billion in new capital funding from 2000 to 2012. After all this, we are told that Missouri’s infrastructure is crumbling and that we do not spend enough. What’s clear is that more money spent does not equal money well spent, and that the time has come for Missourians to rethink what an economically sound transportation system should look like.

The post How Much Does A Competitive Transportation System Cost? appeared first on Show-Me Institute.

When Dave Nichols, director of the Missouri Department of Transportation (MoDOT), delivered the conference’s keynote address, he focused on his department’s impending financial Armageddon. He stated that from 2005 to 2011, MoDOT had a construction budget of $1.3 billion per year, but this year it has just half that amount. He also claimed that MoDOT requires $485 million simply to maintain the existing system. However, MoDOT will not have even that minimal amount by 2017. The decrease in funds is the result of the declining purchasing power of the state gas tax, decreasing federal support for transportation, and increasing bond payments. The director explained that the $1.3 billion budget had given Missouri better roads, new bridges, and increased safety measures. He pointed out that the department will no longer be able to make such improvements, and soon will be unable to maintain the current system.

The mismatch between MoDOT revenues and obligations did not appear overnight. Since the early 2000s, MoDOT has slowly seen its costs and obligations increase. At the same time, nothing has been done to increase user fees in the form of gas taxes (which has remained at 17 cents since 1996) or tolls. But instead of fixing the problem by raising user fees or controlling costs, MoDOT issued billions of dollars of debt and then relied on federal stimulus funding to improve and expand Missouri’s infrastructure. In effect, Missouri drivers got new roads and bridges without creating the tax base necessary to pay for them. With the bond money spent and the stimulus finished, MoDOT has to live within its means, which apparently it cannot do.

Once again, Missouri has an opportunity to set MoDOT funding on a sustainable, user-pay path. But instead of seizing the opportunity, some speakers at the conference called for a temporary 1-cent transportation sales tax to pay for transportation projects. I have written before that a sales tax is not a good way to pay for roads. Paying for highways based on how much people shop, and not how much they drive, encourages artificially high demand for roads. This increases road degradation, congestion, and sprawl beyond what would occur if drivers had to pay for their roads through gas taxes or tolls. Thus, it guarantees that when the “temporary” sales tax expires, Missourians will face the same funding problems they are facing today. Except then, it will be worse, because the user-generated revenue will be lower and road system maintenance requirements will be artificially higher.

The speakers at the Missouri Conference on Transportation accurately outlined the current condition of transportation funding in Missouri. Unfortunately, their policy solutions would create a system that is not bound by user demand and turns transportation spending into a subsidy slush fund.

The post Missouri Conference On Transportation Report appeared first on Show-Me Institute.

As part of the American Recovery and Reinvestment Act of 2009, the United States Department of Education (U.S. DoE) created a competitive grant process called Race to the Top. The Race to the Top application encouraged states to adopt college- and career-ready standards.

The Missouri Department of Elementary and Secondary Education (DESE) applied for a Race to the Top grant in January of 2010, promising to adopt college- and career-ready standards.

In 2012, the U.S. DoE began awarding waivers to No Child Left Behind. DESE applied for a waiver in February of 2012, again promising to adopt college- and career-ready standards. They received the waiver in June of 2012.

DESE, without approval from the legislature, set Missouri on a new course by adopting the Common Core State Standards. Essentially, DESE committed Missourians to a set of national curriculum standards.

The Common Core State Standards have been met with a considerable amount of consternation.  Bills have been introduced in the Missouri House and Senate that would halt the implementation of the new standards. I have submitted written testimony to the committees and written elsewhere about the impact of these standards.

Now we are finding out that individual districts in states that did not receive waivers from the U.S. DoE are able to apply for waivers. What I want to know is, when will DESE begin awarding waivers to school districts that wish to opt out of Common Core? After all, the state was able to opt out of a federally binding law and now individual school districts may have that ability. Shouldn’t DESE give local schools the ability to opt out of these new state standards if they can demonstrate that they have a comprehensive local system of accountability in place?

The post DESE Should Consider District Level Waivers appeared first on Show-Me Institute.

I am not categorically against a state or other governing entity issuing bonds for worthwhile spending on infrastructure, but putting the state in debt just to launch a public works program looks like a mini version of the American Recovery and Reinvestment Act of 2009 (i.e., the Stimulus), which really covered itself in glory. To be fair, the Stimulus was not entirely composed of infrastructure spending, but infrastructure spending was a significant part of it.

There are other reasons to be wary of a state issuing debt, as Chris Edwards from the Cato Institute explains:

• . . . debt financing is more costly than current tax financing because of the interest expenses and related charges.
• The most important reason that voters should hesitate to approve bonds is that the country already faces huge government liabilities. At the state level, pension and health benefit plans for retired workers have funding shortfalls of about $2 trillion.

Again, there may be good reasons for the state to issue bonds. Transportation and higher education infrastructure are both legitimate uses of public dollars. However, before putting the state further into debt, it is important that these potential bond issuances are thoroughly examined to see which projects they would be financing.

I will write more about these potential bonds in future posts. I can see myself and others at the Show-Me Institute supporting some type of bond issuance, but I hope the primary plan is not that they will serve as some sort of jobs program.

The post The Name’s Bond . . . Building Bond appeared first on Show-Me Institute.

There are still workplaces in St. Louis County that legally allow smoking. . . . let’s truly eliminate second-hand smoke in the workplace. It’s better for all of us.

Saint Louis County recently passed an expansive anti-smoking ordinance; the law includes exemptions for bars and casinos. The owners of those establishments felt that if smoking was not permitted, they would go out of business. I attended one of the hearings when the Saint Louis County Council was considering the partial ban. Several bar and restaurant owners told officials they feared their businesses would close or they would have to lay off employees if customers were not allowed to smoke.

Well, it turns out that more than $7.5 million in federal stimulus money is funding those radio ads and advocacy efforts to eliminate exemptions. According to the Recovery.gov website, federal stimulus money has gone to Let’s Face It’s anti-exemption campaign. In its report to the federal government, Let’s Face It noted that it hopes to “place amendment on council agenda,” “remove exemptions from current ordinance,” and  “increase the number of County municipalities that enact smokefree [sic] policies that exceed the comprehensive County-wide policy. . .”

The group has also partnered with the St. Louis Rams, and ran anti-smoking advertisements during the Rams’ Dec. 18, 2011, home game. In its report to the federal government, Let’s Face It claims to have created 38.16 jobs associated with this campaign. Some of those jobs are associated with $2 million that went to Fleishman-Hillard (four jobs) and $175,000 that went to the St. Louis Cardinals (actually, no jobs are claimed to be created with the money directed to the Cardinals).

The Show-Me Institute has made the case that customers (and employees) have the freedom to choose what bars and restaurants they frequent. The argument that customers or employees are somehow trapped at a venue that allows smoking is a smokescreen, at best.

But federal funding of advocacy efforts goes even further. If the anti-second-hand smoking argument is a good one, then why aren’t private associations and nonprofits stepping up to make the case? Why does the federal government have to fund an advocacy campaign?

What is next, Fannie Mae funding an organization that advocates for land banking legislation? Or federal stimulus money being used to fund similar advocacy campaigns throughout the United States against soda?

The post Let’s Face It: Federal Money Being Used To Lobby Saint Louis County appeared first on Show-Me Institute.

“Life’s not supposed to be fair,” my father said. “Stop
measuring,” my mother said. “You’re not supposed to measure.”

But this was before a new obsession in American political
life: rising concern over the issue of fairness. Many people have
started to measure – and they are plainly envious of the good
fortune of others. To borrow the words of a Japanese proverb, they
have come to think that the nail that stands up is the nail that should
be hammered down.

That was the spirit of the Occupy movement – on Wall
Street, in Oakland, and many places in between, including four
Missouri cities. Those claiming to be the 99 percent railed
incessantly against the 1 percent. In setting out to make a public
nuisance of themselves, the pity-me protest brigades let the world
know how fed up they are with the unfairness of life.

President Barack Obama has nursed and cultivated this same
sense of grievance. In a speech in Osawatomie, Kan., he invoked
fairness no fewer than 16 times. In one staccato burst, he called for
“a tax code that makes sure everybody pays their fair share . . .
(and) rebuilding the economy based on fair play, a fair shot and a
fair share.”

How fair is that?

Let me put the question another way.

How fair is it to fritter away hundreds of millions of dollars
of taxpayers’ money on green energy companies like Solyndra
which have gone bankrupt?

How fair is it to launch a trillion dollar “stimulus” program that
actually depressed the economy – leaving unemployment higher than it
was before – and then turn around and demand a whole new stimulus
program?

How fair is it to go on the greatest federal spending spree in
modern history – quadrupling the size of the annual deficit and raising
serious concerns about the creditworthiness of the United States – and
then go about the country accusing critics of your profligacy as being
solely concerned with promoting the interests of “millionaires and
billionaires”?

How fair is it to use hard times to promote the politics of envy –
when it is your own reckless rhetoric that has done so much to unsettle the
business community and your own policies that have prevented a normal
cyclic recovery from occurring?

The president and others calling for more “fairness” through
bigger government and higher levels of spending seem to have little or no
concern at how their policies and ideas are eroding economic and political
freedoms.

• They are calling for the government’s right to claim more of
  your income to spend any way the government sees fit (e.g., on
  silly “job creation” programs that wind up going bust and
  leaving taxpayers on the hook).
• They are using “fairness” and allegations of corporate greed
  and irresponsibility in order to justify a vast expansion in
  regulation and government control over business and
  commerce.
• And everywhere – including here in Missouri – they aim to
  enlarge the public sector, even though that drains money and
  jobs out of the private sector.

No one would pretend that the ultimate goal of free-market
capitalism is equal outcomes for different people, regardless of talent,
effort, or sheer luck. That is a socialist agenda. But neither is the free
market – as our president suggests – a place where the rich prey
ceaselessly upon the poor and “everyone is on their own.” That is an
absurd caricature of free enterprise and more than 200 years of American
history.

In fact, the essence of free-market capitalism is voluntary
exchange for mutual benefit. People satisfy their own needs by competing
to satisfy the needs of others.

My parents understood that. They expected their children to
compete and enjoy the benefits of living in a country that has produced
unparalleled wealth and opportunity for its people. But they did not want
us to go about our lives with misplaced expectations of fairness – or to fall
prey to the diseases of envy and self-pity.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me
Institute, which promotes market solutions for Missouri Public Policy.

The post Freedom vs. Fairness: Will America Succumb to the Politics of Envy? appeared first on Show-Me Institute.

In officially joining the “Aerotropolis” bandwagon and calling for a special session of the Missouri Legislature in September, Nixon used the phrase “Let’s get it done” several times in a twenty-minute speech. That was his way of endorsing the much-talked-about bill to support the development of an air cargo hub at Lambert-Saint Louis International Airport.

The bill would pass out $360 million in tax credits – with $300 million going to support the development of additional warehousing space and the rest going as an inducement to freight forwarders to send additional cargo through Lambert.

But if the goal is to transform Lambert into the world’s next great cargo hub, will this legislation be enough to “get it done”? Will it succeed in creating thousands of new jobs and providing a major boost to the region and state?

There is no reason to suppose it will.

As policy analysts at the Show-Me Institute have pointed out in a number of papers and commentaries, there are acres and acres of unused warehousing space in and around Lambert. If setting up a Midwestern cargo hub at Lambert is such a great idea, why has the sensible money stayed on the sidelines? Why does the hub need tax credits or other government guarantees to attract investments for upgrades, retrofits, or new construction for refrigeration?

After months of discussion, supporters of the Aerotropolis legislation have yet to produce a serious cost-benefit analysis of what Missouri taxpayers should expect in return for a substantial investment in the project.

The St. Louis Regional Chamber and Growth Association (RCGA) produced an eight-page statement making the claim that $300 million in public incentives for new warehousing would lead to $34 billion in private economic activity over the next two decades. That is an economic multiplier of more than 100. Perhaps suggesting the lack of a sound basis, the RCGA has yet to identify the assumptions used in reaching this astounding conclusion.

At the same time, no group supporting the proposed legislation has produced a shred of evidence that the Chinese government or even a single international carrier is committed to turning Saint Louis into a major air cargo hub.

Greg Lindsay, who co-wrote the book Aerotropolis: The Way We’ll live Next, has publicly scoffed at the pending legislation. He has called the proposed investment both “too much” – in representing an egregious waste of taxpayers’ money – and “too little” – as billions of dollars of additional investment would be required to enable Lambert to compete with established powerhouses such as Dallas Fort Worth and Chicago O’Hare International Airports.

It is not surprising that supporters of the Aerotropolis legislation are anxious to stop talking and swing into action in passing a bill. Even they must know the economic case behind the legislation does not survive close scrutiny.

In his press conference in Saint Louis, Governor Nixon engaged in the kind of chest-thumping that often accompanies large job creation schemes, calling for “decisive” action by the public sector. “We need a bold spirit and competitive vision again,” Nixon proclaimed. “We are competing against the world.”

But if business generation is the real goal, you don’t start by slaying the great Goliath of global competition. Instead, you begin by providing a better product or service that someone else will want to pay for – at a price that will provide a decent profit.

That kind of thinking is alien to glory-seeking and intervention-minded politicians. It is also alien to rent-seeking business people – business people, that is, who would rather lobby for special favors from government than compete in the open market; business people who would rather drop the real risk of capital investment at the feet of taxpayers rather than lift it onto their own shoulders.

Over the past several years, we have seen many examples of much touted job creation and pump-priming economic schemes, at the federal as well as the state level – everything from “cash for clunkers” to the massive $787 billion stimulus bill.

What they all have in common is simply this: They don’t “Git-R-Done.”

The post Aerotropolis: The Wrong Way to Get-It-Done appeared first on Show-Me Institute.

Less excusable are the actions of supposedly wise politicians who lay down billions in tax dollars in the vain hope of hitting it big with a stimulus or economic development bill. We are promised that a dollar in government spending will create more than a dollar in economic growth.

This idea, known as the fiscal multiplier, has never been borne out by evidence. When the actual results of government spending on the economy are examined, they show lackluster or even negative returns. However, that has not stopped proponents of greater government spending from using the multiplier to promote everything from the federal stimulus bill to state and local subsidies for warehouse construction around Lambert–St. Louis International Airport.

The multiplier is based largely on the work of economist John Maynard Keynes, who argued that higher government spending combats people’s propensity to hoard money in a recession and puts unemployed people and resources to work. As the spending ripples across the economy, a dollar in government spending should cause substantially more than a dollar in economic activity.

The Barack Obama administration invoked multiplier theory to promote the $787 billion federal stimulus package. The president’s economic advisers assumed every dollar spent by the stimulus would add $1.50 to gross domestic product (GDP). In a March 2 column for the New York Times Economix blog, University of Chicago economist Casey Mulligan showed that stimulus spending did not boost GDP, and may have caused it to shrink.

Nor has stimulus spending delivered the bounty of jobs that its supporters promised. Obama claimed that the stimulus would prevent unemployment from exceeding 8 percent., yet it hit 10 percent and now remains stubbornly stuck at 9 percent.

Others have taken this idea a step further, claiming a still bigger multiplier effect for specific projects — thinking, just as I did in my youth, that it must be easy to toss the ring around the bottle. When final plans for Ballpark Village were announced in 2006, the Saint Louis Regional Chamber and Growth Association (RCGA) estimated that Phase I of the project would cost $387 million, but generate $273 million annually — paying for itself in a year and a half. Of course, this assumed that everything would go as planned. Almost five years later, construction has not started and the investment has been downgraded to $155 million, with at least $57 million of that coming from various levels of government. Furthermore, Ballpark Village is primarily shuffling existing businesses around instead of attracting or creating new ones. Stifel Financial Corp., the village’s largest future tenant, will move all of seven blocks.

Despite these failures, politicians of every stripe recently trotted out the multiplier to support subsidies for warehouses around Lambert, through “Aerotropolis” legislation. Although the precise equation behind it remains shrouded in oracular mystery, an RCGA study predicts that $300 million in public funding will lead to almost $34 billion in private economic activity over 20 years, suggesting a truly absurd return of more than 10,000 percent. Here, the Keynesian multiplier has itself been multiplied by the central planner’s conceit of being able to pick winners successfully — truly a sucker’s game.

The government cannot create resources from thin air. It must take them from taxpayers through taxation or borrowing. Resources used by the government therefore cannot be used by the private sector. Increasing government spending does not in itself increase the country’s capacity to produce — it just shifts existing production away from goods and services that consumers demand, and toward those demanded by politicians.

The multiplier is a lie, but an attractive one, luring the listener like the familiar siren song of my youth: “Ring the bell, win a prize!”

John Payne is a research assistant with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post Development Spending by Government Only Multiplies Madness appeared first on Show-Me Institute.

Miron’s area of expertise is the economics of libertarianism, with particular emphasis on the economics of illegal drugs. He has served on the faculty at the University of Michigan and as a visiting professor at the Sloan School of Management, M.I.T. and the Department of Economics, Harvard University. From 1992-1998, he was chairman of the Department of Economics at Boston University. He is the author of Drug War Crimes: The Consequences of Prohibition and The Economics of Seasonal Cycles, in addition to numerous op-eds and journal articles. He has been the recipient of an Olin Fellowship from the National Bureau of Economic Research, an Earhart Foundation Fellowship, and a Sloan Foundation Faculty Research Fellowship. Miron received a B.A., magna cum laude, from Swarthmore College in 1979 and a Ph.D. in economics from M.I.T. in 1984.

The post Obamanomics: Growing the Pie or Dividing the Pie? appeared first on Show-Me Institute.

A new study by Daniel Wilson at the San Francisco Fed calls into question the idea that the stimulus legislation as a whole — including the state transfers and direct spending portion — failed to generate the promised improvements in employment.

It is difficult to properly calculate the effects of the 2009 ARRA bill, as it was a nation-wide program. Though employment and growth failed to respond to ARRA as the Administration had suggested, fiscal stimulus advocates have argued that employment levels would have been lower still without the program.

Wilson’s study makes an important contribution to this debate by focusing on state-by-state comparisons. A large portion of stimulus funding at the state level was based on criteria that were entirely independent of the economic situation that states faced. For example, the number of existing highway miles was used to calculate additional transportation spending.

The study uses this resulting variation in state-level stimulus funding to determine what impact ARRA funding had on employment — including both the direct impact of workers hired to complete planned projects, as well as any broader spillover effects resulting from greater government spending. Administration economists have repeatedly emphasized the importance of this indirect employment growth in driving economic recovery.

The results suggest that though the program did result in 2 million jobs “created or saved” by March 2010, net job creation was statistically indistinguishable from zero by August of this year. Taken at face value, this would suggest that the stimulus program (with an overall cost of $814 billion) worked only to generate temporary jobs at a cost of over $400,000 per worker. Even if the stimulus had in fact generated this level of employment as a durable outcome, it would still have been an extremely expensive way to generate employment.

In other words, a few people benefited in the short run, but as a society, we are all poorer for it over time. In February, I argued that stimulus proponents who looked only at the benefits of the federal dollars completely ignored the cost side of the equation, and if this study is accurate, I understand why they might shy away from a balanced look at the program’s effects.

(Link via Hit and Run. Headline reference here.)

The post That’s Not Gonna Be Good for Business; That’s Not Gonna Be Good for Anybody appeared first on Show-Me Institute.

Samuel Staley, director of urban growth and land-use policy for the Reason Foundation, a libertarian research group, said the best way to spend money efficiently would be to establish the bank as a revolving loan fund so that money for new projects would not become available until money for previous projects had been repaid.

Mr. Staley expressed concern that in their zeal to spur growth and create jobs, Congress and the Obama administration would not impose such limits.

“With the $800 billion stimulus program, they were literally just dumping money into the economy,” he said. “There was little legitimate cost-benefit analysis.”

I would propose that dumping money is one thing governments at all levels are very good at.

The post SMI Author Quoted in New York Times Regarding Latest Stimulus Proposals appeared first on Show-Me Institute.

The report includes two examples in Missouri. Really, though, one should have been counted for Illinois rather than Missouri, which leaves us with only one citation for the Show-Me State. The expenditure that I dispute should be classified for Missouri — but without any dispute over its uselessness and absurdity — is the $430,000 given to the Army Corps of Engineers to enhance a museum about the Army Corps of Engineers. It’s no. 27 on p. 24 of the report. The museum, which I sheepishly admit I had never heard of (I go to the East Side Metro East for one thing and one thing only), is dedicated to the Mississippi River and the Army Corps of Engineers, and is in East Alton, Ill. So, that’s $430,00 more in spending so that the Army Corp of Engineers can tell the public what a good job they do.

This is not to say that the Army Corps of Engineers doesn’t do a good job. Rather, they should just do a good job without feeling the need to tell us about it. If I lived in Louisiana in 1927 or 2005, though, I might feel differently.

The Missouri example is $180,000 for scientists at the University of Missouri to deal with the pressing problem of why rat sperm becomes less useful when it is thawed after freezing. (This is example no. 95 on p. 45.) Apparently, this is exactly the type of project for which the stimulus was designed.

All in all, it could have been worse for Missouri. Many of the projects in other states cost millions of dollars more, and most closely resemble a project akin to: dig hole; fill in hole; repeat. Example no. 10 is one of my favorites: $100,000 for “Town replaces new sidewalks with newer sidewalks that lead to ditch.”

No matter where this spending occurs, though, we all pay taxes for projects like this, and elected officials all (or almost all — there are a few exceptions) fight for local spending and spoils.

The post The U.S. Department of Great Rivers and Rat Sperm appeared first on Show-Me Institute.

Only one-third the size of the 2009 program, it barely has enough funds to take care of the existing system.

Is it possible that an extraordinary set of circumstances in 2009 — perhaps a massive stimulus proposal intended to get the economy moving — might be why the 2009 program was so large, and why future programs look small by comparison? Why, we had the American Recovery and Reinvestment Act that year, of course. I realize that this is a minor quibble, but comparing government funding in other years to 2009 will always be unfair. It’s like talking about Major League Baseball piching stats from 1968, or hitting stats from 1930 — you have to give some allowance for context.

But onto the bigger question: How will these upcoming annual appropriations affect Missourians? I, for one, am underwhelmed by the risks. For starters, it is only logical that at some point in a state not experiencing much population growth, expansion of the transportation system will level off. Eventually, an adequate system has been built, and if the population is no longer growing, it does not need much expansion. However, I do agree with the central point of this statement by the MoDOT chairman:

“It’s not just jobs that are related to the construction of the highways. Economic development follows transportation.”

The key for me is that I’d like to see as many of those transportation improvements as possible be private, rather than public. (Note: This observation in itself does not entail a critique of MoDOT, which is also pursuing expanded opportunities for public-private partnerships and tolling, in some instances.)

I could (emphasis on the could, not would) support a gas tax increase if it were used to fund necessary transportation improvements and system upkeep that the upcoming levels might fail to meet. I see no way in which I’d support a general sales tax increase for something like our transportation system that can be paid for in a much more targeted and efficient manner — be that tolling, gax taxes, or property taxes for local roads.

Thanks to Combest for the link.

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Every dime that the state takes away from an individual or business, through an income tax, is essentially taken out of the productive economy. Consequently, the capital that would have been spent investing in future goods is no longer available to the entity that would have otherwise used it. This, in effect, stifles growth.

Some might argue that public spending pumps that money back into the economy, but the 2009 American Recovery and Reinvestment Act is a perfect example of that kind of Keynesian theory failing in practice. The bill massively increased government spending,but did little to stimulate growth in the economy; unemployment remains around 10 percent. In practice, government spending provides much less of a stimulative effect than comparable tax cuts.

It would be in Missouri’s best interest to lower — or even abolish — the state income tax, thus enabling Missourians to spend and invest more of their own money to grow our stagnant economy. As demonstrated in the table below, which displays average annual growth rates per state between 1997 and 2008, Missouri’s growth ranks seventh-worst in the nation. Abolishing or reducing the state income tax would be a step in the right direction toward positive change.

Source for GDP Numbers: Bureau of Economic Analysis

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PROPOSITION I – Improvements to County Buildings & Facilities
Shall St. Louis County, Missouri, issue general obligation bonds up to the amount of One Hundred Twenty Million Dollars for the purposes of constructing various capital improvements to County buildings and facilities, and making improvements to County safety/security and communication facilities?

Saint Louis County officials don’t have to listen to the ballot box results, because their federal benefactor has come to the rescue. The county is using half of its $40 million of Recovery Zone Economic Development funds to build the new health department building that failed to garner support in 2008. A family court building will also be built, using Built America funds. The federal funds won’t fully finance either of these projects, though, and the rest of the money will have to come from the departments’ operating budgets.

Some may argue that the people only voted down the use of a bond to fund these projects, and did not necessarily disapprove of the projects themselves. This may be true, but using stimulus funds to cover only part of these projects will still create an additional burden to taxpayers. It may be a discount, but these stimulus funds will not provide “free” buildings for Saint Louis County — rather, it’s a way around a failed bond issue.

Here’s the real issue: If local voters are not willing to finance their own projects, why should the federal government subsidize them? The federal government does not have a magical money tree; stimulus funds also come from taxpayers, whether present or future. These are buildings that the Saint Louis County taxpayers decided were not necessary, but officials have found a loophole.

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With stimulus spending one of the most contentious issues in a very contentious political year, politicians of all stripes have argued about whether government spending boosts or hinders economic growth. It is beyond debate, however, that the spending will have to be paid for by taxpayers either now or in the future. Those taxes cause the economy to grow slower, according to a new study released by the Show-Me Institute, “Taxes and Economic Growth: A Review of the Evidence.” Written by Mark Skidmore and Nicole Bradshaw — both professors at Michigan State University’s Department of Agricultural, Food, and Resource Economics — the study shows that stimulus spending may not prove to be very stimulating, because only spending on highly demanded government services appears to boost economic growth.

In a review of the academic literature, Skidmore and Bradshaw find a general agreement among researchers that higher taxes lead to lower economic growth, and therefore lower standards of living for American workers. The exact size of taxation’s effect on growth is not firmly established, but the consensus range is that for a 10-percent tax cut, there will be an additional rise in economic activity of 1.5 percent to 8.5 percent. When the bills for our current spending binge eventually come due, taxes will be raised and economic growth will fall. However, when confronted with these facts, supporters of the stimulus will likely argue that the economic growth generated by current spending will more than offset the drop in growth that will follow the tax hikes. This is theoretically possible, but Skidmore and Bradshaw provide good reasons to doubt the idea.

The professors divide government spending into two categories, which they call general fund expenditures and fund transfer payments. The former involves spending on core government services like security and necessary infrastructure, and the latter are government payments made to a group of people who provide no good or service in return, a classification that includes food stamps or government provided health insurance. From their review of the literature, Skidmore and Bradshaw conclude that transfer payments have either a negligible or negative impact on government growth, which is unfortunate because transfer payments have made up the bulk of stimulus spending so far. According to a CNN analysis of the first year of the $787 billion stimulus package, only $31 billion has been spent on projects like infrastructure and high-speed rail, while the remaining $148 billion spent during the past year has gone to states and individuals for purposes such as funding Medicaid and extending unemployment insurance. That spending will directly benefit those hit hardest by the recession, by helping them weather the storm, but it will not cause the economy to recover any faster.

Even that portion of stimulus spending used for infrastructure and other government purchases, an amount projected to more than double to $84 billion for the next year, may not have the positive impact that stimulus supporters expect. Government spending on infrastructure and expanded government services usually, but not always, has a small positive effect on growth. Skidmore and Bradshaw argue that this puzzle can be solved by using a cost-benefit analysis of specific government projects. If the project is demanded by a large number of people, it will probably lead to higher economic growth, but if it is simply a pork barrel project designed to benefit relatively few people, the spending will likely have no (or even a negative) impact on economic growth. For example, spending $3.4 million on an underground animal crossing in Florida and $1.15 million to replace the guard rail around an empty lake in Oklahoma is unlikely to generate any economic growth.

Probably the most efficient part of the stimulus in terms of generating economic growth is the $119 billion in tax cuts, because the literature shows that a new job is generated by the private sector for every $1,906 to $10,800 of taxes that the government cuts from its yearly budget. Still, if tax cuts are not balanced with a corresponding decrease in spending, those gains will be at least partially wiped out by future tax increases that go toward paying off current deficits.

Skidmore and Bradshaw’s study shows that government efforts to revive the economy through greater spending and higher taxes are doomed to fail. The best prescription for reviving the economy of Missouri and the entire United States involves lowering taxes and balancing the budget.

John Payne is a research assistant at the Show-Me Institute, a Missouri-based think tank.

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Some argue that this shift is the type of “stimulus” that the economy needs; after all, the money for this program was allocated from last year’s stimulus package. But will the effect of this program be worth the $300 million in taxpayer money that is being spent to finance it? I know “million” doesn’t sound like a big number anymore, with all of the billions and trillions being thrown around lately, but $300 million is still a lot of money — other people’s money. Using tax dollars to help people buy more energy-efficient machines is likely an inefficient use of funds, because purchases of these machines will become much more common within the next few years anyway, as older machines start to die. The fact that people can save money on energy costs by upgrading their appliances is already a significant incentive.

Each state has its own program, and Missouri has allotted $5.6 million in federal funding. The program will start on April 19 to coincide with the annual Show-Me Green sales tax holiday. If the funding only lasts for one day, which is likely given that Iowa’s $2.7 million ran out by 3 p.m. on the first day, no sales tax revenue would be generated. So, what genuine benefit will this expenditure have for our state? It will not add to the net state wealth, but is instead a mere transfer. Any benefit to appliance retailers will likely be very short-lived, and any arguable benefit to the state economy will be small at best. And, all the while, taxpayers will be able to watch their hard-earned money disappear down the drain into another ill-advised government program.

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