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Full Interview (MP3)

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It appears that the company figured out how to secure tax credits from the state government without increasing the level of employment. Ford is sending one line to Kentucky, but it is starting a new line in Kansas City. Although the number of jobs will remain constant, the company will continue to receive financial assistance from the state. Failing to deliver on promises, in terms of job creation and economic activity, is unfortunately a pervasive problem in Missouri. From an article in the Kansas City Business Journal:

The automobile side of the Kansas City Assembly Plant will cease production sometime during the fourth quarter of 2011, soon after the Louisville Assembly Plant in Kentucky begins production of the next-generation Ford Escape.

The effect on the 3,700 hourly employees in Kansas City remains unclear. However, Missouri state officials seem to expect some downtime at the Kansas City Assembly Plant in Claycomo, Mo., creating an opportunity for a big retooling in preparation for a new product.

Ford has a long history of pitting states against each other, so this news is not particularly surprising. The company has a pattern of securing millions in incentives from state governments, then shutting down operations and leaving the state unless it can secure additional incentives. Taxpayers, of course, are left to pick up the tab.

Don’t forget that the state of Michigan issued $909 million in incentives to Ford in October.

I find it disconcerting that the state government has a working relationship with the company in its operations. According to a statement from Gov. Jay Nixon’s office:

We have been working closely with senior Ford officials for months to make sure the vehicles of the future are manufactured at the Claycomo plant, and it’s clear that our hard work will pay real dividends for Kansas City and suppliers in communities across Missouri. We look forward to putting the finishing touches on this agreement in the coming weeks. Automotive manufacturing has a bright future in the Show-Me State.

Government officials can attempt to anticipate what the most efficient solution to a given problem will be — but, in all likelihood, they will get it wrong. This is because no individual has access to perfect information. As the Show-Me Institute’s editor Eric Dixon explained in the comment section of a recent post, the likelihood that an individual is wrong increases as he becomes further removed from the decentralized feedback loops that markets provide. Nixon and state policymakers are too far removed from the business of manufacturing vehicles to know the optimal state of the market. Missourians would be better off if the state government stayed out of this particular market, and instead allowed market forces to work.

This reminds me of the following concept that Henry Hazlitt describes in Economics in One Lesson. I cite this classic work frequently because it relates to many public policy issues in Missouri. I referenced this passage in a recent post in which I argued that government non-intervention is the optimal job creation strategy. Hazlitt wrote:

When providing employment becomes the end, need becomes a subordinate consideration. “Projects” have to be invented. Instead of thinking only where bridges must be built, the government spenders begin to ask themselves where bridges can be built.

Would the Claycomo plant stay open in the absence of the subsidy from the state of Missouri? If it would not, then the plant is, essentially, an invented project that is maintained because it can be, rather than because it satisfies a market demand. The fact that the new line has yet to be determined makes me wonder whether the project is in the process of being invented.

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I support the Missouri Plan, but many of the changes to the plan debated by the editorial board are very close to what I called for in a commentary piece I wrote almost two years ago. Altering the terms of the commission members, reducing (but by no means eliminating) the influence of attorneys, and adding legislative confirmation of commissioners to the selection process would all be well within the framework that Hall and Sobel examined in their Show-Me Institute study. They were careful to note at the end of their study that they did not consider smaller reforms that would simply change the structure of the commission, though they warned that going too far in such changes would negate the point of the commission. States that use the Missouri Plan but add legislative confirmation to the process score just as well in the rankings Hall and Sobel considered as our current system does.

Our editor, Eric Dixon, wrote a useful piece about ways to interpret Hall and Sobel’s study. We appreciate the Post‘s editorial board using our work, but the study that the Show-Me Institute released does not suggest that all of the recent suggestions for altering the Missouri Plan are poor policy.

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There is a mistaken view that governments can solve economic problems such as unemployment. History has shown that government solutions may create short-term fixes, but have long-run unintended consequences often worse than the problem they set out to solve. Our fine editor Eric Dixon recently mentioned to me, “There is a correlation between economic growth and job creation, so government officials tend to think that they can cause economic growth by creating jobs. But it doesn’t work that way.”

Voluntary economic exchange, often coupled with competition, produces wealth and leads to a greater number of people getting what they want, for less — and it brings rising employment. It is true that those who are employed have a lot going for them that the unemployed may lack. For one thing, they have a regular paycheck and are likely self-sufficient. When someone who owns a business decides that hiring a new person will add more value to her business or product than it costs to remunerate the new employee, the business wins, the employee wins, and the customers win.

Tax-incentivized job creation is a cruel parody of this win-win scenario. When the government steps in, there is reason to believe that the legislator who controls the direction of the subsidy knows less about what people need and want than do the people themselves, so incentives are misdirected. Tax dollars go to support things that people may not have wanted, or at least didn’t want at that marginal rate of exchange. When job creation is subsidized, employers and employees win (at least temporarily), and customers may win — but taxpayers lose.

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Missouri now becomes the 38th state to legalize the use of a midwife, certified by a private entity.

In the Post-Dispatch’s coverage, the state’s medical lobby provided a statement:

Tom Holloway, who lobbies for the Missouri State Medical Association, said the new law jeopardizes public safety because it allows midwives to "provide unlimited services related to pregnancy: C-sections, drugs, epidural anesthetic, even abortions, without any state regulation or oversight."

This clearly misses the point. The state’s oversight and regulations haven’t changed. Any expectant mother can still choose to use an “approved” nurse/doctor and receive the same care as always. But they don’t have too. And that is the point.

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While I certainly agree with many of Eric Dixon’s points, direct democracy is not as rosy as he seems to think.

Surely, Mr. Dixon recognizes the potential for fraud with a paid signature-gathering initiative approach. The bill under consideration in the General Assembly does not limit the initiative process. It only outlaws this particular type of signature-gathering technique. How is preventing fraud an assault on democracy?

And the initiative process has been responsible for terrible legislation, particularly in California, where direct democracy is king. California passed Propositions 39 and 98 through teachers’-union-led initiative processes that mandated minimum K–12 education funding (40 percent of the state budget!) and eliminated the supermajority requirement for passing new school bonds. Most tax increases in California have been passed through initiatives, because the state requires a supermajority legislative vote (only three states have such beneficial requirements) for all tax increases. And while many people seem to love Proposition 13 (also an initiative bill), I would argue that the bill did far more to insulate existing homeowners than it did to lower property taxes across the state (making the state impossibly expensive for an outsider like me).

In Missouri, the initiative process also tends to be the path of choice for social conservatives (and progressives) with controversial ballot issues.

Should Missouri get rid of the initiative process? Not necessarily. But we should definitely make sure that the signatures that are collected are valid.

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• Education Week has a story on how the increased enrollment in charter schools across the country has hurt enrollment at Catholic schools. We have certainly seen this in St. Louis, with the controversial decision to close several city parishes and schools in recent years. I think this is one of the things that just happens. As parents get a less expensive (free), quality option for their children’s educations, many low-income people are going to take that. Change is often good, but nobody said it was always easy.
• The Arch City Chronicle is reporting about a bill that would take away the driver’s licenses of teenagers not in school. While I certainly understand the use of incentives to keep kids in school, and none is more powerful than a driver’s license, I would recommend to you Eric Dixon’s post the other day on unintended consequences. A fairly obvious unintended consequence of this bill would be to limit the employment opportunities for teenagers who have left school. It would be limited to jobs along public transit routes, which don’t require a car. Now, that may be a decent number of jobs, but further limiting opportunities for people who are already limiting their own opportunities might not be such a good thing.
• Missourinet has a story on the Missouri House of Representatives moving to restore the deductibility of property taxes for outstate taxpayers who work in Missouri. This is an excellent, and unanimous, move by the House, and if it passes overall it will head off retaliatory moves by other states. This is very important to me, because I commute here to work from Singapore.
• Finally, in a contender for stupidest idea of the year, the Post-Dispatch is reporting that Illinois is considering lowering its voting age to 17. However, an even worse idea is contained within the article:

Alex Koroknay-Palicz, executive director of the D.C.-based National Youth Rights Association, said his group is pushing for the voting age to be 16 across the country.

"(They’re) informed, active and intelligent, and they deserve a voice in our democracy just as much as everyone else," he said.

Koroknay-Palicz said 16- and 17-year-olds are typically more stable than an 18-year-old. Eighteen-year-olds have more on their plate — starting college, getting a job or moving away from home, he said.

"The trouble is, though, that when you give people the right to vote at 18, it’s actually a bad time to start voting because you’re going off to college or getting on with your life," Koroknay-Palicz said.

Seriously, is this a joke? Is there really a National Youth Rights Association? How are they funded? Do they get an allowance from other lobbying groups? As for being informed, active, and intelligent, when I was 16 I was none of the three, and I now work at a think tank!

If you don’t have a voice in how your own house is run, you don’t need a voice in how the country is run. This guy’s statements remind me of the end of Wild In The Streets, after the 20-year-old dictator insults a kid, and the 10-year old looks in the camera and says, "We’re gonna kill everyone over 12." (And yes, I deserve enormous praise for not only being able to reference this camp classic, but to paraphrase it from memory despite only seeing it once about 15 years ago.)

Alex’s statements just get more absurd. His arguments that 18 is a bad time to start voting could just as easily serve as a reason to take voting rights away from senior citizens. Switch "…starting college, getting a job, or moving away from home," to "retiring, collecting social security, and moving into an assisted care facility," and wham!, it now makes the point that there is too much change in your 70s for you to vote. Just unbelievable.

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Mr. Dixon focuses on the vague benefits of smoker vs. non-smoker “utility,” a value that Dr. Pakko’s article avoids entirely. Instead, Dr. Pakko focuses on the tangible negative costs of smoking bans, providing a counter-argument to recent papers.

So while I agree with Mr. Dixon’s opposition to smoking bans, I disagree with his focus on aggregate utility as a value judgment. As he argues:

“Markets, though still far from perfect, ultimately do a better job of maximizing aggregate utility because each individual market participant is able to estimate his or her own utility in a way that no legislator can, and then act accordingly”

That statement is misleading. I don’t oppose smoking bans (and support the market) because I believe that non-smokers derive less “happiness” from them than smokers do without them. I oppose smoking bans because they are a direct infringement upon personal liberty.

Maximizing aggregate utility is not necessarily a good thing. Abusing certain minority groups might “maximize aggregate utility” if the benefits to the aggregate abusers outweigh the negatives of the abused. That’s why utilitarianism is a dangerous value judgment, especially for governments.

The government’s objective should be to maximize personal freedom to the extent that those freedoms don’t infringe upon the rights of others. And before you say, “But what about the non-smokers? Aren’t their rights being violated?” remember that the non-smokers are in smoking environments voluntarily. Going to a bar is a choice. Attending jury duty is compulsory. I have no problem with a smoking ban in a courtroom.

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Missouri is one of 10 states that prohibit midwives without medical or nursing degrees from assisting with prenatal care. Last year, a late addition to Missouri’s historic HB 818 health reform bill legalized the practice of midwifery for those who obtained a “tocological certification” from a private accreditation group specializing in pregnancy-related services.

The provision was a source of controversy and led to the removal of Senator John Loudon, who had sponsored the midwife provision, from his position as chairman of the Senate Small Business, Insurance, and Industrial Relations Committee.

Senator Loudon is now being restored to his prior leadership position, under the condition that he work to repeal HB 818’s midwife provision. This is an unfortunate twist in the saga. Many Missouri mothers are better off using midwives than traditional hospital care. And, as was pointed out in our op-ed on the subject, it’s already legal for anybody to help deliver a baby in Missouri. It’s only when money is involved that it becomes a problem.

Anyway, read our our op-ed on the topic. It says it better than I can.

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It’s also appropriate for government to perform its normal role in assuring that people affected by disasters get the services that they contract for — for example, that if they pay a contractor to repair their roof, he will actually do so for the price agreed upon.

But it’s not necessary or useful for government to attempt to repeal the laws of supply and demand for dealing with disasters. One doesn’t need to be a die-hard libertarian to recognize that that will only slow recovery efforts and cause people to suffer longer.

It’s important to keep in mind that this isn’t a question of whether or not the state should take action after natural disasters. As this comment highlights, the state can either help recovery efforts with wise policies, or it can make things worth through misguided policies like punishing "price gouging."

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Time will tell whether McCaskill sticks to her guns. But McCaskill has supported Republican Senator Jim DeMint’s new push to ensure that earmark requests be transparent, revealing the name of the sponsor and exactly where the money is going. Early moves toward such transparency in the new senate have stalled.

Eric Dixon, an editor at Missouri’s Show-Me Institute, says "We should congratulate McCaskill for sticking to her principles in her fight against congressional earmarks." I agree. I’m cautiously optimistic. Very cautiously, though. Show me!

I made much the same sort of qualification in a blog entry earlier this month. The real measure of a fight for reform is how well it holds up in the long run. Hopefully, McCaskill will stick to her guns.

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As the Show-Me Institute’s editor, Eric will be in charge of maintaining the high quality of all of the Show-Me Institute’s publications, including our website and blog, our Policy Studies, and Show-Me Quarterly. He’ll also be writing op-eds and contributing to the weblog.

Where am I going? I’ll be doing technology policy research from home in Saint Louis as an adjunct scholar at the Cato Institute. I’ll also be helping out part time at the Show-Me Institute for the next few months to make sure the transition to the new editor goes smoothly. I’m also working on a study on eminent domain abuse in Missouri, which I hope to finish in the not-too-distant future. If you’d like to read more of my tech policy work, please check out my contributions to Cato’s blog and the Technology Liberation Front.

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