David Stokes, Elias Tsapelas, and Avery Frank join Zach Lawhorn to discuss the expiration of enhanced Affordable Care Act subsidies, new federal proposals aimed at lowering healthcare costs through cost sharing, employer coverage reforms, and prescription drug transparency. They also break down the latest installment of David Stokes’ Free Market Guide for Missouri Municipalities on parks and recreation, the role of user fees and outsourcing, national polling on public school open enrollment and why parents strongly support it, what they are watching as the 2026 legislative session approaches, and more.

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Link to the national survey: yeseverykidfoundation.org/new-national…2-education/

Produced by Show-Me Opportunity

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Download Part Four Here

The post A Free-Market Guide for Missouri Municipalities Part Four: Parks and Recreation appeared first on Show-Me Institute.

This does not pass the smell test, as nice as that burnout tire smell can be. I don’t doubt that certain city employees may need cars, but new Ford Mustangs should not be on the menu. In fact, no new cars bought by the city should be under consideration.

Contracting Out for Fleet Management

The City of St. Louis owns lots of vehicles—3,400 to be exact. Many of these are specialized vehicles, such as police cars, ambulances, trash trucks, and fire trucks. But it also owns many normal cars, like the Mustangs it just bought.

What St. Louis should do with its regular car fleet—as other local governments have done—is contract with a rental car company to provide and maintain the city’s fleet. If only there were a major rental car company nearby. . . .

Local governments need cars for some of their employees to drive. If you have an inspector driving to appointments all day, that mileage reimbursement cost is going to add up quickly on taxpayers. But that does not mean a city, county, school district, etc., must own its own cars. Enterprise, or whichever company won such a bid process, could provide the local government with the vehicles it needs while saving taxpayers money.

How Do Cities Save Money with Outsourcing?

As one article on the fleet outsourcing topic described it:

Perhaps the most obvious benefit of outsourcing is that municipalities can save both money and stress in an extended fiscal period by not having to worry about the employment of drivers in some cases, vehicle repairs and upkeep.

Allentown, Pennsylvania outsourced its fleet management several years ago to save money, just as local governments around the country have done.

Look, I get it. It would be fun to be a St. Louis city employee driving around in a new Mustang. But taxpayers should not have to fund “cool.” Cities need cars, but contracting for them is a better option than buying dozens, or hundreds, of them outright.

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There are many successful examples of outsourcing in local government in Missouri. A lot of my work at the Institute has focused on park and recreation outsourcing, so those are the examples I’ll give. Privatizing park services is obviously unpopular with residents, as few wish to sell their parks. But outsourcing park operations is more common than people may realize.

In 2021, the St. Louis suburb of Des Peres outsourced the management and lifeguard services for its swimming facilities to Midwest Pool Management (MPM). Des Peres estimated it would save between $60,000 and $80,000 per year by outsourcing the operations.  MPM operates aquatic centers for numerous cities in the St. Louis region, as well as the Springs at Tiffany Hills in Kansas City. Other recreational facilities that are ripe for contracting and outsourcing management of include (actual examples in parenthesis): tennis centers (Shaw tennis center in Clayton), ice rinks (Steinberg rink in St. Louis City), golf courses (many locations, including Forest Park in the City of St. Louis ), and restaurant facilities within parks (Creve Coeur Lakehouse restaurant in St. Louis County).

Assets such as municipal golf courses, skating rinks, and tennis centers can be primarily funded by user fees instead of general taxes. Instead of spending tax dollars to operate these amenities, cities can enhance revenue and focus on core services by outsourcing recreational assets to companies that specialize in those areas. For example, the City of St. Louis received $402,260 in 2021 in lease payments from private operators to operate the golf courses in Forest Park (page 21 in link document).  Similarly, St. Louis leased out its Forest Park ice rink for $45,000 per year to a private operator. These arrangements provide better services for customers and a better result for taxpayers. In every example I’ve given above, local government still owns and is ultimately responsible for the asset.

According to the primary survey on this subject, about 25 percent of local governments outsource their facilities management operations. So, while it may not be standard, it isn’t rare. St. Louis County has a responsibility to negotiate hard for the taxpayers and be sure the contract isn’t too long. While the article on the deal makes it seem that the county is paying more in outsourcing, the numbers in it don’t include the long-term pension and health-care costs for government employees, and that is where savings from outsourcing really come in. As one guide on this topic put it:

Outsourcing can mitigate the long-term structural challenges faced by governments with regard to health care and retirement benefits.

In this particular instance, the county is simply having trouble filling these jobs as it is, so this outsourcing example is as much out of necessity as a choice. (It is hard for the county just to give its facilities employees a raise without giving all county employees larger raises, and that would really hit taxpayers hard.)

Local governments should privatize, outsource, or share services with other governments as much as they can. Residents, taxpayers, and voters (most people are all three, of course) all benefit from it.

The post Outsourcing Is Good appeared first on Show-Me Institute.

Many public schools are unable to do all of this. To meet the needs of students, they often—to borrow a word from the business world—“outsource” jobs. Just like your paycheck gets printed by an outside company or your office is cleaned by an independent janitorial service, schools often hire a private company to manage the district’s bus services, to provide before- and after-school care, to cook children’s meals at lunch time, and to clean the buildings. Schools contract with outside healthcare professionals or private schools to meet the needs of students with special needs. A district can even contract with an outside management firm to run the school if they want. Some schools are even outsourcing who teaches your children, at least when they have a substitute teacher.

Filling all of the vacant classrooms when teachers are absent can be a challenge for school district officials. Some districts hire full-time aides who act as floating subs, filling in here and there as needed. Others employ a cadre of retired teachers, individuals looking to gain experience in the profession, or others simply looking for part-time work. The process of recruiting, hiring, and placing substitute teachers can be cumbersome. Rather than hire an assistant superintendent or other central office staff member to take on this responsibility, some schools have begun outsourcing this job to a private company.

In Saint Louis, for example, Kelly Educational Staffing provides this much-needed service to several school districts. As Dale Singer of St. Louis Public Radio reports, the privatization of substitute teachers has been a success. In Normandy, a district that has had many struggles in the past few years, “the rate of filling classrooms with substitutes had been in the 55–60 percent range”; with Kelly, “that figure rose to around 90 percent.”

Time and again we see benefits from outsourcing public services to private companies. Yet, many fail to see how private school choice programs, such as vouchers or tax credit scholarships, could yield the same benefits. Indeed, the same principles apply to both situations.

When a public school chooses to outsource services, they make a voluntary decision. Companies compete for their business and district administrators choose the company that they believe will best meet their specific needs. If the company fails to perform, the representatives of the school district can choose to take their business elsewhere. The same can be said for school choice. When parents have options, they are able to choose the school that will meet their needs. That’s the beautiful thing about a market—it allows people to voluntarily get the services they need.

We should celebrate when public schools find a way to better deliver public education by collaborating with the private sector. Similarly, we should celebrate when parents are given the ability to choose their child’s school.

While Missouri currently allows public schools to outsource just about everything, it does not extend that opportunity to parents. It is time for that to change. Parents should be given the opportunity, through vouchers or tax credit scholarships, to enter into the educational marketplace and contract with the school that is going to best meet their child’s needs. 

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Nixa Public Schools outsourced maintenance to Sodexo, based out of Paris, France. St. Louis Public Schools contract with First Student, “the largest bus company in North America,” for transportation services. More than 100 public school districts contract with Chesterfield, Mo.-based Opaa! to provide food service for public school students.

I was reminded of this piece last week when I read an interesting story by Dale Singer of St. Louis Public Radio, “Outsourcing substitute teachers deemed a success.” Singer shares how several Saint Louis area school districts, including Parkway, Normandy, and Maplewood Richmond Heights, now use Kelly Educational Staffing to find substitutes. 

This arrangement of privatized substitute services has been beneficial for everyone. In Normandy, for example, a district that has had its fair share of trouble over the past few years, the district has struggled to fill classrooms when the teacher is absent. According to Singer, “the rate of filling classrooms with substitutes had been in the 55-60 percent range; that figure rose to around 90 percent” with Kelly Educational Staffing.  The arrangement also means school districts can cut down on administrative costs in the central office.

The system is even great for retired public school teachers who wish to teach. In Missouri, a retired teacher can only work 550 hours for a school district while collecting their pension benefits. When substitute teachers are outsourced to Kelly, they no longer work for the school district. They work for Kelly Educational Staffing. This means they can work more and still draw their pension.

This is just another example of how privatization can be a good thing. As I wrote in my piece two years ago,

Opponents of school choice like to throw out the word privatization as if it was a bad thing. Yet, public schools contract with private providers in nearly every aspect of our K-12 education system.

If the goal is to provide a world-class education to students, policymakers need to avoid the knee-jerk reaction against school choice and recognize that the private sector can help deliver on the promise that every child should have access to great schools.

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Gateway Ambulance is able to provide a potentially better service than existing ambulance services because of an innovative delivery system. Rather than keep ambulances at a fixed location such as a firehouse, Gateway plans to keep ambulances ready to go out in the community. These locations will be chosen based on a statistical analysis of where they would be most useful. If the city’s needs change and the community is better served with ambulances posted in different locations, the solution is as easy as driving the ambulances to the new posting points. You can’t move a brick-and-mortar firehouse like this.

From reports we’ve heard, Gateway Ambulance can provide a better turnout time than the fire department. “Turnout time” is the length of time between an alarm and when an ambulance starts moving. Most fire departments in St. Louis County have an average turnout time of about 90 seconds. This makes sense because staff need to transition from whatever they are doing, get ready, get to the ambulance, and get the vehicle moving.

Gateway operates out of their ambulances. If it’s hot or cold outside, the vehicle is already running. All the Gateway Ambulance drivers need to do is find out where they are going and they’re ready to go.  With the private option, turnout time is virtually eliminated.

Spending less money for a better services sounds like a win-win, right? It’s the sort of outcome that we often see when contracting out for public services. Private companies have a strong incentive to provide a superior service because if consumers, in this case taxpayers, don’t like the service, they can simply go to a different company.

The post University City uses private sector to save taxpayers money appeared first on Show-Me Institute.

The Show-Me Institute has written favorably about EMS privatization policies in the past. Privatization, when done right, can increase efficiency and expertise, provide improved services to the public, and decrease costs. However, all outsourcing proposals must be carefully considered to ensure privatization is done properly.

The University City Council ought to investigate the specifics of this privatization proposal for how it would affect services and city finances, rather than shooting from the hip and accepting or rejecting a privatization proposal on purely political grounds. Public employees, city officials, and businesses that the city may contract with are all interested parties in any outsourcing effort. When deciding whether to contract out services, the council should do its best to ignore the special interests and focus on the details of how this proposal affects the city as a whole.

Private ambulances have served parts of Saint Louis County for years, and University City might be able to benefit from private ambulances as well.

The post University City Should Carefully Consider Privatization Proposal; Ignore Special Interests appeared first on Show-Me Institute.

When I was growing up, I regularly played golf at the Forest Park municipal golf course in St. Louis. Later, in my high school and college years, I noticed the quality of the course was improving, a lot. This happened at the same time (late 1980s) the city of St. Louis outsourced the management of the golf course to a private company. As that outsourcing, or privatization, of the golf course has continued, the quality of the course has continued to improve. I doubt you would find one golfer familiar with the course before and after who thinks the outsourcing of its management and operations did not significantly enhance it.

That same type of story is repeated throughout Missouri. Good government need not be big government, and the public sector does not have to provide public services in every case. There is a role for private delivery, often regulated, of public services in Missouri. In many cases, the private sector can deliver those services more affordably and at a higher quality than the government.

Ambulance service is one area where Southeast Missouri is a leader in the privatization debate. In much of Missouri, government agencies provide ambulance services. However, in Cape Girardeau and Butler counties, ambulance services have long been privately provided. Government operation of ambulance service in most other parts of Missouri leads to a constant pressure to increase taxes and spending. In fact, voters in St. Charles County (outside St. Louis) rejected an ambulance tax increase in 2013, only to see the exact tax increase planned again for 2014. Those private ambulance companies in Southeast Missouri are serving the community just as well as a government agency could, and taxpayers are benefiting.

Research has shown privatization works best when the driving force is pragmatism, not ideology. Politicians and voters can still debate about what services should be provided as part of the eternal debate over the role of government in our society. But privatization is more about how those services are provided, not whether they should be. Unless you genuinely believe as many people as possible should be on the public payroll, such as the big city political machines of yesteryear, then a government service you depend upon or care about likely can be addressed with privatization.

There are certain roles that should always belong to the government, such as police powers, and never to the private sector. Furthermore, the role of government regulation in many privatized public services is important, such as regulation of private utilities. Finally, in some instances, such as animal control, private partnerships with not-for-profit groups may be preferred to for-profit companies. Whatever way you look at it, there are numerous examples, such as the ownership and management of Maramec Spring Park near St. James by the private, not-for-profit James Foundation, where privatization can provide better services at lower costs for Missourians. Just play golf at Forest Park to see the evidence.

David Stokes is the director of local government policy at the Show-Me Institute, which promotes market solutions for Missouri public policy.

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Government privatization refers to the practice of providing what are commonly considered public services via the private sector. In these cases, the public service is provided either directly by a private firm (or multiple private firms), or indirectly through private firm management of government-owned operations (i.e., outsourcing). There are numerous ways private management of government operations can be arranged. Privatization, when done properly, can increase efficiency and expertise, provide additional services to the public, and decrease costs for taxpayers.

In 2003, the Missouri Legislature created a subcommittee on Competition and Privatization that issued a final report in December 2004. The subcommittee’s work was promising, and its goals were inspiring. Unfortunately, the final results of the project were ultimately disappointing and few of its recommendations were implemented. However, there are valuable parts to the report that document how Missouri has used private entities for many information technology (IT), data entry, and other service-related state government needs. For the first time, that report is available online at Showmesunshine.org.

We also have included several examples of contracts and proposal requests between local governments and private sector partners. If there are local officials in Missouri who wish to look further into privatization but do not know the legal requirements, we hope that these examples of existing contracts and proposals can be of assistance. These contracts include examples from the City of Saint Louis, Kansas City, Cameron, Jackson County, Chillicothe, and Wentzville.

Other documents we have made available online here include:

• A 2007 memorandum from the City of Florissant documenting how it used the funds from the 2002 sale of its municipal water utility.
• A 2004 memorandum from Milwaukee County, Wis., detailing that county’s privatization efforts from 1995 to 2004.
• A 2004 report from Stephen Witte with the Missouri Legislative Academy on the issues regarding toll roads in Missouri.
• A 1996 report from the Missouri Council on Efficient Operations discussing various ways to make state government more effective.

The Show-Me Institute’s privatization project is dedicated to expanding the use of privatization in Missouri state and local governments. That effort is ongoing. Missourians can use this information to monitor state government and their local governments as a way to encourage privatization efforts when possible. We also hope the documents listed here will assist local government officials who may be considering privatization efforts. Being active in government and monitoring its services can be difficult. This tool makes it a little easier.

Contracts and proposal requests between local governments and private sector partners:

The post Missouri Privatization Documents appeared first on Show-Me Institute.

Though I never met the man, I feel a debt of gratitude to Ronald Coase, the Nobel Prize-winning economist who died on Labor Day at age 102. Reading his “Nature of the Firm” – one of the most cited essays in all of economic literature – encouraged me to start my own business.

Two decades ago, I persuaded John McDonnell, the CEO of McDonnell Douglas, then the nation’s 23nd largest industrial company, to outsource the biggest part of my job (writing his speeches) back to me as an independent writer. I left the company with an annual contract that paid me no less money than I was making before and that allowed me to pursue other clients. But as I told John McDonnell, I also knew that I had to perform at a high level – being painfully aware of the fact that the company could cancel my contract at any time if I did less well as an independent contractor than I had as a “salary-man” (to use the Japanese expression) or employee.

Anyone familiar with Ronald Coase’s work will recognize that I had struck a classic “Coasian” bargain – finding an efficient free-market solution to a particular problem (my unhappiness with the corporate environment and desire for independence) that worked for both parties: The CEO accepted the notion that I would be a hyper-motivated non-employee, and I became my own boss.

Coase was the first to ask – and provide a plausible answer to – the question of why companies exist . . . and why a critical part of their success comes from getting large numbers of people to submit to a form of voluntary servitude – punching a time clock and giving employers the right to direct their performance in exchange for predetermined wages or salaries and protection from sudden or arbitrary dismissal.

His answer was that companies exist for the purpose of reducing “transactions costs” – meaning all the costs of trying to order economic activity through voluntary exchange. That includes the costs of searching out and evaluating other parties; negotiating contracts; maintaining communication; and policing and enforcing the terms of those contracts.

Imagine the extraordinary difficulty that a Henry Ford or a William Boeing would have faced in trying to contract out for every part and every task going into the assembly of a car or airplane. Hence the need for the visible hand of management in coordinating the allocation of resources.

At the same time, Coase fully appreciated the disciplines and rewards of free enterprise, and he was acutely aware of the tendency of corporate (or government) bureaucracies to stifle individual initiative and kill any sense of real ownership that people have over the quality of their own work. Within a large, publicly owned corporation, no one, including the CEO, is spending his own money.

Citing the picturesque words of another economist (D. H. Robertson), the British-born Coase, who spent most of his working life in the United States, described companies as “islands of conscious power” – or central planning – in an “ocean of unconscious (i.e., spontaneous free-market) cooperation . . . like lumps of butter in a pail of coagulating buttermilk.”

The “lump of butter” of which I was a part in the early 1990s was a shrinking rather than a growing mass: In just three years, the company shed more than 50,000 jobs, or 42 percent of the workforce. In the midst of all the downsizing, people were angry and confused – not knowing where the axe would fall next and bitterly resenting a sudden loss of the personal security that they had gained (and felt entitled to) through years of fealty to the same company. What they didn’t see was that a whole way of life was disappearing.

And now it is gone. Today, no one – not even someone graduating from a top business school – expects to spend his or her entire adult life with a single company. Everyone accepts that big companies really aren’t built to last. More like lumps of butter than castles of perpetual growth and stability, they may dissolve at any moment and disappear into the liquid churn.

One may think of the quarter of a century from 1955 (the first year of the Fortune 500) to 1980 as a golden age for big business in America. During that time, Fortune 500 companies ruled the roost – growing at about twice the rate of GDP growth and enjoying robust profitability from one year to the next – even during recessions. In 1975, the last year of the virulent recession touched off by the Arab oil embargo, only 15 Fortune 500 companies, or 3 percent of the total, reported losses, and all of the top 50 companies were solidly in the black.

Compare that to 1993 – which happened to be my last year as an employee at McDonnell Douglas. This was a brutal year for many big companies. Even though the 1990-91 recession was officially over, no fewer than 151 Fortune 500 companies – or just more than 30 percent – lost money in 1993, and that included 4 out of the top 10 (GM, Ford, IBM, and DuPont) and 22 out of the top 50 ranked by revenues.

To add just one more statistic gleaned from sifting through old issues of the Fortune annual survey, it is worth noting that Fortune 500 companies shed close to 3 million jobs in the 10-year period ending in 1993.

So what happened to bring the era of big business dominance to a close and set the stage for a new era of entrepreneurship and greater dispersal as opposed to centralization of economic activity?

We may turn to Ronald Coase for what I believe is the key insight. In his essay on the nature of the firm – published in 1937, when he was a young professor at the London School of Economics – he addressed the different ways in which technological advancements could affect the size of companies:

It should be noted that most inventions will change both the costs of organizing and the costs of using the price mechanism. In such cases, whether the invention tends to make firms larger or smaller will depend upon the relative effect on these two sets of costs. For instance, if the telephone reduces the costs of using the price mechanism more than it reduces the costs of organizing, then it will have the effect of reducing the size of the firm.

But of course, I thought, when I read those words for the first time. This was a year before John McDonnell and I struck our Coasian bargain. With his encouragement, I had agreed to take part in a research project by the Center for the Study of American Business at Washington University in St. Louis examining how U.S. firms (including McDonnell Douglas) were responding to the twin challenges of the information revolution and globalization . . . and to write sections of a book (The Dynamic American Firm) summarizing the findings.

Coase’s thinking loomed large in the book and in my own subsequent decision to go out on my own.

The mainframe computers that came into existence in the 1950s were so big and expensive that only the biggest companies could use them. With the help of these early computers in reducing the costs of organizing production and marketing, Fortune 500 companies became bigger and more prosperous throughout the sixties and seventies.

Then came the information revolution – which (even before the Internet) had the opposite effect of reducing the size of firms. It reduced the need for corporate bureaucracy. Still more, it caused many big companies to disassemble their carefully constructed vertical empires and to contract out for just about everything outside of their own core competencies. I knew that writing was not one McDonnell Douglas’s core competencies, and I reasoned that I should set a price for my work as an outside contractor that would be equal to the cost that the company would incur in having to hire a full-time speechwriter to replace me. Because the drafting of speeches and annual reports took maybe 50 percent of my time at McDonnell Douglas, I figured I would free up many hours that would go into serving other clients.

The Dynamic American Firm did not become a best-seller, but in re-reading some passages of the book, I can relive some of the excitement that I felt in pondering the next step in my own life:

Like “de-industrialization,” the rapid rise in business services and self-employment over the past several years has set alarm bells ringing in enlightened centers of thought. “In the future,” one displaced executive told Time magazine, “we are going to be moving from job to job in the same way that migrant workers move from crop to crop.”

Perhaps. But unlike the migrant worker, today’s corporate refugee, equipped with a personal computer, printer, copier and fax machine – all purchased for about $7,000 – can earn a good living toiling in the comfort of his, or her, home. That is so because the information revolution has greatly reduced transactions costs – for big firms and small contractors alike.

Coase may have done more to extend our understanding of business and commerce than any thinker since Adam Smith. But his influence did not stop there. He also had a profound influence in challenging the belief that government regulations, taxes, or subsidies were the best and, indeed, the only way of dealing with actions of business firms that have harmful effects on others, with a commonly cited example being the emission of sparks from a train that causes damage to a farmer’s crops along the railroad’s right-of-way.

In a “The Problem of Social Cost,” his second most famous essay, published in 1960, Coase argued that most disputes of this nature are best resolved by negotiation, rather than regulation or imposing strict penalties on the damaging party.

As Coase pointed out, both the railroad and the farmer would be better off if the latter agreed not to cultivate the vulnerable portion of his land in exchange for a payment that would equal or exceed the opportunity cost incurred in foregoing its cultivation. In other words, without regulation, the two sides could easily reach a mutually beneficial solution.

“The Problem of Social Cost” gave rise to a whole new body of literature in the field of “economics and the law.”

In awarding him the 1991 prize in economics, the Nobel committee observed that “Coase may be said to have identified a new set of ‘elementary particles’ in the economic systems.” Coase himself made no such claims, saying in a 2012 interview, “I’ve never done anything that wasn’t obvious and I didn’t know why other people didn’t do it.”

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

The post The Best Bargain I Ever Made appeared first on Show-Me Institute.

WASHINGTON — Racing to meet an October deadline, Obama administration officials said Thursday that they had awarded a contract worth as much as $1.2 billion to a British company to help them sift applications for health insurance and tax credits under the new health care law.

The company, Serco, has extensive experience as a government contractor with the Defense Department and intelligence agencies, and it also manages air traffic control towers in 11 states and reviews visa applications for the State Department. But it has little experience with the Department of Health and Human Services or the insurance marketplaces, known as exchanges, where individuals and small businesses are supposed to be able to shop for insurance.

A billion dollar contract to a foreign company with limited experience in the health care industry? What could go wrong?

Of course, it remains to be seen how Serco will be able to determine tax credit eligibilities since the tax credits themselves are partly dependent on… the employer mandate,.

The IRS both delayed the imposition of penalties and “suspend[ed] reporting for 2014.” As the American Enterprise Institute’s Tom Miller observes, without that information on employers’ health benefits offerings, the federal government simply cannot determine who will be eligible for credits and subsidies. Without the credits and subsidies, the “rate shock” that workers experience will be much greater and/or many more workers will qualify for the unaffordability exemption from the individual mandate. …

All of these tax credit details matter to Missouri taxpayers. According to Daniel Kessler, a senior fellow at the Hoover Institution, insurance rates for many Missourians could rise a whopping 89% in 2014 because of the Affordable Care Act. To make matters worse, the question of whether tax credits can even be issued in Missouri and many other states is already unclear. Under the text of the law, tax credits flow through state exchanges only; Missouri, as well as a majority of the country, will have federal exchanges. The Affordable Care Act not only raises costs for most, but indeed, the law may be written in such a way that even its cost-mitigating provisions won’t apply to most of the country, Missouri included. Assuming Serco could determine whether tax credits can be issued to anyone, it may end up that only a fraction of the country would qualify for the tax credits outlined in the law.

It’s pretty cynical of the government to dump news of its health law outsourcing on a holiday — and of all holidays, a patently American holiday — to ensure fewer people found out about it. And it’s a sad commentary not only on the unpopularity of the law itself, but of the kind of political leadership slowly and sneakily implementing it. What a massive mess.

The post Of Course: Health Law That Will Ship Jobs Overseas to Be Overseen by… An Overseas Company appeared first on Show-Me Institute.

Stokes links to several insightful articles demonstrating that “the way it has always been done” is not always the best way. Not only does competition among companies help develop less expensive technology and more efficient methods, but it also allows for creating different solutions to serve different people’s diverse needs. In this Reason Foundation article (which was linked by Stokes), Geoffrey Segal discusses some of the benefits and goals of using competition to encourage creative solutions:

But cost savings aren’t the only benefit. A review of state practices around the country found that a need for greater flexibility, access to skills not available in-house, and private sector innovation are all important factors in a state government’s decision to outsource or institute competitive sourcing of services. […]

Regardless, competition is about finding new ways of doing business and buying something different from what you already have.

When a number of parties compete for people’s business, a variety of services become available, better satisfying the many different consumers who are looking for different products. A competitive market allows smaller companies to cater to the specific preferences of consumers who are in the minority, without forcing these less-popular solutions on the majority.

Not only that, but when one company does invent a new product, other companies compete by imitating the new product, creating less-expensive knockoffs and making products more affordable. In his 1991 article “Innovation, Imitation, and Economic Growth,” published in the Journal of Political Economy, economist Paul S. Segerstrom pointed out that “the benefits to society from an innovation last forever,” while the benefit to the developer of the new product only lasts until a competitor can produce a cheaper imitation. In order for producers to keep making money in a competitive atmosphere, they must constantly develop newer and better products, or else make someone else’s ideas more affordable. Either way, the general public benefits from better, less expensive products.

The post Creativity: Not Just for Artists appeared first on Show-Me Institute.

The $2.5 billion settlement to improve the Kansas City sewer system has put the city well past the question of whether something needs to be done with its infrastructure assets. Right now, private companies are willing to pay for the right to manage the city’s property, and long-term savings result when the private sector operates public services more efficiently. Partnering with the private sector — either in the form of up-front payments for asset management, or cost savings from greater operational efficiencies — could help Kansas City meet its financial obligations, both now and in the future.

In 1984, Oklahoma City contracted out the management of its wastewater treatment facilities to a private utility company, Veolia Water. At the time of the contract, Oklahoma City spent $14 million per year on its system. Seventeen years later, in 2001, Veolia operated an improved system for only $11 million per year. These numbers have not been adjusted for inflation, making the savings even more impressive. Veolia still operates the Oklahoma City wastewater system today, after further contract renewals.

I provide this example not to encourage you to buy stock in Veolia or move to Oklahoma City, but to showcase the potential effectiveness of partnering with the private sector in public infrastructure operations, management, and delivery. A city council committee has approved a resolution for Kansas City officials to study the possibilities offered to residents and taxpayers from private sector competition for public infrastructure programs. The full council is scheduled to consider the proposal soon.

This resolution is limited in its reach. The proposal simply calls for the city to study the expected effects of contracting out the management of certain assets. There is no plan or intention to sell off and fully privatize city assets. Instead, the study could consider a range of options, such as private companies that pay the city for the right to operate city parking garages, or a private engineering firm contracting to operate water or wastewater facilities. One local example of the benefits of these ideas involves recent successful changes to the Kansas City animal shelter, although that particular effort moved further toward full privatization than this proposal does.

Successful examples of the private provision of public services can be found throughout Missouri. They include instances of outsourcing, contracting, and private ownership. Private companies successfully operate the nation’s only private, commercial airport in Branson; manage the pharmacy services of Saint Louis County’s Department of Health; provide electricity, gas, and water throughout Missouri; and manage trash collection in communities throughout the state. Around the country, private companies efficiently operate public highways, libraries, jails, and much more.

Not every example would be appropriate for Kansas City, but a study could help determine where private partnerships would benefit the city. Mayor Mark Funkhouser deserves credit for bringing these issues to the forefront, and the people of Kansas City will benefit if they get the serious study they deserve.

David Stokes is a policy analyst for the Show-Me Institute, a Missouri-based think tank.

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I want to be very clear from the beginning that Kansas City is NOT considering full-scale privatization of its infrastructure, as I recommended the city of St. Louis do with its water division. Kansas City leaders will study the potential for contracting with private partners to manage facilities, including wastewater treatment, parking, and more. Today’s Kansas City Star has a very good story about yesterday’s committee meeting (which I attended). Mayor Mark Funkhouser and the members of the committee deserve a great deal of credit for their willingness to consider these possibilities for the taxpayers and residents of Kansas City.

This type of operations and management (O&M) outsourcing can have great benefits for the city and its people. Oklahoma City has had great success after outsourcing its wastewater treatment plants in 1984. Anyone who thinks that this type of original thinking always fails or hurts taxpayers simply needs to look at the success in Oklahoma City for the other view. Like anything, these types of efforts can be executed either well or poorly. Although privatization failures exist, Oklahoma City represents only one example of success out of many. I look forward to sharing them with you as this discussion moves forward.

The post Kansas City to Take a Hard Look at How It Provides Services appeared first on Show-Me Institute.

If free trade is one area that this contentious group can agree, why do elected officials in Washington and in Jeff City continue to pass measures that impede, rather than proliferate, free trade?

As the latest example of impeding free trade, the U.S. Senate is targeting companies that outsource, particularly to India:

Democrat Senator of Missouri Claire McCaskill on Thursday said the proposal would increase fees for particular companies that exploit two categories of visas — H-1B and L.

Not only do legislators seem to ignore economists, they also seem to ignore history. The fact that protectionist policies do more harm than good has been repeatedly demonstrated in the past (e.g., the Smoot-Hawley Tariff Act in 1930, the steel import tariffs in 2002, and protectionism in the vehicle manufacturing industry).

When a country or a state protects certain industries, those companies do not have to innovate their product to compete in the marketplace. As additional negative consequences, such protectionism dampens downward pressure on consumer prices and reduces the variety of goods and services available to consumers in a region, who are more limited to that which they can produce themselves because goods from elsewhere are artificially priced out of market availability. If this proposal progresses, perhaps the same problems could plague the IT services industry.

Subsidizing favored companies and industries and simultaneously imposing restrictions on those that are not favored is an expensive and inefficient practice. In doing so, the government sends the fallacious message that it can pick winners and losers in the marketplace. Overall welfare would improve if the United States and Missouri both embraced the creative destruction of their respective economies, instead of cementing favored activities for reasons of nostalgia and/or xenophobia.

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[A]ccording to some analysts and students of corporate behavior, […] companies that take a limited and more-targeted approach to layoffs tend to do better in economic recoveries than those that slash employment sharply and across the board.

“You can’t shrink your way into prosperity,” says Wayne Mascio, a business professor at the University of Colorado, Denver.

Although the article focused on downsizing in private companies, I think that the conclusion applies nicely to the public sector, as well. This is particularly relevant to state agencies in Missouri as they cope with their budget problems. Instead of scaling back their operations proportionately, governmental agencies in Missouri should take a targeted approach, by identifying programs that are underperforming and subsequently eliminating or outsourcing them. This would increase the likelihood that the programs would recover and perform better in the future.

When determining which programs, or segments thereof, to cut, a firm or a government agency should also consider non-financial and indirect costs. This is because unintended negative consequences could adversely affect a firm or an agency’s bottom line, as well as its ability to perform core functions. In order to increase its overall growth and prosperity, a firm or agency should focus on the activities for which it has a comparative advantage, and then trade amicably with others that possess a comparative advantage in other activities.

The firm or government agency in question should also consider its opportunity cost for providing a program under review. Outsourcing non-core functions enables concentration on core functions, which can improve efficiency and quality. This way, firms and agencies alike could maximize their up-time and productivity.

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