So, what would the bill change?

HB 225 would modify a law passed in 1976 that prevents government-supported utility companies from raising rates to pay for construction of new projects. Specifically, HB 225 would allow only a “clean baseload plant  rated under 600,000 megawatts” to be exempt from the current law. The current ban on raising consumer rates to help pay for construction projects would still apply to traditional nuclear plants (which are rated at over 700,000 megawatts), non-baseload energy sources (such as windmills and solar panels), and fossil fuel plants (which are deemed unclean). A utility company would only be able to raise consumer rates to pay for the construction of (SMRs).

So, what are small modular reactors (SMRs)? How are they different?

SMRs are essentially a smaller, more compact version of a traditional nuclear plant. They are brand new, cutting-edge nuclear technology, and are beginning to be rolled out across the United States—including a new SMR project a stone’s throw away from my hometown in East Tennessee. Although they are less powerful, they improve upon some of the shortcomings of traditional nuclear power plants. First, they take up far less space—the SMR being constructed near my hometown will be the size of a football field. They are less expensive and can be assembled more quickly, as the major components of each SMR are prefabricated (constructed beforehand), meaning they can be manufactured in a factory offsite and shipped to the location. This differs from traditional plants which are much larger and have to be custom designed to fit certain landscapes. SMRs are very versatile—they can increase or decrease output to match energy demand and shore up weaknesses in the power grid. For example, if a huge concert comes to a town in Missouri, an SMR can ramp up energy output to assist the grid. Additionally, SMRs can be grouped together so that if energy demand exceeds the capability of one reactor, another can be paired with the current reactor.

Are these small modular reactors safe? Could they explode and create radioactive waste?

When thinking of nuclear energy, many conjure up images of Chernobyl—the Soviet Union nuclear plant and subject of a recent HBO series—or of nuclear bombs that loomed ominously during the Cold War. However, modern nuclear energy is clean, safe, and efficient. Nuclear fission does not produce greenhouse gas and misconceptions surround nuclear waste. Nuclear waste is reusable and there is only a small amount of it that has to be stored securely. If you took all the nuclear waste ever produced by the United States nuclear industry since the late 1950s, you could dig a ditch 10 yards deep under the dimensions of one football field and store it there. Additionally, a nuclear plant cannot blow up like a nuclear bomb; it is impossible. While a disaster like Fukushima is already unlikely, the design of an SMR (which does not require power to cool a reactor down) makes an accident even less likely.

HB 225 could expand nuclear energy in our state, providing Missourians with additional clean, safe, efficient, and reliable energy, and deserves serious consideration.

The post Nuclear Energy in Modern Missouri appeared first on Show-Me Institute.

To be sure, there were different degrees of socialism. The totalitarian socialism of Mao and the Soviet Union killed people, ruined economies, and snuffed out freedoms critical to both political and personal life. The democratic socialism common in the West, softer and therefore less destructive, merely specialized in overregulating the private economy and extreme redistribution of wealth.

But even in the West, socialism manifestly failed. The democratic socialism of Great Britain reduced that country from a leading economic power to the “sick man of Europe,” and was firmly rejected by British voters during the Thatcher years.

Unfortunately, socialism has come slouching back onto our college campuses, settling itself comfortably among the students. A 2015 Reason-Rupe poll showed that 58 percent of 18- to 24-year-olds viewed socialism favorably. By contrast, only 28 percent of seniors ages 65 and above were favorable toward socialism. Several other polls say the same thing: A majority of young adults support socialism, and in fact prefer it to capitalism.

To older adults, this fact probably seems disturbing and inexplicable. How could anyone support a philosophy that has spawned evils ranging from economic stagnation to mass killing? Speaking as a 21-year-old college student, I believe that the explanation boils down to two things—discontent and ignorance. Most of today’s college students grew up during the Great Recession. They are graduating with large debts and, for many, bleak prospects for employment. They feel cheated, and believe that something is deeply wrong with our current system. Since that system is capitalist, they see socialism as an alternative.

At the same time, however, most young adults misunderstand socialism. In one study only 16 percent of millennials could define socialism as a government-managed economy. And who can blame them for their ignorance, considering what they’ve learned—or haven’t learned—in the classroom? In my experience, professors may not espouse socialism, but they seldom challenge its tenets. Most of my history classes in college have focused on the many ways America has victimized the poor and downtrodden. Professors equated capitalism with imperialism while failing to even mention the evils committed by totalitarian socialist countries or the economic destructiveness of democratic socialism. One of my professors dismissed the atrocities committed under Mao Zedong’s regime by saying, “While there were certainly many failures with Mao’s reign, during his rule China’s literacy rate went up, as did migration to cities.”

“Failures”—that is how my professor referred to the 45 million who starved to death under Mao.

I believe this same indifference to truth is what turned so many college students into enthusiastic supporters of Bernie Sanders during the last presidential campaign, giving him more youth votes in the primary than Clinton and Trump combined. While Sanders is no totalitarian, he certainly supports the same democratic socialism that emaciated Britain in the postwar years. Students loved the promises he made (free college, free healthcare, and forgiveness of debt) and were perfectly willing to believe that big and benevolent government could make almost anything “free” simply by raising taxes on the very rich.

It should be said that this support for socialism isn’t necessarily permanent. Studies find that support for socialism drops after college and goes down as people earn higher salaries. Young people aren’t stupid; they are just young, and some economic truths cannot be truly appreciated until experienced.

Of course, some college students don’t make it easier for themselves. Many refuse to listen to conservative voices and cannot stand correction—or argument. Nothing strengthens a lie quite like an echo chamber, so the lie of socialism has grown into a powerful force on campus that threatens competing (and worthier) ideas. Yes, most students are just young and will outgrow their revolutionary fervor. But right now, students are being cheated out of the best opportunity most will ever have to test competing political and economic ideas against one another. And until our colleges have the courage to break through the echo chamber, students will get—at best—only half the education they’re paying for.

The post Socialism: The Slouching Beast on our Campuses appeared first on Show-Me Institute.

A quarter of a century ago, Margaret Thatcher threw the British House of Commons into an uproar when she mocked the concept of a United State of Europe in no more than three words. Punctuating each one, she said:

“No. No. No.”

This wasn’t just verbal overkill.  More precisely, she was saying “No” to a European Parliament comparable to the U.S. House of Representatives, “No” to a European Council of Ministers comparable to the U.S. Senate, and “No” to a European Commission approximating the power of the White House and executive branch.

Nevertheless, senior members of her party railed at her vehement rejection of a new conventional wisdom.  They challenged her leadership—and forced her resignation.

After eleven years (the most of any British prime minister in the 20th century), she was booted out of office on the issue of European integration. She resigned on Nov. 28, 1990.

Since her departure, every British PM (two Conservatives and two Laborites) has waved the pro-Europe flag. Support for the European Union (EU)—supplanting what began as the European Common Market—has been the consensus view of the British political establishment EST (Ever Since Thatcher).

However, with the “Brexit” vote last month, this era may also come to an abrupt close. After 26 years, will the British public  have swung around to her thinking? 

Thatcher foresaw many of the difficulties today’s Europe.

In 1975, as opposition leader, she campaigned to keep Britain in the Common Market. However, after winning a third term as prime minister in 1987, she worried about the metamorphosis of the Common Market from free-trade zone into the “Babel Express”—a new super-state with many different languages and national identities. Ironically enough, the EU was taking shape just as an older super-state (the Soviet Union) was falling apart.

A new super-state centered in Brussels, Thatcher thought, would be as antithetical to democratic freedom and democratic accountability as the older one centered on Moscow.  In her memoirs she wrote: It would have “the same inclination toward bureaucratic rather than market solutions” . . . and it would make distant and unelected elitists the masters rather than the servants of the people.

“Ultimately,” she wrote, “there was no option but to stake out a radically different position from the direction in which most of the Community seemed to be going, to raise the flag of national sovereignty, free trade, and free enterprise—and fight.”

Here are eye-opening excerpts from a major speech she gave less than two years out of office.  At the Hague, she predicted worsening problems of:

Insecurity—because Europe’s protection will strain [relations with the U.S.] on which the security of the Continent ultimately depends.

Unemployment—because the pursuit of policies of regulation will increase costs, and price Europeans out of jobs.

National resentment—because a single currency and centralized economic policy . . . will make [people in various countries] feel angry and powerless.

Ethnic conflict—because the wealthy European countries will not be the only ones faced with waves of immigration from the south and east.

Suffice it to say that all she predicted has come to pass.

The post Leadership Lessons from Attila the Hen: Margaret Thatcher on Europe-and the United States appeared first on Show-Me Institute.

According to some, ending competition for convention catering business would increase quality:

An exclusive food provider, according to O’Neal, would help the convention center ensure quality control because “with one vendor, the building can control quality better, and that’s what people remember about a building.”

City Manager Troy Schulte agrees. Even if the city weren’t negotiating with Hyatt, Schulte said, he was thinking about moving toward a single caterer. He said the city has received some complaints about catering, which he declined to specify. Schulte said a single provider would make quality control better.

You read that right. Some Kansas City leaders apparently think that reducing choice increases quality. (By the way, Aramark has an exclusive catering agreement at Kauffman Stadium, and they haven’t been doing so well regarding quality.)

This flawed thinking isn’t limited to the catering contract, according to the Memorandum of Understanding. Neither the initial award of catering nor the award of the construction contract for the hotel are to be competitively bid. The city apparently just plans to give those contracts to Hyatt and J.E. Dunn respectively without making sure their bids are the best or the cheapest.

Is it any wonder that city finances are such a mess when even the most basic economic principles of choice and competition are disregarded?

The post Back in the USSR appeared first on Show-Me Institute.

Government does a terrible job planning the economy, whether it is a Soviet five-year plan or retail TIFs (tax increment financing) in Saint Louis County. Municipal government can improve the local economy by doing the things it needs to do well: police, fire, local roads, etc. It does not need to “develop” our economy, especially because “economic development” in Missouri is synonymous with taxpayer subsidies and corporate welfare.

Clayton, the Saint Louis County seat and the region’s other downtown, is considering an economic development sales tax, along with three other tax increases, on the April ballot. Doing four tax increases at once (four!) is crazy, but the point of this post is just the economic development sales tax.

Clayton has been careful in its use of tax incentives and other economic development tools in comparison to other Saint Louis County municipalities, which admittedly is a very low bar. Clayton deserves credit for that. So I can’t understand why it would propose raising a tax to do more of something it should not do in the first place: government planning of the local economy.

Clayton officials likely would claim that the intention for the new tax funds is not more use of subsidies or more local planning, but a continued focus on business recruitment, retention, etc. I believe them, and in the short run, I am sure that would be true. But, in my opinion, the increased use of, and funding for, government economic development activities will almost certainly be followed by heavier use of various subsidies and tax incentives. Cities such as Clayton should be moving in the opposite direction with less or zero use of these types of programs, not increasing taxes to do things they should skip from the start.

More to come on these four tax increase proposals next week.

The post Bloodletting In Clayton appeared first on Show-Me Institute.

They range from large programs, such as the historic preservation tax credit and the Quality Jobs program, to the small, such as the state’s film tax credit. There are at least half a dozen more state-authorized local tax incentive programs, such as Tax Increment Financing (TIF). Missouri, like many states, aggressively uses these programs to encourage investments the government deems desirable.

But do these programs work? Do they accomplish their various goals, which have many different angles but all fall eventually into the categories of economic growth and job creation? These programs may not be as intense as a Soviet Five-Year Plan, but they are centralized economic planning nonetheless. Any time the government takes tax dollars and directs them to other areas of a market economy, it is engaged in central planning. Some planning is essential, but has this type of economic planning benefitted our state or our local communities?

This study relates closely to the current debate over Enhanced Enterprise Zones (EEZs) in Missouri.

Note: The data source for Personal Income, Per-Capita Income, and Total Employment is the U.S. Bureau of Economic Analysis. The source for Labor Force is the Economic & Policy Analysis Research Center at the University of Missouri-Columbia. The source for Assessed Valuation is the Missouri State Tax Commission.

Related Links

Commentary: Why Enhanced Enterprise Zones Are A Bad Deal For Missouri Cities

Commentary: EEZs Are An EZ Path To Corporate Welfare

Commentary: Callaway County Does Not Need An EEZ

The post The Effectiveness of Enterprise Zones in Missouri appeared first on Show-Me Institute.

Plainly, it is more than the exercise of peaceful assembly and free speech. The protesters have had almost two months to express their complaints about corporate greed, income inequalities, and the whole notion that life isn’t nearly as fair as it ought to be. What more can they possibly say that they haven’t already said (however obtusely) a hundred times?

In the root sense of the word, to ‘occupy’ a place is to seize it from someone else. In just that sense, the Soviet Union ‘occupied’ Poland in September of 1939.

In the public theater going on in our cities today, the occupiers lay claim to the ground that they occupy — chanting “Whose Streets? Our Streets” and refusing to leave, regardless of city ordinances forbidding the pitching of tents in public places and regardless of the entreaties of elected officials asking them to leave.

According to their argument, the occupiers have reclaimed public space for the “99%” — meaning everyone outside the tiny group of people (the richest “1 percent”) who supposedly control almost all wealth and power. Of course, it is preposterous for the protesters to claim that they speak for 99% of the country — or, indeed, for anyone other than themselves.

Nevertheless, in cities across the country, mayors and other public officials have gone along with this fiction and bent over backwards in trying to accommodate the occupiers.

That was the case in my home city of Saint Louis, where 60 or so protesters were camped at Kiener Plaza, two blocks away from the city’s baseball stadium. At first, Saint Louis Mayor Francis Slay, a Democrat, went out of his way to welcome the “Occupy residents,” as he called them. He offered the occupiers a free permit to gather at the plaza and openly expressed his willingness to overlook the violation of various city ordinances.

Said the mayor in a blog post on Nov. 4:

During the weeks it has been camped here, Occupy St. Louis has had the opportunity to make its points heard during some very high profile events, including a presidential visit (on Oct. 5) and the World Series.

I emphatically disagree with those who say that allowing the encampment to remain during those events showed St. Louis in a bad light . . . Moving the Occupy residents simply to deny them a chance to tell their story to a large audience would have been wrong-headed and wrong-hearted.

But with the Christmas season drawing near (a big event at Kiener Plaza), the mayor wearied of the street theater. He announced that he would put an end to the occupation — promising only to give the group 24 hours’ notice before police would be called. In response, the Occupy St. Louis group accused the mayor of bending to the will of corporate leaders — the dreaded 1 percent. At a meeting with the mayor’s staff, occupiers expressed their outrage by showing up with money taped to their mouths.

The drama ended in the early morning hours of Nov. 12. That is when Saint Louis police arrested 27 remaining protesters and cleared the plaza of tents and signage.

If any moral may be drawn from the “big-hearted” mayor’s falling out with those he so recently lauded as having “important things to say about the direction of the country,” it is this: You can please professional agitators and self-proclaimed victims some of the time, but you will never be able to please them all of the time.

In truth, the protesters in Saint Louis and other cities have no claim to special treatment in the use of parks and other public places — apart from their willingness to flout the law.

The violation of city ordinances may sound like no big thing — against the immensity of the First Amendment guarantees of free assembly and free speech.

But no one ever denied free speech to the protesters. It is they who put the liberty of others in jeopardy. City ordinances that prohibit the pitching of tents in public places ensure that no one group can seize these places and deny or inhibit others in the use and enjoyment of the same space.

In other places around the country, city officials should follow the Saint Louis mayor’s example: They should strike the tents and stop coddling the occupiers.

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

The post Occupation as Aggression – And Public Theater appeared first on Show-Me Institute.

No country in the modern world has managed persistent economic growth without considerable reliance on private enterprise and decentralized private markets. All centrally planned economies failed to achieve sustained development, including the Soviet Union before its collapse, China before market reforms began in the late 1970s, and Cuba since Castro’s revolution in the late 1950s.

This is advice that the state government in Missouri should take to heart. Through the use of programs like targeted tax credits, TIF, and the LRA’s land holding policy, the government in Missouri attempts to plan the economy and consequently stunts its growth.

Missourians and the Chinese alike would experience more economic growth if the government allowed private enterprise and the decentralized market to function.

The post “Speaking Words of Wisdom, [Gary Becker Says] Let It Be” appeared first on Show-Me Institute.

Gov. Jay Nixon, who signed the legislation, has traveled the state promoting job expansions in other industries. He expressed little concern Friday about the potential loss of jobs for strippers and others in the adult entertainment industry.

“I do not believe that the economy of the future of my state will be built on that industry,” Nixon said.

If a person disapproves of the exotic services industry, then he or she may choose not to patronize those businesses. It is quite another thing, however, to prevent other individuals from engaging in voluntary market transactions.

The problem in Missouri is that the state government is propping up industries that are failing, and simultaneously squashing industries that are successful without subsidy in the private sector. Individuals and businesses should not be given special advantages over others — even if one economic activity (e.g., exotic dancing) is viewed as less glamorous or moral than another (e.g., filmmaking or computer services). Restrictions such as this one create inequality because they force unfavored businesses to compete at a competitive disadvantage in the marketplace. This invites corruption as a consequence, because the restrictions incite individuals and businesses to petition the government for special treatment.

If the state government in Missouri were serious about promoting economic development, it would stop attempting to pick and choose the economic activities that occur within its borders. This strategy didn’t work for the Soviet Union, and it won’t work for Missouri, either.

The post “I Do Not Believe That the Economy of the Future of My State Will Be Built on That Industry” appeared first on Show-Me Institute.

– A reduced scope for Latino history and culture. A proposal to expand such material in recognition of Texas’ rapidly growing Hispanic population was defeated in last week’s meetings—provoking one board member, Mary Helen Berlanga, to storm out in protest. “They can just pretend this is a white America and Hispanics don’t exist,” she said of her conservative colleagues on the board. “They are rewriting history, not only of Texas but of the United States and the world.”

– Changes in specific terminology. Terms that the board’s conservative majority felt were ideologically loaded are being retired. Hence, “imperialism” as a characterization of America’s modern rise to world power is giving way to “expansionism,” and “capitalism” is being dropped in economic material, in favor of the more positive expression “free market.” (The new recommendations stress the need for favorable depictions of America’s economic superiority across the board.)

– A more positive portrayal of Cold War anticommunism. Disgraced anticommunist crusader Joseph McCarthy, the Wisconsin senator censured by the Senate for his aggressive targeting of individual citizens and their civil liberties on the basis of their purported ties to the Communist Party, comes in for partial rehabilitation. The board recommends that textbooks refer to documents published since McCarthy’s death and the fall of the Soviet bloc that appear to show expansive Soviet designs to undermine the U.S. government. […]

– Thomas Jefferson no longer included among writers influencing the nation’s intellectual origins. Jefferson, a deist who helped pioneer the legal theory of the separation of church and state, is not a model founder in the board’s judgment. Among the intellectual forerunners to be highlighted in Jefferson’s place: medieval Catholic philosopher St. Thomas Aquinas, Puritan theologian John Calvin and conservative British law scholar William Blackstone. Heavy emphasis is also to be placed on the founding fathers having been guided by strict Christian beliefs.

There is so much to unpack here that I could never do it all justice in a blog post, but here are a few brief criticisms from this former high school social studies teacher:

• While I’m certainly not one to push for highlighting the roles of minorities simply because they are minorities, Latinos have done a great deal to shape the history and culture of Texas. It is arguably the confluence between the Mexican and U.S. cultures that so defines the American West and Southwest, and makes Texas so unique, but apparently the Texas State Board of Education would rather not discuss half of that equation.
• The changes in terminology are deliberately meant to whitewash American history. As much as the conservative board members may not like it (or don’t even want to admit it), Americans and the American government have engaged in plenty of bad behavior over the years, and to act like none of that happened is no different in principle than a German nationalist denying the Holocaust in order to avoid dragging his country’s name through the mud. Furthermore, speaking as a strong advocate of free markets, I would prefer that they not use that term for the corporatist shenanigans executed throughout this country’s history; I have reservations about using the term “capitalism” for them as well, but that term has more traditionally implied some kind of government favoritism than “free market” has, so I still prefer the old standard to the change.
• There is certainly nothing wrong with pointing out that there were a number of active Communists within the government and other high echelons of American society during the Cold War. However, that does not make Joe McCarthy’s wilder claims any more accurate, or the Hollywood witch hunts of the House Un-American Activities Committee any more justifiable.
• Removing Jefferson from the account of this country’s historical origins is absolutely unforgivable. I can only think of two other founders whose intellectual influence is as profound as Jefferson’s — Hamilton and Madison — and Madison arguably changed his own position between Hamiltonian and Jeffersonian thought over the course of his life. What’s worse is that the board has replaced one of our country’s intellectual giants with a grab bag of European historical figures. Blackstone is appropriate enough, but what in God’s name is Saint Thomas Aquinas — a medieval Catholic philosopher — doing on a set of standards about the Enlightenment intellectual origins of an almost entirely Protestant country? (I realize Thomas contributed mightily to the natural law tradition, which gives rise to philosophies of natural rights, but that should be studied as part of a section on the Middle Ages, not the Enlightenment.) Like Syme in 1984, the Texas State Board of Education has made Thomas Jefferson an unperson, disappeared down the memory hole.

The problem here is not so much the specific politics of the Texas State Board of Education, although I do find those objectionable. We have seen this same phenomenon from the other side, with demands for more politically correct textbooks in California. The root problem is that any one institution has this much power over education. In more market-driven school systems, standards would be set not from bureaucrats on high but through the interplay of scholarship and consumer demand. Certainly, some parents would still demand slanted views of history, but at least they would not be the only views available. If we want the study of history at the elementary and secondary levels to be something more than a political football, we must recognize that government monopolies, by nature, tend to strangle dissenting views.

Yahoo link via Hit and Run.

The post The Perils of State Curricula appeared first on Show-Me Institute.

Several businesses including hotels, a gas station and a hardware store settled claims they charged customers more than market value for their goods and services following January’s ice storm.

What do they mean by "more than market value"? If some people are willing to sell and others are willing to buy at a price, then that is the market price. This reminds me of one of my first econ courses, in which I had to read Aristotle and other ancients, who thought goods had several different values: the price they sell for, how useful they are, their intrinsic goodness, etc. I guess defining value is an interesting philosophical question, but since philosophers haven’t solved it in a few thousand years, I doubt the Missouri Attorney General will make much progress before the next ice storm.

We don’t want state officials fixing the price of goods for us, especially in times of shortage like right after storms. That’s so former Soviet Union.

The post What’s It Worth? appeared first on Show-Me Institute.

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

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

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

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

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

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

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

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

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

The post Centralized Economic Policy Bad for Missouri appeared first on Show-Me Institute.

No doubt spending more on life sciences will lead to some beneficial science being done, and it may very well lead to important breakthroughs. But by itself, spending more money on biotech research isn’t likely to make the broader Saint Louis area a biotech hub. Carnegie Mellon is one of the best computer science schools in the country, but Pittsburgh isn’t known as a hotbed for tech startups. Nor are subsidies from the state of Pennsylvania likely to make it a hot technology area.

If government wants to make Saint Louis the home of the biotech industry, the best way to do that is to make it hospitable to industry in general: cut taxes and red tape, provide good infrastructure, and then get out of the way. That might spur the growth of the biotech industry here in Saint Louis. But it might also spur the growth of all sorts of other industries as well. After all, the whole reason we have a market economy rather than running our economy using Soviet five-year plans is that government officials don’t know what’s needed and where the economy is headed. If they can’t run the economy as a whole, why should we expect they’d be any better at picking what Saint Louis’s next hot industry is going to be?

The reason, I suspect, is that when you cut taxes and thereby spur the creation of a lot of small businesses, you don’t necessarily get to attend a big ribbon-cutting ceremony and take credit for it on the evening news. So even if tax cuts and deregulation are better for the state’s economy than “targeted” economic programs, they’re not as good for the career of the politician in question. So instead, politicians focus on high-profile projects that make good photo-ops, regardless of whether they’re good policy or not.

The post How to Spur Budding Industries appeared first on Show-Me Institute.

The video marketplace is changing so fast that it’s gotten hard to keep track of it all. In October, Apple Computer unveiled a new iPod that allows users to purchase popular television shows like Lost and Desperate Housewives for $1.99 an episode and watch them on the go. By the end of the month, the company had sold a million episodes over the Internet. Then in November, Yahoo! and TiVo announced an agreement to deliver Yahoo! content via the Internet to TiVo set-top boxes. Not to be outdone, AOL and Warner Brothers announced a new service called In2TV, which will allow consumers to watch older TV shows for free over the Internet.

But while every month brings new developments in the video marketplace, the telecommunications laws that govern it are stuck in the 20th Century. Missouri state law gives local governments the power to decide which companies may do business in their jurisdictions, and in many cases city governments have created soviet-style five-year plans in which only one company is permitted to offer video services. Those “franchise” requirements harm consumers by raising the cost of entry for new companies wishing to offer video services, leading to fewer choices and higher prices.Cable TV franchising was originally created on the assumption that pay television service is a “natural monopoly.” Policymakers worried that without municipal oversight, such monopolies would gouge consumers and fail to provide responsive service. But whatever merit that argument might have had in the early days of the cable television industry, it has no basis in reality today. Virtually all Missouri households enjoy vigorous competition between cable and satellite television. And more competition is on the way. Phone companies like AT&T (formerly SBC) and Verizon have announced plans to build new fiber-optic networks to millions of households nationwide and use them to deliver video, voice, and data services.

Ironically, the franchising rules themselves have become a serious obstacle to competition. A company wishing to offer video services across the state of Missouri is required to negotiate hundreds of local franchise agreements with cities and counties across the state. It’s a time-consuming, burdensome process that is likely to delay the deployment of new services by several years.

To see how Missouri could be doing things better, we need only look to the state of Texas, which passed a sweeping telecommunications reform law this summer. The legislation swept away the old municipal franchising system and replaced it with a streamlined process for obtaining permission to deploy video services state-wide.

Some Texas city officials argued that the change was anti-democratic, because it deprived local communities of the right to regulate their own affairs. That’s nonsense. The Texas law doesn’t empower state government at the expense of local governments. Rather, it empowers consumers to decide for themselves what video services they wish to purchase.

The cable industry, on the other hand, argued that the change was unfair because, in some communities, they are locked into multi-year franchise agreements that have stricter requirements than those of the state franchise. That, they claim, puts them at a disadvantage. It’s a valid point, but the industry vastly overstates its case. The differential treatment will only last until the current franchise agreements expire, after which all service providers will compete on a level playing field. And the industry ignores the tremendous benefits it will continue to enjoy as incumbents: cable companies control more than 70 percent of the pay television market. If they focus on keeping those customers happy, they should have little to fear from additional competition.

Texas’s telecom reform has already begun to pay dividends. On November 17, SBC (now AT&T) cited the state’s telecom reform as it announced $800 million in new technology investments in Texas, bringing new services and increased competition to the state. It’s not surprising that companies would focus their technology investments in states where the regulatory burdens are low. Streamlining our own archaic telecommunication laws will help attract the new investments necessary to put Missouri at the forefront of the broadband Internet revolution.

Timothy B. Lee is editor at the Show-Me Institute.

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