Some local governmental entities are doing what they are supposed to: lowering their tax rates in response to assessment increases. Now, I know some of them are required to, as they appear to be very close to the legal cap — but a rollback is a rollback, so let’s give credit where its due. According to the Post-Dispatch, we need to give a shout out to Valley Park School District. Let’s hear it for Parkway schools! Lindbergh is in the house — or, I guess since they just lowered the commercial rate, I should say they are in the building! Perhaps some of these rollbacks should have been more substantive; I don’t know the exact details of every one. But they all deserve credit for rolling back the rates in response to assessment increases.

The Wall Street Journal has a lead editorial today on Missouri’s system of selecting judges, very originally known as "The Missouri Plan." Unfortunately, as most of you know, the Journal’s damned website is subscription only, so I can’t link to the entire thing for you. I had the bright idea of cutting the article out of our dead tree edition, scanning it, and linking to the file (a clever idea only about a billion people have already thought of), but stopped when I was informed that might be illegal. Anyway, the editorial is interesting but ultimately disappointing. The final summation:

Keeping judicial selection democratically accountable is the best insurance for choosing the best judges, and ensuring that they are serving the interests of the citizens.

I can’t tell whether that is calling for all judges to be elected, or just for increased transparency and more involvement by elected officials in the selection process. My guess is that they are calling for all judges to be elected, which would be an absolutely terrible idea statewide and in larger counties. If they are merely calling for more openness and input from elected officials, I agree with that, to a large extent.  As a reminder, my own op-ed on this issue is here. There are many good parts of the editorial, too, especially the none-too-kind comments on the current Supreme Court panel Governor Blunt gets to pick from.

The ending of the Wall Street Journal editorial isn’t its only weakness, though. It quotes a poll, as if that is some sort of evidence for anything:

In a Federalist Society poll done in March, 87% of state residents were unaware even of the make-up of the nominating commission.

An any point in time, about 30 percent of Americans can’t name the vice president. Should we get rid of that office? Any idea how many people can, right now, name their state representative? I am guessing 20 percent at most. Should we get rid of them? (Don’t answer that.)  I am actually surprised 13 percent of Missourians could correctly list the commission’s make-up. Just because people watch "Entertainment Tonight" instead of reading The Economist does not mean the Missouri Plan is flawed.

I was going to post today on additional feedback my op-ed has received, but the Journal seemed more topical. I’ll do that tomorrow. Can’t you just feel the excitement? 

P.S. — You wanted more Spike Lee references, you got ‘em!

At the risk of making it seem like this blog is now all David Stokes, all the time (as though that would be a bad thing), we’re pleased to announce the publication of David’s new case study, "Saint Louis County, Drugs, and Competitive Bidding: A Privatization Success Story."

St. Louis County privatized its pharmacy services a few years ago in the face of spiraling costs, and the transformation was remarkable. Pharmacy spending had outstripped budgets consistently for years, until privatization began — and in that first year, costs suddenly dropped below budgeted figures. The downward trend in costs continues, and pharmacy services are now coming in under budget consistently even as the budgets are lowered in response to the existing savings.

Take a look at the graph on page 4. Its numbers show a stark difference, made all the more striking when presented visually. It demonstrates that when done right, utilizing market alternatives to public policy problems can bring renewed efficiency, savings, and quality to taxpayers. A lesson like this bears repeating.

The Post has a very short blurb that still manages to say a great deal about assessments and basic economics. It is so small I’ll reprint the entire thing here (emphasis added):

The Ladue School Board has decided to keep the district’s residential real estate tax rate at $2.75 for each $100 of assessed value. The rate is the same as last year. Board members said they could keep the same rate because of the district’s growing tax base and an increase in assessed value. The board approved the debt service rate at 23 cents for the third year.

Where should I begin? First of all, you have to like how they seem to be bragging about not raising the taxes on property owners in the district. Assessments in Ladue School District went up 21 percent during the past two years. As school districts are heavily dependent on local property taxes, that will lead to a 21 percent increase in their budget, from property taxes alone. Without any rollback, if you live within Ladue School District (which is much larger than just Ladue), you’ll see a 21 percent increase in your tax bill for the schools, but hey — at least they didn’t raise your tax rate!

I emphasized the part about the growing tax base because it is all the more reason to roll back the rates! Good for Ladue to have a growing tax base, but new construction is not even counted in the math for assessment increases. So Ladue schools will actually see an even larger increase in funding than 21 percent, but hey — at least they didn’t increase your tax rate!

According to legend, when Cornwallis surrendered to Washington at Yorktown, the British military band played "And The World Turned Upside Down." I sometimes feel that way when I read about occupational licensing. David Nicklaus has a great article in the Post-Dispatch today about a recent study released by the Reason Foundation, about licensing just for the right to work in America, which I wrote about here. Nicklaus writes that Missouri may not actually lead the nation in the fewest licensing requirements — the study missed some — but we clearly have far fewer statewide license requirements than most other states. As I said previously, this is something we can be very proud of.

Back in the 1990s, I owned a legal support company and we did a lot of process service and some investigation for attorneys. So I joined the statewide investigators association, a voluntary group, and I recall how badly many of them wanted to be licensed statewide by the government. There were different reasons for this, but I vividly remember some people arguing that their profession could never be a truly respected occupation until it was licensed, as if some governmental entity regulating you makes you legitimate. I think a great deal of people share that sentiment, and it is one I cannot fathom. Many people in professions like being licensed, because not only does it help to eliminate competition, but for some strange reason it makes them feel more proud of their own occupation.

From the Nicklaus article:

Missouri’s interior designers, who sought and won state licensing in 1998, and sports agents, who have been licensed since 2004, also show up as unregulated on the Reason Foundation’s list.

Why the hell should interior decorators be licensed by the state? What is god’s name could possibly be the safety rational for protecting someone from having the interior coloring and furniture of their house poorly designed? Please don’t read this as a rip on interior designers — we had one come to our house last year, and she was terrific. I assume she was licensed, as I just read a few minutes ago that they have to be, but I honestly could not care less whether or not she had a license. Rugged Individualism is in deep trouble in our society if people continue to think that what they choose to do for a living is not truly valued or impressive until they get a government license to do it. To use one of the best clichés we have: All work is honorable — government license or not.

There is a citizens’ group that is attempting to make changes to the state’s property assessment and tax system. The South County Times has an article (via Combest) about the group’s recent rally outside the St. Louis County Administration Building. I signed the petition on their website — even though, as I have previously noted, we won the assessment lottery this year and saw a very small increase while many of our neighbors were in the 20-percent range. I signed because I would like to see changes at the state level to the assessment laws, as well as officials at the local level rolling back rates — even when not legally required.

Local officials who don’t roll back rates, or who don’t roll them back very much despite large assessment increasese, are correct in many circumatances that they don’t have to roll them back. St. Louis County government tax rates are so far below the authorized maximum that they are not required to roll back.  But not being required does not change the fact that rolling back rates, even slightly, is the proper thing to do. My own ideas on improvements to the statewide system can be found here. I wish this group well.  They are going to hit a brick wall when they talk to rural and urban legislators about this, though, and realize how little people outside St. Louis and Jackson Counties care about reassessment.

I have had the pleasure of receiving some great feedback from David Steelman over the past two days about my op-ed on the Missouri Plan. We have had an excellent discussion. Steelman, an attorney and former state representative, corrected me on one point. I said I couldn’t imagine that the framers of the Missouri Plan had in mind the ability to "stack the deck" (my term, not his) with supporters of an ex-governor, when they instituted six-year, staggered terms for members of judicial commissions. He pointed out that at the time of the reforms, Missouri governors could not serve consecutive terms — so the six-year term was absolutely an intentional decision by the plan’s framers to take politics out of the appointments, by making commission members independent of whomever was currently serving as governor. So I stand corrected and appreciate the information.

He pointed out that the most clearly political selections come after one party has had a stronghold on the commission selection for a long period of time. He then suggested that the best way to go would be for the commission to have no political appointments, since that inevitably leads to politics being injected into judgeships. I don’t think he intends for every member of the judicial commissions to be elected lawyers or automatic judges, but rather that citizen members should be chosen by some other method. Since, in his opinion, that last option is unlikely, he believes keeping six-year staggered terms is the best way to have more consistent, less volatile, and less political judicial selections.

In short, my opinion is that if the use of six-year, staggered terms for appointees was intended to keep politics out of the appointments and increase independence, then that is one part of the Missouri Plan that failed. Too often, the appointees of ex-governors — particularly in the current Appellate Court panel — are more loyal to their party than to the idea of a fair panel. So it would be better, to my mind, to eliminate the idea that appointed spots aren’t political, and instead just admit the obvious and have appointees serve their terms concurrent with the governor. There would still be checks and balances on appointees through elected lawyers and the automatically placed judge on each committee. This is what I mean by respecting the will of the voters.

But David made a number of good points, and I greatly appreciate his time and thoughts.

I also received a call today, with some similar commets and critiques, from a judge I won’t name (even though it would not be a big deal if I did). I appreciate the judge’s feedback, as well. I wish to emphasize again that I support the Missouri Plan and think it would be an enormous mistake to get rid of it. If my op-ed can play a small role in sparking discussions about ways to improve the plan, while keeping it primarily intact, then I will be very pleased.

The Reason Foundaton just released a major report on employment licensure in the United States. The good news, from an economic freedom perspective (which is, of course, the best perspective): Missouri ranks number 1, with fewer licensed occupations than any other state. We only license 41 different occupations, which is last, and best, by a good margin. So lets cheer for ‘ol Mizzouri!

Occupational licensure is often nothing more than a blatant attempt to limit competition and favor certain groups or companies. While Missouri may only license 41 occupations, many of the ones we do license still have no need whatsoever for licensing: barbers, dental hygienists, cosmetologists, hearing aid dispensers, and plenty more.

The other thing you need to consider is that many things that may be licensed elsewhere at the state level are licensed here at the county level, and as such are not included in the report. Saint Louis City and County license a number of different occupations, and most of them have absolutely no need for licensing. I’ll bet Jackson County does this, too, along with plenty of others. The licensing rules favoring certain unions in Saint Louis City and County are particularly blatant examples of regulatory attempts to squash competition. The rules for operating a stretcher van are also terrible. In the interest of fairness, I should praise Saint Louis County for being one of the rare examples of a local government that — with some exceptions — does not require a business license in order to attempt to make a living on your own.

All that being said, we should still be proud of Missouri for ranking first nationally, for licensing the fewest number of occupations. To paraphrase Jesus, which is always dangerous: The last shall be first!

And that rhymes with P, and that stands for Poole. Bill Poole, that is, president of the St. Louis Federal Reserve. At least, that’s the hue and cry being raised by a few rabble-rousers who don’t understand the Fed’s role in maintaining stable monetary policy.

Yesterday, I intended to link to this excellent Post-Dispatch piece about recent controversy over Poole, written by David Nicklaus — but I just didn’t have the time to say anything substantive about it. The article is still worth highlighting, though, because it makes a few points that deserve ongoing public attention:

When people start calling Bill Poole names, you know things are getting rough in the financial markets sandbox.

The amiable, bearded president of the Federal Reserve Bank of St. Louis makes an unlikely villain, but he’s become a regular whipping boy for market commentator James Cramer, and now Sen. Kent Conrad is calling for Poole to resign.

His sin? All Poole has done is to advocate the same careful, data-driven approach to monetary policy that has served the nation well in recent years.

Being cautious with Federal Reserve policy is no small thing. Any good student of 20th century economics knows that Fed policy was one of the largest factors (among many others) contributing to 1929’s Wall Street crash and the onset of the Great Depression. Any number of books on the subject reveal variants of this extreme example of cause and effect — the important thing is, the people running the Federal Reserve today understand the damage that irresponsible Fed policy can bring. Ben Bernanke, current Fed chairman, outlined the role of the Federal Reserve in spurring the Great Depression in a 2004 speech:

The market crash of October 1929 showed, if anyone doubted it, that a concerted effort by the Fed can bring down stock prices. But the cost of this “victory” was very high. According to Friedman and Schwartz, the Fed’s tight-money policies led to the onset of a recession in August 1929, according to the official dating by the National Bureau of Economic Research. The slowdown in economic activity, together with high interest rates, was in all likelihood the most important source of the stock market crash that followed in October. In other words, the market crash, rather than being the cause of the Depression, as popular legend has it, was in fact largely the result of an economic slowdown and the inappropriate monetary policies that preceded it. Of course, the stock market crash only worsened the economic situation, hurting consumer and business confidence and contributing to a still deeper downturn in 1930.

Bernanke acknowledged the Fed’s role in causing the Great Depression even more explicitly in an earlier speech from 2002:

The best thing that central bankers can do for the world is to avoid such crises by providing the economy with, in Milton Friedman’s words, a “stable monetary background”–for example as reflected in low and stable inflation.

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.

Current Fed leaders tend to credit economist Milton Friedman as the intellectual source for much of today’s practical monetary policy. As Bernanke said in yet another speech:

In preparing this talk, I encountered the following problem. Friedman’s monetary framework has been so influential that, in its broad outlines at least, it has nearly become identical with modern monetary theory and practice. I am reminded of the student first exposed to Shakespeare who complained to the professor: “I don’t see what’s so great about him. He was hardly original at all. All he did was string together a bunch of well-known quotations.” The same issue arises when one assesses Friedman’s contributions. His thinking has so permeated modern macroeconomics that the worst pitfall in reading him today is to fail to appreciate the originality and even revolutionary character of his ideas, in relation to the dominant views at the time that he formulated them.

And Bill Poole, of the St. Louid Fed, gave the keynote speech at a July 31 event honoring Milton Friedman’s legacy, co-sponsored by the Show-Me Institute:

Although Milton did not prevail in his quest to have the Fed maintain a constant money-growth rate, he did prevail in his insistence that policy be apolitical and rely to the maximum possible extent on market judgments. He lost a battle but truly did win the war.

It’s remarkable the extent to which Friedman’s views have influenced today’s Federal Reserve, but Friedman himself was so acutely aware of the potential danger Fed policy can cause that he’s on record as wanting to abolish the Federal Reserve altogether:

[... T]hough I want to know what my ideal is, I think I also have to be willing to discuss changes that are less than ideal so long as they point me in that direction. So while I’d like to abolish the Fed, I’ve written many pages on how the Fed, if it does exist, should be run.

Bill Poole and other Federal Reserve leaders deserve tremendous credit for standing up to demagogues who call for intervention by central banks in every momentary fiscal crisis. As David Nicklaus said in his Post-Dispatch column:

Someone needs to remind Conrad what the Fed’s real job is. As the nation’s central bank, it’s supposed to keep inflation under control while creating a climate that allows for steady employment growth. It’s not, or at least it shouldn’t be, in the business of propping up stock prices or bailing out hedge funds that invested in subprime mortgages.

[...] Poole’s point was that the Fed shouldn’t act rashly just to placate Wall Street, and it was a point that needed to be made.

This is exactly right. Bailing out market players who face the prospect of financial loss only reinforces the poor decisions that led to economic crisis in the first place. The Fed is there to help stabilize the economy as a whole, not smooth out bumpy rides for particular investors.

Long time devotes of St. Louis’ fourth estate know that the finest journalism in St. Louis is not provided by the Post-Dispatch, KMOX radio, or Channel 5, but via the Sound Off! section of the Suburban Journals. Now, it is commonly referred to as Town Talk, and it never fails to inspire, educate, and — most commonly — astound.  Anyway, there is a great snippet in this weeks version from someone who, as you will see, supports the use of tolls in transportation, as I do:

Charge tolls
I’m so sick of hearing about these bridges. Make them toll bridges. Make the roads toll roads. Why, as a taxpayer, am I paying for all of this work? I don’t even use these roads or bridges. The people who use them should pay. Most states have toll bridges and toll roads. What is wrong with St. Louis and Missouri? Are they that behind?

Now, I might have put it slightly differently, but the view is basically the same. People who use the roads and bridges should be the ones who pay more of the cost of those roads and bridges. We’d need to amend our state constitution to turn existing roads into toll roads, and we should give strong consideration to the use of public-private partnerships in providing our transportation needs. As the Clash said, "Over and out!" 

There is an insightful opinion piece in today’s Post-Dispatch about the author’s recent experiences driving in France, which makes heavy use of tolling in its transportation system. The author, Bradley Fratello, is president of the Downtown St. Louis Residents Association — a group for which I used to serve on the board, a long time ago. It’s a great read about the efficiency of the highway system in France, and I recommend it highly.

There is a very reasonable editorial today in the Southeast Missourian (link via John Combest) regarding the tax dispute between Kansas and Missouri, over the deductibility of various state taxes. My first thought was that it seemed like some sort of summit between Kansas, Missouri, and Illinois would be an ideal opportunity to hash out this dispute and come up with a solution everyone can live with. But as I thought (that’s what they pay me to do here) about it, I realized it is much more complicated than that. The knee-jerk reaction I briefly had would be for the IRS to come up with rules for interstate taxation. But aside from the fact that this would violate federalism, every state has its own situation and is going to adjust its tax system accordingly. A federal solution would penalize some states and help others by not adjusting to those differences.

It would seem Illinois could work with Missouri on this, because more Illinois residents work here than vice versa, but you also have to consider the number of Wisconsin and Indiana residents who work in the Chicago area (Chicagoland, as they call it). A solution that might benefit residents of the Metro East might hurt Illinois tax collections up north. Play along with me for a moment, as if I cared about a reduction in the state’s tax collections.

Or take Michigan. It’s famous for its property taxes, particularly in the counties and townships along Lake Michigan. Why? Because people from out of state, mostly Illinois and Missouri, own the vacation homes in those lake communities and having a large property tax is a good way for Michigan to fund its governmental entities. They can make it up to the locals in other ways.

Every state and local community is different, and each is going to come up with a unique tax structure to benefit its residents. Missouri has more employees coming into the state to work than leaving it, so Missouri benefits from a structure that realizes this. I am not saying we shouldn’t be good neighbors — heck, I agree with our study that says we should get rid of the state income tax entirely, and the earnings taxes as well. I am saying this is a complicated issue that would best be served by each state folowing an across-the-board low-tax strategy, and coming up with one-on-one compacts in situations where that would best serve the interests of two states that share a surprisingly large number of commuters — be it Kansas and Missouri, or Hawaii and Kentucky.