On Monday, the St. Louis Post-Dispatch ran this opinion piece discussing the amount of public health spending by state. The article points out that Missouri spent just $9.26 for each resident, which is the second-lowest amount of all the states, higher only than Nevada. The author is concerned because “public health is one of the most cost-effective investments any state can make.” To support this assertion, the piece cites a 2008 study which, “found that investing in public health and disease prevention can reduce rates of chronic illnesses such as cancer, [heart] disease and diabetes.” This study also estimated “that every $1 invested in those programs would return $5.60 in benefits over five years.”

What the article doesn’t mention is that the study it cites also concluded that an investment of $10 per person per year in “proven community-based programs” would give us the aforementioned rate of return. Furthermore, according to this study, “evidence shows that implementing these programs in communities reduces rates of type 2 diabetes and high blood pressure by 5 percent within 2 years; reduces heart disease, kidney disease, and stroke by 5 percent within 5 years; and reduces some forms of cancer, arthritis, and chronic obstructive pulmonary disease by 2.5 percent within 10 to 20 years.” Missouri spends almost $10 per person per year, the figure observed in the study, but still has poor health outcomes. This tells me that we are probably not spending our money in the most effective way.

There is further evidence of that in a comparison of four measures of public health in Missouri and Nevada, the one state that spends even less than we do in this area:

* Information on high blood pressure from CDC; all other information from statehealthfacts.org

So, even though we spend more than Nevada on public health, we still have higher numbers in all four of these categories. This is admittedly an overly simplistic analysis, but the point is that amount of state public health spending is obviously not the only factor that matters for health outcomes in Missouri. The programs themselves should be evaluated for effectiveness, to determine whether investment of additional resources in them is worthwhile.

The larger point here is that using state taxpayer funds to address public health problems might not be the best strategy, given the frequent ineffectiveness of state-run programs. Instead, we should end the tax benefit for employer-provided health insurance, which would allow individuals to have control over their health insurance. People would then have a direct financial incentive to become more sensitive to the effect that their lifestyle choices have on their premiums. As a result, a greater number of people would make healthier choices, in addition to the obvious incentive of health in and of itself.

The Census Bureau has enlisted Dora the Explorer to spread its message that the Census counts babies and children. In a new video, Dora proclaims that counting small children on Census forms “helps us get important things in our town, like day care centers, schools, and more.”

Dora didn’t discover the connection between Census data and federal spending on her own. The Census Bureau is itself emphasizing the link between counting kids and spending:

“The adults among themselves sometimes forget the census is about everyone, and kids should be counted,” said Census Bureau director Robert Groves. “If we fail to count a newborn that is born this month, that newborn misses all the benefits of the census for 10 years.”

If you forget to count your newborn on this year’s form, does that mean your baby won’t get to attend a publicly funded daycare or school for the next decade? Obviously not. So, what “benefits of the Census” are the uncounted babies missing out on?

On Friday’s CBS “Early Show,” I saw a segment about a new government program that offers consumers cash rebates to replace their energy-inefficient appliances with new Energy Star–rated ones — “Cash for Appliances,” if you will. Sound familiar? Just like “Cash for Clunkers,” this program probably won’t increase the volume of sales significantly, but rather just shift the timing of these sales forward.

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

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

The Center on Budget and Policy Priorities released a report last week about state budget shortfalls, “Recession Continues to Batter State Budgets; State Responses Could Slow Recovery.” (Link via an article on the Wall Street Journal: Real Time Economics blog).

This made me wonder the the following: Are income taxes correlated with a higher mid-year budget gap as a percent of the FY2010 General Fund Budget? Do states that have no income tax have a lower incidence of mid-year budgetary shortfall?

In an attempt to answer this, I took Table 1 from the CPP report, and added the states that do not have a budget shortfall (Alaska, Delaware, Michigan, North Carolina, Oregon, Texas, and Wisconsin) and those that have a surplus (Montana and North Dakota). I sorted this table by the percentage of budget gap over the 2010 general fund budget. Next, I added the top marginal tax rates for personal and corporate income for each state. The green cells indicate states that assess zero income tax, and the red cells indicate states that have income tax rates of  9.0 percent or greater.

Projected Mid-Year FY2010 Budget Gaps as a Percentage of FY2010 Fiscal Budget by State

(Modified to Include Income Tax Rates and States With Zero Shortfall)

* Washington is reflected low in the list because the amount shown is for the two-year budget, ending in FY2011.

The states that have no income tax are disproportionately aggregated at the top of the list. This graph indicates that states without an income tax may be better at predicting their revenues in the future. I can think of a few reasons why this is, and I invite our blog readers to suggest additional reasons in the comments.

• Sales taxes are a less volatile source of revenue than income taxes.
• Income taxes are closely tied to the job market, and sales taxes are not. When a person loses her job, she then has zero earned income, and therefore generates zero income tax revenue for the state. During this period of unemployment, however, she continues to make purchases and pay sales taxes (either by using personal financial reserves or unemployment compensation).
• Sales taxes are more effective than income taxes in addressing budget shortfalls more immediately, because they are collected at the point of transaction. Income taxes, in contrast, are collected only once per year. States do not have to wait until residents file their income taxes in order to collect revenue.

Notice that Missouri is ranked 37. This means that 36 other states were able to forecast their budgets better than Missouri. Perhaps if Missouri repealed its income tax in favor of a broad-based sales tax, it could predict its revenues better, and it wouldn’t face such a shortfall in the future.

The state of Missouri has extended unemployment benefits for up to 20 weeks. This is undoubtedly a temporary boon to the people who receive the benefits, but it can only hurt the economy. In particular, it will cause more people to stay unemployed longer. A fundamental rule of economics is that if you subsidize something, you will get more of it, and unemployment is no exception.

You might be tempted to dismiss that idea as little more than armchair theorizing, but there are solid numbers to back it up. For instance, take this blog post from University of Chicago economist Casey Mulligan about unemployment in Pittsburgh from 1980–1985:

Unemployment rates got quite high in Pittsburgh in those days, reaching 16 percent at one point, and staying over 10 percent for two and a half years. The chart below shows some of the results. It graphs weeks from unemployment benefit exhaustion against the fraction of unemploy[ed] people either finding a new job or being recalled to a previous job in that week. “Exhaustion” refers to the time when benefits cease being paid to the unemployed person, regardless of whether they have found a job.

Almost no one started working during the 2-3 weeks prior to the exhaustion of their unemployment benefits (weeks “-3″ and “-2″ in the chart). Miraculously, more than one quarter started work a week later (19% started a new job, 10% returned to a previous job). Economists agree that a huge reason for this behavior is that people are more willing to remain unemployed when unemployment itself generates a paycheck. (The job they take may not be great, but the data show that often there is a job to take).

If incentives mattered in Pittsburgh in the early 1980s, why wouldn’t they matter in the United States today? Or why did employment increase almost 1,000,000 last summer?

Not only would this decision cause more unemployment in Missouri, it would also further stretch an already overextended budget. It’s a bad idea all around.

(Casey Mulligan link via Marginal Revolution.)

Rent seeking has been a major topic around here recently. I don’t need to provide links — if you’re reading this on the main page of the blog, you can just scroll down a bit for some excellent posts. Now we are going to do a little bit more rent seeking as a nation, by charging international visitors without visas (I guess this means residents of Windsor going to Detroit for a Red Wings game) a new $10 fee that will be used to market the United States internationally. Basically, it will be a national version of what just about every city (including St. Louis and [probably] Kansas City) does with hotel taxes: charge an extra fee and use it to promote the local travel industry. I think we can admit that there are plenty of worse examples of rent seeking than this, but it still entails private enterprise using the government and taxation in order to benefit one sector of the economy at someone else’s expense. (It makes it a lot easier to do this if the expense is borne by someone who does not live here.)

Now, I want to get into their numbers:

The association says the U.S. welcomed 2.4 million fewer overseas visitors last year than in 2000. And that, the group says, has cost it an estimated $509 billion in total spending and $32 billion in direct tax receipts.

We can presume that 2.4 million is for one year, and $509 billion is for 10 years. Taking 2.4 million a year for 10 years, and dividing that into the total spending amount, yields an average amount spent per visitor of just more than $21,000. This article states that the average spending per visitor is $4,500. I don’t think I believe the number put out with the bill signing, but the alternative would be to accuse the PR and lobbying group behind this effort of inflating their numbers. And we all know that would never happen. …

In the beginning of Economics in One Lesson, Henry Hazlitt describes classic rent-seeking behavior:

While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.

To see this lesson applied, check out the personal blog of Jason P. Hunt, a film and television producer in Kansas City. He uses it to voice support for H.B. 1587, which would increase the cap of film production tax rebates from $4.5 million to $10 million. Although I’m getting bored of blogging about the production incentives program in Missouri, I want to refute the specific points that Hunt made in his most recent post, “An Open Letter to the Missouri Senate”:

I understand several in the legislative branch would question why we need to increase this cap.

I question this, too, especially since only one single production in Missouri has ever come close to the $4.5 million cap during the last 10 years. (That production was Up in the Air, which was awarded $4.13 million.) The second-highest amount ever awarded was $786,800. The “Show Me: Tax Credits” web tool shows that the average amount awarded is only $369,347.

I suppose Hunt’s implicit argument is that glamorous, large-scale productions won’t be motivated to film in Missouri unless the state coughs up even more cash. If Missouri awards more money to an activity in which it has a comparative disadvantage, it faces an increasing opportunity cost. This is money that the state could otherwise devote to other programs and/or return to the pockets of taxpayers.

Consider that for every dollar allowed as a tax credit under the program, three have to be spent within the state.

From what I understand, an economic multiplier of 3 is unrealistic. In estimating the activity generated from its film incentive program, Louisiana uses a demand earnings multiplier of 0.3982. Here’s a math problem: How much wealth do a $61,000 Range Rover and a $68,000 Mercedes generate in a state? Using Hunt’s logic, they would create $387,000 of economic activity within the state’s borders. I disagree that this is realistic.

That’s found money.

That money comes from other states. If a person is walking to her car in a parking lot and finds $20 lying on the ground, she may consider herself to be $20 richer. However, the person who dropped the $20 on the ground in the first place is $20 poorer. No wealth was generated. When a production company from another state spends $1,000 in Missouri, the money is not created out of thin air; it’s $1,000 that the company would have otherwise spent in a different state.

When states regard each other as antagonistic economies, it is a mutually detrimental situation. Targeted incentive programs result in dead-weight loss and restrict overall growth. In order to increase overall economic growth and prosperity, Missouri should focus on the activities for which it has a comparative advantage, and then trade amicably with the states that have a comparative advantage in producing films.

There’s another reason it’s a bad idea to regard this out-of-state spending as “found money”: Missouri doesn’t get to keep 100 percent of it. States that offer film production incentives get a raw deal, because they are poorer by the amount of money that they allocate in tax credits. For every $1,000 that a film production company spends in Missouri (up to the cap), the state economy only keeps $650. In other words, Missouri government pays the film company $350 for every $1,000 that it spends here. Raising the cap, as Hunt supports, would exacerbate this loss.

Charles Jaco just finished taping an interview with Show-Me Institute research assistant John Payne, about the Metro mass transit system in the St. Louis area. At least some portion of it is slated to appear in tonight’s FOX 2 news broadcast at 10:00. Be sure to tune in. [UPDATE: The video is now online.]

For more information about St. Louis transit, read Payne’s recent op-ed about MetroLink, which also ran on the Riverfront Times blog and in the St. Louis Business Journal. His commentary attracted some attention from a Metro board member, who responded on our blog, followed by a short rejoinder by Payne.

The Show-Me Institute ran a trio of pieces in October 2008 about transit funding in St. Louis, considering the problem from different angles. We’ve also been fortunate enough to publish a few pieces analyzing Kansas City light rail plans, by transit scholar Randal O’Toole and policy analyst David Stokes. Although these latter pieces considered the issue specifically as it relates to the Kansas City area, many of the broad observations about light rail costs and efficiency apply just as well to St. Louis.

I wanted to note that Alderman April Ford-Griffin called me today to discuss the proposed open space map that NorthSide Regeneration Regeneration LLC submitted as part of its plan for a $8.1 billion development of the city of Saint Louis.

I have written about how owner-occupied homes appear to be slated for open space, as are some area businesses.

When I asked Ford-Griffin about the fate of Fehlig Brothers Box & Lumber, a 137-year-old area business that, according to NorthSide’s plans, will become open space, she said that much detail can’t be read into the company’s plans.

“That is a concept,” she said. “That is not a document where you take it and say this is what’s going on this block and this is what’s going on that block,” she said.

You can read the updated report, with Ford-Griffin’s comments, here.

I used the “Show Me: The Spending” web tool to determine how much money that government agencies in Missouri spent on ”Property Damage Settlements” during the last decade. From the resulting graph, we see that the Office of Administration (in blue) and the Department of Transportation (in purple) are responsible for most of the expenditures. In fact, together they account for 98.92 percent of the total — $10,113,764.76, adjusted for inflation.

Trend of “Property Damage Settlements” by Government Agency (2009 Dollars)

The Office of Administration consistently spends $437,964.86 per year on average. The Department of Transportation’s trend of spending, however, is more volatile. It spent $77,637.71 on property damage settlements in 2007, $2,282,899.37 in 2008, and $6,500.00 in 2009. MoDOT made the largest single payment to a vendor in this category in 2008, in the amount of $1,920,556.60.

“Property Damage Settlements” for MoDOT in 2008

Why are these state agencies spending so much on property damage settlements? What property are they damaging, and why do Missouri taxpayers have to cough up $10,113,764.76 for it?

On Feb. 23, I wrote about the proposed “open space” that NorthSide Regeneration LLC, has planned for the company’s $8.1 billion development of the city of Saint Louis. According to NorthSide’s plans and other publicly available documents, at least four owner-occupied homes are slated for open space.

When discussing the possibility of eminent domain, NorthSide representatives, including developer Paul McKee and attorney Paul Puricelli, have stated that eminent domain won’t be used to take owner-occupied residences. The specificity of the qualification “owner-occupied residences” should make anyone looking into the project take pause. After all, there are many types of properties that are important to lives and livelihoods that aren’t owner-occupied residences — for example, businesses. In the latest Show-Me Report, I profile Fehlig Brothers Box & Lumber, a business slated for open space.

First, I’d like to thank Hugh Scott for his response to my op-ed arguing against expansion of the MetroLink system. I doubt we will ever see completely eye to eye on the subject, but an informed dialogue can still be illuminating for everyone involved.

Before I respond directly to any of Scott’s points, let me just clarify something that may have been unclear from the op-ed (a 700-word format does not allow for full explanation of every point): I was not arguing against the proposed half-cent sales tax. My point was that we should not expand the MetroLink system into areas with relatively low population densities because the lines would have low ridership and be even more heavily reliant on tax dollars than current lines.

Scott observes that the flexibility of buses is a disadvantage as well as an advantage, a point well-taken. Light rail is undoubtedly better than buses when it comes to understanding routes. However, the question is whether that disadvantage outweighs the advantages of flexibility and lower costs that buses provide, and my answer is that it depends on population density. The denser an area, the more rail should be preferred to buses, and vice versa.

With regard to the possible lines of MetroLink expansion, Scott is perfectly right that Metro does not plan on expanding the system without federal funds to diffuse the costs of constructing the line(s). However, even if a new line would not cost area taxpayers a cent to build, it could still be a bad deal for them if very few people rode it and they were then on the hook for operating costs. Again, my argument is that the best method of forecasting ridership is through population density. Aside from the north-south corridor, none of the proposed lines come close to matching the densities found along the current lines.

Finally, I agree that MetroLink performs well against the light-rail systems of other cities, but that is a relative metric when the question should be an absolute one: Do the benefits justify the costs? Even existing lines do not meet the profit-loss test used in the private sector, so light-rail systems are not efficient by our most common metric for success. Perhaps we need another absolute standard we could use to determine which light-rail lines are successes and which are failures, but for now the best that can be said is that it is unclear whether the benefits of MetroLink expansion would outweigh the costs.

The Show-Me Institute recently released an op-ed by research assistant John Payne titled, “Adding New MetroLink Lines Too Costly, Inefficient.” The piece appeared on the Riverfront Times blog on Feb. 15, along with comment from the paper, and ran in the St. Louis Business Journal on Feb. 19.

We recently received a thoughtful response from Hugh Scott, III, who has been a member of Metro’s Board of Commissioners for nearly five years, commenting on Payne’s op-ed. In the interest of furthering dialogue about important issues like public transit funding, his entire letter appears unedited below:

As even noted anti-tax advocate Glenn Beck acknowledged on his show yesterday, (2/22/10) some taxes are necessary. In the case of public transit, I would maintain that taxes supporting these systems inure to the economic benefit of metropolitan areas. Public transit enables people to commute to jobs and transit centers provide a critical mass of customers for businesses located near them. Not only does Metro employ 2000 St. Louisans but it assists countless thousands of workers to get to jobs in healthcare, retail, manufacturing and distribution. For many of these commuters, no public transit would mean no job.

Show-Me Research Assistant John Payne misses the mark in his article, “Adding New MetroLink Lines Too Costly, Inefficient.” While he tacitly agrees that public transit is important for our community, he advocates opposition to the proposed referendum for a ½ cent sales tax on the April ballot. The focus of his criticism is on the part of the proposal which suggests some the addition of light rail corridors. Extending light rail is however, not the major thrust of the proposal.

Throughout its history, BiState (Metro) has not had sufficient dedicated taxes to support its operations. It has relied on the beneficence of the City of St. Louis and the adjoining Missouri and Illinois counties, the States of Missouri and Illinois, and the Federal government to provide operating subsidies. Some of these entities have been generous over the years. Others have been quite parsimonious. In all cases, awarding of funds is arbitrary and Metro must beg for money from its stakeholders on an annual basis. If Metro is expected to operate in a business-like manner, it must have a stable reliable source of revenue. This, in fact, is what the April 6 ballot proposal is really all about.

When the last tax measure failed in a very close vote in November of 2008, Metro was forced to cut 40% of its bus and train service and 400 staff members. This resulted in the loss of at least 5000 jobs in our community. While half of these cuts were quickly restored due to the receipt of emergency funds from St. Clair County and the State of Missouri, deeper cuts will be necessary if the proposed tax is not approved by the voters. With the approval of the new tax, pre-2009 service will be restored and the current system will be able to operate on a stable financial footing for the first time in memory.

Other short term (1-5 year) priorities include implementation of a bus rapid transit system similar to the “higher speed bus routes” advocated by Payne, adding amenities such as a “smart card” fare system, and beginning planning for more light rail. These programs will be implemented only after the pre 2009 service is in place and only when funds are available. The five year plan does not call for construction of new light rail corridors.

Putting a light rail extension in service will take a minimum of ten years. It will also require large amounts of federal funds in order to build. Metro does not believe that the community should “foot the bill” for any Metrolink expansions without the majority of the funds being provided by the federal government. Instead Metro is asking for funds to begin the planning process so that when federal funds become available for light rail expansion, St. Louis will be in line. It only makes good sense to spend some money on planning. Otherwise, federal money for light rail will go to other cities and St. Louis will be left out.

Payne tries to make a case for increased bus service as opposed to more light rail. He asserts that buses are a better form of transit because they are cheaper and provide more flexible route opportunities. This was precisely the argument made by former BiState CEO, Col. Rudolph Smyser in the 1960’s when he ordered the shutdown of the last of the street car lines in St. Louis.

While it may be argued that buses are superior to light rail from an economic standpoint, flexibility of routes is precisely the problem with buses. Businesses which might prosper by being near a transit stop do not locate near bus stops because a bus stop might easily move to another street or corner. Many non-transit dependent customers will not ride buses because it is often difficult to know where the bus is going. With streetcars, subways and light rail, one need only look at a map showing landmarks or look down the track to know where the car is headed.

In some ways, Metro has successfully mitigated the confusion caused by changing bus routes by creating a hub and spoke system integrating buses and light rail. Thus a person who boards a bus that says “Clayton Station” can expect to travel to the Clayton Metrolink station. Similarly, a passenger who boards our most heavily traveled bus route, Grand Avenue, can be confident the bus will travel north or south on Grand without deviating. In a sense, our increased market share in buses may be in part attributed to our lack of flexibility with routes not the reverse.

In conclusion, Metro has built a world class transit system which integrates bus and rail service quite successfully. While our population density might be low for light rail travel our market share compared to peer group cities is very high. Light rail continues to gain popularity from non-transit dependent riders and nationally, our market share is in the top three cities in our ten city peer group. The April ballot proposal is about preserving this fine system. Our first priority must be to stabilize the existing system. Future planning is always important but it comes further down the list of priorities.

From KMOX:

The Missouri House Budget Committee was told two Missouri prisons could close down if the House cuts funds by five percent.

The warning was delivered to the budget officials by Public Safety & Corrections Chairman Dwight Scharnhorst from St. Louis County.

A top official told Scharnhorst how losing nearly 20 million dollars would effect on the Department of Corrections.

“His statement at the time was, ‘I will definitely have to close one institution, possibly two.’ It would be minimum security, he designated that right away.” said Scharnhorst.

Adult Prison Director Tom Clements says non-violent prisoners and those eligible for parole could be released before the end of their sentences.

So, what’s the problem? The state would save money, and people who mostly should not have been in prison in the first place would be free. I suppose those who work in the closed prison(s) would be hurt in the short term, but this would be an improvement for the economy as a whole because the money formerly spent on incarceration would be available for more productive uses. The same applies to the former prisoners who just might be able to return to (or start) useful employment. I simply fail to see the danger in this “warning.”

Link via John Combest.

Using the “Show Me: The Spending” web tool, I isolated the amount of money that government agencies in Missouri have spent on agency-provided food during the last decade:

Trend of Agency-Provided Food In Missouri (2009 dollars)

When I was an undergrad at the University of Wisconsin–Madison, I sat on the Student Services Finance Committee, which allocated $28 million to student organizations providing educational and diversity services. During our budget hearings, the issue of organization-provided food was one of the more controversial.

I’ve always thought that food is an example of wasteful spending, whether it be funded by student-segregated fees or taxpayer dollars, because it isn’t available to and doesn’t directly benefit all students on campus, or all taxpayers within a state. Once it is consumed, it cannot be used again. Plus, $4 million per year is a big tab — and this sum doesn’t include money spent on food while traveling. If government agencies in Missouri stopped providing food, they could make up 2/3 of the revenue that is lost through the sales tax exemption on yachts, for example.

That stated, I realize that it is unrealistic for this number to be zero; there are certain situations in which agency-provided food can be appropriate. On the SSFC, we adhered to a food policy in order to be consistent and viewpoint neutral.

On the bright side, at least government agencies in Missouri haven’t increased their expenditure on food over the last decade.

The home of Shirley Hamilton, in the 2200 block of Madison Street, in Saint Louis’ north side.

Although NorthSide redevelopment plans for her area indicate that Hamilton’s neighborhood is slated to be replaced, Hamilton said she’s not concerned. As a resident of a city block with only three houses, she said, she’s been expecting this. “It’s been going on as long as I’ve been here,” she said.

Another home on the 2200 block of Madison. Photos by Caitlin Hartsell.

Shirley Hamilton has been living at 2209 Madison since 1978. Her home is one of three houses on the 2220 block of Madison, all of which are small, but tidy. Between each house is a good amount of open space.

These three houses fall squarely within the boundaries of the recently approved $8.1 billion development of the city of Saint Louis’ north side. Of course, about 4,600 other properties also fall within those boundaries, but in the case of the 2200 block of Madison, NorthSide Regeneration LLC, the company behind the development, may be endangering one of its most frequently invoked promises.

That promise concerns the use of eminent domain. Although eminent domain is constitutional, it can be very unpopular, especially if it appears that a government agency is using that power merely to help a private business.

Proponents of the development, including developer Paul McKee, NorthSide lawyer Paul Puricelli, Alderman April Ford-Griffin, and Alderman Marlene Davis, have said repeatedly that the city won’t use eminent domain to take owner-occupied homes, and that fears to the contrary are unfounded. In fact, the company went even further. When NorthSide applied for millions of dollars in tax credits from the state, the company submitted an affidavit stating, among other things, that “The Applicant has not identified any owner-occupied residences for acquisition under the Redevelopment Plan.” McKee, the chief manager of NorthSide, signed it.

Along with that affidavit, NorthSide submitted a list of about 260 owner-occupied residences to the state. Hamilton’s home and the house sitting the farthest west on her block were on that list.

NorthSide has also disclosed some of its preliminary plans for the area in its redevelopment plan, which was submitted to the city when the company applied for nearly $400 million in tax increment financing (it has been approved for up to $380 million). One of the more interesting pages of that plan is page 24, which is a map of “proposed open space” for the area.

According to that map, NorthSide plans to remake four city blocks into open space: the area lying between Madison Street and Maiden Lane, west of 22nd Street and extending a little past Jefferson Avenue. In other words, despite all the assurances about the limits on eminent domain for the NorthSide project — including the affidavit of its chief manager — Hamilton and her neighbor are two owners who may not have long to occupy their homes.

That’s not to say that the company didn’t try to purchase Hamilton’s home. About a year ago, she said, she got a letter from a lawyer, representing an anonymous buyer, looking to purchase her home. When Hamilton called the number listed, she said, she was quickly offered $60,000 for the property. But Hamilton, who is retired, wasn’t interested in searching for a new home, and asked instead if the buyer could offer her a deed to a different property, elsewhere in the city. The lawyer promised to check, Hamilton said, but never called back. A few months later, Hamilton said, she was sent the same form letter.

Hamilton said that her next door neighbor did sell. According to city property data, the second house on the block is owned by MLK 3000, one of the companies that NorthSide used to acquire properties under the radar. Hamilton said she isn’t interested in moving, but if the developer could offer a trade instead of money, she would consider it. She’d like to stay in the city.

An email inquiring about how concrete the plans for open space are, and whether NorthSide would adjust its plans if property owners were unwilling to move, did not receive a response from Bill Laskowsky, NorthSide’s chief development officer, and a company representative.

Ultimately, Hamilton said, she’s not concerned. As a resident of a city block with only three houses, she said, she’s been expecting this.

“It’s been going on as long as I’ve been here,” she said. Laughing, she noted that when Mayor Freeman Bosley Jr. was in office, her home was slated to become a golf course.

“I’ll deal with it when it comes,” she said.

According to NorthSide’s plans and its submitted list of owner occupied residences, two other homes appear to be slated for open space: one on the 2500 block of Madison, and one on the 2700 block of Glasgow Street.

Within other documents submitted by NorthSide, the company has designated the area surrounding Hamilton’s home as “mixed use,” which could indicate a different set of plans for the area.

Mr. Combest linked this morning to a story in the Jefferson City News-Tribune about a proposal to reduce the length of the legislative session in Missouri. To this I say, “Amen!” Just like the size of the legislature, the length of time in session is a factor in the logrolling potential that constantly builds pressure for more spending, more laws, more restrictions, etc. (Here is a link to a study demonstrating that professional legislatures — and length of time in session is one of the variables used to determine “professional” status — spend more money per person than citizen legislatures.)

So, I readily agree that Missouri should have a shorter session, because I basically agree with P.J. O’Rourke that preventing a politician from governing is like preventing a pit bull from eating your child. Anything that limits the ability of government to infringe on our freedoms is good by me. You can find a lot more on this subject in my paper about government in Missouri from the perspective of public choice economics.

I do wish someone would have called us to testify about this proposal, though. From the article:

No one spoke for or against the plan during Monday’s hearing.

Nobody ever said public choice economics was exciting. …

Missouri exempts yachts from sales taxes. And, like most selective sales tax exemptions, this policy has several negative consequences. Mike McGraw wrote about this in the Kansas City Star over the weekend (link via Combest).

First, there is a fiscal problem: Missouri is losing $6 million a year as a result of the exemption. The fact that Missouri is cutting other areas of its budget (e.g., education and battered women’s shelters) to address its deficit exacerbates this problem.

Second, there is a fundamental problem: The policy encourages rent-seeking. Boat producers benefit because the sales tax exemption provides an incentive for a person to buy a bigger boat than she would otherwise. From the article:

The additional revenue that taxing large boats would generate would be more than offset by sinking boat sales and lost jobs, said Mike Atkinson of the Lake of the Ozarks Marine Dealers Association. [...]

Exemption-eligible boats appear to be especially popular with Jefferson City lobbyists, whose colleagues have fought for years to keep the tax break on the books.

I tried to brainstorm a list of consequences of the sales tax exemption on yachts that are positive, albeit admittedly insignificant, for the purpose of this post. For one, Missouri residents benefit from some ironic boat names, such as “Tax Haven,” “Tax Seaduction,” and “Special Interest.” (These are just as witty as Tiger Woods’ yacht, “Privacy.”) Additionally, this exemption removes any incentive for members of film production companies to misuse the film tax credit program in Missouri to purchase a yacht for their personal use. They’d have to go to a different state.

According to a story from WSIL:

A plan pushed by Rep. Mike Bost, R-Murphysboro, could bolster a core of his district’s economy. Bost wants to create a fund that would go toward improving the region’s wine industry.

He’s proposing to divert a portion of the revenue from the excise tax on wine, and reinvest it in the industry. It’s classic rent-seeking behavior. He also uses the copycat argument (i.e, “other states are doing it, so mine should, too”) that many legislators use to justify production incentive programs for their favored industries.

“This is not anything that hasn’t been done in other states,” Bost said. “That is why the state of Missouri has grown its wine industry so well, and it’s because they are able to do this.”

Although it is true that Missouri provides assistance to wine producers, it does this in a manner that’s different than the one proposed in Illinois. Rather than diverting excise tax revenue, Missouri provides a generous tax credit to wine producers.

Using the “Show Me: Tax Credits” web tool, I discovered that Missouri has awarded $5,736,848.39 under the Wine and Grape Tax Credit during the past decade. The largest recipient, Stone Hill Wine Company, received a combined sum of $2,005,629.22 from 2002 through 2004:

Trend Wine and Grape Tax Credits Awarded in Missouri by Vendor

First and foremost, I disagree that a state should rely on tax credits to attract businesses. A state is better off if it has businesses that are self-sustaining, not reliant on government assistance.

That said, however, I prefer Illinois’ proposal to Missouri’s Wine and Grape tax credit program because it places the burden of the subsidy on users rather than on non-users. In Missouri’s program, all taxpayers in the state pay for the subsidy. In the Illinois proposal, only those who consume the product are assessed. It’s a user-fee system that’s analogous to the way in which gasoline taxes and tolls fund highway maintenance.

Additionally, it’s fallacious to expect that the production and consumption should be equal within the state. States like Missouri and Illinois should focus on the activities that they do best, and then realize the benefits of free interstate trade. If Illinois were serious about maximizing its wine consumption, it would specialize in some other type of production that it can do more efficiently, and then trade with another state that has a comparative advantage in producing wine.

Critics of the Illinois proposal are correct to state that the money being spent on wine production cannot be spent on other programs, such as education. However, the same can be said of the money that Missouri taxpayers spend via the wine and tax credit. No matter how it is routed, taxpayers are going to be poorer by the amount of the subsidy.

[NOTE: Since the original publication of this blog entry, additional information has been released about the filmmakers accused of purchasing personal vehicles using Iowa's film tax credit program. From the Iowa Republican:

We would like to emphasize that these are separate filmmakers from those involved in production of the film The Scientist, also referenced in the blog entry below.]

Three companies and three individuals that were involved in the production for the film The Scientist have been charged with inflating and falsifying expenses in order to obtain more than $1.85 million in tax credits through Iowa’s film tax credit program.

According an article in the Des Moines Register:

Weiner Runge, a 44-year-old film-maker and resident of St. Louis Park, Minn., is accused of a felony for reportedly inflating values of expenses on applications to the state for tax credits. Over the course of the project, Weiner Runge inflated the cost of making the film from $767,250 to almost $1.8 million, according to the Attorney General’s office. [...]

Saunders, 37, [...] provided free services that were used to claim $2.5 million in credits. Saunders also faces felony theft charges.

The following are specific examples of how they are accused of inflating the cost of the services and products that they consumed under the guise of the film tax credits.

Court records indicated Maximus Production Services filed claims for rental equipment that were significantly inflated, such as $225 each for a push broom, a hand broom, a metal rake, a pick axe and a sledge hammer, and two shovels for $450.

The invoices also included various sizes of step ladders that ranged from $900 each up to $1,125, and a 24-foot extension ladder reported to have been rented for $1,350.

As for the most egregious misuse of Iowa’s film tax credits, filmmakers involved in two other productions bought a Mercedes and a Land Rover for themselves. From the Des Moines Register again:

[S]tate officials found [movie]-makers had used the tax credit program to purchase two luxury vehicles worth more than $60,000 and other items later put to personal use.

If these filmmakers purchased their vehicles in Minneapolis, the combined state and county sales tax rate would have been 7.375 percent if not for the tax credit exemption. That means that the filmmakers avoided paying more than $8,850 in sales taxes on their combined vehicle purchases. This is the amount of money that the film producers saved buying the vehicles in Iowa under the guise of a film production, and it represents lost sales tax revenue for Minnesota. Filmmakers who live in Hollywood, Calif., would have an even greater incentive to buy luxury cars using film tax credits in other states because the combined state and county sales tax rate there is 9.75 percent. For a purchase of $120,000, then, a person would have to pay an additional $11,700 in sales tax.

Supporters of film tax credit programs say that the films have economic and fiscal impacts beyond the amount that the filmmakers spend in the state. We’ve discussed this concept in a previous post on this blog, in fact. I’d like to pose the following questions to these supporters: How much economic activity does the purchase of a luxury car generate in the state economy? How much extra output does it yield for the state? Will this motivate more people to move to the state? My answers are, in order, “not much,” “none,” and “no,” but I am eager to read their comments.

I worry that Missouri’s film tax credit program could be at risk of the same kind of fraudulent activity, because it has a structure similar to Iowa’s program. Under both programs, the tax credits are transferable. Iowa has since pulled the plug on its program to scrutinize its accounting, and Missouri would be better off doing the same.

Using the “Show Me: The Spending” web tool, I mapped the historical line graph of the film tax credits allocated in Missouri during the past decade. The only spike in the graph occurred in 2009, and that was for Up in the Air:

Trend of Film Tax Credits Awarded in Missouri

The total number of tax credits that have been issued since 2000 is 35, for a total amount of $12,927,154. The average amount of a tax credit was only $369,347, which is much less than I anticipated. The smallest amount of credit that was awarded was $19,048, and the largest was $4,131,011. The latter award occurred in 2009, for Up in the Air, and it is represented by the spike in the graph for that year.

Although I disagree that Missouri should offer film production incentives, I am relieved to learn that few productions are taking advantage of it. Only one film has come close to the tax credit cap during the last 10 years. I have heard many of our commentators and politicians call for increasing this cap, but this graph leads me to believe that it would not encourage a marginally higher number of large-scale productions. It would be as efficacious as putting a price floor below the equilibrium price.

An article in the St. Joe News highlights the accomplishments of federal stimulus dollars in Northwest Missouri:

Missouri’s 6th Congressional District, only two of whose 26 counties gave electoral majorities to President Obama, got more than $314 million last year from the federal economic stimulus program. [...]

In Plattsburg, Mo., a $1 million stimulus grant is paired with a $4.3 million low-interest loan to help build a water treatment plant. “Those two things you can’t be upset about,” said City Manager D.J. Gehrt. “But it’s not as simple as getting $5.3 million and you can go out and start your project.”

The engineering plans were finished and submitted for review 13 months ago. But the reviews stalled while agencies pondered where the funding might flow. Further delays have come from setting up mechanisms to repay the debt incurred from the loan.

If all goes as planned, Mr. Gehrt said, the treatment plant will be completed in the summer of 2011, maybe a quicker timetable because of the stimulus money, but maybe not.

In the long run, he added, “it’s going to save the ratepayers in our service area a good amount of money.”

In St. Joseph, the stimulus program directed more than $31 million to recipients like the school district, Missouri Western State University, the Department of Transportation and Community Action Partnership.

Etc. No doubt some people are benefiting from the stimulus, but because government spending does not face a profit and loss test, there is no good way to determine which projects are worthwhile and which wasteful. The article also ignores all the things taxpayers and bond holders would have done with the money had it not been taxed away or loaned to the government — in other words, it only pays attention to the seen, but not to the unseen, effects of the spending. These recipients of stimulus funds would not have received the money to do what they’ve done, but that money would have been used instead to create something else, if it hadn’t been spent in the stimulus.

Furthermore, although the $314 million that the 6th district received may seem like a lot of money, it amounts to less per capita than the national average. During the last year, $334 billion in stimulus spending has been allocated with $119 billion going toward tax cuts and another $14 billion in individual benefits like additional unemployment insurance payments. That leaves $201 billion in spending projects awarded during the last year. According to Wikipedia, the population of Missouri’s 6th district is 621,690, and the estimated population of the United States is 308,705,000, which means that the district contains just barely more than 0.2 percent of the national population. Given that 0.2 percent of $201 billion is $402 million, the district falls under the national average for stimulus spending by $58 million dollars.

Maybe the 6th district’s underwhelming support for Obama during 2008 is in some way related to the underwhelming amount of stimulus funds it has received.

As many residents of Saint Louis are aware, there has been a coyote wandering through Tower Grove Park for more than a week. As someone who lives very close to the park, I demand the city of Saint Louis take swift and drastic action to drive the beast from our midst. The city should establish a Coyote Patrol, similar to the Bear Patrol created after a bear wandered into Springfield in The Simpsons episode “Much Apu about Nothing.” No expense should be spared to protect us from the solitary predator: We need round-the-clock surveillance of the park, and patrols of all nearby wooded areas to ensure that no more coyotes sneak in.

While some might say that the risk of coyote attack is still very low — negligible, even — and that therefore we shouldn’t spend lavish amounts of money guarding against it, I respond that the risk can’t be much lower than some other risks the government pours billions into thwarting. And when Tower Grove Park is once again free of coyotes, we will have the government’s Coyote Patrol to thank — just as Homer knew to credit the Bear Patrol for keeping bears out of Springfield:

The Christian Science Monitor describes a Farm to School program in Vermont that encourages local meat consumption. This student has gotten the message (emphasis mine):

“I think it’s really good because we get healthier here than at my old school, and we get more fruits and vegetables and local meat,” says fourth grader Morgan Jones.

The district bought meat from a local farmer, spending an additional $1 per pound above the price it would normally pay.

As Farm to School expands to include products like meat or cheese, it gets harder for supporters to justify the program as anything but protectionism. The appeal of local fruits and vegetables is easier to relate to. Anyone’s who’s eaten delicious fruit right off the tree can sympathize with activists’ support for local produce. (At least, we can sympathize in the early fall and late spring. Activists still have to explain how local produce is superior during the rest of the school year, when very few fruits or vegetables are harvested. Many will say to preserve the local food in the fall — but is locally preserved food really better than food that was preserved somewhere else, or shipped in fresh?)

Meat, on the other hand, has no local advantage at any time of year. There’s no such thing as a hamburger picked fresh off the cow. Meat has to be preserved and prepared no matter where it comes from. Its quality depends on factors like the health of the animals and how safely the meat was handled.

It would be great if Missouri districts could resist this Farm to School trend and refrain from insisting on local meat. Districts should shop around for the safest meat at the best price — and not settle for whatever meat happens to be raised nearby.

The billions of dollars that the federal government doles out in agricultural subsidies each year — most of which go to a few large corporations, influential politicians, and wealthy landowners — do a lot of damage to the economy. The subsidies insulate businesses from the market forces that would, if left unfettered, force them to innovate and improve. They encourage overproduction and irresponsible farming practices: As farmers try to increase their yields in reaction to artificially high crop prices, they expand their farms into less-fertile land that must be blasted with chemicals if it’s to grow anything at all. And the subsidies make it harder for small farmers to enter the market and compete against the corporations that are propped up by price supports and shielded from risk.

Agricultural subsidies are harmful, no doubt about it. But is there a way to mitigate them? Activists say yes. They contend that new laws would counter the subsidies’ damage. To open the agricultural sector to competition, activists suggest — among other ideas — enacting preferential food policies that require school districts to purchase a set percentage of their cafeteria food from local sources. This, it is argued, would take power away from the corporations and undo some of the subsidies’ bad effects.

As much as I oppose subsidizing corporate agriculture, I can’t support the local food mandates. Ordering schools to buy local food is a poor antidote to corporate subsidies, for these reasons:

• There’s nothing to stop corporations from farming near school districts and touting their produce as “local.” Remember, a farm doesn’t have to be small or unsubsidized to count as local; it only has to be nearby. Just as agricultural corporations have stepped up to claim a large share of direct payments and other kinds of farm aid, they’ll also be eager to sell local food — at a premium, because districts won’t have the option to walk away from the sale and buy from businesses located farther away instead.
• Preferential treatment for local farmers could cause as much environmental damage as traditional subsidies. It would lure farmers to grow food near school districts, whether or not the land is suitable for crops. A district’s closest farmer might not always be the most responsible with pesticides and fertilizers. Even if you look around and see that your local farmers are environmentally conscious today, the situation might change when new businesses move in to be near a school district and have a guaranteed customer.
• Local food mandates place an unfair burden on school districts. District administrators didn’t engineer the mess in the agricultural sector, and fixing it shouldn’t be their job, either. They should be free to focus on their main goal — educating children. Let’s not take money that could go toward teachers’ salaries or building repairs and instead use it to pay a higher price for local food, when healthy food is available at a lesser expense from somewhere else.

Local food mandates, by guaranteeing customers for some farmers through public school policy, are themselves a form of subsidy. Neither the market nor the environment will be well served by adding yet another subsidy to the already over-subsidized farming sector. The real solution is to end government aid for agriculture. When farmers are free to compete on their own merits rather than on their political influence, we may see the market change in favor of farmers who were previously overlooked — including, possibly, farmers near your home or school.

Show-Me Institute research assistant John Payne recently had an op-ed published in the Riverfront Times about the proposed tax hike to fund a MetroLink expansion. Payne’s piece elegantly summarizes the following points about why Proposition A is a bad idea:

1. Although the campaign message focuses on strengthening current lines that have had service cuts, the proposition would focus appropriated funds on expansion to less populated areas. MetroLink already has trouble paying for its current infrastructure; expansion would only create the need to use even more tax dollars in the future, or cut existing lines still further.
2. MetroLink has a poor track record of correctly forecasting its costs. (Payne cites as an example the Cross-Country MetroLink Extension, which cost upwards of $676.8 million after an initial projection of $550 million.) If it had been constructed through a public-private partnership (like in Denver), the contractor would have been accountable to spend more responsibly, without repeatedly asking for tax increases. In contrast, MetroLink’s need for a tax increase is written into its 2009 fiscal budget.
3. Expansion of bus routes is much more cost-effective than expanding light rail. From the op-ed:
   

   We would obtain a much greater benefit at a significantly lower cost if we instead focused our public transportation dollars on new, higher-speed bus lines, which are cheaper and far more adaptable than light rail. Although the expansion of light rail into every reach of suburbia may promise an end to traffic congestion and the revitalization of the city, it will ultimately entail spending huge amounts of money in order to transport far fewer additional passengers than are served by the lines already in existence.

4. Some, like the members of this Facebook group supporting the measure, argue that additional public transit services are necessary in order to help the city’s low-income residents. Many advocates of Proposition A don’t realize that the tax increase it would bring is regressive, because it offers no rebates or exemptions based on income level, so it would disproportionately hurt the poor. It would be used to expand services past the city and county, so the people paying the taxes won’t benefit directly from the expansion.

I’m currently reading Gridlock: Why We’re Stuck in Traffic and What to Do About It by Randal O’Toole, the Antiplanner. Although the book discusses the problems in America’s transportation system in general, certain parts of it are specific to light rail in Saint Louis and the debate surrounding the proposed MetroLink expansion. I’d like to share some passages from Gridlock that communicate why expanding MetroLink is unnecessary and cost-inefficient.

First, O’Toole provides evidence that expanding MetroLink hasn’t historically increased ridership in Saint Louis:

When St. Louis opened its first light-rail line in 1993, it was hailed as a great success because system ridership, which had shrunk by nearly 40 percent in the previous decade, started growing again. But when St. Louis opened a second line in 2001, doubling the length of the rail system, rail ridership remained flat and bus ridership declined. By 2007, total system ridership was no greater than it had been in 1998.

Second, O’Toole describes how Saint Louis experienced a reduction in energy efficiency after launching a light-rail line. He explains that this is because the city ultimately uses more fuel on buses that carry smaller average loads than it did before building the line.

For example, in 1991, before Saint Louis built its first light-rail line, St. Louis buses averaged for than 10 riders and consumed 4,600 BTUs per passenger mile. In 1995, after opening the light-rail line, average bus loads declined to less than 7 and energy consumption by bus and light rail together increased to 5,300 BTUs per passenger mile. CO₂ emissions also climbed, from 0.75 pounds to 0.88 pounds per passenger mile.

Third, MetroLink’s revenues add up to less than its expenses, and an expansion would exacerbate this deficit:

The transportation plan for St. Louis [...] notes that the transit agency’s projected revenues could not even cover its operating costs, much less the cost of light-rail expansion. The plan adds that county voters rejected a tax increase needed to support transit operations and that, even with that tax, the agency’s revenues would be insufficient to support the proposed expansions.

O’Toole has written several pieces on the subject of high-speed rail for the Show-Me Institute. His most recent study for the Show-Me Institute, “Why Missouri Taxpayers Should Not Build High-Speed Rail,” was published in September.

Last week, Judge William Price, the chief justice of the Missouri Supreme Court, delivered the State of the Judiciary address. He made one thing clear: The judiciary is tasked to protect the people of the state, but they cannot carry out this commitment successfully without sufficient resources. Missouri’s essential government services must be carried out even in the worst of economic times. The Missouri judiciary is doing its part to be fiscally responsible, returning millions of dollars of appropriated funds even though their own budgets are tight. They feel the same economic pressure that other government agencies are experiencing, but they are making an attempt to keep the interest of the public at the forefront.

We have all undoubtedly felt overworked and underpaid, and during a recession, the proportion of the labor force feeling this way has surely increased. As Judge Price pointed out, those who make some of the most important decisions throughout the entire criminal justice system — state prosecutors — are being spread thin. This is a worrying state of affairs if we want prosecutors to make well-considered decisions. People work better when they are happier — it’s as simple as that.

One of the most pressing issues mentioned in Judge Price’s address is the state’s overspending on the incarceration of nonviolent criminals, something that Show-Me Institute research assistant John Payne mentioned in an earlier blog post. This is a situation resulting from too many restrictive laws that have resulted in the criminalization of nonviolent offenses, such as transactions involving drugs, alcohol, and even prostitution. Regardless of how one feels about the morality of such activities, it’s hard to justify expending so many resources on their prosecution when the core functions of the judicial system — protecting life, liberty, and property from actual direct, measurable harm — is suffering from a lack of resources.

Too many people are being arrested and tried for crimes that have no complaining victim. As Reason editor Radley Balko has observed, “Because there is almost never a complaining victim in vice crimes, law enforcement officers must go to extraordinary lengths to investigate and prosecute these crimes. This leads to all sorts of other problems, including invasions of privacy, entrapment, and police corruption.” The situation has also led to inconsistency in prosecution throughout Missouri. The toughest counties are prosecuting five times as many offenders as the most lenient counties.

Judge Price has has offered a rather convincing reason to change these policies, and to decrease the rate of prosecution and incarceration of nonviolent criminals — because we can’t pay for it. What’s even more convincing is that we cannot afford to pay for the proper treatment and rehabilitation for these offenders. Price outlines how poorly the system treats people who haven’t directly harmed anybody else, by tearing them from their lives, throwing them in a “concrete box with very expensive guards, feeding them, providing them with expensive medical care, surrounding them with hardened criminals for long periods of time, and separating them from their families who need them and could otherwise help them[.]” What’s worse, while in prison, some of them are being trained by full-fledged violent criminals on how to further divide themselves from mainstream society. These people are also citizens, and deserve to be given a chance to reintegrate into society.

Price provides some sobering numbers:

In 1994, shortly after I came to the Court, the number of nonviolent offenders in Missouri prisons was 7,461. Today it’s 14,204. That’s almost double. In 1994, the number of new commitments for nonviolent offenses was 4,857. Last year, it was 7,220 — again, almost double. At a rate of $16,432 per offender, we currently are spending $233.4 million a year to incarcerate nonviolent offenders … not counting the investment in the 10 prisons it takes to hold these individuals at $100 million per prison. In 1994, appropriations to the Department of Corrections totaled $216,753,472. Today, it’s $670,079,452. The amount has tripled. And the recidivism rate for these individuals, who are returned to prison within just two years, is 41.6 percent.

Price observes that if the state government were run like a business, these wasteful practices would have been done away with years ago. “Business” may not be the most convincing metaphor to use, because one of the classic economic justifications of government action, particularly the justice system, is that public goods are not optimally provided by markets. Some economists, however, have suggested that many aspects of government action that are commonly justified in terms of their status as public goods, including some within the justice system, can’t correctly be considered public goods:

The standard economics approach to delineating the optimal set of the state’s functions is unsatisfactory.² In particular, when economists such as Joseph Stiglitz (1988: 24) indicate that “a primary role of government” is to provide the legal framework “within which all economic transactions occur,” not much is said about the desired content of the laws, and how it might affect the desirability or efficiency of their enforcement. Besides, there is typically no mention of nonstate enforcement mechanisms and their relationship to those of the state. The impression is created that all conflict resolution in economic life is in the unavoidable domain of the state. That impression is in contrast with the empirical evidence (see, e.g., Greif 1997, Gow and Swinnen 2001, and Waldmeir 2001).

This confusion is related to the use that is made of the concept of public goods as being nonrival in consumption and nonexclusive (Samuelson 1954: 387–89). If these goods are to be provided at all, taxes and the related state’s coercion are necessary. However, which goods are truly public? Is the justice system the domain of the state because the relevant services are a public good? Clearly, that cannot be said of all such services. Then, which “justice services” constitute a public good? Is the lighthouse, the favorite textbook example of a public good, a public good? Ronald Coase (1974) has shown that lighthouses in 19th century Britain were operated and financed privately. This finding, however, has not prevented the lighthouse to continue serving as the primary example of a public good in many textbooks (e.g., Stiglitz 1988: 75).

There may be fewer public goods in real life than typically assumed. As a result, the necessary (or desirable) scope of the state’s activity may be narrower, too. Some of the goods declared “public” may in fact be private goods, pushed into the state’s domain by public intervention that has eliminated or undercut the possibility of voluntary private financing of these goods. In other words, some uses of the theoretical concept of public goods may inadvertently constitute ex post justifications for the results of previous expansion of state activity.

Judge Price is not an economist, but by questioning whether the routine prosecution and incarceration of nonviolent offenders for committing consensual crimes actually provides more value than cost for the people of Missouri, this may well be the type of argument he was trying to make, using different terminology. Price is suggesting that it’s time for a more thorough analysis of which interests are truly being served by prosecuting many types of nonviolent offenders, and whether such prosecution actually provides results that could be considered a public good. His address doesn’t contain all the answers, but it’s the starting point for a worthy debate.

In times of fiscal crisis, it sometimes becomes necessary to embark upon a new policy path, and welcome changes that we might otherwise avoid. Whether Judge Price’s recommendations are inspired by a concern for justice or for more practical financial reasons, this would be a positive step for the government to take. The judiciary appears to be willing to do its part in order to withstand the jolts of the recession, but are the other branches of government also up to the task?

The editorial board at my hometown newspaper, the La Crosse Tribune, is critical of the way that federal stimulus funds are being spent in Wisconsin. An editorial published yesterday, “They’re feeling the stimulus … in Missouri,” laments that public works projects in western Wisconsin are being awarded to out-of-state contractors instead of to local ones.

So here’s a scenario that’s a result of force-feeding the U.S. economy through the tube of federal agencies: While $12.5 million in stimulus money will fund projects on French Island and Brice Prairie, projects that local contractors say they could handle, only a handful of out-of-state firms are allowed to bid them.

In one case, a Kansas City, Mo., company got the nod to build a $6.1 million district office on French Island for the U.S. Fish and Wildlife Service. And only three firms, all out of state – one them a Missouri-based subsidiary of an Australian steel company – are in the running to handle two projects at the Upper Mississippi Environmental Sciences Center.

It’s rare that I read an article that interests me on a both a biographical and a public policy level. Initially, I feel compelled to pick sides — but which should I support: the state in which I lived for 20 years or the state in which I live presently? Ultimately, I must decide that my conflict of interest is false, because I disagree that the subject of the editorial is even an issue.

The purpose of the fiscal stimulus was to incite economic recovery on a national level, not for certain states on an individual level. Therefore, the La Crosse Tribune shouldn’t lament the fact that a project wasn’t awarded to a Wisconsin-based firm — instead, it should celebrate the fact it went to an American firm. Furthermore, federal money comes from taxpayers in all states, not just those who live in Wisconsin or in Missouri. State officials and residents shouldn’t feel that their companies are entitled to federal stimulus money simply because a project lies within its borders.

States win and lose business from each other all the time in response to supply and demand — this is the beauty of the interstate trade. Wisconsin lost at least one free-market research analyst to Missouri in the last year, along with other business, but the editorial board at the La Crosse Tribune didn’t write about that. Why, then, does it bring this particular project to light? There are probably many public works projects in Missouri that are bid on by out-of-state vendors, perhaps even from Wisconsin.

As some readers point out in the comment section, awarding the project to a Missouri-based firm may not result in as many lost jobs for Wisconsin individuals and families as suggested in the article. This is because the Missouri firm could use local laborers, including perhaps the employees of the Wisconsin-based firms that were outbid.

The practice of soliciting bids from many contractors, regardless of their origin, is very good because it encourages competition and its positive consequences. If many contractors bid for a single public works project, it drives down cost and taxpayers get more for their money.

Even in the midst of a huge budgetary crisis, it’s nice to see that Missouri taxpayers will continue to support the finer things in life:

In the budget proposed by Gov. Jay Nixon last month, the Missouri Arts Council, part of the Missouri Department of Economic Development, would not receive a direct appropriation from the state to fund nonprofit arts organizations, including the Allied Arts Council of St. Joseph.

However, Mr. Nixon has recommended that the agency be given the ability to spend $9.7 million in the next fiscal year, the same spending authority it was given during the current fiscal year. The agency is provided federal dollars and money it receives from a trust fund that collects tax revenues from out-of-state professional athletes and entertainers who perform in Missouri.

Supporters of this spending might point out that the money comes from the federal government, but I’m sure that money could be spent on more essential services and help bring Missouri at least somewhat out of its fiscal black hole.

Art is undoubtedly a wonderful thing, but it does not require government funding.  People who enjoy art — myself included — can continue to spend their own money on it. If artists and artistic institutions cannot attract such patronage on their own merits, then people clearly do not value it, and the government should not be funding it.