Today the Saint Louis Business Journal published a letter to the editor by John Payne and me (link added):

Editor:

The editorial board recently oversimplified our views on rural broadband access (“It’s a wired world, after all,” Aug. 20 issue). We do not oppose the proliferation of broadband into rural areas, merely the government subsidization of such expansion. Greater broadband penetration in rural areas indeed provides social benefits, but we remain skeptical that those benefits will outweigh cost of millions in taxpayer dollars.

Solutions for extending broadband exist in the private sector. I-Land Internet Services, for example, is expanding broadband into rural western Missouri at no cost to taxpayers. Fifty percent of people living in rural areas already have home broadband Internet service, according to a Pew Internet study released earlier this month. Furthermore, of the people who do not have high-speed Internet, only 6 percent cited a lack of access as the primary reason for not subscribing, compared with 48 percent who find the Internet irrelevant and 18 percent who have usability issues. Eighty million dollars is a very high cost to benefit such a small subset of people.

Christine Harbin, research analyst, Show-Me Institute
John Payne, research assistant, Show-Me Institute

Of additional note, contributors to Show-Me Daily have discussed this issue before.

Are people inherently born with the right to an important and well-paying job? How about a decent house? The author of a recent article in the St. Louis Beacon certainly thinks so. He advocates a larger government role in job creation and cites Franklin D. Roosevelt’s “Second Bill of Rights,” or a similar economic bill of rights, as the prism through which the entire economy should be viewed.

FDR’s Second Bill of Rights includes:

The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;

The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;

The right to a good education.

The framers of the Constitution saw the need for a Bill of Rights as a means of protecting the people from an overbearing and oppressive government. They drafted a bill of negative liberties, or protections that define what the government cannot do. They gave no guarantee of housing, food, or employment because they saw the dangers that the notion of positive rights pose as a potential threat to liberty — the idea that, just by being born, people are entitled for others to provide them a comfortable life.

Because the government does not produce any wealth, even the most basic obligation to one individual must be paid for by taking from another. In order to guarantee one person a profitable job, a decent home, or adequate food, wealth must first be taken from those who have rightfully earned it, infringing on their liberty to do as they wish with their own money.

Unfortunate individuals who receive assistance do not receive those benefits because it is their inalienable right, but because it is irresponsible to let them starve or freeze in the streets. No one is entitled to anything that is not their own, no matter how basic of a necessity; however, it is the responsible duty of able individuals to help those in need through their charitable impulses.

Although the end result may be the same, in terms of the needy receiving necessary aid, there is a stark distinction between an unalienable right to something and the responsibility of an able man to care for their fellow man. The difference can be summed up in one word: liberty. The liberty of every individual to do as he pleases with his own money and resources. Although it is repulsive — and, at the very least, irresponsible — for an able individual to let those less fortunate starve, I have no right to infringe upon their liberty to do as they please with their own money.

This is by no means an argument against all government assistance. Obviously, the government cannot allow its citizens to starve or children to live on the streets, homeless. Rather, my objection is with the larger issue of entitlements justified through a notion of positive rights. When fully implemented positive rights lead to socialism, a concept that has been tried and found ineffective at growing economies, raising standards of living, or even helping the very poor. To paraphrase Margaret Thatcher, “The trouble with Socialism is that eventually you run out of other people’s money.”

Last Friday, I travelled to the 108th Missouri State Fair in Sedalia, for my shift at the Show-Me Institute’s booth, fully prepared to engage in conversation with Missourians about how state and local governments create barriers to the free exchange of goods and services. I expected to field some tricky questions about whether the Show-Me Institute has partisan affiliations — we have none — or about pending, unaffiliated ballot initiatives, but I did not meet a single Missourian who wanted to know about either of these matters. Instead, I got tripped up by a seven-year-old’s query, “What is the smallest town in the state?”

Had the child asked which of Missouri’s 115 counties has the highest rate of tax abatement as a percentage of total real property assessed valuation, I could have provided an answer. Had he inquired about the intricacies of state supplemental tax increment financing, I would have jumped at the chance to describe its function and effects. I certainly would have had something to say about state spending for historic preservation or the myths of downtown “revitalization” in St. Louis. But I did not know the answer to the question, “What is the smallest town in the state?”

I promised my questioner that I would get back to him after consulting the Census, so, without further ado, here is the answer to the trickiest question from Sedalia:

Goss Town, population one, in Monroe County, population 9,311, is the smallest town in the state.

If you have a question for the Show-Me Institute, please feel free to stop by our booth in Sedalia for the remainder of the fair, or place a comment on the blog.

I just want to remind everyone that today, at 6:00 p.m., the Show-Me Institute will be hosting a panel discussion with Liberty on Tour and the American Civil Liberties Union (ACLU), about recording the police. Recently, individuals in Maryland, Illinois, and Massachusetts have been arrested for filming either their or others’ arrests. In Maryland, police raided a motorcyclist’s home after he had posted video footage of a traffic stop on YouTube. Anthony Graber, the motorcyclist, faces up to 16 years if convicted of violating Maryland’s wiretap laws. The Illinois legislature has explicitly made it illegal to record an on-duty police officer without his or her permission. A man arrested for filming an arrest in Boston has recently filed suit against the city.

This panel discussion is our attempt to explore the issues of liberty at stake, as well as provide the opportunity for anyone who is interested to meet the panelists and to ask questions.

The discussion will begin at 6:00 p.m. TODAY at the Show-Me Institute’s office at 4512 W. Pine Blvd in the Central West End of Saint Louis.

The event is free, and snacks will be provided. However, because Liberty on Tour is traveling across the country, we suggest a $5 to $10 donation to help pay for the group’s travel costs.

Our star-studded panel includes:

• Adam Mueller and Pete Eyre of Liberty on Tour, a project to tour 13 cities in 13 weeks to talk about the principles of voluntaryism. Adam is also a founder of Cop Block, an organization devoted to watchdogging police officers who break the law. Pete Eyre currently works for the Future of Freedom Foundation, which advocates for individual liberty, free markets, private property rights, and limited government. Both Adam and Pete were part of the Motorhome Diaries project.
• Redditt Hudson, of the ACLU of Eastern Missouri. Redditt is a former Saint Louis police officer, and part of his work at the ACLU is to lead workshops that educate people about their rights under the law, including practical advice about how to interact with the police.
• John Payne, a research assistant at the Show-Me Institute, will be moderating the discussion. John has argued for greater transparency and recording of SWAT raids in Missouri, and follows issues of civil asset forfeiture closely.

If you have the time, please drop by, and don’t hesitate to bring questions! The panelists will speak briefly about their perspectives on recording the police, and then we will open up the discussion for questions from the general public. After about an hour of discussion, we will move the group to Sasha’s on Shaw for dinner and drinks.

If you can’t make it, you can send questions you’d like asked to info@showmeinstitute.org, tweet them to @showmeinstitute, or post questions on the event’s Facebook wall. Finally, we will film the discussion and post it online for those who cannot attend.

I am writing from the Missouri State Fair on my second and final day of representing the Show-Me Institute here. I have been impressed by the number of people who claim to agree with our message of less government, but judging by the prevalence of “Fire Pelosi” stickers, I worry that some of this backlash against government spending is based on nothing more than partisanship. However, most of the people who obviously dislike big government — no matter what party affiliation it wears — are vocally pessimistic about our ability to change the government for the better. Although restraining government may look hopeless at times, I believe pro-liberty sentiment is more widespread than we often suspect.

SEDALIA — I am writing this from the Show-Me Institute booth at the Missouri State Fair! We are talking about individual liberty and limited government with all of the fairgoers.

If you are in Sedalia, stop by the exhibition hall between corn dogs to talk to us about free markets. For those of you who haven’t had a chance to stop by, here is a picture of our booth!

* Title quote: Lenny at the State Fair, from That Thing You Do.

At around 5:05 this afternoon, I will be on the Mike Ferguson show on 93.9 FM The Eagle in Columbia, talking about government-subsidized broadband Internet access for rural areas. If you are not in Columbia, but would still like to listen to the show, you can listen online — provided you have a fast enough Internet connection. The invitation was extended to me based on this post I wrote a couple of weeks ago.

(Headline reference here, which is meant both to celebrate the Rush concert in Saint Louis this Sunday, and to annoy my colleague David Stokes.)

Last Wednesday, Show-Me Institute staff and interns ventured on our third free-market field trip. We went to Busch stadium to interact with one of the freer markets available here in Missouri: ticket scalping.

We assembled into four teams, starting out with either Cardinals tickets (two tickets normally valued at $39, although we bought them for $20 each) or money ($60). We each competed to try to improve our situation by engaging in voluntary market transactions.

Even ticket scalping can leave both parties better off! Without giving too much away, the video demonstrates a few key economics lessons, like information asymmetry — where one party has better information than the other. In this case, the experienced sellers understood the market much better than some of our teams did. Another lesson that comes up in the video is the idea of value: A ticket’s face value does not necessarily reflect how another party will value it, and thus it may be difficult to recoup a ticket’s nominal “worth” when selling it. Issues of supply and demand also came into play, as we were at a game on a hot day when tickets were not sold out.

Further lessons can be gleaned from the free-market explanations interspersed throughout the video. I encourage you to watch it!

While looking for some academic papers on Google Scholar, I took a moment, as an afterthought, to see whether the search engine was picking up work produced by Show-Me Institute scholars (it is). To my surprise, a brief article that I cowrote with intern Abhi Sivasailam was the first delivered result in a search for “Show-Me Institute” on Google Scholar.

Normally, I would be thrilled. But, sadly, the study wildly misrepresents Abhi’s and my work.

We were cited in a study published by U.S. Public Interest Research Group (PIRG), an organization that initially began as a public interest law firm founded by perennial presidential candidate Ralph Nader. There are now many state-based PIRGs, who, according to the organization’s mission statement, stand up to powerful special interest groups in order to advocate for the American public.

In February 2010, U.S. PIRG published “The Right Track: Building a 21st Century High-Speed Rail System for America,” about the benefits of intercity high-speed rail. In 2009, President Barack Obama invited states to apply for federal funds that would be devoted either to updating railroads or to building entirely new rail systems. Authors Tony Dutzik, Siena Kaplan, and Phineas Baxandall argue in the paper that additional funding is necessary to bring America up to speed, as it were.

“The worst, most costly mistake America can make going into the 21st century is to not invest adequate resources in upgrading and expanding our passenger rail network,” write Dutzik, Kaplan, and Baxandrall (emphasis theirs).

This blog post is not to argue with PIRG’s conclusion — I believe others can, and have, argued persuasively that government-provided, high-speed rail is costly and usually doesn’t deliver what’s promised. Instead, this post is about academic integrity.

U.S. PIRG cites Abhi and me as the source for the following:

Missouri has applied for funding to pave the way for future 90 or 110 mph service continuing from St. Louis to Kansas City. The projects would reduce delays on this corridor by 48 percent, increasing the number of trains arriving on time from 19 percent to over 80 percent.

The cited source is an article we wrote titled, “High-speed rail predicted to travel much slower than advertised.” I re-read the article, hoping to find where Dutzik, Kaplan, and Baxandrall could have interpreted our work to indicate that “Missouri has applied for funding to pave the way for future 90 or 110 mph service continuing from St. Louis to Kansas City.”

I can’t find specific text that backs up the 90 or 110 mph service to which the PIRG authors refer. I did find the following in our article:

[...] trains traveling the route between Kansas City and Saint Louis would travel much slower. According to the state’s preliminary application for federal funding, those trains would travel an average of 55 mph after improvements, a 5-mph increase from the current average speed.

And:

In order for passenger trains to reach a maximum speed of 110 mph on the route between Kansas City and Saint Louis, a large portion of the track would need to be rebuilt as a double track, Union Pacific spokesman Mark Davis said.

“I don’t think anyone is seriously thinking of higher than 90 between Kansas City and Saint Louis,” said Randal O’Toole, a senior fellow at the Cato Institute, who studies transportation issues.

In fact, a takeaway point of our article was that there is a difference between maximum speed and average speed. Just because some state governors say that a high-speed rail train will hit speeds of 100 miles per hour doesn’t mean that your travel will remain at that constant speed. More than likely, your average speed will be much slower, with the train hitting that maximum speed for a short duration of time.

PIRG also notes, in the sentence attributed to us, that “The projects would reduce delays on this corridor by 48 percent, increasing the number of trains arriving on time from 19 percent to over 80 percent.”

According to the state’s application, we wrote in our article, trains were rarely arriving on time in Missouri:

According to the preliminary application, only 18.6 percent of trains running between Kansas City and Saint Louis arrived on time during the federal fiscal year of 2008.

So, I suppose that’s how the authors arrived at the figure of 19 percent. And we did write that the Missouri Department of Transporation (MoDOT) had estimated that, with improvements, the percentage of trains arriving on time would increase to 80 percent (we wrote that the estimated figure was 80 percent, not over 80 percent, as written in the PIRG paper). But Abhi and I also noted that trains had been arriving on time more than 90 percent of the time in recent months. And, to my dismay, I cannot find in our own work the 48-percent delay reduction figure that PIRG attributes to us.

Furthermore, it is strange that the PIRG authors attributed these figures to a brief article written by Abhi and me, rather than to the entities and published reports that are the direct source of the estimates we used. We simply reported what the transit improvement claims were; we did not verify them.

Finally, we represent merely one citation of 238 in this particular U.S. PIRG publication. If our work was misrepresented, it is certainly possible that other authors or facts were misrepresented, as well.

I will let Abhi have the last word, via this statement that he sent to me:

That researchers affiliated with the Show-Me Institute have been critical of high-speed rail projects in the state is readily apparent. In fact, pieces of published scholarship and blog content can be read as direct critiques of fundamental arguments that lie at the core of the paper released by PIRG. It is important to stress, however, that these disagreements are not on trial in this post.

This post was motivated not by an inclination to re-engage debate on high speed rail, but rather to offer a clarification of prior work and expound on a teachable moment: misrepresentation of this nature, however slight, damages the academic enterprise. Though the transgression was minor, such acts of misrepresentation represent a deficiency in either academic integrity or academic rigor that can damage the credibility of all parties involved. Scholarship with such errors invites not just skepticism on the quality of sources, but on the quality of the contentions they support.

On Friday, August 20, the Show-Me Institute, along with Liberty on Tour and the American Civil Liberties Union (ACLU), will host an informal panel discussion about recording the police. Recently, individuals in Maryland, Illinois, and Massachusetts have been arrested for filming either their or others’ arrests. In Maryland, police raided a motorcyclist’s home after he had posted video footage of a traffic stop on YouTube. Anthony Graber, the motorcyclist, faces up to 16 years if convicted of violating Maryland’s wiretap laws. The Illinois legislature has explicitly made it illegal to record an on-duty police officer without his or her permission. A man arrested for filming an arrest in Boston has recently filed suit against the city.

These arrests raise interesting questions of privacy expectations, free speech, differing state laws, and, as Reason Senior Editor Radley Balko has noted, your right to petition the government. This panel discussion is our attempt to explore the issues of liberty at stake, as well as provide the opportunity for anyone who is interested to meet the panelists and to ask questions.

The discussion will begin at 6:00 p.m. on Friday, August 20, at the Show-Me Institute’s office at 4512 W. Pine Blvd in the Central West End of Saint Louis. Please RSVP either by email to info@showmeinstitute.org, by phone to (314) 454-0647, or by commenting on this blog entry.

The event is free and snacks will be provided. However, because Liberty on Tour is traveling across the country, we suggest a $5 to $10 donation to help pay for the group’s travel costs.

Our star-studded panel includes:

• Adam Mueller and Pete Eyre of Liberty on Tour, a project to tour 13 cities in 13 weeks to talk about the principles of voluntaryism. Adam is also a founder of Cop Block, an organization devoted to watchdogging police officers who break the law. Pete Eyre currently works for the Future of Freedom Foundation, which advocates for individual liberty, free markets, private property rights, and limited government. Both Adam and Pete were part of the Motorhome Diaries project.
• Redditt Hudson, of the ACLU of Eastern Missouri. Redditt is a former Saint Louis police officer, and part of his work at the ACLU is to lead workshops that educate people about their rights under the law, including practical advice about how to interact with the police.
• John Payne, a research assistant at the Show-Me Institute, will be moderating the discussion. John has argued for greater transparency and recording of SWAT raids in Missouri, and follows issues of civil asset forfeiture closely.

If you have the time, please drop by, and don’t hesitate to bring questions! The panelists will speak briefly about their perspectives on recording the police, and then we will open up the discussion for questions from the general public. After about an hour of discussion, we will move the group to Sasha’s on Shaw for dinner and drinks.

If you can’t make it, you can send questions you’d like asked to info@showmeinstitute.org, tweet them to @showmeinstitute, or post questions on the event’s Facebook wall. Finally, we will film the discussion and post it online for those who cannot attend.

As the president tries to ramp up education reform with the administration’s new Race to the Top funding structure, he is receiving blow-back from the NAACP and a number of other groups. Their major critique of this most recent outreach program is that a funding structure based on competitive incentives during a recession cannot help the massive education problems that exist in the nation’s low-income communities.

The statement that the civil rights and other activist groups produced at the end of July suggested as a solution more of the status quo — or, at least, more for the status quo. It seems that their position is to give current schools more money (with no qualifier) and trust them to fix the problems.

Unfortunately, the economic reality is that money doesn’t grow on trees. Whether or not this attempt at ensuring that the dollars devoted to education are spent effectively actually achieves all the program’s goals, competition for the grants will hopefully create change in a stagnant system.

One of the criteria in this system that the civil rights groups oppose is the use of charter schools. Today, an article in the Wall Street Journal pointed out that minority support for these institutions is on the rise, and the numbers suggest that nearly 50 percent of African Americans and Hispanics support the formation of charter schools, while only 14 percent of African Americans and 21 percent of Hispanics oppose them. It is time for these groups to stop playing politics in education. The current system doesn’t work.

The Show-Me Institute’s most recent policy study shows that superintendents in school districts across the state are receiving compensation based not on performance factors, but rather correlated with school district characteristics, such as population size.

The time to reform education is now; competition and a fundamental change in how schools are funded have a far better chance of helping the kids that need it most. Although Missouri is not on the short list to receive any of the grants, we should pay close attention to this new federal market-based funding structure and track its results.

An editorial in the Kansas City Star argues that Missouri should stop training companies to expect subsidies. It describes the phenomenon as a “subsidies-for-development disease [that] has become dangerously pervasive” in Missouri. This is something that contributors to Show-Me Daily have been arguing all along, and I am glad that others are beginning to assess tax credit programs critically.

Here’s one of the editorial’s major points:

It’s understandable that lawmakers would want to do something to protect the Claycomo jobs in the face of competing offers from other states that are equally shameless. Yet the whole process, despite the studied silence of Ford, had the feel of extortion. Ford never had to say a thing, but everyone knew the company was expecting something.

Ford expects handouts from other states too, despite the fact that it’s a profitable, private company. Ford is playing a game, and it is one that a state like Missouri can’t win. Unfortunately for taxpayers, Ford is not the only company playing — many other companies in other industries also pit states against each other in search of the biggest handout.

Additionally, from the editorial (emphasis mine):

“[Offering incentives] always has an unsavory feel,” said economist Chris Kuehl of Kansas City-based Armada Corporate Intelligence. “It’s not unlike the sports guy, dangling six different teams.” Kuehl said he actually heard someone compare the Ford deal to the bidding war over NBA star LeBron James.

Is Kuehl a Show-Me Daily reader? Perhaps the someone he refers to was Joseph Steelman, who made that exact comparison in a recent blog post. Or perhaps that person was myself, because I also previously discussed how the bidding war over James is an example of how taxes can incite people and businesses to change their behavior.

Please join the Show-Me Institute and the John Cook School of Business at Saint Louis University in the fourth annual Friedman Legacy of Freedom event. The event will take place on Friday, July 30, from 11:30 a.m. to 1:30 p.m., and will feature a panel of economists from the region who will discuss Friedman and his lasting impact on economics. Economists Dr. Michael Podgursky from the University of Missouri–Columbia, Dr. Susan Feigenbaum from the University of Missouri–Saint Louis, and Dr. Daniel Thornton from the Federal Reserve Bank of Saint Louis will convene to discuss Dr. Friedman’s contributions and their continued relevance to our economy and our lives.

Click here to register online.

If you happen to be in the St. Louis area and near a radio (or at a computer pretty much anywhere) today around 11:00 a.m., please consider tuning in to KWMU 90.7 FM, where I’ll be a guest on Don Marsh’s Legal Roundtable. We’re planning to discuss a wide range of topics, including recent U.S. Supreme Court decisions, the ruling in the NorthSide redevelopment case here in St. Louis, and some other fascinating and timely legal issues.

I was pleased to see that the Post-Dispatch ran a letter to the editor today that I wrote in response to its recent editorial calling for St. Louis officials to renew efforts to subsidize the NorthSide redevelopment plan. This is the text of the letter:

Developer Should Bear Risk of Failure

In responding to Judge Robert Dierker’s ruling that St. Louis officials lacked authority to offer hundreds of millions of dollars to subsidize the NorthSide redevelopment plan, the editorial board, in the editorial “Celebrating Decline” (July 12), implies that the plan can proceed only if the city provides the anticipated subsidies. The developer’s own estimates indicate a belief that he will realize a profit of at least $251 million even without those subsidies.

Nothing in the ruling prevents the developer from pursuing his quixotic vision or from enjoying any profits that might result from its success; rather, it requires that, like all other entrepreneurs, the developer must personally bear the risks of failure instead of pushing them onto the taxpaying public.

Dave Roland — St. Louis

Policy Analyst, Show-Me Institute

This is admittedly old news, but in my defense, I do not follow sports. From the Wall Street Journal:

According to an analysis by Richard Vedder, an economist at Ohio University, [LeBron] James’s net present value tax savings on his salary are between $6 million and $8 million by living in Miami versus his home town of Akron.

This demonstrates how taxes can incite people and businesses to change their behavior. When tax rates differ across geographies, individuals and businesses have an incentive to move to the area of lower burden. This is largely why states that do not tax income experience larger rates of growth than states that do.

Later in the article:

While LeBron’s departure got extraordinary media attention, it is hardly unique. In the early 1990s, Ohio was the home of 43 Fortune 500 companies. Twenty years later the number is 24. Census Bureau data show that from 2004-2008 Ohio saw a net outmigration of $6 billion of income and some 97,000 taxpayers. Even Ohio’s famously liberal Senator, the late Howard Metzenbaum, moved to Florida late in his life to reduce his estate taxes.

If Missouri were to reduce or eliminate its income tax, then it would encourage more individuals and businesses (and professional athletes!) to locate here.

I have no means to verify or disprove this, but perhaps James used the Show-Me Institute’s IDEAS application in his decision process. Individuals can use the site to compare competitive tax environments across states, and I encourage our blog readers to play with the site to see how they would fare if they relocated.

[NOTE, 6/28/10: According to officials at the Department of Economic Development (DED), the DED did undertake a review of NorthSide Regeneration LLC's tax credit application, and fixed the discrepancies it found in the company's application before formal application submission. Show-Me Institute research found discrepancies in approximately 20 percent of the reported property values in the initial submitted application. The DED did not send some of the documentation surrounding the application process after a Show-Me Institute Sunshine Law request, because DED officials say it was part of the issuance process, rather than the review process. We are engaging in further research to verify these claims and will post more as we learn more. Stay tuned.]

Today, I appeared on the Charlie Brennan Show to talk about the discrepancies in NorthSide Regeneration LLC’s tax credit application filed in late 2009 (you can read more about that, and the discrepancies, here).

A lawyer for NorthSide, Irvin Ness, called in to explain the discrepancies, which appear to total more than $500,000. Ness said that the tax credit application we used to conduct our review was outdated — that NorthSide had submitted an updated application in December 2009 to update the reported property prices in a way that would correctly reflect the certificates of value on file with the city of Saint Louis.

Although this explanation could prove to be true, there are at least two reasons to doubt it:

1. I based my review on a copy of NorthSide’s tax credit application, which was provided to me by the Department of Economic Development (DED) in response to a Sunshine Law request submitted on Jan. 13, 2010. If an updated version had been filed before that time, the DED should have sent it rather than an out-of-date version.
2. My request specified that I wanted to receive “Copies of documents and emails regarding the review of NorthSide Regeneration LLC’s application for DALA tax credits in 2009.” I have made the documents they provided available online (in six parts, here, here, here, here, here, and here). They include no mention of property price discrepancies, or that the application had been resubmitted to reflect new property prices. If the application had been updated to reflect different prices than those that were initially submitted, and the DED had any correspondence about such an updated application, the DED failed to fulfill my request adequately.

At least until NorthSide can produce an updated version of its tax credit application that was actually submitted to the DED in 2009, it’s difficult to determine which error was committed — errors on the application, or errors in fulfilling my requests.

In any case, Charlie Brennan has invited me to appear again on his show, along with Ness, on Tuesday morning. Tune in then to hear more!

Thanks to everybody who listened to Audrey Spalding’s segment on KMOX this morning about discrepancies in the tax credit application filed late last year by NorthSide Regeneration LLC.

Audrey’s report is now available on the Show-Me Institute website, detailing how the property value amounts that NorthSide reported to the state appear to be overvalued by more than half a million dollars in comparison to the certificate of value amounts filed with the city of St. Louis.

For more of Audrey’s work covering the north side redevelopment project in St. Louis, follow the article links on her staff bio page.

Audrey Spalding, the Show-Me Institute’s public information specialist, will appear on The Charlie Brennan Show tomorrow, Friday morning, at 10:20 on KMOX in the St. Louis area. If you don’t live near St. Louis, you can also listen in online.

Audrey will be talking about the use of state tax credits for redevelopment in the north side of the city of St. Louis, and about how the tax credit application formally submitted by redevelopment company NorthSide Regeneration LLC appears to have overstated the value of its properties by more than half a million dollars. We’ll be posting much more about these topics in the near future, but in the meantime be sure to listen to Audrey address them on the radio tomorrow morning.

Show-Me Institute Research Analyst Christine Harbin will be on the Mike Ferguson show on Columbia’s 93.9 FM “The Eagle” at 5:00 p.m. this evening! She’ll be talking about the proposed tax credits for a Ford plant in Claycomo, in the Kansas City area. Tune in!

If you missed the discussion about red light and surveillance cameras that the Show-Me Institute hosted on June 9, you can now watch the video online. Both Saint Louis city Alderman Antonio French, who represents the 21st ward, and Missouri Sen. Jim Lembke, who represents part of south Saint Louis city and south Saint Louis County, answered questions from our crack intern moderator Martha King and attendees:

Policing by Camera, a panel Q&A – Show-Me Institute
from Show-Me Institute on Vimeo.

French has spent nearly a year trying to get surveillance cameras installed in some of the high-crime areas of his ward. He maintains that the cameras will help police officers identify criminals, while deterring crime.

Lembke has argued against the use of red light cameras. The cameras, he says, violate due process because the owner of a car seen running a red light is presumed guilty — even if the camera cannot identify the driver.

If you are interested in how our local elected officials view the trade-offs between liberty and security, I encourage you to watch this video. Both the moderator and the public asked probing questions, which Lembke and French answered thoughtfully.

I hope that we can host similar, engaging discussions in the future. You can check back on this blog, join our email list, or become a fan of the Show-Me Institute to get updates about future events.

Because I’m a masochist, I have actually read through some of the comments to this op-ed on mandating autism insurance by the Show-Me Institute’s own Caitlin Hartsell. Unsurprisingly, they are mostly unfavorable. Most of the comments don’t attack Hartsell’s reasoning or even her conclusions, but seem to assume that because there is a problem (children with autism need treatment) that government action (a mandate forcing health insurance to cover autism treatments) will solve the problem and not cause any negative unintended consequences. These are just further examples of the government-as-magic school of thought. That’s certainly distressing, but I see it so often that I’ve come to take it for granted.

What I do find shocking in the comments is that some people don’t seem to be even remotely familiar with how insurance is supposed to work. The best example comes from commenter bogie90:

And do you buy autism insurance before your child is born just in case they have autism? Who would do that? And the insurance companies aren’t going to cover after the fact, remember pre-existing conditions?

Yes, of course you buy it before the child is born in case they have autism. That’s what insurance is for: to protect you against tragic but unlikely outcomes. You buy fire insurance for your house just in case you have a fire. However, you can’t insure your house against fire once it has the pre-existing condition of being on fire. At that point, insurance is just dollar trading to repair the damage from the fire. This might be one of the big problems with the debate over health care: people do not actually know what health insurance is.

On Wednesday next week, the Show-Me Institute and the Saint Louis chapter of Liberty on the Rocks will co-host a discussion of the use of cameras in public places as a law enforcement tool. During the past few months, red light cameras and surveillance cameras have been in the news, and we’re excited to have Sen. Jim Lembke and Alderman Antonio French, both of whom have taken strong stances on these issues, speaking at this event!

The discussion will begin at 7:00 p.m. on Wednesday, June 9,
at the Show-Me Institute Office at 4512 W. Pine.
Please RSVP either by email, to info@showmeinstitute.org,
or by phone at (314) 454-0647,
or by commenting on this blog post.

Sen. Lembke, who represents part of the city of Saint Louis and Saint Louis County, has spoken out against the use of red light cameras, on the grounds that they entail the presumption of guilt. As he said in a Post-Dispatch article, “[the use of red light cameras] takes liberty away in that there’s no other crime that I know of on the books where I as a citizen am guilty until I prove my innocence.”

Alderman French, who represents the 21st ward, has been campaigning hard to have surveillance cameras set up near high-crime areas in his ward. In the Riverfront Times blog, French explained that the crime is coming from a small group of people, and that surveillance cameras might deter that activity. From the RFT:

“It’s the same group of bad guys doing bad things,” French says. “We’ll advertise the hell out if it, that there’s cameras. One of reason people do things is because they think that can get away with it. If they know somebody is watching it’s very likely they’ll go somewhere else to do drug activity and violence.”

One of the most interesting aspects about the use of both red light and surveillance cameras is that the cameras will likely soon be able to identify, without a doubt, the individual committing a crime. At that point, although camera surveillance seems to be a particularly un-American activity, is there any constitutional argument against it? Do cameras really infringe upon our liberties if they are placed in public places where any police officer could also be placed?

French and Lembke will have the opportunity to answer these questions, and others, on June 9. If you are free, please drop by. The discussion will be informal; it our hope that attendees can ask the elected officials questions directly, and be part of an engaging conversation about the trade-offs between liberty and security.

Liberty on the Rocks is a nonpartisan, nonprofit, social organization that seeks to unite individuals, regardless of political affiliation, who desire liberty. With the goal of facilitating networks, friendships, and intelligent conversation, Liberty on the Rocks seeks to initiate the energy and dialogue necessary to move America from the grassroots up, toward the constitutional principles of freedom used to found this nation.

I’ll be guesting on the McGraw Show with McGraw Milhaven on The Big 550 at 9 a.m. on Monday morning. We’ll be talking about water, water, and more water, which is appropriate given that it is supposed to rain all weekend. Please listen in, if you can.

Last week in the Wall Street Journal, Michael Boskin published an editorial described the negative effects of corporate income taxes on an economy:

Reducing or eliminating the corporate tax would curtail numerous wasteful tax distortions, boost growth in both the short and long run, increase America’s global competitiveness, and raise future wages. [...]

Junking both the corporate and personal income taxes and replacing them with a broad revenue-neutral consumption tax would produce even larger gains.

Although Boskin focuses on the federal corporate income tax, his conclusion would also hold true for the state corporate income tax in Missouri. Eliminating the state corporate income tax and replacing it with a broad-based consumption tax would attract more employers, business activity, and migration to the state. This echoes the scholarly work published by the Show-Me Institute, finding that taxes and economic activity are inversely related. When you tax something, you get less of it, after all.

Sixteen states have a lower corporate income tax rate than Missouri’s, which now stands at 6.25 percent. Businesses have a marginal incentive to locate in those states, instead of in Missouri, because they would enjoy a higher after-tax return to capital. As a consequence of realizing that higher return, the firms in these low- or no-tax states would supply more production.

Eliminating the corporate income tax would also be a more efficient and fair way to attract businesses to Missouri than targeted incentive programs, which is the state government’s current practice.

This month, the Cato Institute published a bulletin titled “Employee Compensation in State and Local Governments,” in which the author examines state and local compensation costs:

State and local governments face large budget deficits as revenues have stagnated and spending has remained at high levels.

I used the Show-Me Institute’s newest web tool, Interactive Database for Economic Analysis by State, to isolate state and local government employment and payroll data from U.S. Census. Next, I used this inflation calculator from the Bureau of Labor Statistics to adjust the data to 2008 dollars.

The following graph shows this information for all states for 2008. Wyoming has the highest number of public employees per capita, at 927, and Nevada had the lowest, at 437. Missouri was in the middle — it was ranked the 29th highest (alternatively, the 23rd lowest) in this category:

The data for Missouri reflect the general growth in the size of government described in the Cato bulletin. From 1993 to 2008, the number of total employees grew by 29 percent, the number of full-time employees grew by 27 percent, and the number of part-time employees grew by 44 percent.

The data also show that payroll is growing at a faster rate than the number of employees. From 1993 to 2008, after adjusting for inflation, total monthly payroll grew by31 percent, full-time payroll grew by 30 percent, and part-time payroll grew by 55 percent:

Given this rate of growth in monthly payroll and number of employees, Missouri’s present budgetary problems are no surprise to me.

If you don’t have any other plans tonight, come out to the Plaza Frontenac Cinema to see The Cartel, a new documentary discussing the troubles facing public schools in New Jersey. The main showing will begin at 6:45 p.m., after which yours truly will open up the floor for a brief Q&A session about the ideas contained in the film and how they might make a difference for Missouri. Hope to see you there!

On Monday, Missouri State Auditor Susan Montee released a study of tax credit cost controls. The audit’s conclusions have been covered by the media, as well as on Show-Me Daily. The audit seems to affirm much of the Show-Me Institute’s scholarly work on tax credits; it reports that the economic impact of tax credits is routinely overestimated and their costs underestimated. Some key findings from the audit are outlined below:

Fiscal Notes

Fiscal notes tended to understate the cost of tax credits, some of which underwent further expansions after their initial passage. Of the 15 tax credits reviewed, the fiscal notes underestimated their total cost by $1.1 billion over a five year period. This is not surprising given the tendency that Show-Me Institute research assistant John Payne noted for politicians to overestimate the impact of their policies and underestimate the costs.

Four of the five tax credit programs for which fiscal notes underestimated the amount that the credits would disperse were new. They had lower participation than expected, as well as annual limits on the amount that could be redeemed. (See page 8 of the audit for a table displaying the projected and actual costs for all 15 of these tax credit programs.)

The audit notes that the short time frame — three years — of the cost estimates limits their ability to predict long-term effects. On the flip side, the audit also notes that even longer estimates are inaccurate and unable to predict true costs. Given that the fiscal notes had poor predictive power, the audit suggests that limits and sunset clauses may be necessary methods to limit the costs of tax credits.

Annual or Cumulative Limits

Annual or cumulative limits cap the amount of tax credits that can be redeemed from any particular program. This is one measure that the audit suggests be put into place for all tax credits, although 23 of the 53 programs redeemed in 2009 did not have annual or cumulative limits.

Some tax credit programs have seen their limits increased substantially, like the Missouri Quality Jobs program, which initially had a $12 million annual limit and currently has a $80 million limit. Officials’ ability to increase these limits through committees or departments, without having to go through the full legislative process, circumvents the purpose of limits.

Sunset Provisions

In 2003, Missouri passed the Sunset Act, which stipulated that each program must be reauthorized after six years. This allows the economic impact to be evaluated before further extensions are granted. Of the 18 tax credit programs passed after 2003, only 10 have sunset provisions. The audit suggests that sunset provisions be included in every new tax credit.

Conclusions From the Audit

Sunsets and both annual and cumulative limits could substantially control the cost of tax credits. As the audit points out, it is difficult to predict the long-term effects of specific tax credits; with a sunset provision, the effects are reviewed and evaluated before a program is continued. Annual and cumulative limits would hold tax credits to the amount specified by the bill, which would discourage underestimates as well as control tax credit expenditures. Currently accounting for 7.8 percent of the 2009 Missouri budget, tax credits will continue to grow if cost-control measures are not better implemented.

How has the legislature responded to the audit’s pronouncement on tax credits? The speaker of the House issued a press release disagreeing with its conclusions:

“Auditor Susan Montee and Governor Jay Nixon are playing a dangerous and damaging political game creating a fictitious conflict between education and Missouri jobs. Education and economic development are mutually beneficial, not mutually exclusive,” [the speaker] stated. “In the House, we have always welcomed independent, objective scrutiny on how to best reform and enhance tax credit programs. Missourians need jobs. Therefore, the Missouri House will continue to protect responsible economic development programs that create those jobs. And we will have the last word on this matter.”

With all of the evidence that tax credits cost more than anticipated with less impact than predicted, greater scrutiny is warranted before the state considers passing any further credits. The audit brings to light important issues that proponents of tax credits must face in order to bring greater fiscal responsibility to Missouri’s budget.

Aside from the audit’s careful consideration of the unforeseen costs that tax credits entail, it’s also important to consider some of the broader economic reasons that such targeted industry credits are not as effective as their proponents suggest. As Show-Me Institute scholars have repeatedly pointed out, tax credits are less efficient than lower tax rates, both because legislators have no special talent for picking winners and losers in the economy, and because the credits distort economic incentives, causing a misallocation of capital — subsidized producers have an incentive to produce more than is efficient, and some other set of unsubsidized goods or services are slightly underproduced as a result.

Perhaps this audit will encourage a the legislature to consider lower tax rates in lieu of inefficient tax credits.

I’ll be appearing on the Mike Ferguson Show on The Eagle, 93.9 FM in Columbia, this afternoon to discuss ethanol. Everyone can listen live online, and I hope you will tune in.

A blogger, commenting on my recent editorial about the wasteful nature of Missouri’s green tax rebate program, recently expressed skepticism that promoting the purchase of energy-efficient appliances may also encourage individuals to consume more energy.

In the second part of his post, he links to an article on Slate that cites a study analyzing electricity consumption patterns in the wake of government policy intended to “nudge” consumers into using less energy. First and foremost, this study is not relevant to my argument. In the case of Missouri’s green rebate program, which is what I discussed in my commentary, individuals receive a cash rebate when they buy energy-efficient appliances. The study cited in the Slate article looks at a case in which the electricity company simply sent its customers a home energy report that included charts and a list of tips on how to improve energy efficiency. The program considered by this study included neither a financial incentive, nor an upgraded appliance. The only conclusion that I would feel comfortable making from the study is that pamphlets do little to influence individual behavior. The study suffers from additional shortcomings, as well. For example, I disagree that a change of 1 percent or 3 percent is significant. This variation could be attributable to multiple other variables, such as a change in the price of energy or a seasonal change in the weather. The study also did not prove that the customers it identified as “liberals” reduced their energy consumption as a result of the home energy reports. Again, this reduction could have stemmed from any variety of other factors. Furthermore, because the percentage change and the sample size are both so small, a completely different result could conceivably be selected from the raw data.

According to a report published by Peter Huber and Mark Mills at the Manhattan Institute, the claim that we can meet future energy demand through conservation and efficiency is a myth. They provide evidence that, despite dramatic gains in energy-efficiency, aggregate energy consumption has increased over history:

The American economy has experienced massive efficiency gains: for each unit of energy, we produce more than twice as much GDP today than we did in 1950. Yet during that period of time, our national total energy consumption has tripled. Paradoxically, when it comes to energy, the more we save, the more we consume. [...]

“Efficiency fails to curb demand because it lets more people do more, and do it faster—and more/more/faster invariably swamps all the efficiency gains,” Peter Huber and Mark Mills state in The Bottomless Well. Or, as Huber characterized this “efficiency paradox” in a 2001 Forbes column: “More efficient jet engines … cheaper tickets … more passengers … more jets in the air.” The same holds true for cars, lightbulbs, power plants, and everything else that uses energy.

Furthermore, an economic moral hazard problem is often associated with buying green products. Energy-efficient appliances make doing dishes and laundry cheaper, which subsequently encourages individuals to use these appliances more frequently than they had before. Increases in energy efficiency mean that there is a decreased need for the existing energy supply, which leads to a reduction in the cost of energy, consequently shifting the demand curve for energy to the right. Similarly, there is evidence that owning a fuel-efficient car encourages people to drive more. A person could become less inclined to turn off light bulbs when they are more efficient, just as a person could be more inclined to run his washing machine or his dishwasher when it is not full.