Wichita Liberty

An audio version of this post is available here.

In February 2008, Janet Harrah of the Center for Economic Development and Business Research at Wichita State University produced a report titled “Wichita Public Schools: Impact Analysis Operations Impact, Bond Impact and Success Measures.” This report painted a glowing picture of the USD 259 (Wichita, Kansas public school district) bond issue in 2000. The district uses it to promote the success of the 2000 issue, and to promote the proposed bond issue that may be voted on sometime in 2008. The study may be viewed at the CEDBR website here.

The author of the study told me that the Wichita school district paid $1,500 for this study. Usually, research such as this that is purchased by the customer is treated as just that: something bought because it suits the customer’s needs. Since the customer controls what is done with the product, it is certain that if this study had produced a result that didn’t show a fantastically positive benefit for Wichita school district spending, the school board would not have released it to the public. But as we shall see, the way this study is structured guarantees a positive result. Also, the price of $1,500 is astonishingly low for a study of some 28 pages with three authors.

Perhaps the primary problem with this study is that it treats the cost of the bond issue as though it doesn’t exist. The study presents evidence of the benefits of school district spending, but mentions only in passing school district taxation:

An opportunity cost exists for the use of public funds for education. If public funds were not used to provide public education, they would be available for alternative use. Estimating the potential economic impact of alternative uses of these opportunity costs was beyond the scope of this analysis. (Page 6)

It is the lack of analysis of these “alternative uses” that is most important. Actually, not much analysis is required. All that is needed is to recognize that when money is paid to the Wichita public schools, that money is not available for other spending. It means that when a construction worker is hired to build a Wichita school, that construction worker isn’t working on something else in Wichita. It cannot be any other way. As Henry Hazlitt explained in his classic work Economics in One Lesson:

Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project.

The study also uses the technique of the “multiplier,” which is to say that spending by the school district causes other spending to happen, and other jobs are therefore created. But the construction worker, whether working on a school building or a shopping mall, is paid the same and spends his wages in the same way. The multiplier effect is the same.

This study also analyzes the impact of the bond issue (and ongoing operations) on local governments such as the City of Wichita and Sedgwick County. From page 6: “These measures view the taxing entities’ expenditures as a public investment. Public benefits are measured by tax collections. If public benefits exceed public costs then the rate of return is greater than 100 percent and the benefit-cost ratio is greater than 1.”

These rates of return can be fantastic. For Wichita and Sedgwick County, their rate of return for the 2000 bond issue is over 1,000%! By way of explanation the study states: “These ROI percentages for the city and county are relatively high since these jurisdictions derive significant benefits from increased sales tax collections as a result of the District’s payroll, while incurring very few costs.”

The problems with this analysis are these: First, the taxing entities’ investment is raised by taxing their residents. Second, the public benefits, as explained above, are the taxes that the government collects. It is as though we tax ourselves so that we can pay even more taxes, all this to feed the machinery of government. And if you believe in limited government and personal liberty, it is not a benefit to pay more taxes.

While it is true that the City of Wichita derive benefits from Wichita school district spending, the city’s benefits are funded by taxes paid to the school district. It is only by considering these local governmental entities to be separate from each other that this fantastic rate of return on “investment” is possible. If the total cost of government is considered, the picture is different.

These defects and omissions — not realizing that tax funds could be spent elsewhere if not sent to government, not realizing that benefits that government receives are the taxes that people pay, and separating government into compartments that play off each other to create artificial returns — need to recognized as we read this report.

An audio recording of this article may be heard here. 

Supporters of the proposed bond issue for USD 259, the Wichita, Kansas public school district, portray Wichita’s public schools as a “public good.” Therefore, the entire community should pay for — and be happy to pay for — the ongoing operations of the schools, and should be willing to invest in a large bond issue to pay for capital improvements and new facilities.

But is public education a public good?

Economists tell us that one characteristic of a public good is that people can’t be excluded from consuming it. This is the case with national defense. No one can choose not to benefit from it. Schools are different, though. It is possible to exclude people from schools simply by locking the doors. Businesses of all types do this. In fact, USD 259 choses to deny service to about 0.5% of its students each year (average expulsion rate for the last 11 years).

Another characteristic of a public good is non-rivalrous consumption, meaning that consumption by one person doesn’t diminish another’s ability to consume. Broadcast radio and television are such goods. But public education is not this type of good. Overcrowding is given as one of the reasons for this bond issue, and education bureaucrats continuously clamor for smaller class sizes. So overcrowding must — at least according to public school administrators — reduce the quality of the education experience. Consumption, therefore, is rivalrous, and public education fails this test as a public good.

These two characteristics are the traditional definitions of a public good, and public education fails both tests. But today a different, murkier, definition is often applied. I quote at length from Is High School Football a Public Good? by Jim Fedako, published at the Ludwig von Mises Institute. While this article speaks of football, we may remember that athletics are a large portion of the proposed bond issue for the Wichita public schools. His argument also applies to most aspects of the public schools.

But no one really applies the technical definition to derive public goods. … Instead, the collectivist definition — the vacuous, yet now standard, definition — applies the general welfare argument to elevate football from a private activity to that of a public good. The argument goes something along these lines: football is beneficial because it prepares boys for adulthood, keeps them off the streets after school, and provides them with a place where they can excel.

The public goods argument as currently stated says that the benefits that accrue to the child also accrue to society in general. In this collectivist view, raising children is the role of society since society benefits when it’s done right — a better work force — and suffers when it’s done wrong — more crime and criminals.

But this argument can be applied to almost any expenditure that parents make while raising their children. Better to be jumping on ice or practicing a roundhouse kick than to be out loitering on street corners. Why limit the concept of public goods to football, basketball, baseball, softball, etc? Based on recent history, it is only a matter of time before public goods subsume more activities, with the costs spread over the community in the form of increased taxes: the complete socialism of parenting.

The problem with the concept of public goods is that it misdirects the debate. In modern society, every action I take has a perceived positive or a perceived negative external effect on other members of society, and most of the time there are perceived positive and negative external effects occurring simultaneously. When I mow my lawn, one neighbor perceives the noise as a negative — reducing calm and tranquility — while another neighbor perceives my well-kept lawn as a benefit — invoking calm and tranquility.

I use the qualifier “perceive” because the whole public goods argument for coerced funding of football teams is based on the perception of the observer. The parents of the football player, the player himself, as well as local high school football fans, perceive the team and games as a positive for the community. Some say that it benefits the kids, while others say it strengthens the community. Both views see tax-funded sports, football in particular, as a winner for the community.

Yet the parent struggling to make ends meet each month, the retiree living on an inflation-robbed pension, the lover of freedom, etc., see their ever-increasing tax bill as a negative. For the parent, a child’s dental appointment goes wanting for the sake of the football team; for the retiree, the higher tax bill comes at the cost of a colder house in the winter; for lovers of freedom, additional money lifted from their wallets is another slap in the face by collectivists.

I received this letter to Sedgwick County (Kansas) Commissioner David Unruh “over the transom” and I thought it merited reading by the general public. The author speaks of the “road to economic perdition.” I had to use the dictionary to refresh my memory of the exact meaning of the word “perdition.” While that term seems at first to be a little strong, I believe that trash franchising, like a ban on smoking, is just the first step in the plans of our local government officials. If politicians and newspaper editorialists can convince us that we require the force of government to take care of something as simple as picking up the trash — something that works very well already – it’s an easy jump to the next level of control. So perdition seems appropriate.

The May 21 Wichita Eagle reported that you and a number of other commissioners want to impose some sort of franchise on trash collection by cities operating in the area where Sedgwick County is responsible for trash disposal with state authorities. The Eagle quotes you as supporting a government franchise monopoly by haulers in specific areas as well as uniform terms for collection of residential refuse.

Before joining the commission I know that you were a businessman in the car repair business. Since government monopolies and uniformity in service is apparently preferable to free markets and open competition I hope that you will want to extend government into providing uniform monopoly in car repair as well as other private sector businesses. If the county’s goal is ending duplication of services and allegedly “wasteful” competition what basis do you have for only limiting franchising to trash hauling?

It is very clear to even the most casual consumer that there is significant variations in pricing among the folks repairing automobiles just like there are in the trash hauling business. There is a lack of uniformity in people getting their cars repaired too.

I must also note that an Unruh repair shop near 13th St. W. and Maize Rd. is only a short distance away from Westlink Auto Service. Having two firms competing for customers is obviously as duplicative and excessive as multiple trash firms going down the same street to collect refuse.

We have a similar situation nearby where two instances of two separate firms selling groceries are located on adjacent corners at 21st W and Maize Rd. (Walmart and Dillons) as well as Maize Rd. and W. Central (Aldi and Dillons).

Government monopolies have also a proven track record of performance. There is a name for this when university students study 20th century governments where these types of restrictions are commonplace.

Look how Wichita water and sewer rates have performed in the last few years and how it now appears likely that the city will be once again raising these rates significantly soon. Municipal power plants that dot many small Kansas towns also have a similar track record of costly performance for the citizens who have to pay the rates.

The City of Wichita got out of the trash hauling business in the late 1970’s for a reason. Establishing private/public franchise monopolies is a power that should be exercised very cautiously and carefully and has failed in the past. However, if you are going to expand local government’s roles in establishing ways of eliminating duplication of services and wasteful competition, you should fully understand where this road to economic perdition leads.

Currently both Sedgwick County and Wichita are considering trash franchising.

On the surface, “franchising” sounds like a good thing. It sounds like someone’s opening a new Subway sandwich shop.

But what trash franchising does is to grant a monopoly to one (or sometimes a few) service providers for specific geographic areas. Under franchising, people living in an area will have either no choice, or perhaps limited choice, in choosing who picks up their trash. Rates will also be set by government.

The effect of this is that the profit motive for trash haulers is dramatically modified. Under franchising, trash companies have guaranteed customers paying mandated rates. What is the likely effect of this? I refer to Walter E. Williams, who said this: “Here’s Williams’ law: Whenever the profit incentive is missing, the probability that people’s wants can be safely ignored is the greatest.”

The use of the term “franchising” glosses over the consequences of a government mandate of who customers may choose to do business with. Citizens need a better term that accurately describes what our government is considering. Unfortunately, I am having trouble coming up with such a term, so I am asking you for help.

So far I have these terms: “mandatory service provider selection,” “choice elimination,” “enforced selection,” and “trash service reduction program.”

As you see, none of these terms are very artful. So please help me. You may email your suggestions to bob.weeks@gmail.com, or leave them as a comment to this article. Comments may be anonymous.

On May 6, 2008, Kansas State Senator Anthony Hensley, Democrat from Topeka and Senate Minority Leader, introduced a resolution commemorating the 75th anniversary of President Franklin Delano Roosevelt’s new deal.

Besides being misinformed about the true impact of Roosevelt and the new deal, Senator Hensley wastes the time and resources of the people of the State of Kansas with resolutions such as this. Sadly, not even one Kansas senator voted against this resolution.

For a true look at Franklin D. Roosevelt and his presidency, I recommend reading Ralph Raico’s introduction to John T. Flynn’s book The Roosevelt Myth here: John T. Flynn and the Myth of FDR.

Here’s the text of the resolution:

SENATE RESOLUTION No. 1868
A RESOLUTION commemorating the 75th anniversary of President Franklin Delano Roosevelt’s New Deal.

WHEREAS, In the summer of 1932, Franklin Delano Roosevelt, Governor of New York, was nominated as the presidential candidate of the Democratic Party at a time the country was suffering from the Great Depression. In his acceptance speech, he told the American people, ‘‘I pledge you, I pledge myself, to a new deal for the American people.’’ And, Roosevelt won the presidency by a landslide; and

WHEREAS, The New Deal was the title President Roosevelt gave to a sequence of programs he initiated between 1933 and 1938 with the goal of giving relief to the needy, reform of the country’s financial system, and recovery of the economy during the Great Depression; and

WHEREAS, The New Deal Roosevelt had promised began to take shape immediately after his inauguration in March of 1933. The first days of Roosevelt’s administration was the ‘‘First New Deal’’ aimed at short-term recovery programs and saw the quick enactment by Congress of the Emergency Banking Act, Federal Deposit Insurance Corporation (FDIC), National Industrial Recovery Act (NIRA), Agricultural Adjustment Administration (AAA), Civilian Conservation Corps (CCC), Rural Electrification Administration (REA) and Tennessee Valley Authority (TVA); and

WHEREAS, Later the ‘‘Second New Deal’’ led to the enactment of the National Labor Relations Act (NLRA), also known as the Wagner Act, which established stronger collective bargaining rights for labor unions and the Works Progress Administration (WPA), which created hundreds of thousands of low-skilled blue collar jobs for unemployed men and women; and

WHEREAS, The most important program of Roosevelt’s New Deal was the Social Security Act, which established a system of universal retirement pensions, unemployment insurance and welfare benefits for low income families; and WHEREAS, Several New Deal programs still exist under their original names, including the Federal Deposit Insurance Corporation (FDIC), Federal Housing Administration (FHA), and Tennessee Valley Authority (TVA), while the largest programs still in existence today are the Social Security System and the Securities and Exchange Commission (SEC); and

WHEREAS, The New Deal programs were a reflection of Franklin Roosevelt’s personal and political philosophy that government has an important role in helping people make ends meet and in earning money for the work performed which raises the morale of the working man and woman: Now, therefore,

Be it resolved by the Senate of the State of Kansas: That we commemorate the 75th anniversary of President Franklin Delano Roosevelt’s New Deal; and

Be it further resolved: That the Secretary of the Senate provide an enrolled copy of the resolution to the Franklin D. Roosevelt Presidential Library and Museum, c/o Cynthia M. Koch, Director, 4079 Albany Post Road, Hyde Park, New York 12538.

On emergency motion of Senator Hensley SR 1868 was adopted unanimously.

From Karl Peterjohn of the Kansas Taxpayers Network.

How Much More Will Electricity Cost In Your Future?
Karl Peterjohn, Kansas Taxpayers Network

Governor Sebelius and her bankrupt Secretary of Health and Environment Rod Bremby (Bremby filed for personal bankruptcy over a year ago) now appear to have stopped the Kansas house from joining the Kansas senate in overriding her veto of the coal power plant expansion in western Kansas. The legislature’s final attempt at legislating a solution that would expand electrical power generation in the western half of Kansas is headed for another gubernatorial veto. The Kansas House of Representatives appears to be well short of the 84 votes needed to override her veto.

A number of legislators from northeast Kansas as well as mainly Wichita Democrats have mustered up enough house votes to kill this $3.6 billion power plant project. The May 13th death of Rep. Ted Powers, R-Mulvane, who voted to override this veto, makes a sine die override even more unlikely.

Eastern Kansans who seldom venture into western Kansas unless they are driving on I-70 to Colorado felt little direct concern on this 2008 legislative issue. That allowed the well-organized urban-based environmentalists to convince enough big city legislators from both parties to sustain Sebelius’ veto in the house.

Eastern Kansans’ power generation was not at immediate risk. Neither were their utility rates. That will change and this unpleasant and very expensive change is coming soon.

If you want details on the national plan and how this is becoming Kansas’ environmental policy the Capital Research Center (CRC) has provided the details. There is a national plan established by ultra-left wing environmental groups and CRC’s April, 20008 report (see www.capitalresearch.org/pubs/pdf/v1207000450.pdf) details this effort. The liberal environmental foundations are funding this state level plan to impose Kyoto Treaty like cuts in carbon energy emissions.

This will result in a huge rise in electricity costs as well as making other power sources more expensive. It will help push gasoline and other petroleum prices higher. This will be accomplished through entities like the Pennsylvania based Center for Climate Strategies that is helping establish new carbon controls by administrative edict over Kansas state policy.

Soaring utility costs will limit economic growth in a way that will restrict the economy while dramatically raising prices across the board. Here’s how it will happen.

What Governor Sebelius is trying to do at the state level in the 21st century with new restrictions on carbon based energy will soon lead to new carbon taxes. It is possible that new carbon taxes will appear at both the state and federal levels. Along with the tax hikes will be emission restrictions. Don’t forget that whenever you exhale or burn a log in the fireplace, you are emitting carbon.

Bremby’s edict is similar in impact to what former President Clinton achieved when he vetoed oil drilling in Alaska in 1995. It took roughly a decade for the lack of oil drilling to impact the U.S. oil prices. In contrast, today the demand for electrical power is growing. There is pressure on prices but major increases have not occurred. You can expect the rising demand for electricity to hit much more quickly than oil prices did a decade ago. Don’t forget that oil fell to record lows in the late 1990’s a couple of years after Clinton’s anti-energy veto.

The demise of the Holcomb power plant expansion when combined with new “carbon emissions” edicts from regulators like Bremby will negatively impact the Kansas economy in the future. This is a continuation of Democratic Party energy policies. At the beginning of the Clinton presidency, the Congress narrowly rejected the Clinton administration’s new carbon tax. This is likely to reappear in Washington next year.

The Holcomb power plant battle was not an aberration or isolated event. It is the energy tip of the “man made global warming” hoax (ironically occurring while parts of Kansas have been at or near freeze warnings well into May) that is centralizing all economic power and authority with state or federal levels of government in our state. The governor’s new energy council will include industry leaders who need to be worried about their carbon emissions.

Several established Kansas businesses are already expanding elsewhere like Bombardier and Spirit AeroSystems going to North Carolina. Cessna, whose President Jack Pelton will head up the governor’s new energy panel from the private sector, will now expand in Kansas after the state agreed to subsidize this expansion. So now, the state will be picking “winners and losers” in our economy.

Westar Energy, the electrical power company that owns a number of Kansas coal fired power plants, is now seeking higher electrical rates to pay for new pollution equipment costs from the KCC. They need to do this since their existing coal fired power plants are not nearly as low pollution as the Holcomb expansion would have been. Westar now needs Bremby to renew their existing permits to continue operations. Bureaucratic coercion is now codified in Kansas under Queen Sebelius.

House Speaker Rep. Melvin Neufeld, R-Ingalls, has campaigned for the Holcomb plant expansion and against this arbitrary power grab by Bremby and his boss. This is a problem in Neufeld’s southwest Kansas district where the nearby Hugoton gas field slowly declines in production. Neufeld has warned that Bremby’s bureaucratic edict against Holcomb has pushed a possible oil refinery, a $10 billion project with 1,500 new full time jobs, out of state too. Neufeld has copies of documents concerning the permitting process from Bremby’s office concerning this project. Naturally, liberal newspapers like the Wichita Eagle criticized Neufeld for pointing out this loss.

Another irony about power generation and carbon emissions was the fact that both houses of the legislature overwhelmingly passed state legislation to try and locate a new agricultural-terror research facility in Manhattan this year. This new federal facility would need a special electrical power plant to be allowed to operate. Since this was a government facility, unlike the private co-op, the carbon dioxide being generated from this proposed new back-up electrical power plant was not a problem. The carbon it emits comes from natural gas and not the politically incorrect coal too.

Governor Sebelius quickly signed this authorizing legislation into law. If it is government, it is good. If it is private, let’s stop it. Here is another example of government economic hypocrisy.

Kansas has started a new era. The price of living in Kansas is going to soar while you will be facing stagnant incomes as politicians in Topeka and their out-of-state environmental foundations control economic activity by regulatory edict.

While the rest of the world grows, China alone has built or is building hundreds of new power plants, many of which will be coal fired. Jobs will continue to flow out of the U.S. Kansas and the other 49 states will increasingly find themselves and our economy in green handcuffs. That will result in a lot of Kansans eventually finding themselves in the same bankruptcy line behind the already bankrupt Rod Bremby while Governor Sebelius makes plans for her next job in Washington.

Denis Boyles dissects the 2007 Kansas Economic Report and discovers something growing quickly in Kansas under its governor Kathleen Sebelius: poor children. He quotes the report as follows:

The number of Kansans estimated to be living below the poverty threshold in 2004 totaled 297,733, or more than 11.0 percent of the total population. From 2000 to 2004, Kansas poverty increased 26.6 percent while poverty in the U.S. went up 17.3 percent. From 2000 to 2004, the number of people in Kansas living below the poverty level increased more rapidly than the state’s population as a whole, with a 26.6 percent increase in poverty and a 1.7 percent increase in population.

Since a low in 2000, the number of people under the age of 18 in poverty in Kansas has increased by nearly 20.0 percent, reaching more than 98,000 people in 2004. This rate was higher than the national rate which increased at 12.5 percent. Additionally, the number of people under age five in poverty in Kansas has increased 27.5 percent in the past five years compared to 15.1 percent for the nation.

Read the entire analysis as published on Kansas Liberty here: Into poverty, with difficulty.

Part of the Wichita Eagle opinion watch series.

A writer in the April 2, 2008 Wichita Eagle presses the case for passenger train service in Wichita. But there are several problems with the writer’s argument.

The writer makes this claim: “With Kansas’ vast wind resource, we could power our trains with no fossil fuels.” Yes, there is a lot of wind in Kansas. But it doesn’t blow continuously. What does the writer suggest we power the trains with at those times? Until there is an economically feasible method of storing the electricity generated by wind, we will be reliant on traditional methods of power generation. Wind can only be a supplement.

The writer admits that high-speed passenger train service will require a lot of public money. That’s okay, he says, as we presently spend a lot on our roads and traffic systems. The government-built and owned roads are frequently criticized, however. The fact that we’ve spent a lot on them — with often unsatisfactory results — is not an argument in favor of more government involvement in transportation systems. There is, in fact, a small movement towards more private highways, and there are persuasive arguments that all roads and highways should be privately owned.

If there is in fact a demand for high-speed rail travel in Kansas and the United States, let private entrepreneurs, rather than government, lead its development. That’s the best way to have a system that meets the needs of customers, rather than the needs of politicians and government bureaucrats.

I wonder if the writer remembers that the government does have a track record of owning and operating a railroad. That’s Amtrak, and having mentioned that, I believe no more needs to be said.

Paul Jacob, in a Common Sense commentary writes about David Boaz’s article in the Wall Street Journal (available at the Cato Institute) which describes the effort to obtain a customized Starbucks card with the phrase “laissez-faire” printed on it.

The request was rejected. But the socialist slogan “people not profits” was accepted by Starbucks, as was the United Farm Workers slogan “Si Se Puede.” (”Yes we can,” adopted by Barack Obama’s presidential campaign.)

Here’s what you find if you read Starbuck’s mission statement: “Embrace diversity as an essential component in the way we do business.”

It seems that some political ideas are more “diverse” than others.