Contracting with a lower cost department can make sense and avoids the stupidity of the Urban Cooperation Act's forcing the highest wages and benefits that occurs with consolidation of municipalities (and thus discouraging the very "cooperation" the name of the Act implies).
Municipalities stuck with excessively high costs imposed by arbritrators under PA 312 should definitely look at this alternative. The Center for Michigan » SPECIAL REPORT: Combining cop shops can save big bucks
An amendment to PA 312 without requiring the arbitrator to take into consideration the municipality's ability to pay is truly "hollow". A chance to control costs has been lost, but we will need to come back to this. Michigan Senate Bill 1072 Will Change Public Act 312, but May Have Little Effect [Mackinac Center]
As much as we love and respect our public safety employees (police and firefighters), PA 312 needs to be more balanced, to reflect the community's ability to pay. The Center for Michigan » Cities push hard on Act 312 and cost controls
These proposals make sense to control costs of corrections, without being "soft on crime". We also need to look further at the levels of wages and benefits of prison workers and privatizing support services to minimize costs. The Center for Michigan » Three things every citizen should know about state prisons
See also: Repeal PA 312 to Eliminate Binding Arbitration for Police and Firefighters? and
Michigan Laws that Impede Greater Efficiency through Collaboration
I welcome your comments. Cheers!
Thursday, February 25, 2010
Is the Name of the Michigan "FairTax" a Sham?
In response to Facebook postings:
- “David A. Dudenhoefer February 23 at 11:33pm Reply http://www.campaignforliberty.com/blog.php?view=32914 This is timely as some hacks in our state are pushing this "fair-thief" tax” and
- Tony DeMott’s Facebook posting: “The Fair Tax simply changes who is the tax collector. It turns small businesses into tax collectors. The Consumer will still end up paying all the taxes. The tax burden will not be lowered at all. Michigan citizens care about lowering the tax burden, not who the tax collector is. The Fair Tax is a sham and if you believe our government is too big, too intrusive, and too oppressive, you should oppose this sham”
I respectfully disagree. But first, let me make clear that I totally agree that there are a lot of costs that can and should be cut out of government spending, both at the state and federal levels. Any serious look at my Facebook and blog postings would confirm that. Second, I am opposed to many of the government interventions into our economy and personal lives which go well beyond the limited government our Founding Fathers envisioned. So, I am onboard with the concept endorsed in Michigan by the Business Coalition that we must get the spending reforms first, then we can tackle the tax structure.
I also agree that the name “FairTax” is a misnomer, as any tax system is a transfer of wealth from somebody to government for transfer to someone else, and so will never be “fair”, whatever that means. But, it is a piece of the marketing of the FairTax idea, and I can understand that. A proposal needs to be evaluated on its content, and not by its name.
Having said that, now it is important to realize that taxation in one form or another is a reality, and one that is not likely to change. So, if we are to be taxed, the questions are, “What taxing mechanism is best? On what criteria should we judge a tax system?” In other words, one can distinguish between (1) the tax level, i.e., the total amount of taxes collected and (2) the taxing mechanism or structure.
It does matter what tax system is in effect, as different tax systems have different secondary or indirect effects. For example, economists will tell you that a business is a tax collector, and not a “taxpayer”, as the indirect impacts are: higher prices, lower wages to its workers, lower dividends to its owners, or fewer jobs, or some combination of these impacts. The consumer ultimately pays. Different tax schemes have different impacts, some which distort the free market economy more than others. An income tax, for example, discourages earning, savings and investing. With different direct and indirect impacts, it therefore does matter what tax system we use – given that we will have some tax system.
A consumption tax is one that distorts the free market the least, although even a consumption tax discourages consumption, and therefore lowers prices, and therefore less is produced in a free market society, in effect, lowering the standard of living in the society. Is it perfect? No. No tax system is. I just see it as better than the current tax system, whether it be called a “consumption tax”, “FairTax”, or whatever.
It also matters how easily a tax can be increased, as the easier it is to raise a tax, the more likely the politicians will raise it. The visibility of a tax is one deterrent to a tax being raised. Contrary to the claim that the FairTax would be hidden, it would be incredibly visible, paid on each purchase, and far more visible than an alternative I fear will be proposed to raise more revenue at the federal level – the Value Added Tax, which is collected at each level of production and hidden in the final price of a product.
I further disagree with the use of David’s term of calling those who support the FairTax as “hacks”. I understand the tactics espoused by Saul Alinsky in his book “Rules for Radicals” that calling people names is a good tactic for radicals. I believe it is offensive, however, when used against friends who happen to disagree with you on some point. Fact is, none of us will ever agree 100% with anyone else. Maybe I am too willing to leave the name calling to the radicals who we jointly oppose, but us freedom lovers should look to find common ground amongst us, rather than look to tear us apart. No one group in the “liberty” movement has a monopoly on patriotism.
Respectfully, your friend,
Rick
Tuesday, December 29, 2009
Bureaucrats Should Not be Picking Winners and Losers in Our Free Market Economy
Everyone wants to reduce the near 15% unemployment in Michigan, so everyone is for “creating jobs”. But how to do so? Nobody except the most liberal folks think raising taxes to create public employment jobs makes sense. That just destroys as many jobs as it creates, at best. But what about spending tax dollars to subsidize some private companies that the bureaucrats think are worthy? Hmmm.
Well, that is what the Michigan Economic Development Corporation (the quasi-public agency that administers state economic development programs) through the Michigan Economic Growth Authority does by granting “tax credits” to encourage businesses to stay in or relocate to Michigan. Is this good policy?
In this philosophical debate on how best to create jobs, I come down on the side of creating a better business climate for all businesses in Michigan, encouraging all businesses to flourish, to harness the entrepreneurial spirit and innovativeness that made Michigan the envy of the world years ago. I simply do not believe that bureaucrats in Lansing can pick the winners better than the best minds in business and finance who are risking their own money and careers with their investment choices.
The businesses who don’t get the tax credits but who compete with those that do also don’t think that granting tax credits to some, but not all competing companies, is such a hot idea. For example, after 29 years as a nationally known niche business, Karl Pohrt closed his Ann Arbor bookstore Shaman Drum. Pohrt said he couldn’t compete with Walden Books (a subsidiary of Borders) after Walden Books was approved for $7 million in tax credits from the state of Michigan’s Michigan Economic Growth Authority since 1995 for bringing it headquarters to Ann Arbor.
“I think the idea of an agency picking winners and losers without making that a public decision, seems to me to be profoundly anti-Democratic,” Pohrt said. “It opposes the idea of the free market if they are underwriting certain companies. … “ Small business owner says larger companies getting tax breaks means “you don’t stand a chance” Reportingmichigan.org, Oct. 20, 2009
Another example is Cabela’s receiving tax credits to locate their store in Dundee, while Jay’s Sporting Goods in Clare didn’t. Now, living in Legislative District 55 where the Cabela’s store is located, and knowing that it has become one of the state’s largest tourist attractions, makes it seem like an exceptionally good idea. But, does it come down to principle or does it matter whose ox is being gored or being fed? As a matter of principle, Cabela’s should not have received a competitive advantage over Jay’s Sporting Goods.
Further, the Mackinac Center for Public Policy recently questioned the effectiveness of the program in its study report “The Michigan Economic Development Corporation: A Review and Analysis”. The Mackinac Center is a research and educational institute headquartered in Midland, Michigan, noted for its conservative positions on policy matters. The report says:
“[W]e describe the organization of the MEDC, enumerate its many programs and review the performance of several of them - such as the Michigan film incentive, the state's now-defunct Broadband Development Authority and the Michigan Economic Growth Authority. MEGA is the MEDC's flagship tax credit vehicle for "creating" jobs. We also describe the ongoing tax money used to support the MEDC.
MEGA is a 14-year-old authority that offers state business-tax credits to select companies that plan to invest in business facilities in Michigan and create or retain jobs here. In order to claim the tax credits, companies must provide a minimum number of jobs as detailed by state law. The MEDC also frequently arranges for MEGA recipients to receive additional incentives, such as state education tax abatements, job training subsidies or local property tax abatements. Some of these incentives may be awarded immediately, regardless of whether the business has created jobs at the facility.
The authors inspected credits awarded from 1995 to the end of 2004 and found that while MEGA deals were expected to produce 61,043 jobs, only 17,971 were ultimately created. Hence, the actual job count was just 29 percent of the expected total. [Note, however that if the firms getting the incentives only create 30 percent of the jobs they planned on, then they will only get 30 percent (or less because frequently there is a trigger minimum) of the incentives they were originally offered.]
The program has offered more than $3.3 billion in Michigan business tax credits since its inception.
This study makes a number of recommendations regarding this expensive and counterproductive program. Some of them are listed below:
Well, that is what the Michigan Economic Development Corporation (the quasi-public agency that administers state economic development programs) through the Michigan Economic Growth Authority does by granting “tax credits” to encourage businesses to stay in or relocate to Michigan. Is this good policy?
In this philosophical debate on how best to create jobs, I come down on the side of creating a better business climate for all businesses in Michigan, encouraging all businesses to flourish, to harness the entrepreneurial spirit and innovativeness that made Michigan the envy of the world years ago. I simply do not believe that bureaucrats in Lansing can pick the winners better than the best minds in business and finance who are risking their own money and careers with their investment choices.
The businesses who don’t get the tax credits but who compete with those that do also don’t think that granting tax credits to some, but not all competing companies, is such a hot idea. For example, after 29 years as a nationally known niche business, Karl Pohrt closed his Ann Arbor bookstore Shaman Drum. Pohrt said he couldn’t compete with Walden Books (a subsidiary of Borders) after Walden Books was approved for $7 million in tax credits from the state of Michigan’s Michigan Economic Growth Authority since 1995 for bringing it headquarters to Ann Arbor.
“I think the idea of an agency picking winners and losers without making that a public decision, seems to me to be profoundly anti-Democratic,” Pohrt said. “It opposes the idea of the free market if they are underwriting certain companies. … “ Small business owner says larger companies getting tax breaks means “you don’t stand a chance” Reportingmichigan.org, Oct. 20, 2009
Another example is Cabela’s receiving tax credits to locate their store in Dundee, while Jay’s Sporting Goods in Clare didn’t. Now, living in Legislative District 55 where the Cabela’s store is located, and knowing that it has become one of the state’s largest tourist attractions, makes it seem like an exceptionally good idea. But, does it come down to principle or does it matter whose ox is being gored or being fed? As a matter of principle, Cabela’s should not have received a competitive advantage over Jay’s Sporting Goods.
Further, the Mackinac Center for Public Policy recently questioned the effectiveness of the program in its study report “The Michigan Economic Development Corporation: A Review and Analysis”. The Mackinac Center is a research and educational institute headquartered in Midland, Michigan, noted for its conservative positions on policy matters. The report says:
“[W]e describe the organization of the MEDC, enumerate its many programs and review the performance of several of them - such as the Michigan film incentive, the state's now-defunct Broadband Development Authority and the Michigan Economic Growth Authority. MEGA is the MEDC's flagship tax credit vehicle for "creating" jobs. We also describe the ongoing tax money used to support the MEDC.
MEGA is a 14-year-old authority that offers state business-tax credits to select companies that plan to invest in business facilities in Michigan and create or retain jobs here. In order to claim the tax credits, companies must provide a minimum number of jobs as detailed by state law. The MEDC also frequently arranges for MEGA recipients to receive additional incentives, such as state education tax abatements, job training subsidies or local property tax abatements. Some of these incentives may be awarded immediately, regardless of whether the business has created jobs at the facility.
The authors inspected credits awarded from 1995 to the end of 2004 and found that while MEGA deals were expected to produce 61,043 jobs, only 17,971 were ultimately created. Hence, the actual job count was just 29 percent of the expected total. [Note, however that if the firms getting the incentives only create 30 percent of the jobs they planned on, then they will only get 30 percent (or less because frequently there is a trigger minimum) of the incentives they were originally offered.]
The program has offered more than $3.3 billion in Michigan business tax credits since its inception.
This study makes a number of recommendations regarding this expensive and counterproductive program. Some of them are listed below:
- Eliminate the Michigan Economic Development Corp. This department has, by all indications, failed to create new and retain existing jobs for Michigan workers. Killing it and the programs it administers outright would conceivably and directly save tens of millions of dollars that could be used to balance the budget without raising taxes.
- Short of outright elimination of the MEDC, state lawmakers should eliminate the Michigan Economic Growth Authority and Michigan film incentive programs.
- Mandate a full performance audit of each MEDC program. In addition, the Office of the Auditor General should provide a tally of "direct jobs promised" vs. "direct jobs delivered" by year, using independent sources wherever possible, for each program reviewed.
- Require that MEGA use only direct jobs "created" as a measure of a program's success or failure. The MEDC and other state agencies should be prohibited from using hypothetical assertions of spin-off jobs.
- Completely eliminate the "refundable" part of the film incentive tax credit. Tax credits against actual business tax liability are a better tack than disbursing cash from the state Treasury.
- In many instances, the tax credits are used to induce businesses to come to Michigan instead of competing states. The state has approved about $5 billion in tax credits to about 530 projects from April 1995 to August 2009.
- Those companies stated they would have directly created 136,700 jobs.” PDF Complete Document
The Mackinac Center’s recommendations warrant careful consideration. In this battle of philosophies about creating jobs, it appears the Mackinac Center is right both in principle and in practicality.
Saturday, December 26, 2009
"Cool It" Changes the Climate Change Debate
“Cool It: The Skeptical Environmentalist’s Guide to Global Warming” by Bjorn Lomborg (2008) is a debate changing book about climate change. He takes an entirely different approach from arguing whether global warming is real and whether mankind’s activities are a cause of the warming (although his starting point is “Yes” to both questions).
Bjorn’s approach is different because he asks, “Even if global warming is real and man is causing it, is focusing on reducing CO2 emissions the best way to improve the lot of mankind?”
He posits that even if we take the most aggressive measures to reduce emissions, the impact would be modest at best, although it may “feel good”. Further, he debunks many of the exaggerations made by the promoters of the hysteria about climate control, including claims about melting glaciers, rising sea levels, penguins in danger, polar bears becoming extinct, more extreme weather, rivers flooding, a new Ice Age over Europe, malaria in Vermont, more starvation, and water shortages. He decries the politicizing of science and the ignoring of solutions other then reducing carbon emissions.
Bjorn lists many of the claimed benefits of containing/reducing carbon emissions, and contrasts the costs of that approach with alternative approaches to facing the problems of rising sea levels, rising temperature, providing clean drinking water to impoverished nations, etc. The costs are significantly and dramatically less implementing these more direct methods and the benefits are generated now, rather than at some distant point in the future.
This clear headed cost-benefit approach to the climate change debate comes from an economist’s perspective, looking at the “opportunity costs” of trying to control carbon emissions. Because we can’t do everything we would like to do, we must prioritize what we do, and controlling carbon emissions does not come close to the top of the priority list once the politics and hysteria are swept away.
I highly recommend this book to anyone interested in the climate change debate.
Bjorn’s approach is different because he asks, “Even if global warming is real and man is causing it, is focusing on reducing CO2 emissions the best way to improve the lot of mankind?”
He posits that even if we take the most aggressive measures to reduce emissions, the impact would be modest at best, although it may “feel good”. Further, he debunks many of the exaggerations made by the promoters of the hysteria about climate control, including claims about melting glaciers, rising sea levels, penguins in danger, polar bears becoming extinct, more extreme weather, rivers flooding, a new Ice Age over Europe, malaria in Vermont, more starvation, and water shortages. He decries the politicizing of science and the ignoring of solutions other then reducing carbon emissions.
Bjorn lists many of the claimed benefits of containing/reducing carbon emissions, and contrasts the costs of that approach with alternative approaches to facing the problems of rising sea levels, rising temperature, providing clean drinking water to impoverished nations, etc. The costs are significantly and dramatically less implementing these more direct methods and the benefits are generated now, rather than at some distant point in the future.
This clear headed cost-benefit approach to the climate change debate comes from an economist’s perspective, looking at the “opportunity costs” of trying to control carbon emissions. Because we can’t do everything we would like to do, we must prioritize what we do, and controlling carbon emissions does not come close to the top of the priority list once the politics and hysteria are swept away.
I highly recommend this book to anyone interested in the climate change debate.
Thursday, November 26, 2009
Bipartisan Reforms Would Strengthen State Education
This article by Senate Majority Leader Mike Bishop makes sense. Education must be a top priority in our long run economic growth in our state (along with improving the business climate). The challenge is finding sufficient savings in the remainder of the state budget to keep adequately funding education without raising taxes. It can be done.
“Bipartisan reforms would strengthen state education
Sen. Michael D. Bishop
Politics should stop at the classroom door when reforming education.
Michigan must move now to turn around failing schools.
When it comes to improving the education of our children, making sure they have top-quality schools and preparing them for 21st-century jobs, we must put politics aside and work together
Now is the time to make real, meaningful reforms to turn around failing schools and increase statewide student achievement.
Senate Republicans continue to work on several key reforms that fulfill the requirements of President Barack Obama's Race to the Top plan, which makes our state eligible for up to $400 million in additional funding to improve Michigan schools. . . . ”
“Bipartisan reforms would strengthen state education
Sen. Michael D. Bishop
Politics should stop at the classroom door when reforming education.
Michigan must move now to turn around failing schools.
When it comes to improving the education of our children, making sure they have top-quality schools and preparing them for 21st-century jobs, we must put politics aside and work together
Now is the time to make real, meaningful reforms to turn around failing schools and increase statewide student achievement.
Senate Republicans continue to work on several key reforms that fulfill the requirements of President Barack Obama's Race to the Top plan, which makes our state eligible for up to $400 million in additional funding to improve Michigan schools. . . . ”
Senate bills
- Bill 965: Creates an "interim teaching certificate" for individuals with a college bachelor's degree who are taking a 12 credit hour alternative "intensive teaching program" that meets state standards.
- Bills 925 and 926: Allows "schools of excellence" operated by highly accredited charter or other public schools from outside the state. They don't count against state cap of 150 charter schools. Districts where these schools exist would receive state "transition payments" to ease possible student losses.
- Bills 981-983: Failing public schools could run by a "turnaround school chief educational officer" or management firm that could reassign workers, suspend union work rules and control curriculum and discretionary spending.
Click here for more.
Wednesday, November 25, 2009
10 Republican Principles Proposed by RNC Leaders
Some members of the Republican National Committee (RNC) signed on to a resolution that will be proposed at the RNC's winter meeting in January, which lists 10 positions Republican candidates should support to demonstrate that they "espouse conservative principles and public policies":
- We support smaller government, smaller national debt, lower deficits and lower taxes by opposing bills like Obama's "stimulus" bill;
- We support market-based health care reform and oppose Obama-style government run health care;
- We support market-based energy reforms by opposing cap and trade legislation;
- We support workers' right to secret ballot by opposing card check;
- We support legal immigration and assimilation into American society by opposing amnesty for illegal immigrants;
- We support victory in Iraq and Afghanistan by supporting military-recommended troop surges;
- We support containment of Iran and North Korea, particularly effective action to eliminate their nuclear weapons threat;
- We support retention of the Defense of Marriage Act;
- We support protecting the lives of vulnerable persons by opposing health care rationing and denial of health care and government funding of abortion; and
- We support the right to keep and bear arms by opposing government restrictions on gun ownership.
In the spirit of Ronald Reagan "that someone who agreed with him 8 out of 10 times was his friend, not his opponent.", I agree with the 10 principles.
The only one I may not be in total agreement is No. 1, in that I probably would have voted for "a" stimulus bill, as the economy was close to a meltdown. I would have wanted a bill more aimed with tax cuts, rather than spending on pet projects that furthered the Democrats' agenda and paid off some of their campaign debts to many interest groups.
Friday, November 20, 2009
Lifelong Learning
Yesterday I finished listening to the 36 lecture CD series, "Economics", by Timothy Taylor, one of the "Great Courses" from The Teaching College. Even after having taken 27 courses in Economics or Econometrics throughout the years, it was a great refresher, with a very balanced discussion of the pros and cons of many policy issues. I highly recommend it.
I have listened to MANY courses in the Great Courses series, making good use of my drive time, and highly recommend them. Many are available from the Saline District Library.
Anyone who says they cannot afford to get an education is making excuses, because if one wants, he/she can get an education free, just maybe not a college degree. A person can improve their marketability and value in the labor market.
I fully believe, in the long run, one is compensated in direct proportion to the service to others one provides. How much service do you wish to provide?
I have listened to MANY courses in the Great Courses series, making good use of my drive time, and highly recommend them. Many are available from the Saline District Library.
Anyone who says they cannot afford to get an education is making excuses, because if one wants, he/she can get an education free, just maybe not a college degree. A person can improve their marketability and value in the labor market.
I fully believe, in the long run, one is compensated in direct proportion to the service to others one provides. How much service do you wish to provide?
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