Category Archives: economy

The (Robert) Reich Stuff 

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We subscribe to several newsletters at our house, liberal and conservative, because we kind of want to take the pulses of the various parts of the political spectrum. One of those we enjoy is by Robert Reich.

He worked in the administrations of Republican Gerald Ford and Democrats Jimmy Carter, and was Bill Clinton’s Secretary of Labor. He also was part of President Obama’s economic transition advisory board.

He’s been the Chancellor’s Public Policy Professor at UC-Berkeley for eighteen years. He used to be a lecturer in government at Harvard, and a prof of social and economic policy at Brandeis University. Time magazine said he was one of the ten best cabinet members of the Twentieth Century (2008) and ranked sixth on the Wall Street Journal’s list of Most Influential Business Thinkers.

So it appears he has some pretty solid bipartisan credentials.

A few days ago, he explained why prices remain high despite the slowing of inflation. His explanation recalls a warning I heard thirty years ago or more from Abner Womack, an Ag-Econ professor at the University of Missouri, a co-founder of the Food and Agricultural Policy Research Institute.  He warned of the dangers of vertical integration in the agriculture industry—a time when only a few companies controlled the agriculture industry from providing the seeds, providing the fertilizer, processing the harvested product, and marketing it to consumers, and doing the same thing with the livestock part of agriculture. In effect, he was talking about the growing tendency of creating agricultural monopolies.

In his column on February 16, Reich began with a chart:

The chart shows corporate profit trends from 1946 through the third quarter of 2023.

This, he says, is why President Biden is not getting the credit he deserves to improving the economy—-corporate monopolities are unnecessarily increasing prices, or charging the same prices but reducing the size of the products.  For example, he says—

“In 2021, PepsiCo, which makes all sorts of drinks and snacks, announced it was “forced” to raise prices due to “higher costs.” Forced? Really? The company reported $11 billion in profit that year. 

“In 2023 PepsiCo’s chief financial officer said that even though inflation was dropping, its prices would not. Pepsi hiked its prices by double digits and announced plans to keep them high in 2024.

“How can they get away with this? 

“Well, if Pepsi were challenged by tougher competition, consumers would just buy something cheaper. But PepsiCo’s only major soda competitor is Coca-Cola, which — surprise, surprise — announced similar price hikes at about the same time as Pepsi, and also kept its prices high in 2023.

“The CEO of Coca-Cola claimed that the company had “earned the right” to push price hikes because its sodas are popular. Popular? The only thing that’s popular these days seems to be corporate price gouging.” 

And that is why, he explains, consumer prices are still high even though inflation is down and prices are rising “far more slowly” than in the past couple of years. However, those trends are not reflected in the prices of the products.  The result is that the corporations can “get aay with overcharging you” because corporations have few competitors who can force them to lower prices to compete for customers.

Why are prices thirty percent higher than they were in 2020?  Because “four companies now control processing of 80 percent of beef, nearly 70 percent of pork, and almost 60 percent of poultry.”  He suggests, but offers no proof, that these companies coordinate price increases.

Reich says it’s time federal antitrust laws be enforced, noting the Biden administration has been more aggressive in this field than any administration for the last forty years. It has acused the meat industry of price fixing. The administration is suing Amazon with “one of the biggest anti-monopoly lawsuits in a generation.”

He points to legislation suggested by Senator Elizabeth Warren and others. She says, “Giant corporations are using supply chain shocks as a cover to excessively raise prices and sometimes charging the same price but shrinking how much consumers actually get.”  Among other things, the bill would force public companies to divulge more about their costs and pricing strategies.

But, he says, don’t expect this idea to go far because Democrats have only a slim majority in the Senate and Repulicans have a slim majority in the House that enables them and their business allies to blame the Biden administration instead of solving the problem by going after that important constituency for the GOP.

So ends Robert Reich’s basic economic course for the day. He’s clearly a liberal but that doesn’t automatically mean he’s not worth appreciating any more than a conservative’s thoughts are automatically worthy of dismissal.  And those who wear the label “conservative” honorably will find some points of agreement with him, perhaps.

Late in the 1890s and early 1900s, it was popular in politics to be a “trust buster.”  Reich has suggested targets for a new generation of them.

It’s time to get started.

Doing Business, or being Done to by Business 

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A couple of merchandising practices have grabbed our attention lately and we imagine you might have had a passing thought or two about this kind of thing, too.

It’s another sign that our high school graduation speakers were correct: it’s a cruel world out there.

We have several in-store credit accounts that we always pay off each month when we use them.  We’d pay cash but the lure of “points” that we can use to save on something else cannot be ignored.

We used one of our in-store credit cards to buy $1,740 worth of things recently. Our credit card statement told us that our annual interest rate is a tick under thirty percent.

The minimum payment is $29.  The statement told us that if we made the minimum payment, our new appliance would be paid off in just FOURTEEN YEARS. And the total we would have paid for our $1,740 appliance would be a dollar short of $7,000.

However, if we paid $74 a month, the new appliance would be ours free and clear in just three years and we would have saved $4,300 dollars and change.  And the chances would be much better that the appliance would still be working in three, not fourteen years.

All of this assumes we didn’t buy anything else along the way with this store’s credit card.

At least they’re honest about all of this. But they are leaning pretty hard on people to pay off the credit card promptly.

Maybe we could go back to college, fold this expense into a student loan, and wait for the President to forgive it.

There’s a second merchandising practice that is less direct.

A certain kind of refund.

We just can’t accept the idea that a store that says you will get X% rebate on your purchases couldn’t be more fair to their customers.

To claim your rebate, you have to go to the time and effort to mail in your receipt and after a time you get back some kind of a certificate that is not a refund of X% of the purchase price you just paid; it’s a few dollars off of the price you are charged the next thing you buy at that store—if you remember to take your certificate to the store with you.

We wonder what percentage of these rebates are ever filed with the store and how much revenue the store keeps because nobody ever turns in their certificates.

Next:  Do the stores ever pay interest on the customers’ funds that they are holding onto until the certificate is redeemed?   If I inherited a certificate issued fifteen years ago, is it still only worth $1.50 or have I been getting, say, 30% interest each year for grandma’s rebate certificate?

Why not?

We have long thought that if the customer is given the impression that they can save X% on a purchase that the cash register price should be X% less than the shelf-posted price.  In our computerized business world it should not be difficult to hit a cash-register key to signify an item has been purchased at the discounted price so the store’s bookkeeping can keep track of such things.

It just seems more honest to have rebates made by the store at the point of purchase and not play games such as this with customers.

Maybe someday the legislature will pass a law saying all discounts and rebates will be recognized at the cash register at the time of purchase.  That’s a matter of basic honesty in our book.

Yes, yes, yes, we know rebates are not the same as discounts.  But, really, that’s just wordplay.  And rebates that apply only to future purchases aren’t really discounts.  Close.  Kind of like a deer is like a moose, perhaps. Both have horns and four legs.

Maybe we need a law (always the simplest solution) that says any rebates will be made at the cash register upon purchase of the item.  If the item is worth the money, the customer will return to do more business. Customers don’t need carrots on sticks if the product is good and the price is reasonable to begin with.

Capitalism.  Ain’t it Wonderful?

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One Man’s Vision—2

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Jefferson City’s hopes of turning the old penitentiary into a major redevelopment project are in danger. City officials have for many years pinned many of their hopes for a mid-city rennaiscance to the state’s preservation, restoration, and redevelopment of the prison and dozens of acres of land controlled by he city inside the old walls.

Jefferson City leaders must aggressively overturn an effort by the House of Representatives Budget  Committee to eliminate $52.3 million from the state budget that Governor Parson recommended in January and another $40 million he wants set aside for later preservation and restoration work.

It is essential if a downtown convention center is to be more than a stand-alone project that misses the chance to bring about greater transformational change for our city from Madison and Capitol for the next seven blocks to the east.

The plan has been promoted as putting the old place in shape for expanded tourism attraction.  But the issue is far more important than that.  It is only one part of a much greater future for a major part of the Capital City and, it can be argued, is part of a package of developments that is highlighted by the expansion of the Capitol itself.

The Capitol and the penitentiary are bookends of our city’s historic, cultural, economic, and ethnic past, present, and future.  In fact, the penitentiary is a major reason this city continued to exist for the first eighty-five years as the seat of state government, a development that curtailed the efforts to end the City of Jefferson’s political history before it had hardly begun.

Jefferson City was a tiny, dirty/muddy, little frontier village, the worst of the three possible locations for a permanent capital, when Governor John Miller told the legislature in 1832 it had to do something to create an economy for the city or take the government elsewhere:

If t is not to be the permanent seat of government, that fact cannot be too soon made known, while on the other hand if it is to remain as such, it is advisable that those measures which would advance its prosperity, should be taken with the least possible delay. Some of the principle streets are from the nature of tne ground impassable. It is therefore respectfully recommended that an appropriation be made for grading and otherwise improving,them. The erection of a penitentiary here, the necessity and utility which cannot be doubted, would contribute in a great degree to calm the public mind in relation to th« permanent location of the seat of government.

 The penitentiary, for many years well outside the city limits, today is the link between the water company overlooking the river on the hill west of Bolivar Street to Ellis Porter/Riverside Park and its recently-restored amphitheatre on the east. It’s an area that swells to include Dunklin Street that runs through the heart of Munichberg and continues to and past the entrance to Lincoln University before turning back toward the river at Clark Avenue.

For many years, the tall standpipe at the water company,  the capitol dome, and the smokestacks of prison industries were parts of our skyline.

That area has been, is, and will be the heart of our city.

One Budget Committee member called the restoration “the stupidest idea I’ve heard all day,” and another said it was not a place she would take her grandchildren. Another opposes the idea of making a tourist attraction out of the suffering of thousands of inmates.

It’s time for these folks to hear, loudly, from city leaders that they are flat wrong on several counts.

There’s plenty of time and ways to get that money put back into the budget but Jefferson City needs to become very aggressive in making the case that these committee members are just flat wrong. Thirty thousand people a year don’t think the prison is stupid. A lot of grandchildren have gone through it. And the suffering of inmates is an important part of the reason our national history of corrections has undergone massive change. The prison is a great example of showing how our past can guide us to the future.

Alcatraz is not too gruesome to draw 1.5-million people a year. Nor is the old Eastern State Prison in Philadelphia, which draws 350-thousand. Nor are at least a dozen restored prisons and jails throughout the nation.

Jefferson City cannot allow the short-sightedness of these representatives to prevail.

In a city where you can’t swing a dead cat without hitting a lobbyist, it wouldn’t hurt if they had enough interest in their town to speak up for it voluntarily and help get that money back. And asking the governor to step in would not be improper.

Jefferson City must fight for the restoration of this funding not just because the old prison is a tourism draw but because of its potential for significant other developments that will take advantage of a large plot of available land in the heart of the city. What prison restoration can mean to Jefferson City’s core redevelopment is part of the vision of making a good city a great one.

The prison is more than an old, miserable lockup.  It is one of the most important historical structures still standing in Missouri, a massive learning experience for all who visit it, even grandchildren. Going through it is a matter of going through several eras in the history of crime, punishment, and justice in Missouri.

You want to know how bad things were?  Take a tour. You want to know how things changed?  Take a tour. The stories you hear from guides are intensely human. Calling the prison a tourist attraction, in fact, cheapens the prison as a teaching and learning experience.

We can concede that there are those who don’t think the public should see this institution that focuses on the worst of our society.  But ignoring the worst does not make us better.  Crime is here.  Prisons are here.  Refusing to acknowledge their presence, their purposes, or the changing standards that they represent in our history is unrealistic.

Thousands of men and women went into that “bloodiest 47 acres in America” and came out to live peaceful lives. Understanding the world where they were sent and from which they emerged is important.  Making a tourist attraction out of the suffering of thousands of inmates?  It’s much more than that.

The decision by our city leaders to abandon the old penitentiary as the potential site for a convention center and hotel is a welcome, solid, decision. The plan to put the hotel/center in the prison seemed to be a good idea about a decade ago but nothing developed other than a few lines on paper. It was correct for the previous city administration to bring this long-ignored opportunity back to the public mind and to keep it there. But it is not unusual for first concepts to fall by the wayside as time shows their weaknesses.

I was the President of the State Historical Society of Missouri when we opened our $37-million Center for Missouri Studies about five years ago. It is far beyond what we imagined it would be in the first stages of our planning and it is not on our first choice of location.  But the leaders of our society never once conceded that we could not do what we wanted to do. Our only question was, “How do we do this?”

That characteristic, when applied to cities, is what elevates good cities to great cities.  Do not tell me we can’t do something; explain to me how we can.

What happens with the penitentiary now that it is available for new development is a major factor in Jefferson City’s move from a good city to a great city.  As we explore one man’s vision in this series, details will emerge.

We’ll talk about our vision for the penitentiary later. But for now, the priority must be action that will preserve the penitentiary for its own value to the public while creating an improved opportunity for the city to take steps toward greatness within it.

(photo credit: Missouri American Water Company)

 

Celebration Time—C’mon!

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By Bob Priddy, Missourinet Contributing Editor

Some sports know how to celebrate a victory.  Others just have participants shake hands and go to the locker room.

Admittedly it’s hard to go crazy ninety or 100 times a year in a baseball season, or thirty times if you’re a top NCAA basketball program.  Winning the Super Bowl, the World Series, the Stanley Cup, the NBA Championship—all of those have major celebrations.

But 36 times a year, it’s confettiville—

—at a NASCAR Cup race.   The winning driver is in there someplace.

And it’s time to smoke ‘em because you’ve still got ‘em—–

There’s a car in there.  It just won the NASCAR Cup race at Worldwide Technology Raceway and it’s traditional for the winner to cut roaring donuts and burn off what’s left of the rubber on the rear tires.

And then, in Kyle Busch’s case, to get out of the car and bow to the crowd that often responds with a mix of cheers and boos.

Then the car goes to victory lane for the hurricane of confetti.

and then there’s  celebration with the crew.

Some folks don’t understand why your correspondent likes auto racing.  That’s okay.  I don’t have much good to say about the NBA (I went to a game in Washington, D.C. once and felt that I was at some kind of a carnival that was interrupted by some big guys playing some version of basketball.)  And soccer?  A lot of guys running around a big field for an undetermined amount of time and a team that scores a goal in all of that is a winner.  Horse racing?  One lap is all I get?

Auto racing also is more fan friendly than many sports.  Where else can fans chat with four players before a big game as this fan was doing in the garage area at WWTR? Full-field autograph sessions are often held before a race.  And there are lots of selfies—-

—in this case with Missouri’s most successful NASCAR driver, Rusty Wallace, who was at the track to drive some exhibition laps in his favorite car. It even has a name,  Midnight.

Or photos with prominent participants—in this case with Jamie Little, who is a pit reporter for the FOX television team.

Have you ever heard of the Chiefs inviting fans out of the stands for an autograph or selfie session at Arrowhead Stadium before a game?

So these guys went out and do what they do.  It took about six hours to finish the race because of a 105-minute delay while potential unsettled weather moved out of the area. A lightning strike several miles away triggered the precautionary step. The race included nine on-track caution periods.

One other social note about the race.  Among the spectators, actually a special guest of the Illinois political folks who sponsored the “Enjoy Illinois 300” was this fellow:

We don’t know if Governor Parson got any autographs or had his picture taken with any drivers (or vivacious TV reporters) but he seemed to be enjoying things.  We didn’t know he was a car-racing fan although as a former sheriff he probably had his share of high-speed adventures.  We hope he had a good time, probably more comfortable than we did on a 90-plus degree day walking from one end of the track to the other in our hot photographer’s vest that the track provided so my camera could go to certain places.

And I couldn’t help myself, but seeing him at a race track in sight of the Gateway Arch reawakened an irritation that has been in mind for more than twenty years.   On the other side of our state, some promoters were looking for some tax incentives to build a major NASCAR track near the Kansas City airport.  The legislature, showing the vision that it sometimes shows, refused any help. So, in 2001, within sight of the Kansas City skyline, the Kansas Speedway opened and has triggered a massive industrial development around it.

Maybe a lot of readers don’t understand this racing thing and why people enjoy it so much.  But it is huge economically.  And Missourians are going to a track in Madison, Illinois—as Governor Parson and I and a lot of other Missourians went last weekend—or to the Kansas Speedway, or to the high-banked Iowa Speedway (with design consultation from the aforementioned Rusty Wallace) but we could have had our own track and its economic development around it.

But we blew it. Or our legislature did.

Kyle Busch had plenty of chances to blow the race last weekend at WWTR.  He withstood challenges from Kyle Larson and Denny Hamlin on a series of late-race restarts after crashes to finish half a second ahead of Hamlin. Last year’s winner, Joe Logano, was third with Larson fourth and Martin Truex Jr., one of the drivers talking to a fan in the garage area we showed you earlier, fifth.

Late that night—the race ended about 9 p.m. after eleven caution periods and a stoppage for almost two hours because of lightning in the area—-two big trucks passed your correspondent on Interstate 70—haulers carrying some of the cars that will race next weekend on a road course at Sonoma, California.

(INDYCAR)—Much—but certainly not all—of the skepticism about the raciness of the Detroit street course seemed to have gone away by the end of Sunday’s race, won by Alex Palou.  The track’s roughness, ninety-degree corners and tight passing areas had raised concerns during practice.  Some drivers thought the long front straightaway remained too bumpy and left them unable to advance as they would have liked. One team owner, Chip Ganassi, thought the GP was “a really good race” despite earlier fears that chaos would take place.

Race organizers say they’ve been listening closely to the criticisms and will have a better circuit next year.

Palou started from pole and led 74 of the 100 laps. Runnerup Will Power led fourteen of the others and finished about 1.2 seconds back.

Felix Rosenqvist was third with Scott Dixon continuing his consistent runs this year with a fourth.  Palou led by as many as nine seconds but at the end was only 1.2 seconds up on Power. He was one of the skeptics earlier, calling the course “too tight for INDYCAR, too short for INDYCAR.”  He complained it was “too bumpy.”  At the end of the race, however, he conceded, “I was a really fun race. It was a lot better than I expected.”

(FORMULA 1)—-Red Bull’s Max Verstappen makes it five wins  in seven races this year with a victory in the Spanish Grand Prix. His closest competitor was 25 seconds back.  The results have prompted INDYCAR star Will Power to pronounce Formula 1 racing incredibly boring and not nearly as exciting as INDYCAR racing.

(MIZ)—Finally, Missouri bas a big guy.  And we meet big.  REALLY big. How about 7-feet-5 inches?  Connor Vanover has played at the University of California then moved to Arkansas and was with Oral Roberts University last year.  Petty good stats: 34 games, shot 52% from the field and 32 percent from outside for an average of about 13 points a game. Better than 81 percent of his free throws found the net. 7.2 rebounds, 3.2 shots blocked.

This will be his only year at Missouri. His college eligibility will be finished.

But how’s this for a Tiger front line?  Jordan Butler at 6-11, Vanover at 7-5 and Mebor Majak at 7-2.

(THE BASEBALL)—-Why talk about our teams when we can talk about Albert?

He has a new job.  He’s a special assistant (in other words, a consultant) to Commissioner Rob Manfred, advising him on issues related to the Dominican Republic and other areas. Pujols also is in the broadcast booth as of tonight (Tuesday) as an analyst on an MLB Network. l

Okay, now the teams: The once lowly Pittsburgh Pirates sank the Cardinals back into last place in the division by sweeping the Redbirds during the weekend—after the Cardinals had had to days off to rest up after a poor road trip.  They’re 10 games under .500 but the good news is that they’re playing in a division so weak that the leader is only five games above .500.

The Royals?  They continue to be so bad that if they were in the same division as the Cardinals, they’ve be seven games behind the Cardinals going into this week’s games.

The only team in the major leagues with a worse record is 12-49, the Oakland Athletics.

 

Support your local bureaucrat

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Governor Parson last week recommended a pretty healthy pay increase for state employees.  It’s a much-needed step for a much-underappreciated group of people.

Bureaucrats.   You know, those shiftless people who wrap everything in red tape when they’re not standing outside the front door of a state building, smoking.

Truth be told:  I’m married to a former bureaucrat.  She doesn’t smoke. She never took a state paycheck while frustrating taxpayers with poor service.  She never had anything to do with red tape. She was one of thousands of people who spent their days in cubicles performing everything from mundane tasks to examining situations that would be dangerous to public health and well-being.  She shuffled a lot of paper.  She created a lot of paperwork.  She was a necessary small cog in a very big wheel of a system designed to serve a public too easily bamboozled by opportunistic power-seekers who believe their best road to importance is attacking people such as her.

She left her cubicle behind several years ago to manage a bigger but far less lucrative project: Me.

We hope the legislature acts quickly on the governor’s recommendation of an 8.7 percent cost of living increase.  But his generous gesture constitutes a problem for some in our political world who cavalierly rattle on about shrinking government.  It also presents a problem for those who are eager to cut taxes so they have something to brag about in their 2024 campaigns.

The estimated cost of these salary increases is $151.2 million and that’s only the start.  The number will grow as time passes and more people find state salaries attractive enough to replenish a diminished state workforce—particularly in fields such as prison guards and mental health workers and social services workers, three fields—among many—that require courage and compassion many would find difficult to summon in those professional circumstances. The number also will grow as other increases are approved.

As welcome and as necessary as this expenditure is, it also should temper the enthusiasm of some to reduce the state’s ability to finance it today and properly to augment it tomorrow, lest it lead to layoffs in poorer economic times that will lessen or cancel the progress they create.

These proposed raises fly in the face of those who base their popularity on the time-worn concept of “shrinking government.”  Doing nothing has produced pretty good results for them, although it might be difficult to explain when constituents want to know why they can’t get services government should be providing but can’t get because of too many empty cubicles.

The Missouri Budget Project says the lack of more decent pay has resulted in the decline of state government jobs by 13.2 percent between February 2020 and June 2022. Governor Parson says there are 7,000 unfilled positions in state government and employee turnover is unacceptably high.

Those are numbers of which the “shrinkers” might take pride.  And now, here comes their conservative state leader trying to undo much of the hard-won results of their successful efforts to starve the beast. His common-sense proposal is a challenge to those who think effective and efficient government is possible only if fewer people run it and they’re content with being under-rewarded.  They’re just bureaucrats, you know.  Twenty-first century Bob Cratchits.

One of the goals of the suggested pay increases is to improve recruitment and retention of workers. Oh, Lord, that must mean he supports Big Government!!!

No, he doesn’t. He’s pushing for effective government and we can’t have effective government if we don’t have enough people to do the jobs that effective government requires.  And we can’t get—and keep—enough people if we (us taxpayers) aren’t responsible enough through our representatives and senators to pay them a more-worthy salary.

So, legislators, support your local bureaucrats.  And don’t follow up with something rash that will later set back whatever progress is attained through the governor’s recommendations

Tread Carefully

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The Missouri General Assembly convenes in a special session in a few days to consider a significant cut in the state’s income tax and other issues.

The past and the present and two seemingly unrelated situations suggest this is a time to tread carefully—-although, this being an election year, politics could take a higher priority than should be taken in considering the tax cut.

Let’s set aside politics for a few minutes and raise some concerns based on years of watching state tax policy be shaped.

Days after Governor Parson announced he was calling the legislature back to cut the income tax, President Biden announced his program to eliminate a lot of college student loan debt.  The two issues, seemingly wide apart, actually are related in this context. It will take some time to explain.

We begin with the Hancock Amendment. In 1980, Springfield burglary alarm salesman—later Congressman—Mel Hancock seized on a tax limitation movement sweeping the country and got voters to approve a change to the state constitution that tied state government income to economic growth.  If the state’s tax collections exceeded the calculated amount, the state had to send refund checks to income taxpayers.

Some of the Hancock Amendment was modeled on Michigan’s Headlee Amendment adopted two years earlier. But the timing of Hancock could not have been worse.  While Michigan’s amendment was passed during good economic times, Missouri’s Hancock Amendment went into effect during a severe economic recession considered to be the worst since World War II.

Missouri therefore established a limit that had a low bar. There are those who think the state has suffered significantly because of that.

Except for one year the Hancock Amendment has worked well.  Too well, some think, because it has encouraged state policy makers to underfund some vital state programs already hampered by Hancock’s low fiscal bar.

In 1998, the state revenues exceeded the Hancock limit, forcing the Revenue Department to issue about one-billion dollars in refund checks (averaging about forty dollars per household).

The legislature decided it did not want to repeat that. So it decided to cut taxes to keep from hitting the Hancock limit again.  Not a bad idea, except that when the national and state economies took a dive, financing of state institutions and services was severely lowered.  Had the refund program remained in effect, the economic downturn would have meant no refunds but institutions and services would have been hurt far less because the tax base would have stabilized funding.

The MOST (Missouri Science and Technology) Policy Initiative, a fiscal think tank, has recorded twenty tax cuts from 1993-2013.  The result is that Missouri is almost four-billion dollars under the revenue limit set by Hancock, according to the latest annual study done by the state auditor.

Missouri is unable to do a lot of things it could be doing because the legislature eroded the state tax base instead of issuing checks.

Now the legislature will consider an even deeper tax cut.

Nobody likes to pay taxes. But there has been cultivated in our state and nation a culture that seems to think the benefits of government—education, public safety, infrastructure, care for the sick and elderly and indigent, and other parts of our lives we take for granted—should be free.  Or, to the way of thinking of some people who don’t need those things, eliminated.

How does the Biden program to forgive billions of dollars in student loans provide a cautionary element to consideration of the Parson tax cut?

When I was in college in the previous century, I knew many people who worked their way through school. Some could do it with part-time jobs on campus or in the community. I had one friend who worked for a semester and then took classes for a semester.  I have one friend who  financed his college education by selling thousands of dollars worth of Bibles and other religious books during the summer.

But the expense of a college education today makes that kind of self-financing impossible, or almost impossible.  And here is a major reason why.

Back when my generation and the generation after us, probably, could work our way through school, the state provided for a substantial cost of higher education.  Today, the percentage is much lower.

Last year, one of Missouri’s most distinguished attorneys—who also was appointed by Governor Parson to the Coordinating Board for Higher Education—W. Dudley McCarter, noted in The Columbia Missourian, “After striving to attain this goal over the past 10 years, the state of Missouri has now succeeded in becoming the state that is at the very bottom in funding for higher education. No, it is not Mississippi, Arkansas or Alabama — it is Missouri. Over the last 10 years, state funding for higher education has increased nationwide at an average of 12.40% with some states increasing funding by over 40%. In Missouri, however, funding has decreased during that same period by 13.70% — the only state that had reduced funding. When adjusted for inflation, the decrease is actually over 26%. The national average for funding is $304 per student, with some states providing over $700 per student. In Missouri, the funding is less than $200 per student.”

The downward trend has been going on far longer than that. The internet site Ballotpedia has noted that state appropriations per full-time student dropped by 26.1% in the first decade of this century, about twice the national average.

A study done a few years ago for Missouri State University showed that, nationally, student higher education tuitions made up 30.8% of higher education revenues in 1993. By 2018, tuition was financing 46.6% of higher education costs—and the costs were higher. It was during that time that student borrowing ballooned to offset declining percentages of state and federal higher education support.

The Biden student loan forgiveness program deals with those who have debts already. It does nothing to prevent current or future students from incurring crippling student debts, because government has reduced its support for higher education.  And now, the legislature is being asked to reduce state revenues even more.

We lack the expertise to get too far into the weeds of economic nuance.  But reducing the state’s ability to meet its fiscal responsibilities in the future, whether it’s in higher education or numerous other fields is a long-term issue that must be approached with great caution.

Things are flush right now, thanks partly to inflation and the massive injection of federal Covid relief funds in the last few years.  But Missouri still is far short of its own limit on the state tax burden and still far short in funding numerous human-service needs.

It is politically popular in an election year to cut taxes. The public seldom recognizes the long-term penalties that might result.  Tomorrow’s college graduates might be among those paying a high price for today’s popular tax cut and incurring new student debt burdens.  And if a recession hits next year, as some economists keep predicting, some unfortunate results of this year’s tax cut could become painfully clear.

Governor Parson has taken a wise step in meeting with members of both parties to explain why he thinks a tax cut is appropriate today. We suspect he had an easier sell with member of his own party than he did with the other side. We expect some passionate discussion of this issue during the special session.

We also expect a cut will be enacted.  We hope, however, that we do not have a repeat of the unfortunate post-refund tax cuts of decades ago. We must be careful as we consider what we might do to ourselves, our children, and our friends.  Tread carefully.

Reductio ad absurdum

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The life of retirement on this quiet street provides an opportunity for time to reflect on some of the great political thinking of our times as well as some of the not-so-great ideas. State legislators can be counted on as great thought-fodder producers. They’ll be back in the big-time fodder-manufacturing business in about, hmmmm, ten weeks.  Personal experience has led to the observation that selective self-righteousness always produces fodder. The quality of the fodder sometimes can be measured by a Latin phrase.

Latin does not often spring to the mind of the journalist, but we recall that the introduction of a couple of proposals during the 2015 legislature sent us scurrying to our source for Latin expressions.  It was the first session in which we were not present to subtly suggest some ideas were bereft of intelligence.

One proposal could have eliminated the sales tax that provides the bulk of funds for the Missouri Department of Conservation.  The department wanted to know where the state would find the $110 million dollars to pay many department’s bills if voters kill the tax. The representative didn’t have an answer to that question.

On the other side of the rotunda, a senator wanted to eliminate hunting and fishing permits because, he said, Missourians already pay the conservation sales tax and charging a fee to hunt the critters the conservation sales tax provides habitat for is double taxation.  That’s another $40 million dollars the department would not have so it can pay for all of the stuff it does.

Neither of these fellows suggested how the department could continue to function if it lost $150 million dollars a year, about 85% of its funding.  And if you think the legislature would look very hard for a new funding source, you don’t have a clue about the ideology of the legislative majority.

For example, the legislature started fiscal year 2014-2015 more than $400 million short of the amount it promised public schools they’d be getting by then under the school funding formula.  Do you really think a legislature that lacks interest in meeting its responsibility to pay for the education of Missouri’s children would show any great interest in finding new money to take care of deer, turkeys, otters, elk, prairie chickens, trout, bats, hellbenders, glades, and what little prairie there is left in Missouri?

The legislature solved the problem of funding shortages for education.  It rewrote the formula to reduce its responsibility.

We think the Latin phrase that tops our discussion today means “reduction to absurdity,” a concept that goes back to the great Greek seekers of logical thought who tested the truth of an  argument by seeing if it remained valid when extended to the point of absurdity.

The representative who wanted an end to the conservation sales tax said it’s not “good politics” to have a funding source “that never has an end to it.”  He wanted a statewide vote on whether to continue it.

Hmmmm.   Let’s extend his argument. Had he thought of a proposal for a statewide vote on the income tax?   The state sales tax?  The cigarette tax?   The alcoholic beverage tax?  Since the Farm Bureau jumped to support his bill back then, we wondered if the same standard should apply to the soil conservation and state parks sales tax. Those taxes don’t seem to have any ends either.

There were all kinds of opportunities for “good politics” then.  And if we listen to our legislators who continue to argue that lower taxes will mean more businesses will come to Missouri and create all kinds of new jobs, the expansion of the “good politics” plan could create a business development expansion that would make the Oklahoma Land Rush look like a small-town homecoming parade.

Now, let’s look at the senator’s double taxation argument.  There are all kinds of double taxation that also should be eliminated under his reasoning. We pay a sales tax for the opportunity to own our cars and our trucks and our snowmobiles and our wave runners.  But then we pay a second tax so we can stick a license plate on the front and the rear of the things, or put decals on the side.  And then we have to pay a third tax if we want to put fuel in them. And property taxes, don’t forget them. Forget double taxation.  We’re talking about QUADRUPLE taxation!!!

We pay property taxes that help finance our public schools and universities.  But then we have to pay laboratory fees, sports fees, band fees—and we have to pay to buy or rent textbooks so our children can learn something in the schools we’ve already paid taxes to support, sometimes higher taxes because the legislature continues to refuse to meet its self-imposed obligations. Clearly, those who use our schools are being taxed every bit as unfairly as the people with guns and bows and arrows are being taxed (don’t forget the sales taxes they paid to buy those things) to use the woods where the deer and the turkey play.

We pay taxes to finance our court systems at the county level.  And then we pay additional tax after tax after tax hidden behind the phrase “court fees” for various and sundry parts of the judicial system.  People who make mistakes that put them in court are being double-taxed. In fact, they’re being taxed in multiples, not just as a double tax.

There are astonishing possibilities for even more “good government” in other categories we haven’t touched on here.

The Representative withdrew his proposal fairly soon after introducing it after publicity about it raised big questions about the devastation it would cause. The Senator’s bill underwent major modification and was reduced to something that applied only to people living outside Missouri but who owned at least 75 acres here, which doesn’t exactly peg the logic meter.

We realize it’s never fair to criticize the efforts of others if the critic has no alternatives to offer.  In that spirit is a suggestion that lawmakers should avoid such pennyy-ante tax and fee proposals and focus on a broader “good government” system that lets taxpayers decide how to spend their money—because as we have often heard some legislators say, the taxpayers know how to spend their money better than government does. For example:

—-A law that designates each month as “pledge month” for certain government programs and services.  Let Missourians phone in amounts they would pledge for those services.   January could be Department of Natural Resources and Department of Public Safety Pledge Month.  February could be Department of Transportation and Department of Agriculture Pledge Month.  And so it would go.  We could eliminate an entire large state agency under this plan and that would make advocates of smaller government ecstatic.   We wouldn’t need a Department of Revenue any more. We could set up a smaller Office of Pledge Compliance and save a bundle.

We wonder how things would go for Legislature and Elected Statewide Officials Pledge Month.

Or perhaps we could have a statewide car wash for the Highway Patrol weekend.  A Statewide Social Services Bake Sale weekend.  A statewide garage sale for Mental Health.

Take a Conservation Agent to Lunch Day at the venison chili parish picnic.

See, folks, all the great thinking is not exclusive to legislative chambers when it comes to tax policy.  Any of us can think of things those people think about.

 

 

 

 

Electronic Wampum

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Saw an article in The Hill last week that, “The value of most cryptocurrencies have plummeted in recent weeks, wiping out billions of dollars of wealth.”

Aside from the story needing a good editor (it should be “the value….HAS plummeted), I confess that I do not have the slightest idea why I should buy, sell, or invest in cryptocurrency.  And the Super Bowl commercials for it were pretty useless for me.  I wonder if they were paid for in cryptocurrency.

As I understand what I read from “helpful” internet sites, it’s a kind of currency that exists “digitally or virtually.”  There is no central or national issuing agency for the stuff.  There’s no FDIC.  It seems to be an anarchic system that creates something out of nothing other than the mind of someone who decides to start issuing “it.”  That person decides how many dollars buy a unit of whatever “it” is and people go nuts buying some of it. The person who creates it gets a lot of dollars and the person who buys it gets——

Well, some kind of units that have no physical properties. In other words, you can’t reach in your pocket and pull out some cryptochange to put in the parking meter. There’s nothing printed on paper for me to pull out of my wallet to buy a lottery ticket.

I get the idea that beads, shells, buttons, coins, and pieces of paper have value only if two parties agree on what their value is. But there seems to be no single worldwide party that determines what any particular “unit” is worth, as in an Indian Rupee is worth so many United States dollars, which are backed by a bunch of gold stored in Kentucky, which is itself valuable because somebody has decided it is.  But at least it is something somebody can see, touch, feel and perhaps even smell.

How much in “real” money will it cost me to buy 1,000 cryptosomethings?  And if I buy it or them as an investment, how will I realize any “real” money in return? Is this stuff more secure than the money I have stashed through the investment counselors at my local bank—who I don’t think have any, of my chidren’t inheritance invested in this electronic wampum.

Apparently there are coins of some kind, or tokens, or something in at least some of these operations but what is the common substance or means of exchange that establishes their worth—as in a dollar is the equivalent of so many Euros, or so many rubles equal a dollar?

Can I pay my taxes in cryptocurrency? When I look in the church offering plate and see that it’s pretty empty of tangible funds can I be comforted to know that it is heaped with non-tangible units?  Some sources say this stuff appears to be like stock.  If I buy some for $X and then sell it for $Z I might be liable for a capital gains tax and I would have to pay that in dollars.

Right?

But when I buy stock in American Veeblefleetzer, I know there’s a brick and mortar building tht is making veeblefleetzers.  If I invest in cryptostuff, am I investing in air?

I went to Kaspersky.com, which seems to know something about this, but I was not comforted when I was told, “If you own cryptocurrency, you don’t own anything tangible.  What you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party.”

Kind of like our ancestors traded three beaver skins for a knife, I guess.  Except it’s not.

In this case it seems as if it’s more three  beaver skin units for a VIRTUAL knife unit—which I guess can be used to skin more beavers units that are chewing down tree units and building dam units on stream units.

Are the human equivalents of this system Unit-arians?   I spoke to a group of them a few months ago.  They looked pretty real to me.  I think I touched one or two of them and they seemed very solid.  Not virtual.

Curiously, Kaspersky says using a credit card to buy cryptothings is “risky.” Well, I guess using a piece of tangible plastic to buy a virtual unit of something that is stored in an electronic wallet that I cannot carry my credit card in, in my pocket, is——

Darned if I know.

Can you imagine what a turmoil things would be in if Missouri tried to pay for Medicaid expansion in cryptocurrency?

Here’s something else that I wonder about:

If, sometime in the future after I have departed this bewildering new economic world, these means of exchange that have been so common for centuries are completely replaced by cryptothings, what will be the purpose of Fort Knox?

Will gold reserves mean anything in a world where there is no central or issuing agency for various cryptocurrencies that might be established, the value is which is determined by whomever does the establishing?

Will a Pound still be a Pound the world around? You know, pound, as in £?

The Yen?

The Rupee?

The Leu?

The Sol?

The Euro?

I guess they’ll have value as collector’s items.  And then people will use virtual currency to buy them as decorative collectables and people of the future will look a our clothes and wonder what pockets were for.

The Casinos in Our Pockets

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We lived in an “appointment” world in 1993, when the first Missouri laws governing casino gambling were written.  Voters had approved riverboat gambling, as it was called then, in 1992. The first casinos on boats would open in the spring of 1994.

Many of us still got our national news with the 5:30 network newscasts on television and our local news at 6 and 10 p.m. when those laws were written.

If we wanted to buy new clothes, we went to a clothing store during the hours it was open.  We went to grocery stores during their open hours to get our food.

We knew when each day we could go to the mailbox to get letters from friends and relatives.

And by the end of the year we knew that if we wanted to gamble we would have to go to the riverboat at a certain time to be admitted.

The Station Casino-St. Charles and the President Casino on the moored Admiral riverboat opened May 27, 1994. Gamblers could board the boat in St. Charles from 9 a.m. to 1 p.m. for a two-hour cruise (for which they paid three to five dollars, depending on the day). If they missed the cruise time, they had to wait for the boat to come back so we could pay to get aboard for the next trip.

The President never cruised. It was permanently moored near the Gateway Arch because the old aluminum Admiral had no engines. Gamblers would pay two dollars during the week and five dollars on weekends and could board every two hours from 10 a.m. to midnight.

But the world was changing and the change accelerated each year. “Appointment living” was beginning to diminish although many of us did not realize it at the time.

There were some hints, however.

The Pew Research Center reported in 1994 that the percentage of Americans getting news from the internet at least once a week had more than tripled since 1991, going from 11-million to 36-million news users.

The number of hosts on the internet tripled from January, 1994 to January, 1996, the year something called a “browser” was created—Netscape, the same year that the island nation of Antigua and Barbuda passed a Free Trade and Processing Act allowing licenses to be given to companies wanting to allow internet users to gamble. By the end of the year there were fifteen gambling websites. The next year there were 200 and by 1998, a study was published showing online gaming revenues had topped $830-million. Modern online gambling in this country dates from November 22, 2010 when the New Jersey Senate passed a bill allowing certain forms of online gambling.

It was about that time that the casino industry was starting to see an erosion in patronage. In Missouri, casino admissions reached almost 54.3-million in FY 2005 then declined for three years before climbing back to almost equal 2005’s number. Admissions began annual declines after FY 2011.  In FY 2019 (the last full year before the pandemic crippled casino business), casino admissions had declined by 49%.

Various reasons for the decline can be suggested but the end result seems to be the same—people just don’t go to where casinos are.

So the casinos have to go where the people are.

The situation is not unique to the casino industry. It is part of our changing lifestyles and those changes have become more obvious with the COVID-19 Pandemic that has forced casino closures for in-person business and quarantines for many who would patronize them.

We no longer live in an “appointment” world.  We can buy clothing at any time of the day off the internet.  We can use the internet to get our groceries delivered.  We can order deliveries to our homes from our favorite restaurants.  The same with our pharmaceuticals. Telemedicine is eliminating some office and hospital trips.

Casino betting can happen 24 hours a day because, as one source has observed, “everyone has a casino in their pocket.”  Casinos are looking for new products that can be offered through the ubiquity of the internet that we call up on our ubiquitous cell phones.  First is sports wagering. But later, Missouri legislators are likely to be asked to let table game betting to take place remotely.

Those who find gambling a reprehensible sin will find nothing redeeming about gambling on the internet.  But thousands of other Missourians will welcome the opportunities—as they welcome opportunities to grocery shop from home.

In a world where less and less of life is lived by appointment, the gaming industry knows it must change. And it is, as it should.

Missouri’s casino gambling laws must change, too.  Laws written and fees created in the days of physical customer presence in casinos need to be changed to account for virtual presence.  State services relying on gambling fees and taxes will be increasingly diminished as appointment gambling diminishes.  Casinos, profiting from laws of the 1990s appointment culture, resist modernization of the law. It is understandable that they do.

What is not understandable is why the Missouri General Assembly would not want to protect the state’s interests by bringing our laws from the appointment era into the virtual, but very real, era.

 

The parable of the caretakers’ wealthy friends

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And the professor came among them as they convened to determine the welfare of the people.

And the professor said unto them, “Do not foolishly assume that following an unchanging law benefits the great mass of people who have chosen you to make wise decisions on their behalf.  Nor should you find it adequate to proclaim that enriching a few by adhering strictly to the law is good.”

And he said, “Suppose you, as caretakers of the common good, approve a generous spending plan of $32 billion for the benefit of those who have chosen you. And suppose you determine that $32 billion is adequate for the future and ignore the undeserving who believe your good stewardship of financial resources has become inadequate.

“But inevitably the system generates $33 billion in the next year, and $35 billion in the second.  By following the law, friends and supporters of those who established the “adequate” amount can divide the excess totaling $4.5-billion.

“But in the fullness of time,” said the professor, “those who are limited might rise up and say to those they assume to be their caretakers, ‘This is unfair for inflation has reduced the buying power of $32 billion to only $26 billion and those who rely on actually having $32 billion are becoming impoverished and the people who elect the caretakers are suffering.’”

“’You have established by the growth in wealth of your friends and supporters, year after year, the true value of the $32 billion. Yet you have refused to adjust the law to be fair to the greater number of those you serve while bowing to the wishes of supporters who offer benefits to you for being with them.’”

“’But we are only following the law.  We are meeting all of our obligations,’” you respond. “We are blameless.”

And the professor cast disdainful eyes upon them and said, “Your professions are hollow and self-serving! Those you proclaim are well-served are instead growing thin, yea, their ribs are beginning to show.  In the interests of fairness and justice, it is time—yea, it is PAST time—to adjust the law so that they shall be fulfilled.”

“But,” the caretakers said to the professor, “we do not understand why we should be forced to give our excess back to those who fall under the law.”

The professor rose and he said with passion, “Wisdom without honor has become greed.  You have impoverished those you claimed to help and it is time for those remaining with honor to show the courage to recognize what you have done and to correct it to the benefit of the greater public welfare.”

But the friends and supporters did not care about those who were being impoverished as they grew wealthier.  “You cannot change the law,” they said.  “Giving the impoverished dollars that are worth dollars would be punishment for our success.  Have pity on us for we are your friends.”

And the professor stood nearby hoping the caretakers of the public good would see the hollowness, self-serving, and greed of the supporters who demanded protection from those who trusted the caretakers to be just.