Category Archives: economy

Jefferson City vs. the Pandemic, 1918—II

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A look back at the Spanish Influenza pandemic of 1918 might help us understand how the Coronavirus could run its course in 2020. There are some important things to remember, however. First, Jefferson City, a town of about 14,500 people, had one hospital, St. Mary’s, which was adequate under normal circumstances but faced the same issues today’s hospitals are facing. The other thing to remember is that in 1918 there were no vaccines available or on the horizon. Quinine, which gained popularity in the 1830s thanks largely to Arrow Rock Dr. John Sappington, was tried as a medicine in 1918 but showed no indication that it helped.

In many cases, what happened then is happening now. But in many other ways, today’s conditions, cures, and treatments are a far cry from what our parents, grandparents, and great-grandparents faced.

In recounting these sad and tragic days in 2020’s nervous and uncertain days, we hope we are not leaving the impression that the Coronavirus will have the same course or the same deadly results. Although health officials are struggling to find a cure, medical care is more than a century advanced from the days of the Spanish influenza. It is obvious now that it is likely to be with us for a while and we are likely to lose some people. But we are better prepared today because we know what happened long ago.

It was a bittersweet time. The Great War was ending about the time the Spanish Influenza was at its peak.

A new concern entered Jefferson City discussions in mid-November, 1918 when the National Tuberculosis Association voiced fears the flu epidemic could lead to substantial increases in tuberculosis, perhaps as much as ten percent for the next two years. The NTA said the influenza “weakens a person’s physical vitality and lowers a person’s resistance to the disease.”

The first case of the flu in the penitentiary led to an immediate quarantine reported by the local press on November 17. The first inmate death was reported.

When Mrs. Will Ruprecht died November 20th, the funeral at her home was private “on account of influenza restrictions.”   Home funerals were common in those days before Jefferson City had its first funeral home.

Thirty-nine new cases in two days in the city was considered a “slight falling off” from the previous week but there had been four deaths in the last four days.

The State Board of Health sent around word on November 21 that it would be okay for cities to remove the “more or less drastic measures” intended to limit the disease’s spread. The next day the city had 25 new cases of the influenza.

The day the controls were lifted in Jefferson City, a two year old boy died. The next day, “a beautiful young life went out” when a popular 24-year old woman “just budding into sweet womanhood” died at her home. Robert F. Mueller, “an excellent harness maker,” died the next day and police posted ten more placards on the doors of home signifying they were quarantined. The week ending November 22 saw 173 new cases. The next week the total dropped to 109. People were dying daily and the Federal Public Health Service reported the number of cases nationally was approaching 350,000. The Missouri Capitol was fumigated a second time.

It was December now, likely the longest six weeks in city history.

Community Nurse Ruth Porter, now recovered from her bout with the flu, said her case load had was double what it was in October. Fortunately, the Council of Clubs had bought a car for her to use in her home visits. She had 34 people under her care as of December 13.

The State Prison Board reluctantly admitted more than 100 flu cases behind the walls. State Health Board Secretary George H. Jones reported the state’s October death total of 3,145 represented half of all deaths in Missouri.

The Red Cross was looking for a building that could accommodate patients when St. Mary’s Hospital couldn’t handle any more. The hospital’s own annex became the spill-over building, capable of holding 25 additional patients.

“I am astounded at the death rate of this epidemic,” said the former Assistant State Highway Engineer J. P. Davis, an experienced sanitary engineer who believed in disinfectants. He suggested all of the back yards in town be cleaned up and disinfected. He also suggested the city use a flushing tank filled with a germicide “rather than men with brooms” to clean the streets.

The penitentiary got a gallon of pneumonia serum from the Mayo Sanitarium in Rochester, Minnesota, and quickly inoculated all of the convicts. It was too late for seven of them. Three days later the total was 13 inmate deaths.

But there seemed to be a glimmer of good news when the city’s doctors reported new cases were down fifty percent although the death of Oscar Walther at St. Mary’s Hospital put the city death total into the thirties.

The Daily Capital News asked, “Isn’t it time the state of Missouri was giving some attention to the health of its citizens? It is a sad commentary upon our humanity that we give more thought and spend more money on the health of hogs and cattle than we do upon men and women. The Board of Health has no power to do anything and no money to do anything with.” It was a valid point, but a state health department was not created until a new constitution was adopted almost thirty years later.

Four days before Christmas, the prison announced the deaths of three more inmates raised the total dead there to 22. A study of the fatalities showed 17 of those inmates had been in the prison for less than a year. The penitentiary blamed local jails because, “Many of the prisoners come to the penitentiary run-down physically and are in no condition to have the influenza.” The seriousness of the situation in the prison became apparent with the prison doctor’s end-of-the year report. The prison hospital usually had 20-30 admissions a month and a total of only 32 in October and November. In December it was 459. The final death toll was 26 inmates from pneumonia resulting from the flu.

An important sign that the flu was abating came when the school board decided to reopen schools on December 31. They’d been closed since October 10 and the school days would be lengthened by 45 minutes in an effort to catch up the students on their learning before graduation in late May.

St. Mary’s Hospital reported at the end of the year it had handled 154 flu cases. Forty-one patients had died during the year, “25 were brought in in a dying condition,” most likely influenza victims, many with flu-caused pneumonia.

By the end of January the city death toll was at least 34, fifteen of them people who died at home, plus the 26 prison inmates. Many other deaths were reported throughout the county.

On February 20, 1919, St. Mary’s Hospital caught fire. All 35 patients were removed safely, some taken to the top floor of the Governor’s Mansion and the rest housed in the 14-room vacant mansion of the late Jacob F. Moerschel a Jefferson City brewer who donated the land on which the hospital was built. The fourth floor of the hospital was destroyed, as was the roof, and the rest of the building was heavily damaged by water. A $75,000 fund-raising effort was started to rebuild the hospital, which served the city until 2014 when a new St. Mary’s opened.

The flu made a small comeback in March but by early June, Community Nurse Ruth Porter was reporting “General health conditions have never been half as good as they are now.”

Except—-

Tuberculosis cases resulting from the influenza epidemic were increasing in “staggering” proportions.

The city, the state, the nation survived the worst epidemic in American history up to that time in 1918-19. Most of the great-great-grandchildren of those who were victims of and survivors of the great Spanish flu epidemic will survive the Coronavirus epidemic in 2020. But we know from history that we might be facing a weeks-long struggle. Many will be sick. Some will die.

And then life will go on—as it did after the great pandemic of 1918-1919.

Let America Be America Again

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For many people, America has never been as great as some have nobly proclaimed it to be or proclaim to have made it. Again.

It’s good. But great? Yes, for some. For others, no. Can it be great if it is not great for all? We explore that issue today through the words of a great Missouri writer.

Langston Hughes is considered one of the nation’s greatest African-American authors, a Joplin native whose poetry and prose spoke powerfully of the African-American experience from the time his great grandmothers were slaves to the days when segregation was still a powerful and widely-accepted social institution. He died in 1967, still writing about what this country was but aware of what it could be or should be.

In 1935, he wrote a poem that portrayed the two Americas—the one he dreamed would come with a counterpoint describing the America he knew.

In our turbulent times today, it’s a good idea to think about Langston Hughes, who hoped for a better country while the real world around him seemed far from it. His voice from 85 years ago is a voice for many in these times and a challenge for others who are comfortable with their station.

Let America Be America Again

Let America be America again.
Let it be the dream it used to be.
Let it be the pioneer on the plain
Seeking a home where he himself is free.

(America never was America to me.)

Let America be the dream the dreamers dreamed—
Let it be that great strong land of love
Where never kings connive nor tyrants scheme
That any man be crushed by one above.

(It never was America to me.)

O, let my land be a land where Liberty
Is crowned with no false patriotic wreath,
But opportunity is real, and life is free,
Equality is in the air we breathe.

(There’s never been equality for me,
Nor freedom in this “homeland of the free.”)

Say, who are you that mumbles in the dark?
And who are you that draws your veil across the stars?

I am the poor white, fooled and pushed apart,
I am the Negro bearing slavery’s scars.
I am the red man driven from the land,
I am the immigrant clutching the hope I seek—
And finding only the same old stupid plan
Of dog eat dog, of mighty crush the weak.

I am the young man, full of strength and hope,
Tangled in that ancient endless chain
Of profit, power, gain, of grab the land!
Of grab the gold! Of grab the ways of satisfying need!
Of work the men! Of take the pay!
Of owning everything for one’s own greed!

I am the farmer, bondsman to the soil.
I am the worker sold to the machine.
I am the Negro, servant to you all.
I am the people, humble, hungry, mean—
Hungry yet today despite the dream.
Beaten yet today—O, Pioneers!
I am the man who never got ahead,
The poorest worker bartered through the years.

Yet I’m the one who dreamt our basic dream
In the Old World while still a serf of kings,
Who dreamt a dream so strong, so brave, so true,
That even yet its mighty daring sings
In every brick and stone, in every furrow turned
That’s made America the land it has become.
O, I’m the man who sailed those early seas
In search of what I meant to be my home—
For I’m the one who left dark Ireland’s shore,
And Poland’s plain, and England’s grassy lea,
And torn from Black Africa’s strand I came
To build a “homeland of the free.”

The free?

Who said the free?  Not me?
Surely not me?  The millions on relief today?
The millions shot down when we strike?
The millions who have nothing for our pay?
For all the dreams we’ve dreamed
And all the songs we’ve sung
And all the hopes we’ve held
And all the flags we’ve hung,
The millions who have nothing for our pay—
Except the dream that’s almost dead today.

O, let America be America again—
The land that never has been yet—
And yet must be—the land where every man is free.
The land that’s mine—the poor man’s, Indian’s, Negro’s, ME—
Who made America,
Whose sweat and blood, whose faith and pain,
Whose hand at the foundry, whose plow in the rain,
Must bring back our mighty dream again.

Sure, call me any ugly name you choose—
The steel of freedom does not stain.
From those who live like leeches on the people’s lives,
We must take back our land again,
America!

O, yes,
I say it plain,
America never was America to me,
And yet I swear this oath—
America will be!

Out of the rack and ruin of our gangster death,
The rape and rot of graft, and stealth, and lies,
We, the people, must redeem
The land, the mines, the plants, the rivers.
The mountains and the endless plain—
All, all the stretch of these great green states—
And make America again!

Langston Hughes reminds us from generation to generation we have much work to do before we should proclaim ourselves great. Proclamation is cheap. Achievement of greatness is hard and the quest for it should be never-ending if we really want to create, “the land that never has been yet—and yet must be.”

It not a matter of “again.”  It’s a matter of “yet.”

Whose Money Is It?

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—OR, how a $2 fee is having a multi-million dollar negative economic impact in Missouri.

This entry will be lengthy because we have to use a lot of numbers to make our point.

A number of bills changing Missouri’s gambling laws have been filed for this year’s legislature. But we wonder if any of them should be considered until a significant problem with one of our existing laws is corrected because it has turned into a growing economic drain on our state.

Regular consumers of these pages know that the author has been advocating a fee increase for the casino industry to pay for the creation of a National Steamboat Museum.

As we’ve researched that issue we have come across a lot of interesting other issues and concerns. We passed some of them along to the House Interim Committee on Gaming that met this fall. In some cases we think we have some answers but here’s one where we don’t. Maybe some of our lawmakers will try to provide some. Or maybe somebody will ask the court system to do look into things. Our voice, however, is puny compared to the politically influential voices of a large, wealthy, and politically persuasive industry.

First, the scenario.

In 1993, the legislature required the casinos to pay the state two dollars for each admission on their proposed riverboats. Our first two casinos opened for business in the spring of ’94 and they paid the two dollars, no problem.

Our casinos have paid the two dollars in each fiscal year since. They are obeying the law.

But there’s this thing called inflation.

In the second fiscal year of casino gambling in Missouri, the inflated value of two dollars was $2.05 and the purchasing power of two dollars dropped to $1.95. In the fiscal year after that the equivalent value of two 1993 dollars was $2.11; purchasing power was down to $1.90. (Our numbers come from the Federal Bureau of Labor Statistics.)

We get into some higher mathematics now. Our casinos paid the state in fiscal 1994-95 a total of $25,216,862, a very healthy increase in state general revenue. But if they had paid the state the inflated value of the two dollars, they would have paid the state an additional $702,172.

Whose money was the $702,172? The 1993 law does not say anything about casinos being able to keep what we refer to as “windfall profits.”   In fairness, the law does not prohibit casinos from keeping that money, either.

We were around then, covering the legislature, and don’t recall any concerns that the day would come when two dollars wouldn’t be worth two dollars. Trying to determine legislative intent at this great distance could be difficult although there are a lot of people still around who were serving in 1993 and voted on that bill who might recall what it was.

Fast forward to fiscal year 2018-19 that ended last June 30. Our thirteen casinos paid the state $75,000,634. But the inflationary value of the 1993 two dollars had risen to $3.48 (and it’s $3.53 for this fiscal year). Had the casinos paid the state in contemporary equivalent dollars, they would have paid the state about $55.6 million more than they did. Instead, they kept the money. The total windfall profits after twenty-six years of unadjusted two-dollar payments had reached $888.5 million as of June 30.

Whose money is it?   And whose money SHOULD it be?

Neither side seems to be protected by that 1993 law.

Compounding this question is the continued decline in purchasing power of the two dollars our casinos pay the state. It was down to $1.15 in the most recent fiscal year. The total loss of purchasing power since our casinos opened had reached $944.2 million.

The combined total of dollars the casino industry has kept because of windfall profits and the loss of purchasing power of the two dollars the industry did pay represented an economic deficit to the state during those twenty-six years since the two-dollar fee was established of almost $1.833 Billion as of June 30.

Now the question becomes even more acute: Once again, Whose. Money. Is. It?

There are some other questions, too. Why wasn’t anybody paying attention, either at the gaming commission or in the legislature? The casino industry probably was because it was reaping the benefits but should the industry have stepped forward and said, “Hey, legislature, this two-dollar fee thing is making us a lot richer while the programs intended to be funded by the two dollars are getting poorer and poorer?”

It was under no legal obligation to do so.

Now, with the accumulated negative economic impact after more than a quarter-century of casino gambling nearing Two Billion Dollars, shouldn’t somebody start trying to determine whose money this really is?   Should these windfall funds have been set aside in some kind of an escrow account until somebody decided who is entitled to them? Nothing in the law requires that.

A complicating factor is that the customers of casinos do not pay the fee. It comes out of casino revenues, the money casinos win from the customers. When the law was passed in 1993, it was still assumed there would be boats on the rivers making two hour cruises for which customers paid two dollars. They would get off the boat at the end of two hours and a new group would get aboard (and those wishing for another two hours on the boat would get back on board), each paying two dollars. But when the present system of boats in moats ended any thoughts of customers paying to enter the casino, the decision was made for casinos to pay the state two dollars per person with a new count being made every two hours. That’s how casinos wound up with 37.5 million admissions last year in a state of only six million people, most of whom don’t go to casinos. No customer pays anything.

That means the two dollars is not a pass-through from customers to the state, in effect a user fee. It is now a fee charged to the casinos and it is paid out of their money. (Their adjusted gross receipts in the last fiscal year were more than $1.735 Billion.)

If it is the casino industry’s money, is it the industry’s responsibility to make sure the two dollars going to the state are worth two dollars to the programs and entities that the fee was intended to pay for? If the two dollars are worth only $1.15 to the receiving entity, are they really the “two dollars” promised them by the statute?

The law says two dollars. Period. No inflationary adjustments are mentioned. And the casinos have done what most of us would have done (and what we might have done in certain circumstances)—if there’s money left on the table and nobody else claims it and if it’s MY table, it’s my money.

It is time to answer the questions. Here are the main reasons why.

The two dollar admission fee is split with one of the dollars going to the host city of the casino and the other dollar going to the state gaming commission which takes its budget out of those funds and then divides the remainder among a handful of worthy causes. The biggest worthy cause is the Missouri Veterans Commission Capital Improvements Trust Fund that provides money for nursing homes and cemeteries for our veterans.

Last fiscal year, each of those dollars had the purchasing power of 57.5 cents. The value is down another penny this year. Five years ago, the figure was 61 cents. At this rate, it won’t be long before the casinos are making more money from the two-dollar admission fee that was intended to offset the additional costs to host cities of a casino’s presence and to fund the gaming commission and its worthy causes benefiting veterans, college students, and programs for people who get in trouble because they gamble.

Nothing in the law says they can’t.

Nothing in the law says they can.

Whose. Money. Is. it? And—

Whose. Money. SHOULD. It. Be?

Who can answer the question? The state auditor? The attorney general? The legislature?

No matter what happens with our steamboat museum idea, isn’t it time to find an answer for our veterans, our college students getting scholarships under a program funded by admission fees, problem gamblers looking for help from a program financed by these fees, and our casino host cities?

Here are some additional figures that seem to bold-face the need to address this situation. It has been a long time since our high school bookkeeping class so we hope there is not a flaw in this reasoning. But here it is.

The state received $75,000,634 in admission fees in the last fiscal year. But because of the lack of inflationary adjustment in the two-dollar fee, it did NOT receive $55,600,438 more. That was the windfall profits that the casinos kept. The inflation-caused loss of buying power meant the $75 million the state did get was worth only $42,375,358, a loss of $32,625,276. Here is what it all adds up to:

If we add the amount of money that the casinos kept to the amount of lost purchasing power in the money the state got, the total is $88,225,744.

That means the state of Missouri and the home dock communities in the last fiscal year saw an economic DEFICIT of $13,225,110. Our analysis shows the unadjusted admission fees have produced annual economic losses to the state for the past five years totaling almost forty-eight million dollars.

That economic deficit is on track to almost DOUBLE in the current fiscal year.

In the first six months of this fiscal year (July-December) the economic loss was $$12,201,732—almost as much as all of last fiscal year. Why? Although admissions are down four percent from last year, the value of the two-dollars in contemporary money is more and the purchasing power of the money the state has received is less. The windfall profit so far this year is $28,285,835. The purchasing power loss for those six months is $20,890,844, a combined total of $49,176,680. The two-dollar fee has produced a payment of only $36,974,948.

At least, that’s how it appears from our calculator. And that’s why it is time for the General Assembly to take corrective action, despite this being a campaign year in which the well-financed casino industry can exert great pressure to keep millions flowing into its accounts while the programs the admission fee was created to pay for are victims of a rapidly rising negative economic impact. As long as that $2 fee is not adjusted, the casinos get richer and the programs and entities the fee was intended to finance get poorer.

The casinos want the legislature to let them take bets on sporting events, a new type of wagering that some expert testimony in last autumn’s committee hearings say could increase their revenues by hundreds of millions of dollars a year. Why should it be unrealistic to think the admission fee problem should be solved before these thirteen businesses are allowed to haul in even more dollars through sports wagering?

The casino industry probably would prefer this boat not be rocked, this sleeping dog not be awakened, this pot not be stirred. Its reasons are understandable. But for the others, isn’t it time somebody rocked the boat, awakened the dog, and got busy stirring?

Food for thought

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We stopped in Terre Haute, Indiana on our annual trip to cover the Indianapolis 500 for the Missourinet and as we nibbled on our bad-for-us hamburger and fries, we found an article in the local newspaper, the Tribune-Star, by Morton J. Marcus that we know will upset the Missouri Farm Bureau and other farm-advocacy organizations, Governor Parson, our friends at the Brownfield network, and numerous other people who continue to advocate for something Marcus thinks is an anachronism: agriculture as an important part of Missouri’s (and Indiana’s) economy.

We offer this as food for thought in a changing world—which has an unchanging reliance on the subject on which Marcus’ appears to have some relevant points. You are welcome to add your grains of thought to his observations in our “comments” section.

The article appeared in the Tribune-Star on May 22. It was published in the Indianapolis Business Journal the next day.

Last week, the governor of Missouri was interviewed on NPR and stated that farming was the number one industry in his state. I’ve heard the same claim from Indiana politicians. In fact, one Hoosier solon claimed farming was “the backbone of Indiana’s economy.” I responded, “Every corpse has a backbone.”

Why do people in Missouri and Indiana believe such exaggeration? Perhaps, at one time (in the 19th century) it was true. Farming does take up a lot of the land we see when traveling from one place to another. Plus, the farm lobby is still disproportionately strong.

How important is farming? Folks from Purdue love to say, “If you eat, you’re are part of farming.” Oh, so true! Plus, if you eat, you’re part of trucking, dentistry, and waste disposal.

Let’s look at three different measures not provided by the biggest farm lobby of all, the U.S. Department of Agriculture:

First, value added, the part of Gross Domestic Product (GDP), our basic measure of economic activity, attributed to Agriculture nationally (including farming, forestry, fisheries and hunting) is 0.8%, or 19th of 19 private sector industries. Number one is (drum roll… ) real estate, rental and leasing at 13.3%, followed by manufacturing at 11.4% of GDP.

To be blunt, total value added from farming is less than 0.8% of the U.S. economy. What will the farm lobby say? “Well, you’ve got to remember farmers buy lots of stuff and lots of money passes through their hands that wouldn’t be spent if we didn’t have farming.”

No one is talking about not having farming! That’s the argument of a child, not an industry. We measure economic activity as the value of the goods sold less the value of goods purchased. That’s what we call value added. And the sum of value added by all economic activity in the marketplace is GDP.

For Missouri, agriculture (Ag) is 1.1% of the state’s GDP. For Indiana, Ag is 0.9% of the state’s GDP. In each of those two states, Ag is 19th of the 19 major private sector economic activities in GDP. Only in South Dakota does Ag exceed 5% of the state’s GDP.

Second, personal income, the sum of earnings, rent, dividends, interest, and transfer payments (Social Security, Medicare, unemployment compensation, etc.) are received by — guess who? — persons. Farm earnings are net of the expenses of farmers, but include government subsidies. How many carpenters, janitors, teachers, surgeons can say the same?

In the nation, farming accounts for 0.4% of total personal income. In Missouri, the figure is 0.46%, in Indiana 0.33%.

Third, jobs. Farming, fishing and forestry account for a lofty 0.34% of jobs in the U.S., 0.18% in Missouri, and 0.12% in the Hoosier Holyland.

These are data for 2018. Not 1820, which might have been the source for the governor of Missouri. They are from the U.S. Bureau of Economic Analysis and the U.S. Bureau of Labor Statistics, not the fake news agents working in the speech-writing cubicle of every statehouse.

A couple of observations from your, uh, loyal observer:  I grew up in a farming community, on a five-acre farm. We rented our pasture to people with horses. I spent summers baling hay and cutting weeds out of Illinois bean fields in the days before pre-emergent herbicides.  Today, it seems, the phrase “small family farm” is a phrase for a time long gone.  HOWEVER, there is no doubt that the people who farm, whether they are a dwindling number of individuals or operations that have become corporations for various reasons, raise the food that feeds a growing population.  But whether agriculture is the “backbone” of our state’s economy in the 21st Century is an issue that Morton Marcus has rightfully raised.  Perhaps it is time to find a new defining phrase for the importance of agriculture.  But in doing so, we cannot forget that this industry that is a shrinking part of our total GDP is the source of our food.

A modern assessment of the economic value of agriculture in the greater scheme of the nation’s economy does not violate the old bumper sticker that says, “Don’t criticize agriculture with your mouth full.”  If anything, the comments from Marcus should make us appreciate, on a personal level, the importance to our well-being of agriculture in whatever business model its participants follow.

(Who is this Morton J. Marcus fellow?  He writes entertaining, informative, and sometimes provocative columns, a compilation of which you can find at https://howeypolitics.com/Content/Columns/Morton-Marcus/10/23.  He is director emeritus of the Business Research Center at Indiana University’s Kelley School of Business.  He taught economics there for more than thirty years and was an advisor on economic development and taxation to a half-dozen Indiana governors. One of his degrees in economics is from Washington University in St. Louis.  He has a bunch of other qualifications.  One write-up of his qualifications for his columns notes, however, “None of his advice has been taken.”)

 

A t-shirt story

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I have a t-shirt that says “Missouri. It’s not all that bad.”

Some folks laugh at it.  Others just shake their heads.

A new survey indicates why those opposite reactions are both accurate.  A new survey says we’re keeping our money (“because the people know better how to spend their money than government does,” as the legislative cliché goes).  But what’s it costing us?

A personal finance company in Washington, D.C. peppers our mailbox regularly with surveys on local and state issues. One of the most recent looks at where Missourians rank when it comes to return on investment of their tax dollars.

Wallet Hub says Missouri is the sixth-lowest in total taxes per capita (meaning the population 18 and older).

But we don’t rank as highly in some key things the company also measured.

Our economy isn’t bad—19th, rated on the median household income, annual job-growth rate, the share of people living below poverty line, economic mobility, unemployment and underemployment rates.

We’re 25th in education, a measurement of the quality of our public university system. The company ranked 500 of the 951 public and private universities in another survey.  Truman State was the highest ranking public university in Missouri and it ranked 107th among the private and public schools. Missouri University of Science and Technology in Rolla was 140. UMKC was 200th, the University of Missouri (apparently Columbia) was 223.  Schools were measured on Student selectivity, cost and financing, faculty resources, campus safety, campus experience, educational outcomes, and career outcomes.

We were 29th in public schools rankings.  Among categories in that ranking were the number of blue ribbon schools per capita, high school graduation rate among low-income students, projected high school graduation rate increase between 2017-18 and 2031-32 school years, dropout rate, math test scores, reading test scores, median SAT and ACT scores, and pupil-teacher ratios.

Missouri ranked 35th in health, measured in terms of hospital beds per 1,000 people, the quality of public hospitals—using data from the Centers for Medicare and Medicaid Services, average life expectancy at birth, births, infant mortality rate per 1,000 live births, average health insurance premium, and the quality of health care.

The numbers for safety are worse. We’re 42nd in safety. The ranking is based on our per-capita violent crime and property crime rates and vehicle fatalities per 100-million miles traveled.

In infrastructure and pollution quality—only seven states are worse. The poor quality of our roads and bridges is well-known.  But other factors enter in: average commute time, parks and recreation expenditures, highway spending per driver, air pollution, and water quality and the share of the population that receives fluoridated water through public water supplies.

Not sure what we should expect as the sixth lowest in total taxes per capita.  Probably not surprising that we’re only average at best in some categories and among the worst in others.

But everybody has to be someplace.  And Missourians seem to be happy to be in the lower third of state in some important areas.

King Canute, Charles Wilson, and the dangers of rejecting change

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We have a lot of misquotes that we like to quote to prove our points in arguments and discussions.

One arose when Charles E. Wilson was appointed by President Eisenhower as Secretary of Defense. Wilson was the President of General Motors and his position triggered intense questioning during his confirmation hearing.  When he was asked if he could, as Secretary of Defense, make a decision that would be bad for GM, he said he could although he could not think of such a situation happening because “for years I thought what was good for our country was good for General Motors and vice versa.”

Through the years his statement has been turned into the rather arrogant and erroneous quote that “What’s good for General Motors is good for the U.S.” It came to mind recently when GM announced layoffs and plant closures affecting thousands of workers in the United States and Canada.

The President has threatened GM with various penalties if it doesn’t reverse course and keep running factories and keep employing people making vehicles that consumers aren’t buying in enough quantity to justify their continued production.

It’s the equivalent of President Woodrow Wilson in 1915 ordering the thirteen-thousand manufacturers of wagons and buggies and their supporting industries (horseshoes, harnesses, buggy whips) to maintain production while people drove by their factories in Model T’s.

Paul Turner has recalled in his Adaptive Insights Blog that there were 4,600 carriage manufacturers in 1914, the year after Henry Ford fired up his first production line.  About a decade later there were only 150 of those companies and just 88 in 1929.  “Companies that tried to hang on to the past, or simply apply old world skills and technology to the new world simply failed to exist,” he wrote. One company that recognized the future and embraced the idea that it was not in the business of making wagons and buggies, but was in the transportation business was Studebaker. But changing economics, market demands, and public taste eventually drove Studebaker out of business, along with its late partner, Packard.

Think of the badges that have disappeared in recent years—Plymouth, Oldsmobile, Saturn, Mercury.  We let them slip away with some minor mourning, not paying as much attention as we might have to what their disappearance meant.  But now Ford has announced it’s getting out of the passenger car business because of changing public demand. And General Motors has ignited public awareness dramatically with its announcement that the products it makes, while good products, are not what the public wants in enough numbers to justify continued production and before GM becomes another Studebaker-Packard, it has to reprogram itself for what tomorrow’s consumer wants.  And tomorrow’s consumer appears to be leaning more toward being a rider than a driver and increasingly turning attention to electricity rather than gasoline.

We have lived through numerous non-weather climate changes and that is happening with the auto industry—worldwide—might just be the most eye-catching example.  The sprouting of big windmills and wind farms is an unmistakable indication that the way we get our energy in ten years will be much different from the way we get it today.  A former Sierra Club CEO, Carl Pope is quoted by Theenergymix.com saying “Real markets are poised to savagely strand assets, upset expectations, overturn long-established livelihoods, and leave a trail of wreckage behind them.”

Some will see the words “Sierra Club” and immediately dismiss Pope’s observations as drivel. But remember how quickly the wagon makers and their extensive support industries that employed thousands of people disappeared.  Pope wrote in 2015, just three years ago of, “fossil fuels, with coal companies declaring bankruptcy at the rate of one per month, stock exchanges delisting their stocks, and oil and gas beginning to lose market value.”

Woodrow Wilson probably could have gotten a lot of votes in some places if he promised to revitalize the horse-drawn wagon industry. But by then, Lydston Hornsted had driven his 200 hp Benz faster than 124 mph, pretty well proving one horsepower was not the future of transportation.

Change is not coming in transportation and energy alone, it is here and it is gaining momentum.

Paul Turner set forth three lessons from the transition to the car:

  1. “Only those who embrace creative destruction will make the shift…The carriage makers that didn’t invest in retooling their production failed. Most were too busy protecting their existing, dying, revenue streams. The same holds true today….”
  2. “The transition is much faster than anyone expects.” He cites the death of the wagon industry 1914-1929 and remarks, “That’s akin to a staple of the year 2000 sliding into the dust today—or perhaps today’s cars essentially being replaced by self-driving cars by the mid-2020’s. The pace of change can be disconcerting. Those that have spent their entire careers in a single industry invariably underestimate the breadth, depth, and speed of change. The speed of disruption and the unwillingness to put aside antiquated technology is a potent combination capable of bringing organizations to their knees much faster than thought possible. Innovators like Google with a self-driving vehicle, and Tesla Motors with an electric vehicle designed from the ground up understand this, while the old automakers do not.”
  3. “New innovators emerge out of nowhere, faster than the old world leaders expect.” Forty-six hundred carriage makers were in business in 1914. A dozen years later there were 3.7-million cars and trucks on the roads, some of them driving past a lot of shuttered carriage factories.

He concludes, “Holding on to the past is more risky than embracing the future.”

The Twelfth Century English Historian Henry of Huntingdon told of King Canute setting his throne by the seashore and commanding the tide to stop before it wet his chair and his robes.  Moments later the wet king rose and turned to his followers and told them, “Let all men know how empty and worthless is the power of kings, for there is none worthy of the name, but He whom heaven, earth, and sea obey by eternal laws.”

The tide is here and it is going to keep coming and General Motors is the latest “king” to realize sitting still is to become submerged by the future.  There is pain in change but history tells us that ignoring change or ordering us to ignore that change is asking for a mouth of salt water at best, drowning at worst.

“Two roads diverged—”

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“In a yellow wood,” wrote Robert Frost

“And sorry I could not travel both and be one traveler, long I stood and looked down one as far as I could to where it bent in the undergrowth.”

Two years ago, Missourians elected a charismatic young man who promised to make his state office something special, something different, something clean.

Two years ago, Missourians elected another charismatic young man who promised to make his state office something special, something different, something clean.

One of those young men took a road that has led him downhill into the darkness of the undergrowth, out of sight, and probably away from his dream of much bigger things—although there have been reports of some sounds coming out of that darkness that he’d like to come back for another trip.

The second young man last Tuesday took a road that is leading him up, to a sunny future, and perhaps an opportunity to reach the destination the first man thought he was going toward.

Poetry can take some interesting political turns.

—

Two roads.  One paved, one gravel.  One that would have been important to maintaining and bringing jobs.  One that is paved now but facing reduction to gravel in the future. Missourians have chosen the gravel road into uncertainty’s undergrowth with their rejection of the latest gas tax increase.  Our state legislators and other state leaders who have made economic development a constant theme of their work have failed to convince voters that a tax increase would result in the good roads necessary to encourage economic growth.

They have sewn the wind by preaching the evils of taxes and the blessings of tax cuts and tax breaks, particularly for businesses that presumably will create more jobs.  But industry wants good roads to ship in manufacturing materials and equipment and good roads to ship products out.

“The people know better how to spend their money than government does,” we have heard them say repeatedly.  Again, the people have decided to keep their money and spend it for things better than building roads and bridges and interchanges to companies that might have provided jobs to those same people and their relatives and friends.

The people have decided they want a higher minimum wage, meaning many of those who might benefit from better roads and the better jobs they could help create will have more money for themselves.

Two roads.  Two men.  Two political philosophies.  But we travel with them and we are the ones who often decide which road they, and we, take—a road rising to the future or a gravel road descending into the dark undergrowth.

“And that has made all the difference.”

—or will, perhaps.

Political fashion statement

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Overalls.

There was a time in our younger years when it was easy to identify the farmer boys at school.  They were the ones wearing the bib overalls.  The rest of us wore Levis or Lee Riders or just denim jeans from Monkey Ward or Sears. The rich kids wore slacks, eventually the kind with buckles in the back.

For a while not long ago, bib overalls became fashionable, especially for girls.  They came in bright colors—which made them fashionable.  Some even had short legs. Can’t recall any of the green or pink overalls with the “Big Smith” label.  Big Smiths had loops to hold hammers and were built for working comfort not for style.  And, like all REAL bib overalls, they were blue.

Almost a hundred years ago, however, overalls were political statements.  There were overalls clubs formed.  The craze started in the southern and southwestern states.  In April, 1920, W. H. Pahlen, an automobile accessory salesman walked into the St. Louis City Hall and announced he was a representative of the American Overall Club.

Pahlen met with F. W. Kuehl, the head of the Municipal Employees Union, and got permission to circulate lists for city employees to sign up as club members. Workers in Kuehl’s office, the Water Rates Office, quickly signed up, promising to wear overalls “whenever possible” until the prices of clothing had been lowered to a fair level.

That’s what the movement was all about.  Clothing costs had taken off (to coin a phrase) in the post-war years and a lot of folks thought the situation was out of hand.

Mayor Henry Kiel refused to pledge to wear overalls but he didn’t object to employees showing up at city hall in denim.  “I have lots of old clothes at home which I can wear in the time to come if I find the prices of new clothing too high…I have no objection to overalls; in fact, I have worn them myself long enough and I might wear them again but I have no interest in the overall club.”

City Sewer Commissioner William Clancy said his workers already had organized an overall club.  In fact, his statement sounded like a mandate. “Until the cost of men’s clothing is reduced to a price commensurate with the ability of the employees of the sewer division to pay for same, all employees in the future will wear overalls.”

Real estate salesmen peddling lots in a new subdivision pledged to greet possible purchasers while wearing overalls until clothing prices came down.  Other real estate salesmen were considered likely to follow suit (to coin another phrase appropriate to the discussion).

Ninety men at the Wagner Electric Company had formed a club, pledging to wear a standard khaki uniform each work day.

The members of the Central YMCA announced they planned to attend church services that day dressed in blue denim.

The Financial Corporation and Development Company chartered, under the common law, an Overall Club to solicit membership from “white-collared” citizens.  Company Secretary E. Kreyling told a reporter, “Lawyers, office men, business men, are all getting in line with the army of blue denim-clad fighters against the profiteers. The association will equip its members with the uniform of the overall brigade and muster them in as high privates in the antiprofiteering army.  There are no generals or colonels or other officers; all are privates.

Three-hundred students and three professors at Washington University signed the agreement to organize the Overall and Old Clothes Club at the school, promising to wear overalls or old military uniforms “or any other cast-off apparel” until “the objective of the national overall movement is attained.”  A dance was scheduled at the school gymnasium with entrance restricted to those wearing old clothes.

About forty Wash-U coeds pledged to refuse to speak to any “gentleman friend” and refusing to be escorted to any event by any guy not dressed in overalls, old military uniforms, or old clothes.

In Washington, D. C., Congressman William D. Upshaw of Georgia caused something of a sensation when he showed up in the House of Representatives wearing overalls.  Nothing unusual about it, he claimed.  It was just a move “to strike at the high cost of clothing.”

But the movement had detractors.  President Robert K. Rambo of the Southern Wholesale Dry Goods Association, not surprisingly, thought the whole thing was foolish because, “It will run the price of overalls up to a figure that cannot be paid by those who of necessity must wear them.”  He thought it made as much sense for overall club members to refuse to buy cars until prices dropped 25 percent. “So long as people are willing to pay any price for the things they want and are not willing to practice self-denial, all talk about cutting down the high cost of living is gabble,” he said.

Owners of cotton mills in New England charged southern cotton-growers had started the whole thing in an effort to drive up the prices of cotton.

Our governor, Frederick Gardner, refused to join the overall club when it was formed in Jefferson City.  He preferred to be a member of the W. Y. O. C., the “Wear Your Old Clothes” Club.  One newspaper observed that it was hard to believe the governor’s claim that his newest suit had been made in 1914, six years earlier.

The Jefferson City Democrat-Tribune was an even harsher critic. It noted a week after the formation of the city’s club that it had not seen any of the signers of the pledge going around “in their best blue denim bib and tucker.”  Instead of driving up the price of denim clothes, said an editorial, “Wear out you old clothes.  Send them to the cleaner. Let’s wear patched clothes as we did in our youth, and we will do more to reduce the price of clothes than all the overall clubs in the world. Cut out useless spending and extravagance and the price of living in every community will be reduced.”

And a few days later, it called the overall movement the latest example of American “pinheadedness” and observing, “Why any sane-headed citizen, whose occupation does not require the wearing of apparel of this kind, should wear overalls to bring down the high cost of living is about as clear as a mud puddle.”

The movement played out in a few months—midsummer, probably.  Its legacy might have been expressed by American Medicine magazine in April, as the movement was gaining momentum. “It is the first indication of protest to come from a class which has been a silent and patient sufferer during all the clashes that have taken place between capital and labor in recent years,” said an op-ed article.

Capital and labor remain part of our national dialogue today. We wonder what new clothing statement will emerge.

Let’s just end it

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Bought something on the internet the other day.  Clicked on an icon that said, “calculate sales tax.”   It was optional, but I clicked on it and was told my purchase would entail $1.79 in sales tax.

Did I regret clicking on that icon?   Not at all.  Just a half-hour earlier I had shopped for a similar item at a brick-and-mortar store and hadn’t seen anything I liked.  If I had bought that item at that store, I would have paid about that much in sales tax anyway.  So by clicking on the internet icon, I—to use a cliché—levelled the playing field.  And I remained a law-abiding citizen.

Please don’t congratulate me for my fairness.  I’m sure I could have found something better to do with that $1.79 than give it to the government which—to use another cliché recently spoken—doesn’t know how to spend my money as well as I do.  I just felt that since the U. S. Supreme Court has said states can collect sales taxes from out-of-state internet vendors I should respect the majority opinion of our highest court.

It has not been a surprise that a member of the legislature quickly has come to my rescue. And his reasoning is no surprise, either.  This legislator considers imposition of the Missouri sales tax on internet purchases made by Missourians to be a sales tax increase and thinks the state needs to provide some relief for such an onerous imposition.

Pardon us, however, if we have trouble understanding how the state collection of sales taxes on internet purchases is a tax increase. But if we accept that line of thinking, why accept the  convoluted solution that goes with it?   We have a far better one and one that without doubt would be much more politically popular.

The idea put forth in the proposed legislation is to cut individual income tax rates even more to offset the internet sales taxes that income taxpayers might soon have to start paying. The idea seems premature because it’s going to take some time to make it legally and mechanically possible to collect those sales taxes. Then it will take some time to get a consistent measurement of how much those collections will be and how Hancock limits affect them.  A little less enthusiasm for immediate remedies to the “problem” of collecting internet sales tax might be advisable because there are other issues to be considered.

Think of all of the Missourians who shop locally and pay the state sales tax.  They are good citizens. They follow the law.  The law says those Missourians will pay sales taxes.  They obey the law.

Where is their outrage or political outrage on their behalf—the good citizens—when other citizens avoid following the law by using the internet to avoid paying the sales tax on the things they buy?   Tax avoidance often lands some people in the pokey—unless its sales tax avoidance by using the internet.  It seems this early legislative proposal legitimizes their tax avoidance.

I’d be willing to bet that many Missourians intentionally avoid paying state sales taxes at felony levels each year.  They keep their $1.79 and are never prosecuted for avoiding the sales tax law.

Let it be clearly stated:  Requiring citizens to pay a tax they have avoided paying is NOT a tax increase.  It is a matter of fairness.  It is requiring the sales tax scofflaws to live by the same standards with which their shop-local fellow citizens live.

Here is an idea that is eminently fairer:  Eliminate the sales tax for everybody.

Clearly, there is within the philosophy that the state should not recognize additional funds by collecting taxes from people who should have been paying them anyway, an implied acknowledgement that adequate funding for state programs and services and bureaucrat salaries is not a matter of concern.

So let’s just level the playing field by eliminating the sales tax on everything.  That puts our local businesses on an equal footing with internet sellers—in fact, it might give them an advantage because they don’t charge shipping fees for local purchasers.

To carry out contemporary political thinking: Eliminating the sales tax will trigger a boom in local retail sales, thus providing more jobs that generate more income taxes that will offset the loss of sales tax revenue.

Let’s not make this thing more complicated than it is.  There’s no reason to start calculating income tax cuts.  Just get rid of all sales taxes, period.   That makes everybody equal.

After all, I could have done a lot of good things with that $1.79 if I hadn’t been honest enough to pay a sales tax.

A tax gift, if we want it

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The U. S. Supreme Court has shown it can change its mind and a new ruling that lets states collect sales taxes from out-of-state internet retailers gives Missouri government a new opportunity as well as some new issues to confront.

All reasons for NOT collecting taxes on out-of-state internet sales seem to have been eliminated by the court’s narrow decision to throw out a 1992 ruling saying out-of-state internet merchants would not have to collect state sales taxes and pay them to the purchaser’s state unless the company had a substantial presence in a state.

That ruling in the early days of internet commerce put brick and mortar businesses in Missouri and other states at a disadvantage and they’ve been aggravated for years that the legislature hasn’t corrected the problem.  The legislature has said its hands have been tied by the 1992 ruling.

The ropes are off now.  We’ll be interested to see if state leaders next year call for passage of a law requiring collection of that sales tax.  There is no doubt the state could use the money.

The legislation will not be easy to write although the court ruling does provide some hints about what will work.

It would not be surprising to hear some voices claim—as they have in the past—that imposing sales taxes on internet merchants would be a tax increase on purchasers and therefore not something the state should lay upon the shoulders of taxpayers who have avoided sales taxes on certain purchases up to now.  We’ll have to see if that lame argument still has any legs in a state that continues to rank in various studies in the lower third of all states for overall tax burden.

The court ruling makes it harder to justify saying, “We’re pro business” while maintaining a sales tax policy that puts our home-town merchants at a sales disadvantage to businesses that exist on our computer screens.

And where do we get the idea that the computers on our desks or in our pockets are not some kind of a “physical presence” in our state? Let’s be honest and admit that the internet long ago became more a physical presence in our lives than Wal-Mart. We don’t have to drive across town to buy something on the internet, after all.

Checking out through Paypal is no different from checking out at the local counter.  The buyer doesn’t  physically stick a credit card into a slot at a cash register with Paypal.  But internet merchants do have a cash register right in front of us—the computer that is a very real physical presence. My brick and mortar house becomes an internet merchant’s physical presence in my town and my state every time I check out with Paypal or some similar system.  (Ohio tried to address the issue with a law saying the use of cookies on consumer’s computers by internet retailers constitutes a “presence.” The retailers are fighting the idea in court.)

The danger, as some might see it, to requiring sales taxes to be collected on internet purchases is that state revenue might increase to the point that some lawmakers will decide to once again ease the overall tax burden on Missourians again.

That idea is getting pretty old. And shaky.

Political commentator Josh Barro, a former staffer at the Tax Foundation (considered a conservative think tank) who contributes to Business Insider, observes in a new article that the court decision reminds states of the Constitution’s Commerce Clause that says states cannot unduly burden or discriminate against businesses from other states.

South Dakota, which brought the lawsuit, avoids that pitfall by providing those retailers with computer software that makes it easier for them to pay sales taxes.  It does not require those retailers to deal with the state and every political subdivision within it that charges sales taxes.  The money goes to a central state agency.  Our Department of Revenue, which collects sales taxes collected by our local businesses and then sends proper amounts to local governments, would fill that role with internet sales taxes.

Missouri has not joined the twenty-or-so states that have signed on to the Streamlined Sales and Use Tax Agreement.  Those states have agreed to some common rules dealing with their sales taxes.  This ruling might encourage a new legislature (The 2019 General Assembly will have new leadership and several dozen new members) to take a new look at the SSUTA as it considers what to do to capitalize on the ruling.

One of Barro’s former colleagues at the Tax Foundation, Joe Henchman, says, “If you want to be absolutely sure that your statute is valid under these rules, you should try to emulate South Dakota as much as possible.”  So that’s a starting point.

Barro makes an important observation that some Missouri leaders seem to have been going against for some time: “It is important for a tax system to be adequate—that is, revenues should grow on pace with the economy, so the government can keep pace with the demand for services as the economy grows.”

He notes tax-free purchases from internet retailers distorts the behavior of purchasers by encouraging them to buy online when they otherwise would buy at a local store, thus reducing local tax collections and that means “the government either has to cut back on services or it has to raise taxes on something else.”   The resulting erosion of sales tax income at the state level has put a heavier burden on property taxes and “taxpayers have revolted against increases in this inflexible tax, voting to impose caps that have in some states kept revenue growth well below economic growth.”

Add to that the penchant government has to lower various taxes under the philosophy that lower taxes will mean more jobs that will stimulate the economy and you can get a state that reduces services that industries and employers would like to see before they commit to creating jobs.

So Missouri has an opportunity because of the court ruling.

Justice Anthony Kennedy, writing for the majority in the Supreme Court decision, estimates the ruling could mean eight to thirty-three Billion dollars in annual tax revenues for the states.  The federal Government Accountability Office thinks Missouri’s share would be $180-275-million a year in state and local sales taxes.

Missouri could do a lot with that amount of money at the state and local levels.  Except—

We have the crippling Hancock Amendments.

Those parts of our state constitution put a ceiling on how much new taxes can be collected without a statewide vote.  State Auditor Nicole Galloway, a little more than a year ago, estimated that taxes at the statewide level could not increase by more than $94-million without such a vote. We’re not sure how much of the figure from the GAO would go to the state and how much would go into local government revenue accounts, but Hancock appears to put a cloud over the issue at the state level.

Before the passage of what was called Hancock II, the state had to make refunds to income tax payers if state revenue growth exceeded the original Hancock limits. The state did make those refunds for a couple of years before adopting the first of a series of tax cuts to make sure the state did not to go to the inconvenience of mailing out checks.  The state hasn’t come close to hitting the refund threshold since Hancock II. In fact, Auditor Galloway says Missouri is four BILLION dollars under that limit now.

Will voters support the new authority given Missouri by the U. S. Supreme Court to collect more than $94-million in internet sales taxes?  Will collecting six or seven or eight cents per dollar from an out-of-state internet seller increase state revenue so much that a statewide vote will be required, giving Missourians a chance to reject the proposal?  The GAO and the state auditor have put forth figures indicating that vote might be needed.

We have had about two decades of leadership telling voters their taxes are too high. We’ve seen voters who travel to the polls on increasingly bad roads that go across increasingly crumbling bridges refuse to support gas tax increases to make their journey smoother and safer. And the legislature has taken steps year after year to reduce the state’s financial ability to “keep pace with the demand for services as the economy grows.”

The court has presented Missouri with a gift.  Will Missourians decide to leave it unopened?

(You can read Josh Barro’s article at https://amp.businessinsider.com/supreme-court-wayfair-internet-sales-tax-decision-good-for-consumers-2018-6)