Monthly Archives: July 2012

Government’s Olympic Journey

For an Olympics host city the games are akin to a credit card financed trip to Vegas: lots of wagering on someone else’s dime and hoping for the best. The poster child for poorly executed games was Montreal, 1976. Those games were 800% over-budget – residents are STILL paying off the bonds. On average most cities do a poor job (an average of 170% over budget for the past 50 years). However being over-budget doesn’t necessarily mean the effort was for naught. Atlanta was 147% over budget (1) but was actually one of the success stories (spending a “mere” $2 billion compared to the nearly $15 billion spent on the current London Olympics). In fact most of the games since 1984 have been financial successes. What was special about 1984? The games were held in that good ol’ bastion of capitalism, the United States (Los Angeles). After the financial debacle of Montreal, Californians were wise enough to reject tax increases to cover the cost of the games. This forced the US Olympic Committee to turn to the private sector. The 1984 games were almost entirely privately funded and made frugal use of existing venues. They were the first games to be highly marketed and although criticized at the time for the “unseemliness” of such a sacred event being commercialized, the games turned a profit and that commercialization model has been used ever since.

Events like the Olympics are putatively part of the assumed economic development mandate that some believe is a role government should play. Although I dispute the need for government to play such a role (insomuch as they can play a role by simply getting out of the way) I do agree that the Olympics are about one thing: money. I do not say this as a cynic, but as an observer of human interactions. Money is simply the physical embodiment of humans producing things that other humans want. These people want to consume (watch) sporting events and those people want to produce (participate in) sporting events. Thus the act of facilitating both parties coming together has value. There is no more of a reason for governments to be involved in the Olympics than there is for it to run oil production or mining operations. It’s not that in theory government couldn’t do a good job on its own and actually make money, it’s simply that this has never happened, so why do we keep hoping “this time will be different.” Only the privately “outsourced” games have been successful (as happened in Atlanta and Los Angeles). Which begs the question: if the partial privatization has led to success, why not make the games a wholly private affair? The IOC (International Olympic Committee) could simply rent existing venues from private owners. The IOC would invest profits from the games into programs that foster youth and amateur athletics worldwide thus ensuring a steady supply of future Olympians. Private business would build new venues only where it was profitable. If there were no profits then the private investors would lose their money, not the taxpayer. Businesses that would be positively impacted would come together to form a consortium that would fund infrastructure improvements thereby unburdening the taxpayer from such expenses. In short, those that stand to gain economically from Olympic games should be the ones to (voluntarily) foot the bill. Government has started on the right path by privatizing part of the games, now it needs to complete the journey and stop socializing the costs (taxes) in order to benefit the few (private investors).

Needs and Wants

The TSPLOST frenzy has moved into high gear as we approach the July 31 election. The “pro” side makes some compelling arguments. Compelling that is until you actually think about them.

Needs and wants: It is argued that all projects are beneficial. Ok, I’ll bite. Every project is beneficial. But, just because some proposal IS beneficial in some tangential way, it does not then logically follow that it MUST be funded. Finishing out my basement, remodeling the kitchen and buying a new car are all beneficial for me…but does that necessarily mean I MUST do these things? No, I prioritize those things that are most important. The “pro” side seems to mistake wants for needs. Needs are limited, wants are unlimited; therein lies the danger of confusing the two.

Broad, low taxes are easier to hide than narrow, high taxes: We are told we need more revenue because motor fuel tax receipts have fallen over the last few decades (due to increased fuel efficiency). So why is the obvious solution of raising the motor fuel tax not on the table? Because it is politically unfeasible to add 30¢ of tax to a gallon of gas (currently 47¢ total or 29¢ of GA tax). However, it apparently is politically feasible to slip in a 1¢ tax on every dollar of every sale (except for motor fuel and automobiles, of course, the two things that, you know, are actually correlated to road use).

How much should we spend on roads?: Another argument is that we are spending $1 per year on roads and since this is not “working” the only solution is to spend $2 a year. In this “more is better” argument how does one ever determine “ok, this is enough.” Why not $3? $8? By what non-arbitrary method can anyone determine the ideal amount? Some say define it as a % of the economy or of tax revenue. Oh, please. Do you buy food based on what percentage it is of your total income? (“ahh yes, I better be sure I spend 5% of my pay on food this week!”). No, nobody does that. Pulling arbitrary percentages out of thin air does not provide a rational basis for determining the proper cost of anything. Ok, so how can we know the proper amount? The same way other scarce resources are allocated in a market economy: prices. If we had a mostly private road system prices would rationally allocate monetary resources where they are most needed (just as it does for other goods – prices inform us that it makes more sense to build homes out of wood than out of titanium). Heavily used roads would receive more attention (due to higher toll receipts) than lightly travelled roads.

Jobs: This argument is more of the same old Keynesian fallacies about government spending creating jobs. $18 billion in increased taxes merely removes $18 billion worth of some jobs in order to create $18 billion in other jobs. Moving money from my left pocket to my right pocket does not increase my wealth. The Keynesians are quite fond of this resource shuffle that suggests moving checkers around the board increases the number of checkers. For example, they use this argument to claim that new roads foster growth of new businesses (the “if you build it, they will come” argument). Businesses do come, however they are simply diverted from where they would have otherwise gone. Moving stuff is not the same as creating stuff.

A permanent tax to maintain a permanent bubble: For those old enough to remember Carnac the Magnificent  – the answer is: “Politicians plead to prevent a crisis of massive unemployment in heavy construction.” The question: “What will the news headline be in 2022 when the TSPLOST is up for renewal?” This tax is the quintessential government bubble: turn on the tax spigot to fill the tub but once that spigot is turned off the tub quickly drains. Anyone who threatens to turn off that spigot is vilified as anti-<insert locality> and anti-job.

The pro side insists, “We must DO something!” Yes, we must. Perhaps that “something” should be to force those in government to reprioritize expenditures with the money they already get. Maybe we’re “short” on funds due to massive mismanagement. Should we reward those that have already squandered our money with even more money, because this time, this time they promise to get it right?

On July 31, vote NO on TSPLOST.

Cui bono?

I recently saw a pro-TSPLOST bumper sticker on a truck. I thought “that’s odd, why would average Joe Citizen be so impassioned about infrastructure policy that they would feel the need to advertise it on their vehicle.” Then as I passed the truck the reason became all too clear: a bright blue logo signified that this truck was owned by a road construction firm. Yes my friends, that company is a “rent seeker.” Rent seeking is that process that distinguishes the market entrepreneur (one who must compete in the free market for paying customers) from the political entrepreneur (one who gains an advantage over his competitors by lobbying the government to pass laws favorable to his line of work, such as regulations, licensing laws, or outright government purchasing.) The construction company in question sees the potential $18 billion that will be raised and they want their share of that pie.  If you want to evaluate the merits of any newly proposed program, simply ask “cui bono” (to whose benefit). If the answer comes back in the form of concentrated benefits (construction firms and those selling right of way) and diffuse costs (“it’s only a penny!”) spread among the taxpayers, then chances are it is a political boondoggle that will accomplish little at a greatly inflated cost and should be promptly voted down.

The TSPLOST is being sold to the public the same way every new government expenditure is sold to the citizenry: through FUD (fear, uncertainty, doubt). The fear of what will happen if we don’t pass it (roads will crumble, bridges will fall, kittens and babies will be slaughtered!) comes first, then uncertainty surrounding our future (how else can we build and maintain roads?) and ultimately the third leg of doubt is brought to bear (there’s no way anything else can work). The tenuous justifications for “regional” projects are laughably juvenile in their simplicity. The Project Sheets for the Constrained Project list were apparently assembled from the “TSPLOST” template found in Microsoft Word; only the titles and locations have changed. Miraculously all the projects “could assist in having a positive impact on the economic vitality for this region”, “improve access to jobs”, and “improve travel times for drivers.” Sounds grand, however these descriptions were used to describe the two projects for Morgan county: a 1 mile driveway (Stanton Springs parkway) extension and widening of a lightly travelled rural highway (441 south of I-20). Someone please explain to me how widening a road will enhance access to jobs? Is there some impenetrable Great Wall of Georgia that these new wider roads are going to get us around?  The sad part is that for Morgan county the two projects aren’t even fully funded by TSPLOST. The county will come up $24 million short after 10 years (see spreadsheet). Naturally we’ll need to extend the TSPLOST for ANOTHER 10 years when it comes time for renewal in 2022 else we will have to raise property taxes to make up for the shortfall.

Which raises a final point. It has been suggested TSPLOST will save money through reduced property taxes, however that math does not work. It was stated that county officials “hope” to lower taxes by 1 mil. Using the median home value in Morgan county (US Census) of $169,400 we find that would be savings of about $67. Using the median household income in Morgan county (same source) of $46,000 and the fact that people on average spend about 36% of income on sales taxable goods (food will be taxed under TSPLOST), that translates into an increased sales tax burden of about $165 per year or a net increase of $100 on average. Everyone that would like to reach into their pocket at Christmas and hand over $100 to the government, please raise your hand. Yeah, that’s what I thought. Property tax savings is a red herring. For the overwhelming majority of residents there will be a net increase in taxes. Who benefits? The public or the politically well connected?

On July 31, vote NO on TSPLOST.

Will you still pay me, when I’m sixty-four?

The mainstream media likes to occasionally publicize statistics demonstrating an ever-widening income/wealth gap. This is usually either in response to some left-wing talking head (Obama) mentioning it in a speech, or, it is simply a slow news day and nothing whips the masses into a frenzy like giving them the impression they are somehow being cheated out of their “fair share” of the economic pie, “yeah, let’s stick it to those evil rich people!” Yeah, grandma and grandpa are pretty evil, aren’t they? That’s the little tidbit they leave out of these numbers, although it is one that should be obvious: old people have lived longer than the rest of us, therefore they’ve had more to time to accumulate wealth and the work experience that allows them to demand higher wages. Duh. If the relative proportion of the aged in this country were constant the effect of age on relative changes in income distribution would be nil. But, the proportion of the aged is not constant, it is increasing. The “baby boomers”, the largest single age demographic in this country, are getting older. What do we get when we put those two together? We see a growing demographic that is increasingly earning and accruing more and more wealth. And how would we expect an increasing proportion of increasingly wealthy elderly to effect wealth distribution statistics? That’s right…a growing statistical disparity when people are lumped into wealth brackets that ignore age.

I’m not suggesting age is the sole contributor to changes in wealth/income disparities (increased productivity being another important factor) but it is obviously a major influence considering the overall “greying” of America (see US Census site and compare 1990 v 2025). And it is not merely the size of the group. The financial savvy of today’s “elderly” coupled with an increasingly productive economy have led to a poverty rate among those 65 and older one-third of what it was in 1967 (11% down from 33%). This is HALF the rate for those under 35 (22%). Bear in mind Social Security had been paying the elderly benefits since 1937, so it apparently wasn’t all that effective if the poverty rate was still 33% after 30 years of operation. We as a society need to shed the idea that old=poor and that Social Security is the only thing that stands in the way of grandma turning tricks for her next meal.

So what is the point? It is not to pick on the “age challenged”, but rather to point out that social benefits and tax policy based merely on age, race, or gender make no sense. They are inherently discriminatory insofar as such policies assume ALL in some demographic must be poor or disadvantaged in some way. If we must* have a government run social safety net or constituency-pandering tax breaks they should be means tested at the individual level, not group level. In other words, property tax breaks for the elderly: bad, but, property tax breaks based on income, good. Social Security based on age: bad, but Social Security based on need, good (I’ll leave it as an exercise to the reader as to how one should objectively define an inherently subjective concept like “need” – Warning, your head may explode).

We are a nation of individuals, not groups. We owe it to ourselves to evaluate need at the individual level, not the “group” level, else every self-entitled special interest group lobby will bankrupt this country as each group jockeys to live at the expense of every other group.

 

* Just not to leave anyone with the wrong impression here, I do not believe government is the most efficient vehicle by which assistance and charity can be distributed to those that truly need it, therefore I am in no way advocating a government run “safety-net”. I am merely suggesting that since it is politically unlikely that we will as a society unburden ourselves with the ponzi-esque social safety net we have established, the least we can do is force the government to run it more efficiently and effectively. Private charities do a fine job of that now and could do so much more were the government to get out of the way, lower the tax burden on the “wealthy” so they could give even more and allow the efficiencies of the market (good charities survive, bad ones go away) to provide needed help.

Needs of the many?

Shortly after the Supreme Court’s ruling on the PPACA (Obamacare) case came down last Thursday the world of Facebook exploded in a firestorm of cross fired epithets both praising and decrying the ruling. Frankly I’m just a bit burnt out on it all, as it would seem everything that could be said has been said ad nauseam (and yet I’m writing this article!) I think both sides believe or hope their words can persuade those on the other side, but for the most part it is a futile exercise. The Facebook community and its ilk are no different than Congress or the President; everyone is just talking past each other and no one is listening. In order to persuade you must listen and understand why they hold their beliefs or ideology, otherwise for the most part they will just hear your words but not understand the meaning. My goal in writing these articles has always been to inform and thus persuade. I’d like to think I’ve done a good job at this however I recognize the reality that I’m likely preaching to the choir while being ignored by the congregation.

If you have read this far and you are a pro-Obamacare person then congratulations for being willing to have an open mind. In order for me to have a ghost of a chance of possibly having you consider that socialized healthcare is perhaps not the best route to help people in need, I need your help. I need to understand why you support Obamacare. Please consider the following questions and feel free to respond at the contact info below.

1. Is healthcare a right? If so, why?

2. If healthcare is a right then is there any moral distinction between securing a negative right (i.e. a right secured only through the inaction of others) vs. securing a positive right, such as healthcare (i.e. a right secured only through the action of others)? Stated differently, is it moral to compel other individuals to act on one’s behalf under threat of state sanctions because one’s needs are deemed greater than those from whom the compulsion is placed upon? I believe all major world religions teach to receive help one must ask, not demand?

3. If you believe the needs of some outweigh the rights of others, then do the ends justify the means? If you agree that normally positive rights are by definition amoral, then are violations of morality justified if it might save a human life? (i.e. progressive taxation is theft but is it justified because it might be used for some useful purpose)?

4. If the ends should not justify the means (as this premise can justify any action), then do you believe that with healthcare we can make an exception because people’s lives are on the line? If yes, then why is it ok to violate some rights (property, contract, liberty) but it is not ok to violate other rights (life, privacy) in pursuit of possibly saving a life? Or is it? Would it be ok to euthanize a healthy person if their organs could save the lives of 10 people? Clearly the greater good is served by this action, so why is this wrong yet theft to possibly save a life is perfectly fine? Both involve a “taking” of property.

I understand the desire to help others; all of us on both sides of the debate want to help those in need, we merely disagree on the best course toward achieving that end. If you’re willing to look at the history (see  these articles) you will see that it is government, through regulation and subsidization (Medicare) that has caused prices to spiral out of control. Prior to 1965 (Medicare established) healthcare prices were stable and low and those in need were never turned away owing to the charitable nature of the American citizenry and her doctors. To suggest those in need were not helped is to slander the American people as implicit in the charge is that we are an uncharitable bunch that can only do “good” when forced to do so by our government.