Now you know who not to vote for.
Now you know who not to vote for.
Giving politicians the power to manage the economy causes all kins of problems. For one thing, they act in their own interest – just like anyone else. This shouldn’t be a surprise to anyone, but it seems to be. It’s time to get past the idea that politicians (or bureaucrats) are wise and altruistic overseers of the economy, taking necessary actions to correct imperfections and imbalances caused by, well, regular people.
A good example is the proposed legislation in the Maryland General Assembly to raise the state minimum wage by nearly forty percent. The purpose of this law is to make it illegal for a high-school dropout — let’s call him John — to agree to accept a $10 hourly wage from a shop owner.
The evidence clearly shows the likely result of this action. If the shop owner has a job, she will hire the best-qualified person she can. A person with a good work history, or a high school diploma or GED, will seem like a better bet than John. John, representing the lowest level of skills and education in our society, will be the loser from this legislation. He will become unemployed, and likely remain unemployed for the long term. An increase in the minimum wage almost always increases unemployment for that reason. Specifically, it increases the already abysmal employment prospects for those starting out in the job market (the 17 – 25 cohort), and even more so for the black and Hispanics in that group. An increases in the minimum wage ends up being a knife in the back of the least advantaged, the worst-off among us. When Montgomery County sought to raise the minimum wage, this was the advice they got from expert labor economists at the University of Maryland and Georgetown University. The deleterious effects, the economists testified, are more likely when the increase is large and when the unemployment rate is already high. Economist Stephen Fuller looked at the Maryland bill and concluded it would probably cause a reduced standard of living and higher costs.
But political management of the economy doesn’t pay any attention to those people at the bottom. When the high school grad with the increased wage gets his paycheck, he’ll thank the politicians who caused it. The politicians have no incentive, however, to be concerned about the people at the very bottom of the economy – the ones we should be most concerned about. John’s lost job or lost employment opportunity doesn’t have any political loss for them. They are seeking political support, and they get rewards for increasing the minimum wage — and also for increasing unemployment, poverty, and homelessness.
Restoration is complete for the Sally Callmer mural of the commuting penguins that used to be displayed at the Silver Spring Metro station. The mural, which was originally scheduled for a one-year display period, won the hearts of commuters and passersby in Silver Spring. That’s why, when the mural was taken down a few years ago for restoration, those same passersby raised the private monies to restore the mural
The bad news: WMATA doesn’t plan to put the penguins back up until the Paul S. Sarbanes Super-Duper Bus Stop is completed. See you in ten years, guys.
Politicians usually realize the importance of attracting business to an area, and keeping existing businesses from moving. There are two ways in which they can develop policy towards those ends.
One way is through targeted subsidies and other bribes to firms. An example would be the tax incentives offered by Montgomery County to Westfield, to subsidize Costco’s arrival in Wheaton Plaza. Another (on a grander scale, though no different) is the $200 million that Maryland gave to Art Modell to bring the Browns from Cleveland to Baltimore (on top of building the stadium for Modell).
Another way is to develop a set of policies that make an area a friendly place to do business. Good, well-designed and fair tax systems are simple, transparent, don’t require large resources to comply, don’t skew towards particularly favored enterprises, and minimize the impediments to growth and prosperity.
What’s the difference between the two strategies? And why do both the State of Maryland and Montgomery County prefer the first strategy?
The first strategy is general, and aims to provide a good climate for all business. But that doesn’t gain very many brownie points, or rack up debts and favors that politicians can draw on later. When something benefits the population in general, no one business gains enough that a politician can show up at the door with hat in hand. However, the first strategy gains the politician just that. By helping out Westfield, MoCo councilmembers can count on campaign donations and other favors from the corporation. For the most part, politicians don’t gain from advancing the general public good (as much as I hate using that nebulous and overused term). They do gain from granting favors to individual actors, who then enter into a mutually advantageous backscratching relationship with the pols.
Maryland devotes a nice chunk of the budget to the Department of Business and Economic Development, devoted to handing out this kind of corporate welfare to favored businesses. When it comes to creating a favorable business climate (syn) however, the state government doesn’t do so well (for the reasons outlined above). In fact, it does pretty lousy.
A report issued by economist Kail Padgitt at the Tax Foundation concluded that the Maryland fits in the ten worst business tax climates in the nation. (Sixth from the bottom, actually). The report doesn’t look at an overall business climate (a pretty complicated assessment, one would think, covering transportation and other infrastructure, real estate costs, education, etc.), but rather just the tax aspect of the business climate.
The ranking is hardly incontrovertible, but is methodical and fairly applied across the 50 states. It evaluates the business climate tax index by a weighted ranking of five tax factors. Here’s how Maryland is ranked in comparison with Virginia (since those states competes for businesses):
MD VA PA
Corporate Tax 14 4 38
Individual Income Tax 49 17 14
Sales Tax 11 8 28
Unemployment Insur Tax 47 29 42
Property Tax 40 25 44
Overall Ranking 44 12 26
To his credit, Padgitt cites critiques of the annual Business Tax Climate Index report, but also notes several academic studies that demonstrate that the index tends to correlate well with economic growth in the state.
It is likely that tax policy is helping to steer some businesses (and jobs) away from Maryland into border states. Without discounting other factors that are part of business location decisions, we have seen several cases in the past few years where businesses considered – and rejected – Montgomery County as a location for operations. It would seem that if we want to improve the employment situation in Maryland, the General Assembly is going to have to take a hard look at the the areas where we do most poorly in comparison to other states – the individual income tax, the unemployment insurance tax, and the state property tax.
We’re just out of National School Choice Week, and the Daily Beast is reporting on the issue as a matter of civil rights advocacy. It’s bringing together civil rights advocates and conservatives, — for example, ultraconservative Sen. Ted Cruz and ultraliberal Rep. Sheila Jackson Lee – in joint advocacy for opening up options for parents and students.
School choice, broadly, is about getting a variety of options for educational settings. Choices include magnet schools, homeschooling, private schools, charter schools, and on-line coursework. It’s also about getting parents to stop thinking automatically of the neighborhood school as the only place for their children.
But in order to have options available for parents, the forces that impede those options have to be cleared. School bureaucracies and teacher unions (Hello MCPS and MCEA!) fight against the interest of students, in favoring of solidifying their own power over education and school budgets. The forces in favor of empowering the public school bureaucracy are particularly strong in Montgomery County.
Montgomery County took home a C- on the Brookings Institution’s annual Education Choice and Competition Index, released last month. Baltimore City Schools and Washington DC Public Schools did relatively well, each earning a B minus score.
Here are some of the grading criteria, and how Montgomery County met them (poorly, or not at all):
Availability of Alternative Schools
“Alternatives to traditional public schools include charters and at least two of the following: magnets, vouchers, affordable private and tax credit scholarships [NO]
Assignment Mechanism: A measurement of opportunity for students to get into alternative settings.
- Students are assigned to schools through an application process in which parents express their preferences (rather than through geographical attendance zones) [NO]
- Students receive a default school assignment based on a geographical attendance zone but parents can easily express their preferences for other schools [NO]
- Assignment to oversubscribed schools that do not engage in preferential admissions maximizes parental preference [NO]
- Assignment to schools out of the students’ geographical attendance zone is difficult, unclear or substantially disadvantages parents [YES]
The survey looks at processes and results. It doesn’t examine the degree to which county school administration facilitates school choice. In Montgomery, the school board actively seeks to block and hinder school choice. It’s probably only the high average income level which enables wealthier parents to facilitate school choice, leading to MoCo getting a grade as strong as C-. That really doesn’t reflect how poorly the school system treats lower-income parents, who don’t have the means to overcome the impediments that the board of education and MCPS place in their way.
MoCo will likely do even worse next year, as the only charter school in the county is closing down.
More than half the County Council is sponsoring a bill to create public financing for political campaigns in Montgomery. The bill would mandate that tax funds go into a new pot of money for candidates to draw from. Echoing the PR of Councilman Phil Andrews, who is introducing the bill, the Post gushes “Andrews plan is completely voluntary.” By this, they mean that the pols don’t have to take money from it. But it’s not voluntary for county taxpayers, who would be forced to pay more money — purely for the benefit of the candidates.
Andrews and the sponsors call it “campaign finance reform.”
I call it “Welfare for Politicians.”