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Google follows Microsoft to Washington

A group of nerds get together to start a company. They become wildly successful by focusing on their business. Then they go political.

Stop me if you’ve heard this story before. Oh wait. You have. In the 1990s, there was Microsoft, which had a tiny presence in Washington DC, until its competitors egged on the US Department of Justice to pursuit anti-trust actions against the company. So it entered the parasite economy.

A more recent entrant is Google. Says the Washington Post:

“Nine years ago, the company opened a one-man lobbying shop, disdainful of the capital’s pay-to-play culture.

Since then, Google has soared to near the top of the city’s lobbying ranks, placing second only to General Electric in corporate lobbying expenditures in 2012 and fifth place in 2013.”

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Less bureaucracy, lower costs: Imagine that

The world of health care finance is one giant Rube Goldberg machine, with any number of third parties involved. Through Medicare, the U.S. government is the dominant player in setting prices for thousands of medical treatments. Corporate plans and private insurance companies add themselves into the mix, and of course the Affordable Care Care (ObamaCare) adds even more moving parts.

But there’s a small movement toward stripping away the various bureaucracies, private and public, that interject themselves into health care. For example, some physicians eschew insurance, and go on a cash-only basis. They say it lets them cut costs — no need to staff up with people whose job it is to wrangle with insurance companies. They also say it also lets them have a profitable practice with a lower volume of patients, which means more time for patients. (Cynically, you could also say it leaves more time for playing golf.)

This movement has been going on for a while, and the New York Times has published one of the latest examinations of this in the popular press: Doctors shun cash.

The war on e-cigs

So-called e-cigarettes, or e-cigs, are a curious product. They are called cigarettes, but they don’t contain tobacco, and people who use them don’t set anything on fire–except perhaps the desire of neo-prohibitionists to regulate them as if they were cigarettes.

Have they been proven completely safe? No. But then again, we know that real cigarettes are harmful. If e-cigs, or electronic nicotine delivery systems as they are more fully called, can help some people kick the tobacco habit, the FDA and various state and local agencies should not attempt to regulate them out of business. After all, “if it saves one life ….” Right?

Federal money encourages overly ambitious park project

“Free” federal money always has costs. In the case of some families in Dakota County, Minnesota, it could cost them their property. They own land that is surrounded by a park that the county has been assembling for a while, along the Mississippi River. Spurred by the lure of an offer of funds from the federal government (an offer that will expire soon), the county wants to get the last of the in-holdings and build a bike path that will be part of a multi-county trail system. The families don’t want to sell, and one in particular has taken to the airwaves and Internet, drawing the attention of Tea Party and property-right activists.

I do frequent county, state, and other parks for bike riding and skiing, so you’d think I would be sympathetic to the county. But I think that Minnesota has a public-recreation-government-complex at work. For example, it competes with commercial enterprises, as when cities build magnificent water parks or indoor play structures. The “legacy funding” statewide sales tax is a slush fund for all sorts of recreation-and-sporting groups, and urban planners are trying to nudge people out of cars and onto bicycles through “traffic calming,” bike lanes, and the like.

I’m sympathetic to the plight of the families, since property rights are a key part of a system of limited government.

But is the county out of bounds? I don’t think so, legally. They want land for a park. Creating and maintaining parks? Governments have been doing that for a long time, and parks are public goods.

If the county isn’t out of bounds legally, I think it’s being imprudent and heavy handed. Seizing someone’s land should not be done lightly, and it should be the last resort for highly critical public goods. In this case, the park is already largely in place, and one family says it is willing to sell a small portion of its land so that the county can complete the path. But the county wants all of the family’s land, including that not strictly required for the path. That’s going too far.

From what I have read, and I admit to not having followed this development extremely closely, there’s a systematic problem at work here: that free federal money, coupled with the pressure (political pressure, plus perhaps some funds) from a regional, unelected government body known as the Met Council. The council is all about promoting “smart growth,” “livable communities,” parks, and bike paths.

If the county commissioners are going to spend millions of dollars to create a super-park, they ought to do so with county tax revenue. Why? That way, the costs of their actions will be borne by the people who elect them. The feds don’t put them into office, and neither do the officials of the Met Council. So there’s a disconnect: The county commissioners can take steps that please state and federal officials, deliver bennies to local residents, and not present a bill for their actions to the local residents. The only people who feel the pain are a few families.  That’s not good.

If there’s a not-awful element about this story, it’s that eminent domain, if used, will be for a project that is truly public. The county isn’t taking from a landowner to give money to a private business interest, nor is it justifying its actions on the need to raise revenue. In short, it’s not practicing crony capitalism or industrial policy, just an overly ambitious version of what governments (pure libertarian thought aside) governments should be doing.

Right now, the dispute is in mediation, though I don’t see a positive outcome for the families. The resolution to the action lies in citizens contacting county commissioners.

Is Minnesota really #8?

There’s a lot of bipartisan self-congratulatory talk going on about how Minnesota ranks #8 in the latest edition of The Best States for Business and Careers, an index from Forbes. MinnPost, for example, includes quotes from the current governor, as well as a man who would like to challenge him for the office next year. Of course, everything must become political.

But the quality of a state for economic performance is a complex subject that should defy short-term chest-beating. For one thing, it depends in parts on the personal habits and qualities of its people, which are only partially determined by public policy. In short, not everything is determined by policy or politics. But if we do want to sort out political blame or credit, consider also that there’s typically a lag between a policy and its effects. Many different policy decisions influence the elements of the rankings, and it’s likely that some have short lag times while others have long ones.

When it comes to meta-indexes such as this, I’m always more interested in the particulars than in the headline-grabbing number. And in this case, there’s enough murkiness in just what is included in the index to make me question its validity as a tool for guiding policy. Still, let’s take a look.

To compile its rankings, Forbes looked at six different categories of data:

  1. Quality of life included colleges (the number of top-ranked institutions), cost of living, crime rates, an index for culture and recreation, health statistics, poverty rates, school performance data, and weather.
  2. A state’s economic climate is measured by the average unemployment rate over the last five years, as well as “job, income, and gross state product growth.” In other words, it’s backward-looking.
  3. Growth prospects were calculated by looking behind (the number of businesses that have opened and closed; venture capital investments) and looking forward (forecasts from Moody’s Analytics).
  4. Labor supply is one category Minnesota does well in. It does well in high school and college achievement. This category also measures net migration over the last five years, percentage of workers in a union (low), and projected population growth.
  5. The regulatory environment is, curiously, captured by two indexes that appear to be at odds with each other. One report, Freedom in the 50 States, emphasizes minimal uses of government. The other, from Pollina Corporate Real Estate, “measures tax incentives and the economic development efforts of each state.” When I read “tax incentives,” I think “government picking favored projects over others,” though it’s hard to tell what Pollina has in mind. The Forbes index also “considers labor regulations, health-insurance coverage mandates, occupational licensing, the tort system, right-to-work laws and more.” That’s a mouthful, and by conventional free-market standards, Minnesota doesn’t do that well on these matters.
  6. Business costs, says staff writer Kurt Badenhausen, “incorporate Moody’s Analytics cost of doing business index which includes labor, energy and taxes. Moody’s weighs labor costs the most heavily in its index. We also included a state tax index from the Tax Foundation that launched in 2012 and looks at the tax burden on businesses in each state across different industries.”

It looks like a decent compilation of factors, though we don’t know the specific weighting of each category. In addition, the data for some categories is described only generally, so there’s a lot we don’t know about this index.

What about Minnesota? In the article that summarizes the index, Forbes credits the state’s strong showing to “an improved economic outlook,” as well as its #2 in the percentage of adults with a high school diploma, a low poverty rate, and a healthy population.

Here’s how the state ranks on each of the six categories.

Quality of life: #5. When you have a lot of money–and Minnesota is a high-income state–you can buy a lot of quality of life. How did it become a high-income state? (Insert lots of political debate here, but let’s just say we’re good at making and selling stuff that commands a high value in the global and national market.) In addition, Minnesota’s generous welfare system helps keep the poverty rate low. Also, Minnesota is a laggard in locking people up in prison–which may, considering that prisons become schools for crime–may actually be good for crime rates.

Economic climate: #9. Over the past five years, the state has had it good. Republican politicians and partisans, of course, will credit Republican rule. It’s obviously a self-serving argument on their part, but it still must be asked: What will be the effects in a few years of the state’s current one-party DFL rule? It may depend, in part, on how long that monopoly continues.

Growth prospects: #13. This is encouraging, though again, some of the data–it’s impossible to say how much–is based in part on past policies. The other part is based on educated guesses about the future.

Labor supply: #18. The state’s high rate of high-school completion helps here. Minnesota routinely scores near the top of the nation on the National Assessment of Educational Progress, as well.

Regulatory environment: #22. Given the mash-up of indexes here, it’s hard to say anything other than, “At least Minnesota has been above average.”

Business costs: #34. Though this is the most heavily weighted factor in the index, it is also the only one in which Minnesota ranks below the national average. That’s not good for the future.

It’s all an interesting collection of data, but there’s so little detail about specific measurements that, combined with the other factors mentioned above (lag time, non-policy factors), it’s hard to say anything definitive as a result of this report–except that politicians will seek to claim credit one way or the other.


(First published by Center of the American Experiment)

Trying to limit what you want

It’s easy, but wrong, to think of today’s governing philosophy as socialism. Rather, it’s control, including constraining demand in a number of areas of life.

For example, transportation planners such as Minnesota’s Metropolitan Council want to minimize the demand for miles of roads. We can’t build our way out of congestion, they say. So they seek to constrain the demand for roads by nudging people into living in townhomes near light-rail lines in Minneapolis and Saint Paul.

We would benefit from an increase in the supply of energy, but public policy aims more at constraining demand for energy than increasing its supply. Keystone Pipeline, anyone? The federal government seeks to limit the demand for energy by requiring that everything from cars to washing machines use less energy.

Health care? The whole point of soda bans and anti-smoking campaigns is to reduce the demand for medical care that might be induced by certain habits.

In these and other areas, governments that try to limit demand are joined by private-sector organizations. Sometimes these groups have ideological motives (suburbs either make you bored or evil).  Sometimes they find peace and profit through a regulatory environment. (See: Energy companies, health insurers, and many others.)

So the problem is not entirely government, though many of the attempts to restrict demand would lose their strength without government intervention. For example, with a guaranteed rate of return and a monopoly position within a defined geographic area, power companies find it in their interest to tell customers: Don’t buy so much of our stuff!

But none of this works as planned. More importantly, it’s immoral to manipulate the choices of competent adults. Though people have some common needs and wants–food, shelter, family and friends, and so forth–they’re also incredibly diverse in their interests, preferences, risk tolerances, and priorities. As such, governments should give them much more leeway than they do.

To be sure, governments also restrain supply. The health care industry is filled with supply-restricting regulations, such as requirements that government approve the purchase of an MRI machine. But efforts to reduce demand are an under-appreciated, and pervasive, face of public policy today.

(First published by Center of the American Experiment on September 26, 2013)

Hooray for cuteness capitalism

Along the curbs of many residential streets this summer, you’ll find a classic piece of Americana as well as free enterprise–the lemonade stand. Stop and drop a couple of quarters, please.

The other day, I was driving back home when three children caught my eye. They were all girls, roughly ages 9-12, standing at a corner, waving signs and yelling out “Lemonade! Lemonade for sale!” I went on my way but once home, got on my bike and pedeled around the neighborhood for a couple of miles before I looped around to the girls.

They were selling two colors of lemonade, the traditional yellow as well as pink. For 50 cents, you could get a 12-ounce plastic cup of wet and sugary goodness.

It was a simple exchange: One girl asked which color I prefered, I asked about the price, gave her the money, and then drank enough of the cup that I could place it in my water-bottle cage for the short trip home.

Reflecting on the exchange, I realized that these girls had potentially run afoul of all sorts of laws and regulations. There were no boys in their company (though a man, I presume to be their father, stopped by). Had they discriminated against boys? Where was the EEOC on this? Did they have a food permit? Was their lemonade-mixing facilty visited by inspectors from the health department? How about an occupancy permit? Was this kind of commercial activity permitted under zoning regulations? Was their father violating child-labor laws? Were they getting paid minimum wage? Did they have an occupational license to sell lemonade? And had AFSCME and SIEU tried to unionize the girls against their father, or themselves?

Lemonade stands are a stripped-down version of a retail business, which may be favorite form of business. Oh, it’s not that I love to shop, but I do love the fact that a retail business obviously gives a picture of what commerce is–the free exchange of goods and service to satisfy the wants and needs of the parties involved.

Of course, regulators, having the disposition to regulate, are not unaware of lemonade stands. Two years ago, officials in several states drew public criticism for harassing young retailers, going so far as to fine them and require them to close up their card tables. These actions, in turn, lead to Lemonade Freedom Day as well as  Lemonade for Liberty, and other efforts to draw attention to overreaching government. Thankfully, a quick Google News search today shows no stories of heavy-handed bureaucrats telling 9-year olds to knock it off.

So go ahead. Next time you see a lemonade stand, stop, even if you don’t enjoy lemonade. Engage in some unregulated commerce among free people. As Katherine Mangu-War has said, “The tree of liberty must be refreshed from time to time with subpar beverages.”

If they can’t even get a bridge repair right …

In its recent session, the Minnesota Legislature doled out $250 million in favors to a mega-famous retail center that doesn’t pay property taxes. Thanks to the insistence of one legislator, it also allocated $9 million to please birders and bicyclists.

The Star Tribune’s Rochelle Olson reported on this in a story called “Mall of America expansion funding has $9 million bridge to cross.” Both the Mall and the bridge are within the City of Bloomington. According to Olson’s account, “Before the Mall of America gets one state dollar for a $1.5 billion expansion, Bloomington must agree to replace the historic Old Cedar Avenue Bridge either through restoration or a new structure.”

No doubt you know what the Mall of America is, but what about the Old Cedar Avenue Bridge? It is, in brief, a 90-year old piece of rusting metal that could fall into a back channel of the Minnesota River at any time now. John Weeks, a local man with a passion for documenting Minnesota bridges, has the details on the Long Meadow Bridge (which is the actual bridge still standing), as well as the Old Cedar River Bridge (which has been torn down), the Cedar Avenue Bridge (whicih replaced both the Long Meadow brige and the Old Cedar river bridge), and the Cedar Avenue Bicycle Bridge (an attachment to the Cedar Avenue bridge that takes bicyclists and birders only partway on their trip from Dakota County, in the north, to Hennepin County, in the south).

Bike enthusiasts, including the Minnesota Off-Road Cyclists (see this discussion for starters) have been advocating for a replacement bridge for some time, to replace what served cyclists and pedestrians until the bridge was shut for good about 10 years ag

As a cyclist and policy expert, I have mixed emotions about this. The cyclist in me would certainly appreciate having the bridge repaired (if possible) or (more likely) replaced. The taxpayer in me wonders about the economic value of the project, and whether a toll system might be feasible. The policy expert in me says that I could argue that if tax money must be used to support recreational pursuits, it should come from the Legacy Amendment funds.

Instead, the money for both the MOA and the bridge will come from the Twin Cities Metropolitan Area Fiscal Disparities Program, a redistribution scheme meant to take money from more prosperous cities and give it to less prosperous ones.

So is Bloomington a poor city? Not exactly; it’s one of the wealthiest in the state. Rep. Lenczewski, a Democrat who represents the city in the Minnesota House, says the fact that the city isn’t poor is the reason it should get the money. Or to quote from Olson’s article, “Lenczewski noted that Bloomington gives more than it gets from the fund.”

Another irony is that the Mall of America is going to get tax relief — even though it has yet to pay any tax itself, beyond what it captures for itself in tax increment financing — in an arrangement similar (as I understand it) to the one just extended to the Mayo Clinic. The rich get richer, not through honest work serving their fellow man, but through politics.

As for the bridge, it has been closed for 20 years, and bikes and pedestrians for 10. It has lead paint, and environmental regulations pump up the cost (and some people who would turn this rusting piece of metal into an historic landmark), making removal impossible and fixing it up even more expensive.

Perhaps, though, bicyclists and birders will rejoice soon enough, thanks to a political establishment that picks winners and losers, and then seeks to modify its meddling.

But then again, perhaps nothing will happen. The effort to restore a bicycle/pedestrian bridge is complicated by the mix of government agencies that have to give their approval. These include the Minnesota Valley National Wildlife Refuge (U.S. Fish and Wildlife Service), the City of Bloomington, and the Minnesota Department of Natural Resources. The City of Bloomington owns the bridge, as an unwelcome gift from the State of Minnesota. Its long-term objections may have been overcome with enough cash from the state. But the DNR and FWS may not be as easily mollified. Then again, perhaps $9 million will be enough to satisfy everyone.

A bridge shut for 20 years. The costs of a multi-million dollar project inflated by regulations. Buck-shuffling and disputes among public agencies. A resolution (perhaps) achieved in a package deal to reward the already-rich and connected. And to think, all of this concerns something as basic to the functions of government as a bridge.

Think of what’s happening with your child’s education or your health care.

(First published by Center of the American Experiment)

Childcare Unionization: Using the Power of Government to Enrich Partisan Advantage

Introduction: As I write this, the Minnesota House is set to vote on a proposal to unionize independent, self-employed business owners who heretofore worked primarily for families of small children (home health care aides are also included). Some of these business owners have customers who receive public subsidies. AFSCME, the powerful union of state and local workers, has been seeking to unionize, and enrich its coffers with the dues of, these business owners for several years now. Thanks in part to the union’s backing of today’s majority party, the Legislature will say “thank you” to AFSCME. And the union, in turn, will of course say “thank you” to the DFL with future contributions of time and treasure.

While it’s true that a new law will not automatically sweep the self-employed into a union (there will have to be an election of business owners registered to receive subsidized clients), its enactment can best be described as a gift among political friends. There is no good that a childcare union (backed with the power of the state) could do that could not be done on a purely voluntary basis.

Should government pass a law whose chief achievement is to plump up the financial and political fortunes of the party in power, and its allies? Granted, that’s as old as politics itself, but it’s still ugly. And there’s plenty of ugly going on at the Minnesota Capitol today, with the House expected to endorse a membership- and financial-grab by two powerful unions.

I went to the Capitol for about two hours, talking with childcare providers, a TV reporter talking as “daycare dad,” and my own legislator. (That person is almost certainly a “yes” vote, but I did what I could.) I hung out with the independent business owners, usually sole proprietors, who don’t want to be in a union. One of the women there told me she was a DFL voter, but opposed the legislation, and I saw someone else carry a sign that read “DFLer against forced unionization,” or something like that.

Various Republican members from the House worked the rope, talking with various “vote no” advocates. A Republican legislator, I forget who, asked my (DFL) legislator to come talk with me. We did, though it’s difficult to carry on a conversation when your ears are hurting from loud chanting on both sides.

The throngs of purple- and green-shirted union activists and employees performed, in the words of one friend, the “‘hey hey, ho ho’ bullshit.” At one point, someone brought out a drum, though thankfully that didn’t last long. Of course, there was also the chant, “this is what democracy looks like.”  Democracy? I’m hoping for a republic of limited government. I wanted to yell out “Republic, not democracy!” But I refrained.

The people who wish to remain independent are outnumbered by the union shirts, and they are most likely going to lose out by the time the session if over. But sometimes you need to channel your inner Bill Buckley and yell “Stop!” This is one of those days. I expect this to go well into the night.

For more, see the Twitter feed of John Rouleau. Don’t forget Jonathan Blake, who has a great photo of “the Koch brothers” who are opposed to this power grab. Of course, you can also see the Protest Vigil page on Facebook, as well as Childcare Freedom.

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Finally, here’s what I wrote to my legislator after I got home:

Thank you for talking with me this morning outside the House chamber. To review, here are some key points:

1.  Unionization would eventually affect all day care providers, not only those receiving cca payments. (Daycare providers are daycare providers, regardless of whether they receive state payments or not.) [I was wrong on the math, but not the overall point: A pro-union vote, most likely by a minority of providers who receive subsidies, would sweep all providers who receive a subsidy into a union. The ensuing regulations implemented by union/DHS negotiations could work their way through to affect all providers, not only those who receive subsidies. In addition, providers would be forced to choose between being independent business owners and caring for children from low-income families.]

2. We are talking about independent business owners, most of whom are self-employed sole proprietors. The thought that they would be considered executive- branch state employees (line 2.8) or an employee organization (line 1.19) simply because they took ONE ccap child in their care boggles the mind. (Furthermore, I understand this would apply even to someone who had registered to receive ccap subsidies but was not currently doing so.)

3. Even state government, with its power to tax, does not have unlimited funds. Funds taken from providers are funds not spent on childcare, but on union organizing and on politics.

4. If childcare providers want a lobbying group, they already have one. There is no need to change state law to establish, by privilege, a special place for some groups (1.18-1.20; 3.13-3.25).

5. The establishment of a union or fee-paying requirement will discourage some providers from offering their services to low-income families.

6. The establishment of a union puts another layer of a third-party between parents and care-providers.

7. The Star-Tribune editorial board argues that the measure is largely a payback from the DFL caucus to its union friends:”Let’s be clear: This is a financial lifeline to a big, public-sector, Democrat-friendly union at a time when union membership is at a historic low nationally.” That’s politics, but certainly not good governance. I would ask, “what would you think were the roles reversed?” Imagine, for example, a legal situation in which any firm that wished to bid on a maintenance or construction project with the state must first join a “construction quality council” established by the Freedom Club. Even if the members of the council were world-class experts in various fields of engineering, it would not be a good idea. People would see it, rightly, as a naked power play to appease one political party. In the case of the childcare proposal, the legislative language does not require that childcare providers join a union, but we all know that is the hoped-for intent–and why dozens if not hundreds of union activists, some of them paid by union dues, are chanting outside the chamber today.

In short, there are no problems with child care for which this legislation is an appropriate solution. Meanwhile, the legislation has some severe problems of its own. I know that public unions are big fans of yours, but I ask you to consider the public good rather than that of one specific set of interests. For that reason, I wish you to vote “no.”


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First published by the Center of the American Experiment

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