APRIL 3, 2012

PA to Copy Missouri's Failed Land Banking Policy

Pennsylvania is close to adopting Missouri's 40 year old failed land banking policy. House Bill 1682, which has already passed the House and the Senate's Urban Affairs and Housing committee, would enable local governments to establish public entities that could acquire land, incur debt, and develop vacant properties. However, these entities often block development.

Missouri' Show-Me Institute discovered St. Louis' land bank refused almost half of all purchase offers from 2003 to 2010. It even rejected a charter school company offering $300,000 for 13 abandoned parcels back in 2005. As of April 2011, all 13 of the parcels remain vacant. Check out the video below to learn more about St. Louis' experience.

Philadelphia, already anticipating the passage of HB 1682, introduced ordinances to create a land bank that would give the district Council member authority over development. The Show-Me Institute also had a stern warning about this practice in yesterday's Philadelphia Inquirer:

One rundown St. Louis building had offers from four different buyers, all rejected by the land bank. But when the area alderman showed up at a land bank meeting and asked that it be sold to another buyer, it was.

Unfortunately, the same policy has been written into Philadelphia's land bank bill. In its current form, it would forbid the bank from entering into a transaction without the approval of the district Council member. This will almost certainly thwart development.

posted by KATRINA CURRIE | 09:38 AM | 0 comment

MARCH 30, 2012

Not Why I'm Here

"Why am I here?"  That's an excellent question to ask yourself if you work in Harrisburg.  This week, as I read a piece by Karen Langley in the Pittsburgh Post-Gazette, I found that question ("Why am I here?") was much needed.

Ms. Langley's article summarized a debate this week in the Pennsylvania Senate over a constitutional amendment that would bar imposing health insurance mandates in our state.  As she pointed out, there was a lengthy dispute regarding whether it was appropriate to use the term "Obamacare" on the floor.  Here's a moment she captured:

As the debate wore on, Mr. Scarnati, R-Jefferson, observed that spectators were likely "shaking their heads."

"We are consuming time arguing if we call it Obamacare," he said. "For goodness sake, people."

You could argue that Sen. Scarnati was answering my big question.  He was saying he isn't here to debate semantics.  Fair enough.

Let me give my own answer, though.  Here's why I'm here.  My wife and I decided to uproot our family two years ago and move back to our home state because I honestly believed that if we don't act quickly, the country our kids inherit is no longer going to be great—and that the best place to change that is in the states, not Washington, D.C., where we were living before.  I still believe that today.

What does that have to do with this week's Senate debate?  Everything.  Because when it comes to actually stopping one of the biggest attacks on our freedom ever, namely Obamacare, the problem with what happened this week wasn't the spat over semantics.  It is that as that same Post-Gazette piece points out, "As a constitutional amendment, the legislation would not take effect until passed by both chambers in two consecutive legislative sessions and approved by voters at the polls" (emphasis added).  In the meantime, the things that will actually determine the fate of Obamacare (mainly the U.S. Supreme Court's ruling this summer, the November election, and the ensuing debate in Congress) will occur while Pennsylvanians wait.

What happened in the Senate yesterday was essentially symbolic, at a time when our state and our nation are dying for leadership, for courage, and for tough choices—from both parties, both chambers, and all branches of government.  To borrow Sen. Scarnati's phrase, that is why I'm shaking my head. 

Yes, Sen. Scarnati's constitutional amendment would further solidify the Keystone State's opposition to Obamacare, but it would have little impact on Pennsylvanians today.  HB 42, however, sponsored by Rep. Matt Baker, would bar the individual mandate in state law without requiring the multi-year amendment process.

Not only that, we need much more from lawmakers than than just fighting bad federal policies.  We need them to dedicate just as much effort undoing decades of attacks on freedom here in Pennsylvania, in the form of skyrocketing spending, deepening debt, and forced attendance at failing, violent schools.

The issue isn't what we call the destructive public policies inflicted on our state and nation.  The issue is whether we are doing everything we possibly can about them, as quickly as we can, before the ship of state hits the iceberg we all clearly see ahead.

That's why I'm here.  What about you?

posted by CHARLES MITCHELL | 05:00 PM | 0 comment

MARCH 29, 2012

Do Government Programs Grow the Economy?

While decades of increased government spending have resulted in economic stagnation, many advocates of increasing government spending claim that their favored program will "grow the economy." They argue that if government takes taxpayer money and "invests" it, that is the path to prosperity.

Think of the economy as a small lake. If you fill a bucket on one side of the lake, walk around to the other side (spilling some along the way), and pour the water back into the lake, you aren't increasing the total amount of water in the lake. But that is exactly how a lot of spending advocates argue government programs will grow our economy.

This argument ignores the basic fact that government has no money of its own, other than that which it takes from taxpayers. Claims that any program "creates" economic growth look only at the seen effect of government spending, not the unseen effect of taking that money out of the economy through higher taxes. How much better would families and businesses spend and invest their own money than politicians?

Economist Greg Mankiw looks at a couple of studies that estimate $1 of government spending will result in $1 to $1.40 in GDP growth. But he then points to evidence that $1 in lower taxes will grow the economy by $3:

By contrast, recent research by Christina Romer and David Romer looks at tax changes and concludes that the tax multiplier is about three: A dollar of tax cuts raises GDP by about three dollars.

In a Mercatus brief, Veronica du Rugy and Jakin Debnam ask "Does Government Spending Stimulate Economies?" Their review concludes that economists disagree widely on how much government spending effects the economy, but it appears higher taxes do more harm to the economy:

Some economists find spending multipliers that are smaller than 1.³ Other economists, however, assert that spending multipliers are much larger.⁴ Still others argue that multipliers can't even be credibly measured.⁵

... Barro and Redlick's research estimates that the multiplier for changes in defense spending that people think will be temporary - spending for the Iraq war for example - is between 0.4 and 0.5 at the time of the spending and between 0.6 and 0.7 over two years. If the change in defense spending becomes permanent, then these multipliers increase by 0.1 to 0.2.¹¹ Over time, this is a maximum multiplier of 0.9. Thus even in the government's best-case spending scenario, all of the estimated multipliers are significantly less than one. This means greater government spending crowds out other components of GDP, particularly investment.

In addition, they calculate the impact on the economy if the government funds the spending with taxes. They find that the tax multiplier-the effect on GDP of an increase in taxes-is -1.1. This means that if the government raises taxes by $1, the economy will shrink by $1.1. When this tax multiplier is combined with the effects of the spending multiplier, the overall effect is negative. Barro and Redlick write that, "Since the tax multiplier is larger in magnitude than the spending multipliers, our estimates imply that GDP declines in response to higher defense spending and correspondingly higher tax revenue."¹² Thus, they conclude that greater government spending financed by tax increases hurts the economy.

Finally, here is a great piece by Matt Mitchell on how economists disagree on the stimulus effects of government spending:

In a 2010 interview, future economic Nobel Laureate Thomas Sargent was asked about the economic advice given to President Obama about that same stimulus bill. He replied: "President Obama should have been told that there are respectable reasons for doubting that fiscal stimulus packages promote prosperity, and that there are serious economic researchers who remain unconvinced."

Indeed, there is quite a range of professional opinion. Reasonable economists, using valid techniques have found that $1.00 in government purchases can create as much $2 or $3 in new private sector economic activity. But, unfortunately, other, equally-reasonable economists using equally-valid techniques have estimated that $1.00 in government purchases crowd out or destroy as much as $3 or $4 in private sector economic activity.

Pennsylvania faces a four-alarm fire threatening our fiscal house. And the only way to fireproof the Pennsylvania economy is to control government spending, not take more from taxpayers.

posted by NATHAN BENEFIELD | 02:27 PM | 0 comment

MARCH 26, 2012

Chart of the Day: Welfare Overlap

The Pennsylvania Department of Public Welfare (DPW) encompasses much more than Food Stamps and Medicaid. There are numerous federally-funded and state-only aid programs. In fact, most of the 2.7 million individuals receiving benefits are enrolled in multiple programs, as demonstrated in the chart below (prepared by DPW).

Today, more than one out of every five Pennsylvanians is enrolled in at least one welfare program, yet the state's poverty level continues to rise. It's time to right-size the welfare system, and focus programs on serving the truly needy while encouraging independence.

posted by ELIZABETH STELLE | 01:40 PM | 0 comment

MARCH 1, 2012

Pennsylvania Businesses Face the Highest Taxes

A new study from the Tax Foundation finds that mature Pennsylvania businesses are the highest taxed in the nation. Newly established operations in the commonwealth are the second highest taxed, behind Hawaii.

The study evaluates the impact of corporate income taxes, property taxes, sales taxes, local income taxes, gross receipts taxes, and unemployment compensation taxes. You can click here for the Pennsylvania profile, and read a story on the study in the Pittsburgh Tribune-Review.

The study looks at seven categories of businesses and the effective tax rate on each. The table below identifies the burden, and ranking among the 50 states, for each type of business studied.

posted by NATHAN BENEFIELD | 11:40 AM | 0 comment

FEBRUARY 14, 2012

CF Joins More than 400 State Lawmakers in Brief on Health Care Law

The Commonwealth Foundation joined 17 other organizations and 333 state legislators from across the country in an amicus curiae brief challenging the constitutionality of the Affordable Care Act passed in 2010. An additional 100 state lawmakers signed a related brief.

The U.S. Supreme Court is scheduled to hear the case beginning March 27.

Below is a list of Pennsylvania lawmakers signing on to the brief. The commonwealth is one of 26 states party to the original lawsuit (Virginia filed a separate lawsuit), which is being appealed to the Supreme Court, after a federal court ruled the law unconstitutional.

posted by NATHAN BENEFIELD | 10:05 AM | 0 comment

FEBRUARY 3, 2012

Largest Growth in Pennsylvania Private Sector Jobs Since 1999

The Bureau of Labor Statistics has updated their employment data by state through the end of 2011 (subject to revision).

Looking at December job data ("not seasonally adjusted") over the past couple decades reveals some interesting trends:

• 2011 saw the largest one-year growth in private sector jobs in Pennsylvania since 1999, according to Bureau of Labor Statistics data.
• Manufacturing job growth in Pennsylvania was higher than any year since 1990.
• From 2000 to 2010, the private sector lost 116,400 jobs, while government jobs grew by 30,800.
• In 2011, government jobs declined by 20,200, but the private sector grew by 79,000 jobs.

posted by NATHAN BENEFIELD | 00:44 PM | 0 comment

JANUARY 31, 2012

Corporate Welfare Not Needed to Get a Cracker

The Pittsburgh Tribune-Review reports that Pennsylvania lawmakers are pushing a special tax deal to attract a "cracker" plant to the state. The proposed Shell cracker—which breaks down natural gas into ethylene, used in plastics—has been much talked about, with the Keystone State reportedly a finalist with Ohio and West Virginia. The plant would create thousands of jobs, at least by internal estimates.

The proposal would expand Keystone Opportunity Zones, exempting certain businesses from taxes (primarily targeted to the cracker). What's wrong with a KOZ? Well for one thing, tax breaks for a few require higher taxes, spending being equal, on all other businesses. Further, a Legislative Budget and Finance Committee report finds that the KOZ program has little accountability, and the promised jobs often failed to materialize. Most importantly, tax breaks and corporate welfare don't actually generate economic growth, they simply shift resources.

Rather than expanding corporate welfare, here is what lawmakers need to do to make Pennsylvania more attractive:

• Enact a natural gas policy that removes the political uncertainty stemming from the Frack Attack, and provides predictability for the gas industry.
  
• Improve Pennsylvania's business climate for all businesses. Indeed, lawmakers should take the lesson from the Keystone Opportunity Zones—that businesses are attracted to lower taxes—and apply it statewide.

posted by NATHAN BENEFIELD | 01:31 PM | 0 comment

JANUARY 31, 2012

The "Facts" on Food Stamps

City Paper contributor Daniel Denvir tries to diminish the impact of our Philadelphia Inquirer column on food stamps by offering "facts" in rebuttal. Unfortunately, most of these "facts" are merely matters of opinion or simply wrong.

The first "fact" claims that we shouldn't worry about food stamp growth because most of the money is "federal dollars." But federal funds are not free money, and yes, residents of Pennsylvania pay federal taxes. The high cost of federal spending on food stamps—and costs are growing rapidly—should worry taxpayers. In just eight fiscal years, total costs for food stamps (formally called SNAP) have more than doubled in Pennsylvania.  The national picture is even worse, with food stamp spending doubling since 2008.

Denvir then cites an Inquirer reporter citing advocates citing a federal report that the "fraud rate" (really referring to the error rate) is 0.1 percent. Except this isn't true—the reported error rate is at actually 40 times higher. According to the USDA, the latest SNAP payment error rate for Pennsylvania is 3.93 percent. Twenty-two states have better error rates, and Pennsylvania's rate is slightly above the national average of 3.81 percent.

Another "fact" cited is that there must not be errors, because the Inspector General has a unit to look at fraud and waste. But eliminating the asset test and other eligibility limits was a deliberate decision to reduce the official error rate-you can't make an eligibility error when everyone is eligible. On top of broadening eligibility, the Rendell administration cut in half the number of fraud referrals to the Inspector General. In 2002, approximately 47,000 cases of suspected welfare fraud were referred annually to the Inspector General. However, by 2010 the Inspector General received only 27,645 referrals, even though caseloads had dramatically increased. Is it any surprise the state won awards for low error rates when so few cases were investigated?

Finally, the City Paper claims there is only one known millionaire who collected food stamps, so this really is all unnecessary. This is a straw man argument. While the savings from an asset test may be small in the scope of government spending, and there may be only a few cases of millionaires receiving benefits, Pennsylvanians with adequate resources should not be allowed to abuse the system. Reinstating an asset test is not about punishing the poor, but protecting the truly needy at a time when taxpayers are stretched thin.

posted by ELIZABETH STELLE, NATHAN BENEFIELD | 11:10 AM | 0 comment