Retired University of Kentucky economics professor Marty Solomon in a recent Herald-Leader op-ed demonstrates noted gaps in his understanding of the free-enterprise system, which has done more than any other economic policy in history to tackle poverty.
Solomon defines capitalism as “an economic system that, through competition, drives the prices of goods and services to the lowest possible levels, which benefits the consumer while maximizing profits for the entrepreneur.”
By not even mentioning capitalism’s central tenet – private ownership of assets and all that entails – Solomon offers, at best, an incomplete view. Trying to follow it is like being forced to sit through an entire fuzzy, out-of-focus movie on a theater’s big screen.
This important, but missing aspect in Bernie Sanders’ capitalism “is that owners have the freedom to utilize their assets – be it capital, land, brainpower or other resources – as they see fit, as long as they respect the rights of others,” said John Garen, Gatton Professor of Economics at Solomon’s alma mater.
The answer to enlarging the middle-class pie is not Solomon’s solution – more government tax-and-regulatory activity that confiscates wealth or mandates artificial prices and wages.
Rather, it’s to “enable more private ownership, replete with full-throated competition so that incumbent corporations have to serve their customers to get ahead and maintain profitability,” Garen said.
Solomon’s complaint reflects the Sanders School of Economics’ mistaken notion of free-market capitalism, which actually is its very antithesis.
“Another problem with today’s capitalism is that very wealthy individuals and corporations can legally bribe elected officials to enact laws that provide lopsided economic benefits such as beneficial tax legislation, lucrative government contracts, and relaxation of regulatory requirements on monopolies and environmental stewardship,” he writes.
What he rails against is “crony capitalism,” which occurs when government uses its force, as TV pundit John Stossel once described, to hand out favors to “the chosen few” while harming others in the process.
“It taxes you and me to give money and often special privileges to chosen ones – usually rich people with connections,” Stossel said. “As government grows, it gives out more favors – like handouts to so-called energy companies or union carmakers and bankers on Wall Street. This causes a great deformation and corruption of capitalism.”
Former “Tonight Show” host Jay Leno once highlighted a serious case of cronyism found in the nation’s agricultural policy, which, ironically, presidential candidates Sanders, a Democrat, and Republican Marco Rubio continue to defend.
“The Department of Agriculture wants to use our tax money to buy 400,000 tons of sugar to limit supply and boost prices so sugar producers can pay back government loans that they could default on,” Leno jabbed. “You follow me here on this? We loan them money and now we’re giving them more money so they can pay back our loan. You still wonder why we’re $16 trillion in debt, anybody? Any questions?”
Does Solomon understand that such cronyism is the very opposite of free-market capitalism?
Does he understand that this sugar-subsidizing program forcing middle-class Americans to pay $3 billion more in sugar prices in order to prop up a few wealthy, connected individuals is the result of government doing exactly what he wants more of: controlling markets and establishing price controls?
Solomon speaks of how “the quest for profits and low costs has created an explosion of outsourcing to low-wage countries, resulting in the evaporation of millions of middle-class jobs.”
Yet does he realize that Uncle Sam’s continued abhorrent policy of propping up sugar prices results in confectioners moving abroad because of cheaper sugar?
Does he know that an Iowa State University study reports industries that depend on sugar would gain 17,000 to 20,000 new American jobs by eradicating such cronyism?
The problems Solomon laments about are not the consequences of capitalism, but rather because government has abused its power, pushed the free-enterprise system to the side and created a crony economy in the process.
‘Tis the season for another edition of “Liberty Boosters and Busters.”
My goal is to make these awards more about ideas than personalities. But alas, policymakers’ personal behavior occasionally is so egregious they themselves demand a spot on the “Liberty Busters” wall.
Liberty Buster: Take, for example, Speaker Greg Stumbo’s cheap shots fired at fellow House Democrats who switch parties or accept positions in Gov. Matt Bevin’s administration.
After Hopkinsville Rep. John Tilley joined the governor’s offer as justice secretary, Stumbo bared his teeth, impugning Tilley’s character and those of fellow Democrats who make similar decisions by claiming they were “for sale.”
The speaker – lacking any modicum of class or decorum since voters rebuffed his party in November’s election – failed to meaningfully recognize Tilley’s reform-filled tenure as House Judiciary Committee chairman or that he’s received national recognition for crossing Frankfort’s political aisle to advance solid criminal-justice and substance-abuse policies.
Like the lead jockey hearing thundering hoof beats of competing horses closing ground and ready to overtake him down the stretch during May’s first weekend, Stumbo knows his horse is faltering as the margin by which he holds his speakership in the House fades.
Could Stumbo find himself in an office without “Speaker” on the door by the time those horses rumble down the Churchill Downs track at this year’s Derby?
Liberty Booster: Former Louisville Metro Council member and GOP gubernatorial candidate Hal Heiner offers a complete contrast to Stumbo.
Heiner hasn’t only accepted – with absolute class – former political rival Bevin’s offer to join his cabinet as its education and workforce development secretary, he’s talking about “bold moves” to address stagnant education and workforce systems by advancing an agenda driven by everything from parental choice in where and how children are educated to updating the unemployment insurance system’s antediluvian computer-programming code.
While Heiner’s built a prosperous career as a real-estate developer and doesn’t need the job, Kentucky needs his voice.
Kentucky Youth Advocates’ executive director Terry Brooks got it right when, speaking of Heiner, he told WDRB.com: “You cannot possibly minimize the power of a strong public voice.”
The voice of Heiner, who’s invested a considerable amount of personal resources and political capital in efforts to bring public charter schools to Kentucky, will certainly sound different than the drivel we’ve heard spilling out of Frankfort for decades.
Something different is indeed needed – especially considering that, according to the latest National Assessment of Educational Progress, only 36 percent of Kentucky’s eighth-grade students are proficient in reading; less than 30 percent reached proficiency in math.
While progress has been made since these scores first were recorded in the 1990s, it’s been very slow and too small.
Considering the rate of academic progress in our public schools as tracked by the NAEP, education analyst Richard Innes claims it will take another 126 years before eighth-grade students in Kentucky’s public schools reach even an 80-percent proficiency rate in reading and more than 70 additional years before they make that grade in math.
Space doesn’t permit full treatment here of other candidates for a “Liberty Booster” award, such as Lt. Gov. Jenean Hampton, who in November became the first black Kentuckian elected to a statewide office and whose personal story will spark a spirit of entrepreneurship statewide.
We’ll tell that story soon, just as we’ll highlight foolish legislation sponsored by Rep. Rick Nelson, D-Middlesboro, who proposes using government power to require contractors on public projects to field a workforce comprised of 51 percent Kentuckians and 15 percent apprentices.
Yet Nelson staunchly opposes economically inclusive policies like getting rid of the prevailing-wage requirements on these same public projects, which would actually result in more Kentucky companies with a workforce made up of Kentuckians building schools and government buildings.
No wonder he was so easily defeated by Republican Alison Ball in the race for state treasurer in November.
All taxpayers and restaurant owners of Shelbyville and Madisonville wanted this Christmas was to be left alone by pro-tax politicians and bureaucrats.
Nearly 3,000 of them even went to the trouble of signing Kentucky’s biggest Christmas list – a petition opposing Shelbyville’s planned super-sized restaurant tax, which the state allows fourth and fifth-class cities to pass in order to buy shiny new toys known as “tourism-related projects.”
Local politicians addicted to spending taxpayer dollars on nonessential street-scaping projects want to use the revenue raised from Shelbyville’s restaurant tax on items like a $4,000 light pole, $1,000 six-foot bench and $850 “litter receptacle,” according to city engineer Jennifer Harrell’s email to Mayor Thomas Hardesty outlining the costs of these requested toys.
Thousands of local residents and restaurant owners have made it clear: they’d rather keep their money and spend it as they – not some local mayor with visions of government-funded grandeur – see fit.
The unelected officials at local tourism agencies will have none of that, however.These bureaucrats have cast a memory spell over elected officials to the point that some council members not only support such taxes but also minimize – or even forget – who earned and owns those dollars.
I had to remind Shelbyville councilman Bob Andriot concerning this matter as he wondered aloud while addressing local tourism officials at a recent council meeting: “Are these our dollars or your dollars?”
“They’re neither, sir,” I told him during the comment period.
They belong to local servers, who are the least able to afford losing them.
Bill Hisle, who owns five Cattleman’s Roadhouse restaurants in Kentucky, including one in Shelbyville, told me that servers in his restaurants – many of whom are single mothers – carry the burden of such taxes.
“People tend to stick to their planned budget when they go out to a restaurant, and they will continue to do so – by taking the tax out of servers’ tips rather than increasing how much they actually spend,” Hisle said. “Plus, it’s not as if Shelbyville is going to file for bankruptcy any time soon. The city has money in the bank.”
Some local politicians voted for this huge profligate tax apparently without even knowing how current revenues in their general funds are spent.
Madisonville city councilman Raymond Marion during a Dec. 7 council meeting had to pause during a tirade berating restaurant-tax opponents in his community to find out more about how current dollars are spent.
“There’s a lot of money that we spend out for tourism that comes out of the General Fund. Am I correct?” he wondered inquisitively while turning to other council members before restarting his diatribe.
Even though he had to ask in that open meeting whether or not the tax was even needed to relieve some phantom-like pressure on his city’s budget, he and three other council members still voted for it.
You can bet their constituents – like the hard-working ladies out at the local Country Cupboard (a favorite Madisonville lunch location of this columnist) or Skip and Teresa McKinley, owners and operators of McKinley’s Bread Store & Deli in downtown Shelbyville for 19 years – know everything about their own budgets as they shop for those gifts on their children’s and grandchildren’s lists this Christmas.
They likely will have less money available for those requests next Christmas as beginning Jan. 1, they will be forced to collect more from their customers – most of whom are local residents – in order to fund some shiny new garbage can at the top of the local tourism-agency’s list.
At least they’ll have an upscale bench on which to sit while resting from the heavy tax burden they carry and pondering how to keep their doors open.
Once upon a time, an eagle’s egg was knocked loose from its nest and rolled down the mountain into a barnyard full of chickens.
The chickens compassionately protected this egg until it hatched, after which they raised this creature – not as a beautiful eagle but just like a chicken who scratched the ground for grub and worms while fluttering around the barnyard.
One day, a neighbor convinced the farmer who owned the chickens to let him take that eagle up the mountainside to see if he might fly.
When that man released the eagle, the innate desire to live free and soar took over. That majestic bird stretched his wings and flew into the sky – like eagles are created to do.
But what if he hadn’t soared? What if the eagle had fallen to the ground and died when the neighbor let him go?
Would anyone dare claim he had committed an evil act by giving that eagle every opportunity to at least try to fly?
“Right-to-try” policies can be found in several other states, protecting terminally ill patients’ right to access experimental drugs that may not have gone through the bureaucracy’s full testing gambit.
Allowing terminally ill Kentuckians to try and save their own lives through experimental drugs is a no-brainer for any politician looking for legislation that has – and would – attract strong bipartisan support.
Such legislation passed Michigan’s House of Representatives 109-0 and received an overwhelming 31-2 vote in the state Senate before Gov. Rick Snyder signed it into law one year ago this month.
Americans of all political persuasions are asking: Why should we deny terminally ill people the right to try every option – even if some of those lives still are lost in the end?
Dr. Kent Brantly, who contracted Ebola – a humiliating, wasting virus – in the summer of 2014 while serving as a medical missionary in Liberia, received his first dose of the experimental drug ZMapp while standing close enough to death’s door at the age of 33 to push it open while separated from his family by 6,000 long miles.
ZMapp is made possible by antibodies produced in an Australian strain of tobacco at Kentucky BioProcessing in Owensboro.
Brantly, whose story is told in his moving book “Called for Life,” began to experience nearly immediate improvement after receiving his first dose in Liberia, which allowed him to get on a plane – while fully quarantined – and became the first American to return and be treated for Ebola in the U.S.
While the tobacco leaf that helped save his life isn’t the same kind found in Kentucky’s waving fields, it nevertheless is most impressive that such a demonized plant could produce such redemptive results and be produced here in the Bluegrass State.
But what if this whole experiment hadn’t worked? What if Brantly had died even after taking the drug?
Should the Food and Drug Administration have told this doctor – now fully healed and once again serving the world’s poor and downtrodden – that he had no such right to try experimental medicine that had only been tested on primates but no humans?
Fortunately, the FDA allowed Brantly to obtain ZMapp and save his life from a virus that kills 70 percent of its victims.
In other cases, though, the FDA has operated a command-and-control, pick-and-choose approach, which is neither compassionate nor fair.
Florida Gov. Rick Scott’s recent stop in Kentucky to try and convince businesses to move south to the Sunshine State was met with predictable derision from the political establishment.
Louisville Mayor Greg Fischer used Scott’s visit to remind people of the Florida governor’s baggage from his past tenure as CEO of the Columbia HCA hospital chain, which purchased Humana’s “Galen” hospitals in the early 1990s.
Scott in 1995 moved the company’s headquarters and its 1,000 jobs from Louisville to Nashville, citing Kentucky’s high taxes. He was forced to resign in 1997 in the midst of a $1.7 billion settlement related to Medicaid fraud.
“And now, this guy is coming to Kentucky and saying, ‘Trust me?’” Fischer said. “I don’t think so.”
But Scott isn’t preaching “trust me.”
He’s in competitive mode, promoting the Sunshine State’s warm business climate – including lower taxes, less regulation and the freedom to say “no” to paying union dues without losing your job.
“You don’t have to worry about your taxes going up because the credit rating is not one of the worst in the country,” Scott said, rightly noting that’s “what’s happened in Kentucky.”
Scott’s not the only one who’s touting Florida.
“Friendlier tax codes make it a little easier for us to do business there,” said Chris Yeazel, owner of 1st Choice Aerospace, which has decided to expand in Scott’s state rather than at its Hebron location.
The decision by the company, which repairs interior items on commercial aircraft, means 40 new jobs and a $7 million investment will go to the Sunshine State instead of Kentucky.
It’s fair game for Scott’s critics to question his integrity.
However, Scott isn’t the only governor to come and contrast his state’s attractiveness with Kentucky’s slower economic growth.
Then-Texas Gov. Rick Perry came to Murray last year and said he didn’t “worry about” Kentucky.
“I can promise you: I get up every morning and I’m nervous about what (Gov.) Bobby Jindal’s doing in Louisiana, and I know for a fact that Rick Scott’s over there in Florida looking at his tax code, his regulatory code; he’s trying to pass major tort reform in Florida today. It makes me nervous,” Perry said. “You think (Tennessee) Gov. Bill Haslam’s not sitting down there, kind of looking up here going ‘which of these businesses am I going to come get this time’ because he’s a right-to-work state, he doesn’t have a personal income tax.”
Neither is 1st Choice Aerospace the first company to invest in another state while citing uncompetitive policies.
Chegg, Inc., a California-based textbook rental company, announced earlier this year it was closing its Shepherdsville-based fulfillment center.
Rob Chestnut, Chegg’s general counsel, told Louisville Business First: “Kentucky’s business climate has had us very unhappy for quite some time.”
The story’s headline read: “Where will Chegg Inc. move its inventory? Anywhere but Kentucky.”
Some recent data also casts serious doubt on Kentucky’s competitiveness.
A new Truth in Accounting report indicates that our commonwealth has the nation’s fourth-highest taxpayer burden.
Frankfort owes $53 billion in bills, has $13 billion in assets, which leaves $40 billion in debt and results in a $32,600 burden for each taxpayer – up from $23,800 in 2009.
Compare that with Florida’s taxpayer burden of $1,100 or neighboring Indiana’s $700 load.
Each Tennessee taxpayer would actually receive a $1,300 surplus if the Volunteer State’s $2.4 billion surplus were divided among them.
Such economic strength is attractive to companies looking to expand.
They don’t want to arrive in a state only to be forced to bail out a public-pension system through higher taxes.
Will Fischer and his fellow politicians urge Kentucky’s business owners: “Don’t leave; trust us to fix these problems”?
How many will respond: “I don’t think so”?
If Gov. Steve Beshear’s administration wants taxpayers to trust it to build Kentucky Wired – a $350 million, 3,000-mile high-speed Internet network – then bureaucrats in charge of the project should at least be technologically capable of scanning and posting a copy of the commonwealth’s contract with Macquarie Capital, its Australian partner.
Could it be the administration doesn’t want taxpayers to know the details because Macquarie has a poor track record when it comes to government-owned high-speed Internet projects in other states?
Instead of just releasing the documents, a Finance Cabinet official responded to a simple request to see the contract by claiming his office was having technical difficulties posting the documents online but claimed they would be available in another week or so.
It’s supposedly been months since a deal was reached, yet we still haven’t seen the contract.
With a project this big and with all Kentucky taxpayers on the hook, an open-records request should not even be required. The details should have been revealed even before it was signed.
Perhaps the claim about “technical difficulties” is just a smokescreen for politicians in Frankfort, including legislators – who slipped a $30 million Kentucky Wired-expenditure into the 2014 budget and who would rather not have us privy to its details.
If Kentucky Wired is as good as Beshear’s public-relations machine claims and even the gubernatorial candidates naively believe, wouldn’t they want taxpayers to know as much as possible – as soon as possible – about its greatness?
“Here in Kentucky, you’re about to be given a gift,” Brian Mefford, CEO of Connected Nation Exchange, piped up with all of the sunshiny-ness he could muster during a recent broadband conference. “And the only think you had to do to get that gift is to be a taxpayer.”
He’s right: this project surely will be a gift that keeps on taking … from taxpayers.
There are other question marks about the project, including how Frankfort’s genius bureaucrats and politicians concluded they could build an entire statewide network for $350 million when it cost $500 million to construct a gigabit network in one city – Chattanooga, Tennessee.
Also, realizing that there usually are cost overruns even on projects that government knows how to build reasonably well – such as roads, bridges and schools – what’s the contingency plan for such excesses related to the Kentucky Wired initiative?
What happens if the project runs out of money before completion? Will taxpayers be forced to ante up and make up the difference?
Considering that, conservatively, 85 percent of Kentuckians already have access to high-speed Internet service, where will Kentucky Wired find its customer base?
Will state government quit doing business with private companies who currently serve city colleges and universities? What would such an approach do to the rates of private Internet providers?
What if the network can’t get enough subscribers to properly fund it?
Will all Kentuckians be forced to pay higher utility fees, like Macquarie Capital tried to tack on to the bills of Utah residents – even those who already had their own service and didn’t want to subscribe to the 11-city government network?
Who will build this Internet highway? Originally, rural Kentucky contractors were promised that this would be a true public-private partnership – with them involved in constructing the fiber-optic lines for the network.
We now hear rumblings that a Canadian company is going to be brought in to build out the network instead of employing those who live, work and contract in – and know – rural Kentucky.
Making taxpayers wait to see the details until after Frankfort already committed to funding this deal is like forcing a home owner or car buyer to make the deal before finding out the terms of the loan.
It would be like saying “we’re giving you a gift,” only to find out later it was a genuine dud.
Attorney General Jack Conway is right: the state Board of Education violated Kentucky’s open-meetings law when an ad hoc committee it hastily created in April conducted business in unannounced, closed-session conditions while hiring a search firm to aid in finding a replacement for outgoing commissioner Terry Holliday.
State board chairman Roger Marcum indicated in a May 4 text to Bluegrass Institute staff education analyst Richard Innes that the subcommittee spent “many hours” reviewing proposals offered by search firms after Holliday’s surprise announcement – but the public was never informed.
Even with valid reasons, government agencies cannot legally go into closed session without first publicly citing the specific authorization for conducting the stated business outside public purview, followed by a motion and vote – again, in public – to go into closed session.
This subcommittee did neither, although it clearly was active because it narrowed the number of search firms to only one. The full state education board then voted to hire that firm – Asher/Greenwood & Associates, a Florida company that also recruited Holliday to Kentucky.
Since transparency is vital to holding government agencies accountable, I sent an official complaint on behalf of the Bluegrass Institute to the board in the form of a simple two-part suggestion: the board should acknowledge its error and commit to conducting a training session for its members with an Open Meetings expert from Conway’s office during a regularly scheduled, webcasted meeting.
Board attorney Kevin Brown sent me a letter flatly refusing to acquiesce to my uncontroversial plea, which led to the appeal.
Following release of Conway’s decision, the Kentucky School Boards Association (KSBA) breathlessly defended the state education establishment, hyperventilating in the headline of its statement: “KDE doesn’t believe Attorney General’s opinion impacts ongoing commissioner search process.”
However, past open-meetings violations have resulted in courts voiding contracts, including those of contractors hired to find new school leaders. It would be better for the board to comply with the ruling, perform my education remedy and put this incident in its rear-view mirror.
The KSBA irrelevantly remarked in its statement that my appeal of the department’s refusal to acknowledge its wrongdoing comes from “a frequent critic of the state Department of Education and public education in Kentucky in general,” as if a violation of open-meetings laws somehow doesn’t matter so much when called out by a “critic” of a system that routinely ranks behind many other states in its academic performance.
If the institute’s goal is to degrade the department in some way, would we make such a benign request for corrective action – the most-discomfiting part of which would be simply to acknowledge that open-meetings laws were violated?
A primary reason we included that request was to demonstrate respect for a law without which there would be frequent closed-door meetings offering increased temptation to act in ways not conducive to serving the taxpayers who pay the freight for our public-education system.
The state board’s argument throughout this challenge has been that its temporary ad hoc committee was formed for a single task and thus could ignore the open-meetings law.
That’s a weak, and ultimately losing, argument from an agency that will spend the most – $8 billion – of any state-government department in the current General Fund budget.
Perhaps state board members or their political pals in Frankfort and at the alphabet-soup agencies and organizations don’t deem the state’s education system worthy of being subject to such a high level of scrutiny – especially since it was just a “single task.”
But hiring the next leader of Kentucky’s entire public-education system happens to be one of the board’s most important tasks.
Such a task may be singular in nature but huge in consequences.
In fact, if there’s any decision that should be made with full transparency and accountability throughout the entire process, it’s this one.
A White House report on oppressive occupational licensing requirements reads more like it came from a Rand Paul administration than the current President’s coal-hating crew.
“There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across state lines,” the report states. “Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing.”
Then again, sometimes they do.
For example, Kentucky’s licensing requirements for auctioneers previously were the third-most stringent among states – requiring two full years of experience to become a principal auctioneer, compared to the national average of three months.
However, the state’s Board of Auctioneers in Elizabethtown wants to double the number of Kentuckians – currently more than 2,000 – interested in the profession.
“The more, the merrier,” Ken Hill the board’s executive director said. “We don’t have enough now; we’d like to bring in some new blood.”
Hill convinced the board to reduce some entry costs and the experience requirement to a single year.
Barriers remain, including more than a week of required intensive classroom training which cannot be accessed online and is only available at two locations at costs exceeding $1,000.
Still, Hill is moving toward a common-sense licensing approach that he believes achieves “a balancing act” by protecting consumers from fraudulent auctioneer-actors and “fly-by-nighters” without insulating current auctioneers from more competition.
But there’s much about occupational licensing policies that remains unbalanced.
For instance, burdens placed by arbitrary regulations on military families were a primary motivating factor in the White House’s unusually relevant and frank report.
First Lady Michelle Obama in all of her school-lunch-changing glory has recognized that onerous licensing schemes affect the ability of service members and their spouses to find employment.
Military spouses are 10 times more likely to have moved across state lines in the past year than their civilian counterparts and “have a difficult time obtaining a new license each time they move,” the report said.
Eliminating arduous requirements for military spouses – 35 percent of whom work in professions requiring state credentials – would have a disproportionately positive impact on Kentucky, which ranks ninth-highest among states in the number of active duty military personnel stationed within our borders.
The report also notes that states can better serve returning veterans by using their excellent military training to bypass licensing policies that place “heavy burdens” on their ability to become civilian paramedics, truck drivers, nurses or welders.
The legislature, which has demonstrated an openness to helping military families, could do even more by recognizing that 60 percent of veterans responding to a 2012 survey indicated they had trouble translating their military skills into what Kentucky’s licensing boards consider sufficient – and significant – job experience.
The fact that only 15 of the 102 low- and moderate-income occupations looked at in an analysis by the Washington-based Institute for Justice are credentialed in 40 states or more indicates job-licensing schemes are more about cabals of incumbents seeking to keep competitors out rather than any meaningful public protection.
“These regulations don’t exist because citizens are storming the gates of the legislature begging for fences to keep out those wanting to break into the field,” said the Institute for Justice’s Dick Carpenter, who advised the White House on its recent report.
Kentucky compared to all of its neighboring states has, by far, the largest percentage of its workforce licensed, indicating there’s plenty of work that Obama’s Democrats and Paul’s Republicans could do in Frankfort to remove yet another barrier to entering and flourishing in the commonwealth’s fields of labor.
If ever a well-intentioned government program was trusted too much and verified too little, it’s the 340B Drug Pricing plan created by Congress in 1992 to help indigent and uninsured patients acquire costly prescription medicines.
The policy forces manufacturers to sell those drugs to participating hospitals at reduced rates; some price at more than 50 percent below retail.
However, a lack of proper oversight combined with passage of the Affordable Care Act has resulted in a collusion between big hospitals, big pharmacies and big government, causing an explosion in the size of 340B.
More than 14,000 facilities have signed up despite the fact that 340B was initially meant to serve only around 90 safety-net hospitals and clinics. Spending on 340B ballooned from $1.1 billion in 1997 to more than $7 billion in 2013 and is projected to reach $16 billion by 2020.
The 340B cabal seems to force one industry – drug manufacturers – to subsidize huge profits of hospitals and big-chain pharmacies that likely don’t provide direct benefits to vulnerable and uninsured patients, at least not in proportion to the savings the facilities squeeze from makers.
Participating hospitals simply aren’t required to reveal enough relevant data needed to determine whether they use the 340B program as Congress intended or merely to enhance their bottom line.
A congressional hearing was finally held in March after a growing chorus of voices – including mine in a column last year – criticized Congress for failing to hold a single oversight hearing in the 22 years since 304B’s creation even though the Health Resources Services Administration (HRSA), the program’s oversight agency, admitted more accountability is needed.
But an effective prescription will involve more than tepid talk.
Answers are needed for fundamental questions, including: Should hospitals offering extremely low percentages of charity care even be allowed to participate in the 340B program?
It doesn’t take a brain surgeon to suspect hidden, costly maladies and seek a second opinion on the condition of the program at places like Duke University’s rich hospital, which, according to a four—page letter to the HRSA from Sen. Charles Grassley, R-Iowa, reported 340B profits of $463 million between 2009 and 2012 while treating no more than 5 percent charity cases in any of those years.
While some Kentucky hospitals and clinics seem to correctly use the program by caring for large percentages of 340B patients, it’s certainly questionable whether others are passing on to these patients the savings they receive, much less whether they even qualify for participation – considering how small a percentage of their overall revenues are devoted to charity cases.
For instance, there’s a stark difference in Louisville between University Hospital, where, according to the Centers for Medicare and Medicaid Services, charity cases comprised nearly 10 percent of their patient load in 2014, and Norton Healthcare, which, despite $1.5 billion in revenues and 53 contracted pharmacies, reported less than 1 percent of vulnerable patients.
Still, both are considered “Disproportionate Share Hospitals,” allowing them to purchase highly discounted 340B medicines.
We also see such disparities in other parts of Kentucky.
Charity cases in 2014 comprised more than 9 percent at St. Joseph Hospital in Mt. Sterling but less than 0.5 percent at T.J. Samson Community Hospital of Glasgow and The Medical Center of Bowling Green, which reported $125 million and $285 million in revenues, respectively, during that same year.
Yet all three hospitals claim to serve a “disproportionate” share of indigent patients and are eligible to participate in 340B.
What’s needed are disproportionately large doses of transparency to help determine whether 340B hospitals are, in fact, passing manufacturers’ savings on to enough needy patients.
Some unquestionably are; others undoubtedly profit in big ways from failing to do so and should be rendered ineligible for further participation.
I asked reporters who contacted me for comment regarding President Obama’s proposal to more than double the salary threshold for those getting overtime pay – from $455 to $970 – whether they also planned on including in their stories the number of people who could suffer financial harm by such a move.
No one knows, including the President and his supporters, who – in the same way – cannot back their claims that this policy will help millions of Americans and tens of thousands of Kentuckians.
Wouldn’t any thoughtful analysis of a mandate that could, according to the National Retail Federation, cost businesses $5.2 billion a year at least acknowledge that while some people may indeed be helped by such a policy, a downside does exist.
However, proposals like this aren’t about careful economic analysis. Rather, they’re driven to appeal to a partisan emotionalism.
Otherwise, Obama’s labor-department prognosticators would acknowledge what any Econ 101 student at the University of Kentucky knows: When a tax or regulation is enacted, a process almost subconsciously kicks in whereby those most affected by such government coercion begin searching for ways to avoid paying the Uncle Sam-subsidized piper.
A stark example of this occurred when President George H.W. Bush agreed to raise taxes despite his famous “read my lips: no new taxes” pledge during the 1988 Republican National Convention.
Bush eventually compromised with congressional leaders.
Both sides agreed that raising taxes on items like aircraft, jewelry and luxury yachts would produce some quick revenue and not harm middle-class Americans because those are items generally purchased by wealthier people.
Like Obama’s labor gurus assume that employers will not adjust to avoid his or her increased labor “taxes,” Bush and Congress apparently assumed no change would occur in the purchasing practices of wealthy Americans despite the tax hikes.
You do know what assumptions make out of us, don’t you?
Instead of raising more money to effectively address the deficit, Bush’s plan backfired as aircraft, jewelry and yacht industries laid off middle-class Americans who manufactured these items.
In the end, more money was paid out in unemployment benefits than was received in new tax revenue.
It might be worth noting for our progressive friends: wealthy individuals and companies don’t bear the brunt of tax increases or government wage mandates.
They simply pass the cost and consequences on in the form of pink slips for workers, reducing salaried managers to hourly workers and higher prices for consumers – all of which negatively impacts the very people they design such policies to assist.
On the other hand, reducing government interference in the marketplace and increasing incentives for entrepreneurship – accomplished by welfare-reform legislation passed by a politically divided federal government in the 1990s – can refuel and spark an economic recovery.
The Obama administration uses current employment numbers of salaried workers to support its claim that its new overtime rules will result in bigger paychecks for 4.7 million Americans, including 70,000 Kentuckians.
This assumes that David Douglass, CEO of Nashville-based Back Yard Burgers, Inc., doesn’t carry through with his plan reported by the Wall Street Journal to “figure out an arrangement” that places many of currently salaried general managers on hourly pay “so their total compensation doesn’t increase significantly, even accounting for overtime.”
If that could happen to salaried general managers, what might be in store for Kentuckians who are hourly employees but who dream of a brighter future with a salary and an opportunity?
I spot some information on Obamacare’s far seas where the Kentucky Department of Insurance rides on high waters, indicating the leak that began forming last year in the creaky boat carrying Kynect – Kentucky’s version of Obamacare – is expanding.
Is water filling this boat?
I listened closely as the insurance department on Wednesday revealed rate increases being requested for 2016 by insurers offering plans through the Kynect health exchange, and could have sworn to hearing gurgling noises coming from air pockets as Obamacare drowns in the sea of broken promises offered by its namesake.
President Obama while campaigning for office in 2008 promised: “I will sign a universal health care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family’s premium by up to $2,500 a year.”
The fact that the Kentucky Health Cooperative, which was created with taxpayer-funded loans for the express purpose of providing coverage to Kentuckians seeking subsidized insurance, is seeking a whopping 25-percent increase in its rates makes the president’s claims equivalent to a big fish tale from the high seas.
After the real size of this whopper was revealed, Obamacare defenders tried to walk it all back, claiming that what they really meant was the situation would have been much worse without their reforms.
“It’s an indication of just how much the health insurance reform debate has changed that Obamacare defenders are now thrilled that premiums are going up, on average, only 7 percent or 8 percent,” Merrill Matthews, a resident scholar with the Institute for Policy Innovation, told the Heartland Institute’s Health Care News. “They now proudly claim that’s no worse than it was before Obamacare – even though the promise had been that premiums would go down.”
This fish tale grows even longer when combining Kentucky Health Cooperative’s demand for a 25-percent rate this year with last year’s requested – and granted – 20 percent increase, which makes it a 45-percent increase just during the past two years.
Other states have their own favorite Obamacare fish tales.
Health Care Service Corp., the primary insurer in New Mexico’s exchange, wants a 52-percent spike.
BlueCross BlueShield of Tennessee asked for an increase of 36 percent – which, since it’s an average like Kynect, means the smallest increase any Tennessean enrolled in the plan will get socked with is 20 percent while some get hooked with ginormous 60-percent hikes next year.
Similar ranges will occur within the Kentucky Health Cooperative Plan. Some Kentuckians will get hit with a much-larger increase in 2016 than the 25-percent “average” being sought by the financially struggling cooperative.
Rate increases aren’t the only factor contributing to the leak in Obamacare’s boat.
High-deductible plans purchased through exchanges have resulted in one in four of their customers skipping doctor’s appointments and important medical tests, according to a new Families USA study.
Even though these lower and middle-income Americans are ineligible for Medicaid and have purchased plans through a government-run exchange, they cannot afford to pay their premiums and out-of-pocket deductibles – a minimum of $1,500 on exchange plans – while still going to the doctor and obtaining important tests.
Even as they struggle, these enrollees are held up by Obama and Kentucky Gov. Steve Beshear as evidence of the Affordable Care Act’s success.
In this year’s State of the Commonwealth speech, Beshear praised Obamacare, claiming “Kentuckians will visit the doctor half-a-million more times” and that the program will result in “a higher quality of life.”
That claim has all the elements of a really good, developing fish tale, a real whopper – Obamacare-style.
It’s like being on a sinking boat in the ocean’s midst while dreaming you’re on dry land.
Wishing doesn’t make it so.
Aluminum may not cost as much as it did when special guests at banquets hosted by Napoleon III were offered a prized set of cutlery made from the metal while less-favored guests used knives and forks laden only with gold.
However, its value to Kentucky’s economy – and threats looming against it on the horizon – must be understood.
I reported in July 2012 that the Environmental Protection Agency’s regulatory jolts cast a net much wider than just over the coal mines the Obama administration promised to bankrupt.
The EPA’s proposed rules fired in the direction of Kentucky’s new and existing power plants also threaten the aluminum industry, which is attracted to states where energy supplies are plentiful and cheap. Thus, the Bluegrass State – which has lots of coal and among the nation’s lowest electric bills – has proven so attractive to the industry that nearly 40 percent of America’s aluminum is produced within our borders.
Just a few short years ago, not only were Century Aluminum and Rio Tinto-Alcan considering shutting down their two Kentucky smelters, but the commonwealth itself questioned whether the industry deserved help.
A 2012 report commissioned by the General Assembly concluded that in light of rising electric rates, competitive factors, the location of new smelters (China now has 120 smelters compared to the United States’ 15 such facilities, two of which are in Kentucky) and “the long-term decline of the smelter industry in the U.S., a reasonable person might wonder whether the U.S. smelter business is a good long-term bet.”
Yet the aluminum industry less than three years later is enjoying a renaissance unlike any other segment of Kentucky’s manufacturing landscape.
The industry not only kept its doors open, but it’s expanding – not because of handouts from Frankfort, but due to some old-fashioned market magic reflecting the automotive industry’s desire for lighter-weight auto parts.
InsiderLouisville’s David Serchuk reports in an article entitled “Aluminum: Kentucky’s fast-growing stealth mega-industry” that we’re in the “beginning stages of sea changes that will result in far more cars and trucks being made of aluminum, not steel.”
Serchuk reports that the Kentucky Center for Economic Development projects the use of aluminum sheet for vehicle bodies will “increase from 200 million pounds in 2012 to 4 billion pounds by 2025.”
Contributing to such growth are plans by Ford to build the newest edition of its iconic F-150 pickup truck mostly from aluminum, resulting in a vehicle that’s 700 pounds lighter with improved fuel economy.
Serchuk reports that aluminum production accounted for $2 billion in Kentucky’s 2013 gross domestic product, employed 20,000 Kentuckians – more than twice the bourbon industry – and paid an average – average – wage of $86,000.
Still, while talk of closing down smelters has faded, it hasn’t completely disappeared.
Lurking in the shadows are ongoing concerns about whether the EPA’s power-plant regulations, which remain “proposed” at this point, will be enacted and demonstrate that supply drives demand in reverse as well: less coal means higher electricity costs – at least 17 percent higher, according to the National Economic Research Associates.
Increased demand in the marketplace granted Kentucky’s aluminum industry a reprieve from concerns it would be forced to close its doors because of higher energy rates caused by mine closures. Still, the EPA’s stifling regulations have yet to move from the proposal stage to actual implementation.
What could happen to the commonwealth’s aluminum industry – because of what might happen to our coal industry because of what might happen to other manufacturers – when those rules actually are executed?
The very real possibility exists that an industry just beginning to flourish again might still be forced to close its smelters and move from rural Kentucky to the vast mainland of China.
Pollution containing large amounts of ideologically driven hypocrisy and political correctness seeps from unbalanced environmental extremists’ efforts to ensure that Americans don’t forget the catastrophe of the largest accidental oil spill in the nation’s history that occurred five years ago.
We should remember and then some.
Let’s do all that’s humanly possible to prevent a repeat of the sad destruction caused in the Gulf of Mexico by the explosion and ensuing seepage of 5 million barrels of crude oil into one of the world’s most productive ecosystems.
It was a helpless feeling watching those heavily oiled birds being pulled from water as far away as 40 miles from shore while being limited to helplessly hoping that rescuers could work miracles.
Most didn’t survive.
Estimates place the number of birds that died because of the spill at 800,000 with concerns that the Pelican population in the Gulf decreased 12 percent.
Yet while activists ardently supported the severe punishments heaped upon BP for its negligence (no penalty could be severe enough for these corporatist oil producers), they offer deafening silence concerning the slaughter of 2.9 million birds caused by wind turbines nationwide since Gulf catastrophe in 2010.
Such developments are inconvenient for agenda-driven ideologues who will be satisfied only when we quit drilling, mining or using another drop, gallon or ton of fossil-fuel energy.
The devil on the left shoulder says that extremists used the widely watched oil-drenched Gulf catastrophe to advance an Orwellian energy policy rocketing America into a post-coal age that fills the landscape with those huge ugly wind turbines or heavily subsidized solar panels while sending us back to a lifestyle dominated by horse carriages and candle burning.
However, the angel perched on my right says you won’t see those hugely obtrusive wind-turbine farms in Kentucky anytime soon since it takes at least 9 miles per hour to make wind a viable power source; the commonwealth’s highest winds found near the Fayette, Scott and Bourbon county lines average only 6.5 miles per hour, according to the state energy cabinet.
Yet I didn’t see any zealots, who claim to really care about these endangered birds, protesting beneath huge wind farms that I traveled through on a recent trek through northern Indiana.
Could it be that these zealots, many of whom also advocate for shutting down Kentucky’s entire coal industry, care more about advancing their anti-fossil fuel, energy controlling ideology than they do about saving birds or people?
They claim their top priority in Kentucky is ensuring a safe environment and putting citizens’ needs first. But how can those assertions be considered credible considering their stated objective of bankrupting the entire coal industry?
Researchers warn that meeting the Department of Energy’s goal of having 20 percent of the nation’s electricity generated from wind by 2030 would result in killing 1.4 million birds annually.
A natural query is: Why don’t birds being slaughtered by these blades just avoid them?
Birds were created to look down.
“When hawks, falcons and eagles are flying, they’re usually looking down at the ground for prey, not glancing up to watch for a knifelike blade whipping down on them from above,” LiveScience’s Marc Lallanilla writes.
Plus, the speed of those blades are deceptive.
“Though it can appear as though they’re turning at a slow, almost relaxed pace, wind-turbine blades actually move very rapidly,” Lallanilla writes. “The outer tips of some turbines’ blades can reach speeds of 179 mph (288 kilometers per hour) and can easily slice off an eagle’s wing.”
So why aren’t the extremists campaigning to shut down these wind farms? I thought they really cared about the birds.
They’re too busy worshiping at the feet of the gods of the First Temple of Renewable Energy – which itself is for the birds, if you ask me.
Not only is there a real gap in economic growth between states with and without right-to-work policies, but the chasm between those who write papers from ivory towers and local leaders fighting in the trenches to bring jobs to their communities has never been wider.
Take, for instance, a recent attempt by the Kentucky Center for Economic Policy to slow the momentum of counties passing right-to-work laws by issuing a paper denying the reality of many locally elected county leaders statewide: losing out on attracting jobs for their constituents because our state lacks a right-to-work law, which simply allows individual employees who work at union plants to say “yes” or “no” to paying dues without losing their jobs or otherwise being penalized.
“Local leaders maintain that the push to turn Kentucky into a RTW state, county by county, is motivated by the idea that doing so will create jobs, but that idea is not supported by rigorous research,” writes Anna Baumann, the policy center’s research and policy associate whose bio shows a background in social work.
“Plus, she also considers herself a farmer,” her website bio states.
But an economist she is not. In fact, I couldn’t find the bio of a single economist on the entire Kentucky Center for Economic Policy website.
Not that there’s anything wrong with being a social worker or farmer – those are worthy endeavors that play vital roles in our society.
However, if you’re going to challenge local leaders with claims that “rigorous research” nullifies their actual experience of losing jobs and investment that manufacturers would bring to their counties if the state had a right-to-work policy, shouldn’t you at least possess the economic chops to make such claims?
Also, you shouldn’t ignore what’s happening in Michigan, where, according to the Mackinac Center for Public Policy, 142,000 more people are employed and private-sector weekly earnings have increased 5.4 percent since the Great Lakes State became the 24th state to pass a right-to-work law in December 2012.
Before the fiscal court in Boone County – the commonwealth’s fourth-largest county – recently became the 12th Kentucky locality to approve such a policy, Trey Grayson, president and CEO of the Northern Kentucky Chamber of Commerce, told magistrates that Boone “needs this is our economic toolbox.”
Boone County Judge-Executive Gary Moore told the court that leaders of Tri-ED, an economic-development group in the greater Cincinnati area in northern Kentucky, informed him that passing a right-to-work ordinance would give his county a significant competitive advantage over regions without such policies.
Baumann mentions “conversations with site consultants and economic development officials” in downplaying the impact that the lack of a right-to-work policy has on Kentucky’s growth and yet fails to identify her sources.
Meanwhile, many site-selection consultants are on the record – including in this column – who clearly have the expertise and experience to speak to this issue.
What they say, without fail, is that right-to-work policies matter to companies – particularly manufacturers – with whom they consult and that are looking to expand or relocate.
Before Boone County’s court passed its right-to-work ordinance – becoming the largest county in the commonwealth to do so – Jim McGraw of KMK Consulting, a site-selection consultant who works frequently with Northern Kentucky counties, said “on any kind of level playing field, right to work is going to make the difference.”
It certainly is in Michigan, Indiana and even in Warren County Kentucky, where phones are ringing briskly as local leaders field calls that represent the potential of new jobs, expanded opportunities and the kind of economic growth being enjoyed by other states.
Isn’t this the kind of economic progress that “progressives” like social workers, farmers and even the Democratic leaders at the state House should support?
Did you hear the one about Washington’s power outage that caused the Department of Energy to go dark?
The day Sen. Rand Paul, R-Ky., announced his presidential run, the electricity went out in a wide swath of Washington, stranding frightened people on elevators, causing traffic lights to go dark at the busiest intersections and there – in the Washington Post – was a photo of scores of DOE employees leaving work as the building was shut down.
During past blackouts, backup power was supplied by the Potomac River Generating Station in Alexandria, Va. But the station was shut down after becoming a target of former New York Mayor Michael Bloomberg’s wacky “Beyond Coal” campaign.
Of course, a man with Bloomberg’s resources can conveniently ignore blackouts and pretend there’s no cost to killing coal.
But the head of the D.C. public utility commission doesn’t enjoy that luxury, telling Congress three years ago that her staff “prayed for mild weather” during the summer so that air conditioners don’t overload the grid.
Americans might also want to pray that Sen. Mitch McConnell, R-Ky., succeeds in his efforts to get the nation’s governors to ignore the Environmental Protection Agency’s unconstitutional and likely illegal attempt to force states through its Clean Power Plan (CPP) to submit their plans for achieving a whopping 30-percent reduction in carbon emissions at existing power plants.
In a letter to governors, the Senate Majority Leader outlines his “serious policy and legal concerns” with the EPA’s dictate:
- Quoting Obama supporter and Harvard Law School Professor Laurence Tribe’s assertion that the CPP is “constitutionally reckless,” McConnell rightly notes the EPA is trying to force states to do more concerning carbon-emissions reductions “than what the agency would be authorized to do on its own.”
Tribe, who taught the first-ever course in environmental law in the United States, warns the EPA’s plan “usurps the prerogatives of the States, Congress and the Federal Courts – all at once.”
- The EPA’s mandate for states goes beyond long-established legal boundaries.
While the Supreme Court has permitted the agency to regulate carbon dioxide by requiring improved efficiencies at coal-fired power plants through the installation of pollution-control technology such as smokestack scrubbers, it never allowed for policies forcing coal plants to close or mandating quotas for conservation through unreliable energy sources like wind and solar.
- The EPA admits it cannot quantify “and has refused to estimate the impact” that the CPP would have on its stated goal of addressing global warming.
If the EPA itself cannot provide evidence that its plan will positively impact global warming, why should states act with any urgency?
The reason, as McConnell articulates, is that the feds hope that by pushing states to propose their own compliance plans – which the EPA has ruled must be “federally enforceable” – Washington can wrest control of energy policy away from the states, further weakening our federalist system.
- The CPP’s price tag is astronomical, including double-digit electricity rate increases in at least 43 states with total costs of nearly $479 billion over 15 years.
McConnell notes that the EPA’s proposal “is projected to shrink (Kentucky’s) economy by almost $2 billion, jeopardizing electricity delivery and throwing countless individuals out of work. Its impact would be devastating at a moment when the Kentucky coal industry has already shed nearly 8,000 jobs.”
While the blackout was occurring in Washington, Sen. Paul was in Louisville declaring that those who still care about freedom “need to go boldly forth under the banner of liberty that clutches the Constitution in one hand and the Bill of Rights in the other,” understanding that Washington is “broken” and “can’t be fixed from within. We the people must rise up and demand action.”
A good place for such an uprising to begin might be on the steps of the arrogant and out-of-control EPA in Washington.
If you decide to show up, you might want to bring along a candle – just in case.
House Education Committee Chairman Derrick Graham’s recent op-ed reveals his clear understanding of Kentucky’s education deficiencies.
Graham, D-Frankfort, is well aware of the “persistent disparities in performance between groups of students, especially those defined as minorities, disabled or low-income.”
He eloquently addresses how “students caught in the achievement gap are disproportionately from African-American, Latino and low-income homes,” and how “these discrepancies stunt not only the educational attainment of these students, but their future economic opportunities as well.”
Graham recognizes that “clearly, far too many schools are falling short.”
Why, then, does he employ more stall tactics than a star defense lawyer when it comes to allowing Kentucky parents to have viable alternatives, including public charter schools, for educating their children – especially when a growing body of evidence indicates that such parental-controlled choices help address those very issues he stews about?
While the state Senate recently passed solid legislation to bring public charter schools to Kentucky, Graham – as he often does – used his substantial power as committee chairman to kill the thoughtful, effective and restrained approach.
The Senate-approved policy creates a pilot program allowing five charter schools in Kentucky’s two largest and most-urban school districts – similar to densely populated, low-income communities nationwide where charters more often than not have an impressive track record of high test scores, graduation rates and college attendance and low failure and dropout numbers.
Graham offered legislation purporting to close the achievement gap and turn around failing schools.
While these bills may reinforce Graham’s any-option-but-charter-schools stance with the state teachers’ union – where he no doubt would like to land a cushy job after his legislative tenure – they offer little in the way of actual education improvement for Kentucky’s neediest students.
Accomplishing that requires policies – including parental school-choice options – that would put him at odds with the union bosses.
Graham’s turnaround bill would have allowed for an “external management organization” to come in and advise a failing school’s existing leadership – but only after that school failed four years in a row.
So if Johnny enters a school that fails during his first-grade year, he’s finished the fourth grade before this dull accountability tool can even be picked up. And if, by chance, the school happens to barely pass during Johnny’s fourth-grade year – even after three consecutive years of failure – then it gets to start over with a new “shot clock.”
Two other significant developments regarding charter schools occurred on the day Graham’s op-ed was published by the Lexington Herald-Leader:
- Alabama became the 43rd state to pass charter-school legislation, leaving Kentucky among the seven states in the nation without a parental school-choice policy.
- Stanford University’s Center for Research on Education Outcomes (CREDO) released the results of one of its most comprehensive research projects ever, comparing charters with traditional schools in urban areas in 22 different states.
“This research shows that many urban charter schools are providing superior academic learning for their students,” CREDO director Margaret Raymond said.
Do parents not deserve such options, especially considering the fact that the math proficiency-rate gap among Kentucky’s middle-school students has more than doubled since the Kentucky Education Reform Act was implemented – from 9 points in 1990 to 22 points in 2013?
Among Graham’s flowery rhetoric was his acknowledgement that Kentucky legislators have “a moral obligation and legal responsibility” to ensure such gaps are closed.
So if politicians like Graham and the handful of his party’s fellow charter-school obstructionists in the House fail to close the gaps by blocking school-choice policies that have proven effective elsewhere, does that make such obstruction immoral and even illegal?
One legislator said the beer distribution policy debate that recently brewed and boiled in the Kentucky House reminded him of comic-book episodes featuring Bizarro, the super villain who appeared as the antithesis of DC Comics’ Superman in the late 1950s.
Alvin Schwartz created the desperado with powers and flaws similar to the hero’s – only in reverse. Instead of “green kryptonite,” which was lethal for Superman, Bizarro actually was strengthened by it, but was vulnerable to “blue kryptonite.”
Nothing demonstrated that mirror image more than Bizarro’s bizarre speech, all of which meant the opposite; what was “bad” became “good” and what was “good” wasn’t.
It’s indeed much like what happened during debate on House Speaker Greg Stumbo’s confiscatory House Bill 168 aimed at taking Kentucky property away from a single company, Anheuser-Busch InBev.
An amendment by Rep. Adam Koenig, Erlanger’s free-market Superman (Republican-style), would have placed the bill on a big chunk of “blue kryptonite” by protecting the brewery’s distributorships in Louisville and Owensboro.
Stumbo, D-Prestonsburg, starring as Bizarro – minus (thankfully) the leotards, cape and big large “B” that appeared in place of the “S” on the anti-hero’s costume – called the hero’s amendment “flawed.”
Fellow League of (Frankfort) Justice superhero Rep. David Floyd, R-Bardstown, dared to suggest – during a “truth, justice and the American way” moment – doing away altogether with outdated Prohibition-era beer regulations and allowing Kentucky-based brewers and microbrewers to distribute their own products instead of being forced to use a third party.
Most small operators would heartily support such freedom. The rest simply use regulatory policy as kryptonite against competitors.
This all is really about the worst type of cronyism – the kind used to feed greed and employ Bizarro’s power.
Were it not for the scaremongering and misinformation offered by two distributors that compete with Anheuser-Busch, both amendments could have moved forward.
Chas. Seligman Distributing Company in Northern Kentucky claims that allowing Anheuser-Busch to own distributorships would result in a monopoly.
General Manager Jennifer Doering doing her best Chicken-Little impression includes arguments that, in Bizarro-talk, means the “good” – a company growing in a vibrant marketplace – is “bad” and that the “bad” – discouraging outside investment in the Bluegrass State – is “good.”
“I don’t think it’s right that a foreign company comes in and tries to eliminate a system that works very well. If it starts with Owensboro, it’s just going to continue on,” she lectured, even as Kentucky Gov. Beshear was touting his trips abroad to try and attract new business.
Why should the governor succeed if, as Doering spouts, it’s “bad” for a large foreign-owned company to grow and prosper here?
How “good” it would be – in Bizarro Doering’s view – for government to not only keep that company from purchasing new entities but also to force it to sell its existing operations.
Could it be that Bizarro had ulterior motives? Why yes! As a matter of fact, it very well could be!
Whad’ya know? Seligman sales executive Greg Thomas told Louisville TV reporter Joe Arnold that his company would be “interested” in purchasing Anheuser-Busch’s Louisville operation if the beer giant is forced to liquidate.
So will the story be that in the spirit of Lex Luthor, Bizarro’s comic-strip mentor, Seligman got Stumbo to use his government power not only to shake a company down and give it to a large “contributor” to those very same shakedown efforts?
All while Stumbo used Bizarro-speak about “fairness,” “a level playing field” and the “purity” of the three-tier system, which he even acknowledged is riddled with “exceptions.” Hypocritically so, I might add.
State senators, who ultimately will decide the fate of this krypton-itic legislation, should do in legislative terms what Earth-3 invaders did to Bizarro in their final battle with him – send his ideas down to a terrible defeat, which I’m certain would have even Luthor crying in his Country Boy brew.
Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at firstname.lastname@example.org. Read previously published columns at www.bipps.org.
A new Bluegrass Institute report by Western Kentucky University economist Brian Strow suggests the consequences of raising the minimum wage are more severe in some parts of the country – and among certain demographic groups – than others.
Strow, Ph.D., notes that minimum-wage workers comprise 6.3 percent of the workforce in the East South Central Census region, where Kentucky is located, but only 1.5 percent of Pacific Region employees.
That’s why the $10.10 minimum wage proposed by the Obama administration would have a bigger and more-negative effect on the commonwealth’s business community than a similar increase in, say, Washington state, where a much-smaller percentage of the workforce earns the minimum wage.
“The states that see the largest escalation in unemployment from a minimum-wage increase are those with the lowest wages, which is why Kentucky’s unemployment rate spikes relative to the U.S. rate when the federal minimum wage is increased,” Strow writes.
And if Washington should not do it because of the harm it would cause states like ours, then surely our own state Senate should stop the Kentucky House’s plan to raise the commonwealth’s minimum wage to $10.10.
Not understanding the difference in the impact minimum-wage increases have on various regions exposes economic illiterates like Louisville Metro Council member Attica Scott who, during the recent debate about raising her city’s minimum wage, spurned Mayor Greg Fischer’s compromise offer of $8.75 as keeping low-wage workers “economically enslaved.”
Scott suggests that $10.10 still wouldn’t be nearly enough – pointing to Seattle’s $15 minimum wage.
But government-forced wage hikes don’t affect all areas equally; nowhere do they occur in a vacuum.
Which workers, for instance, does Scott think are the first let go when a company shrinks payroll in order to stay in business? It’s those lowest on the totem pole.
“Workers in a market economy are not paid above their marginal-revenue product for extended periods of time,” Strow teaches. “The employers will only hire employees if their wages (plus benefits) are less per hour than the company brings in per hour in new revenue generated by the employees’ presence. Employers will not pay someone $10.10 hourly to bring in $8 an hour of new revenue.”
Strow explains that a person “whose skill set combined with the circumstances of time and place allows them to bring in $8 an hour of extra revenue to a firm will be hired if the minimum wage is $7.25 an hour but will lose said job in many businesses if the minimum wage is increased above $8 an hour.
That’s because businesses adjust in myriad ways to government-forced wage hikes, including reducing employees, cutting current workers’ hours, automation (remember when a human being used to check your bags at the airport?) or closing their doors.
Neither are all demographic groups equally affected by minimum-wage hikes.
According to the Census, for example, more than half of minimum-wage workers are between 16 and 24 years old.
Strow argues that young people looking for work were most affected by past minimum-wage increases – a trend he believes would only worsen with another hike now. Youth employment fell between March 1990 and July 2014 from 47.1 percent to 27.1 percent; youth employment is barely more than half what it was 25 years ago.
He doesn’t believe it’s a coincidence that such a sharp drop in youth employment occurred during a period of steep increases in the minimum wage, which rose 40 percent – from $3.35 to today’s $7.25 per hour.
“Youth employment is almost half of what it was 25 years ago,” Strow said. “A climb up the income ladder begins by placing one’s foot on the lowest bar. If society truly wants more people moving up the income ladder, it must stop removing the lowest rungs of that ladder.”
This edition of “Liberty Boosters and Busters” comes your way courtesy of the 2015 session of the Kentucky General Assembly.
A “Liberty Booster” is a policymaker who offers an idea that advances freedom, defends our liberty or in some way boosts opportunities for Kentuckians.
“Busters,” on the other hand, attempt with their ideas to obstruct economic opportunity, take away our freedoms or just give some politician the limelight they crave, often without the political courage required to earn that attention.
Liberty Booster: Rep. Rick Rand, D-Bedford, supported reforming Kentucky’s telecommunications regulations in his statement to a House committee.
“As a realtor, madam chair, in a rural area, it used to be people would say: ‘how are the schools here?’ That was the main question,” Rand said. “Now they ask: ‘how are the schools and can I get broadband? Is it available to me in your rural area?’ That’s an important thing because so many people now don’t operate in storefronts.”
Rand proves you don’t have to be a right-winger to support sound economic-development policy in the form of freeing telecommunications companies from maintaining antiquated copper phone lines in larger populated areas while allowing them to use new technology to provide basic phone services.
So does Democratic Gov. Steve Beshear, who tweeted the proposed reform “strikes a strong balance between providing consumer protection & creating #econdev opportunities across KY.”
Liberty Buster: A handful of left-wing House members, including Louisville area Rep. Jeffery Donohue, D-Fairdale, are stifling telecom reform.
Donohue’s accomplished little in the legislature – much like the special committee he chaired that was charged with investing sexual-harassment claims against former Rep. John Arnold.
Yet whereas his legislative résumé is short on advancing real-life policies that create conditions for the commonwealth’s prosperity or address its serious pension, education or economic-competitiveness challenges, Donohue’s surely on the ball when it comes to filing amendments that slow, stifle and obstruct the kind of reforms that would allow Kentucky to brush aside telephone regulations put in place before Sarah was answering the switchboard in Mayberry.
Donohue wouldn’t be oppressing this major reform opportunity without the blessing of House Speaker Greg Stumbo, D-Prestonsburg, who opposes any kind of telecom reform, telling reporters: “I just don’t like deregulation in general.”
If you can name one business, industry, nation or government in history that thrived because it just “didn’t like deregulation, in general,” I personally will maintain your old copper phone line wherever in the world you live.
Liberty Booster: Sen. Chris McDaniel, R-Taylor Mill, proposed a constitutional amendment that would change elections for statewide offices – including governor – to even-numbered presidential election years.
McDaniel’s proposal alone would save state and local governments $18 million every four years. It also would ensure that many more Kentuckians are involved in choosing governors.
Only 29 percent of registered voters even bothered to turn out in 2011, when Beshear was reelected – down from the 38 percent that voted when he won his first term in 2007. Primary-turnout numbers are even lower.
Forty-seven other states figured out that it’s more effective – in terms of both cost and participation – to avoid gubernatorial elections in off years. Isn’t it time for Kentucky to do the same?
Liberty Buster: Not everyone agrees with McDaniel. But hey, what’s a few million here or there when “a little more prestige” is involved?
“We have to acknowledge that democracy costs something,” piped Sen. Dorsey Ridley, D-Henderson. “I think it gives it a little more prestige in the fact that it has its own election.”
So saving Henderson County the $138,000 it costs to hold one of these elections or getting more voters involved in deciding who’s going to be governor isn’t prestigious enough for the senator who represents that area?
Such reactions reconfirm Nobel laureate Milton Friedman’s observation that: “Nobody spends somebody else’s money as carefully as he spends his own.”
Doing so apparently wouldn’t be “prestigious” enough.
A couple of quotes sum up what engaged Kentucky voters already know.
The first one is provided by Mahatma Gandhi, who inspired civil-rights movements worldwide, said: “Action expresses priorities.”
Second, former British Prime Minister Tony Blair once opined: “It is not arrogant government that chooses priorities; it’s an irresponsible government that fails to choose.”
Actions demonstrated particularly by Kentucky House’s Democratic leadership during this year’s legislative session indicate a failure to get on the same page when it comes to voters’ priorities.
A new poll conducted in January by Fabrizio Ward of 600 likely voters for (full disclosure) my organization, the Bluegrass Institute, found that Kentuckians of all political stripes want Frankfort to focus on a few important priorities that affect the greatest number of citizens and have long-term impact.
The survey’s voters were asked to choose which of 11 issues should be the priority of Kentucky’s governor and legislators. By a 2-to-1 margin, both Democrats (53 percent of respondents) and Republicans (39 percent) chose the “jobs/economy” category as the most important area for Frankfort to deal with. “Education” and “health care” were also chosen as the second and third priorities by respondents.
But too much of the activity in Frankfort demonstrates a disconnect with constituents back home who seem to understand better than many elected policymakers that growing the economy and improving our education system clear a path for success in solving Kentucky’s most-pressing problems.
For instance, we need to properly fund our public pension and education systems. Yet aren’t we already taxed enough? So, where will additional tax revenue come from if it’s not from rising incomes that result from growing, competitive and healthy economies?
Kentuckians’ per-capita income in 2013 was barely more than $36,000, which was $4,000 less than Missouri, $5,000 less than Ohio, $10,000 less than Illinois and a whopping $12,000 less than Virginia. In fact, our per-capita income is the lowest of all surrounding states except for West Virginia, which – with its new political blood in Charleston – likely will soon catch up with us.
So why, for example, do we have Republicans in the Kentucky Senate pushing for – of all things – government-mandated smoking bans and minimum-wage increases when Kentucky is being left behind by neighboring states with whom we compete for jobs and economic opportunities?
And why are the leaders of the House’s majority party – who set and control the agenda – spending valuable time during this year’s legislative session trying to ramp up regulations on the beer industry?
Regulating the distribution of beer? Really?
Our poll not only asked respondents to name their top priorities but to indicate which of the issues they considered “least important.”
While 8 percent thought the minimum wage, for instance, was a priority, an even greater number – 10 percent – indicated it should not take up valuable time in a short, 30-day General Assembly session when time is at a premium.
Perhaps the most-telling part of this poll reveals what voters consider the lowest priority; a whopping 54 percent of respondents chose beer-industry regulations as the least important.
Yet much of the news coming out of Frankfort– and nearly every time we’ve seen House Democratic leaders commenting about an issue – during this session – hasn’t been about how we need to grow this economy.
Rather, it’s been about their pet project: a bill that would, if passed as is, not only deny Anheuser-Busch the opportunity to complete the purchase of an Owensboro distributorship, but would force the company to give up a Louisville distributorship it has owned for nearly 40 years.
In doing so, they offer solutions for a problem that doesn’t exist.
These actions suggest that Frankfort’s priorities are out of sync with those of voters from every corner of this commonwealth.