How many does it take?

Government never furthered any enterprise but by the alacrity with which it got out of its way. Henry David Thoreau

The number of bills that became law in Colorado in 2011: 330. Average number of pages of new rules issued by Colorado per year: 15,000. The 2010 Federal Register, which contains federal rules and regulations, is 81,405 pages long – you can buy a copy for $929.

 

How many laws does it take to create jobs? We keep hearing politicians talk about creating jobs. Unfortunately, too many politicians don’t really understand how jobs are created, or who creates them. Nor do they understand what prevents job creation. Here’s a hint: see paragraph one, above.

 

There is a pervasive idea that businesses are unwilling to invest because of uncertainty about taxes and regulations. But it’s not uncertainty that prevents business investment and hiring - it’s the certainty. We know with absolute certainty that federal, state, and local governments will continue to write more laws, rules and regulations that limit economic and personal freedom, and require us to beg favor from government officials just to make a living.

 Over 96,000 pages of new state and federal law, rules and regulations, and that doesn’t even include local governments. How many will you violate today? How could anyone possibly know?

 
Although I’m a registered Republican, I’m not particularly optimistic about the ability or willingness of either party to curb the appetite for more control. In 2010 when Democrats controlled both Colorado houses, 454 bills were signed into law. With Republicans controlling one house in 2011, one would hope for a 50% reduction in passed bills, but we got only a 28% reduction. Republican politicians tend to favor legislation that “favors business,” but that generally means favoring big business at the expense of small business. This is called “economic development,” Orwellian doublespeak for corporate welfare.
 
Democrats add more regulations to “help the little guy,” claiming to be the “party of the people,” but regulations almost always benefit larger businesses, and help only workers who are lucky enough to find and keep their jobs. For example, every year we see legislation advanced by Colorado democrats that would require businesses to provide paid time off for workers. Large businesses already do this, so it’s of no consequence to them. But small businesses and start-ups may not be able to afford it. This type of legislation from democrats hurts “the little guy.”
 

The cost of complying with regulations is astounding. A 2010 report from the US Small Business Administration estimated that in 2008, US businesses spent $1.75 trillion in order to comply with federal regulations. The Colorado Senate Republican Caucus extrapolates from that to conclude Colorado businesses’ cost of compliance with federal regulations was over $30 billion in 2008. That’s enough to pay for 500,000 good paying jobs, or 100,000 jobs in the top 1% of wage earners.

 

When I started my first small business in 1990, I was shocked at the cost of compliance. But I was thankful for Adams County government, who demonstrated common sense and flexibility in allowing me to build that business.  In 2008 however, it was entirely different. I was preparing to start a new business and found that government officials now strictly adhered to codes and regulations that added unnecessary costs, and were unwilling or unable to predict what other problems I might encounter.

 

My plans to start a small business that would have kept me working at something I love, would have employed six or eight people to start, would have filled one or more of those many empty retail spaces, and would have provided a valuable service for my customers, have been scrapped. As I contemplate whether to take on another business venture, I look at the regulatory landscape and have to wonder why anyone would bother trying to combat government to create a business. I applaud those who do, but I fear that fewer are willing or able to do so.

Xcel Energy “Breaks Wind” Records for Rate-Payers

The Denver Post reports: 

Early on Oct. 6, Xcel Energy set a world record for electricity from wind power. Between 4 and 5 a.m. that day, 55.6 percent of the electricity consumed by Xcel’s 1 million customers in Colorado came from wind farms dotting the state. 

“We’re proud of that and believe it shows that wind is an important part of the portolio,” said Michelle Aguayo, an Xcel spokeswoman. 

While that seems like a tremendous accomplishment, let’s take a look at what was accomplished, and what it means for Xcel customers.

The record itself is not that impressive. In a recession at 4:00 in the morning, overall electric usage is pretty low. When the economy is humming along at full steam, manufacturers that require lots of electricity often add night shifts, because electricity often costs less at night, and it’s cheaper than building more production capacity. This creates more jobs. But in this economy, it’s a safe bet there ain’t much happening.  

October 6 was a high wind day. Portions of I-70 were closed that day from winds. In Denver, the wind uprooted power a light pole, which landed on a light-rail power line, delaying the trains. Lots of wind combined with a recession produced the record.

Wind energy costs up to 80% more than conventional power production. When Xcel brags that they broke a record for wind power generation, they are really saying that at 4 a.m. they produced high cost energy at a time that was once considered to be the least expensive time of day to buy electricity.

Let’s go a bit deeper in our analysis. Colorado has a 30% Renewable Portfolio Standard (RPS), meaning 30% of our electricity must come from renewable resources by 2020. The citizens voted in 2004 for a 10% standard, but a “too eager to please” legislature has since raised it twice. Solar and wind devices provide roughly one third of their rated capacities, because the wind doesn’t always blow and the sun doesn’t always shine. A wind farm rated at 100 megawatts will only deliver 33 megawatts. Because they mandated the 30% RPS, we must overbuild renewable generation by nearly three times.

That sounds great, right? Except that there is no way to store the power produced when the wind is blowing for use when it isn’t. Therefore we must have stand-by generation capacity that can meet all our electricity needs.

Coal power can’t easily or efficiently be “cycled”, meaning you can’t turn it off and on to complement wind speeds or sunshine. Some clean coal plants violate clean air standards because solar and wind are too variable. When they are cycled, their clean status is compromised.

Nuclear power, which has no carbon or other bad emissions, can’t be cycled at all. It can only be used for “baseline generation”, the lowest amount of electricity that gets used during a day. As we approach that 30% standard, nuclear can not be part of the mix, because sometimes all our power must come from renewables. The stand-by generation will all have to be quick cycling sources, such as oil or gas.

In recent years, technology has rapidly advanced to make coal a much cleaner fuel for electricity generation. Now that Colorado and President Obama have decided that coal will be eliminated or minimized as a fuel, there will be no incentive for further advancements in clean coal technology. Meanwhile, advancements in wind, solar, and storage technology are creeping along at a snail’s pace. Government interference is misdirecting research and resources.

Colorado’s Renewable Energy Standard is raising electricity costs when families and businesses are struggling, costing hardships and preventing job creation. The environmental savings, if there are any, are negligible. Readily available, clean burning fuels are being ignored, or shipped to China where they burn without the benefit of our clean technology, creating global pollution. It’s time to eliminate the arbitrary Renewable Portfolio Standard and let market forces, guided by sensible restrictions on pollution, determine how we will generate electricity for families and the businesses that create jobs.

Preserving our Blessings

I’m thankful. I’m very thankful. And not just today, Thanksgiving Day, but every day. I grew up in a family with loving parents and siblings. I don’t mean to demean the rest of you, but I’ve got the world’s best wife (some of you are undoubtedly pretty good, but no one can hold a candle to Courtney, the love of my life). We have a home that someday we’ll own, in the great State of Colorado, a state whose abundance of outdoor beauty and recreation gave birth to my entrepreneurial spirit. We live in a land of liberty and opportunity, and for all these things, I’m grateful.

Dad worked hard to provide for us, but also instilled a strong work ethic so that we could provide for ourselves. I remember working with Dad after school one day as an 11 year old. We were picking up scraps and trash at a home he was building. A subcontractor stopped to talk to Dad, and I stood idly by and listened for most of an hour. Then it was time to go home. As we got into the van I was foolish enough to remark how easy it was to earn my 50 cents for that last hour. Man, did he lay into me! He said he wasn’t going to pay me for that hour. I complained that I was there to help him, and since he was listening to the subcontractor, I was helping him listen. Dad carefully explained that he pays me to work, and that we each have different jobs. If I expect to get paid, I had better stay busy doing my work.

My dad taught me that hard work in this land of opportunity is rewarded. Indeed, the United States of America is the most prosperous nation in history. Even the poorest among us live far better than most of the rest of the world. We owe that to our history of respect for liberty. It is our deeply held belief in liberty that gave us a legal system that protects property rights. Without property rights there is no incentive to create or produce anything more than what it takes to survive. After all, if you can’t enforce your right to own what you produce, why bother?

As thankful as I am for all these things, I’m also deeply concerned. Former State Senator John Andrews today told me of the writings of Alexander Tytler:

The average age of the world’s greatest civilizations from the beginning of history has been about 200 years. During those 200 years, those nations always have progressed from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to complacency, from complacency to apathy, from apathy to dependence, and from dependence back into bondage.

In Senator Andrews’ book “Responsibility Reborn” he says, “You’d have to be dreaming, not to recognize that we have been living in a nation that has for quite a while been somewhere on the declining side of the cycle”. He also points out that the cycle can be reversed. If I didn’t believe that, I would not write these columns. I would not have run for State Representative in 2010. Simply put, I wouldn’t bother. If we don’t renew our respect for liberty, if we don’t restore limits on government that respect property rights, we will continue down that cycle.

We have gone from a nation that was built on a rugged entrepreneurial spirit, on self reliance and personal responsibility, and on mutual respect for rights and liberty, to a nation with a culture of dependence that relies on what the government can take from one to give to another.

 

During this season of thanks, let us be grateful for the work of those who established, secured, and protect our freedoms. Let us be mindful of the abundance we enjoy, and how the blessings of liberty created that abundance. And let us commit to not decline into complacency, apathy, and dependence, but embrace the independence and personal responsibility that will ensure the survival of the Republic.

The Misdirected Anger of the Occupiers

“I’ll have a hamburger, for which I’ll gladly pay you, Tuesday”. Wimpy.

Comics often allow a humorous glimpse into real life. I remember growing up and reading Family Circus every Sunday, tracing Billy as he ambled from amusement to amazement throughout the entire cartoon panel. At the time, it didn’t occur to me that we behave that way as children. I just thought Billy was cool. Then there was the comic strip “There Oughta Be a Law”. Can anyone doubt its success? Although its not singlehandedly responsible for overregulation, we certainly have an abundance of laws!

 

What can we learn from Wimpy, the affable carnivore from the Popeye comics? For many youngsters, this was our first look at capitalism. Wimpy made an offer. The hamburger vendor (Bluto) was under no obligation to accept the offer. Why might he accept the offer? If he values the future payment more than his immediate possession of the burger. Were another customer to show up and offer to pay immediately for the burger, Wimpy might not get to eat. Neither has the right to demand anything of the other, because they each have the right to control the fruits of their own productivity. If Wimpy does not respect Bluto’s rights, he may be inclined to steal the hamburger. At that point, government should step in to protect Bluto’s rights, ensuring that each participant in this scenario has full enjoyment of their own property, but not the unearned right to the property of the other.

 

Capitalism is based on value, offer, acceptance, competition, and property rights. The participants, each looking out for their own interests, decide with whom and for what they will trade. Some call this selfishness, but it’s really rational self interest. Competition ensures that resources are used where they achieve the best value for their owner, and that creates wealth. Wealth creates jobs. Jobs create more wealth and society benefits as a whole.

Government’s role is to ensure respect for property rights, the ultimate basis for liberty. When each individual is assured of the right to his property, self interest unleashes the kind of creativity that transformed America into the wealthiest, most respected, and most generous nation in history. Without the rule of law to protect property rights, there is no reason to create wealth because someone else can simply take what you created. Self interest is lost to the extent that property rights are lost.

The Occupy Wall Street movement is based on self interest. The protesters hope for some ill-defined change within Corporate America that will somehow turn into comforts for themselves. Unfortunately, their desires are examples of the very greed they rail against, and their anger is misdirected.

The Occupiers are asking for unearned wealth. That’s human nature. It’s the trait that Corporate America and unions display when they funnel millions of dollars into campaign coffers of elected officials. There will be no human evolution that eliminates self interest, and no amount of punishment for Wall Street will convince corporations to forego their own survival for the sake of mankind. The anger should be directed at government.

 

Lawmakers acting in their own self-interest have lost respect for liberty, property rights, and the right of people to pursue their own selfish interest. With subsidies, loopholes, and regulations, lawmakers have bestowed undue power on those that can return the favor by funding their campaigns. Big business competes for favorable treatment, and it nearly always comes at the expense of the “little guy.” Lawmakers and bureaucrats have essentially institutionalized legal theft. The result is a loss of freedom, opportunity and jobs for society as a whole, and the 99% in particular.

A return to constitutional limits on government will return opportunity to the powerless, increase self interest, and create greater prosperity for all Americans. As F. D. Roosevelt said, “[it is] not that the system of free enterprise for profit has failed in this generation, but that it has not yet been tried”.

The Cost of Monopolies

Jon Caldara of the Independence Institute, when asked if teachers are paid too much, said, "How would we know? The reason that I say that is, there is a government monopoly for education…"  

Proposition 103 is on your ballot. It’s a huge increase, advertised as being for education (although the legislature is not required to spend the money on education.) IF it really does go to education, a major chunk of will probably go to increasing teacher compensation. It’s reasonable to ask if teachers should be paid more. 

I met many teachers while I was on the campaign trail in 2010. Every one impressed me as a caring, devoted, hard worker. They expressed a sincere desire to make a difference for the youth they teach. Teachers, like all of us, want to do good and also better their own lives. That’s a common instinct for all of us, and it’s what led to America’s prosperity.

Wages and benefits, like other valuable resources, are controlled by supply and demand. That’s the essence of a free market. In times of full employment employers often find it difficult to find workers. To entice people to join their companies they offer higher wages than other companies who are competing for those workers. If the strategy is successful the companies that are losing workers have to raise wages. At some point the businesses will either have to become more efficient or pass the increased costs on to customers. Those who can’t will lose customers. If they go out of business, their laid-off workers add to the supply. The fresh supply of new job-seekers reduces wages. In a free market for workers, wages never quite reach stability, but are always moving toward balance. 

In contrast, public education is a monopoly with wages set by union demands and school board acquiescence. Public teacher unions will always push for higher wages and benefits, regardless of sustainability, because public education simply won’t go out of business. Taxpayers are forced to meet the demands of these unions because the consumers (parents) never have to pay directly for the product. In contrast, private sector unions often give up some of their benefits to help in the survival of their industries. 

Back to Caldara’s question about how much public school teachers are paid: we can look at schools that compete for the same teachers but aren’t compelled by a union contract. This won’t give us a complete answer, because the supply of teachers is mostly consumed by public schools, but it could give us an indication.  

 

 

In 2007-08, private school teachers were paid $13,000 less than their public school counterparts, and that doesn’t even include the far superior benefits most public schools offer. So do private schools have trouble finding qualified teachers at a considerably lower price?  

Compared to private schools, public schools are free. Private schools must offer enough value to persuade parents to pay for them. If private schools could not get enough teachers, or if they were only able to hire teachers rejected by public schools, they would not be able to compete for customers. Who would pay thousands of dollars every year to put their children in poorly staffed schools? The existence of successful low-paying private schools indicates that they can find good teachers. 

Meanwhile, unions are sending good teachers to the unemployment lines. There are about 50,000 public school teachers in Colorado. If unions agreed to accept lower wages and benefits for teachers, every 25 cents per hour in reduced compensation would allow our public schools to retain 3-400 teachers. Would public schools be able to find enough teachers at lower wages? 

Principal Pat Gardner of Broomfield Academy (a private school) tells me that she quickly gets 40 qualified applicants for every open full time teacher position. After that she quits taking applications. Broomfield Academy pays less than public schools. Granted, working for a private school has other benefits. Because of the greater freedom to hold students and parents accountable, a teacher can be more effective. Does that added benefit make up for less pay? As Caldara said, how can we know?

Stuck With a Dishonest Tax Increase

There will be no floor debate, no committee hearings, no amendments. Proposition 103 is already written, and if we approve it we are stuck with it.

Boulder Senator Rollie Heath’s Proposition 103 increases sales and income taxes to raise over $500 million per year, supposedly for education. I applaud Senator Heath for properly proposing this tax increase. He’s following our constitution’s Taxpayer’s Bill of Rights (TABOR) that requires tax increases be voted on by the people.  A whole slew of groups are trying to circumvent and destroy TABOR. 

The Colorado Supreme Court ruled that property taxes could be increased without our vote. They also ruled that removing a tax exemption is not a tax increase, leading to the “Dirty Dozen” tax increases in 2010 which killed businesses and jobs. The legislature raised fees instead of taxes to get more money, and we got a huge increase in our vehicle registration fees.

Westminster City Councilman Bob Briggs sued the state to end the Taxpayer’s Bill of Rights. Separately, Lobato v. Colorado would more than double education spending, creating a crisis that would require emergency tax increases. It’s another end-run around our Taxpayer’s Rights. If this assault on TABOR continues, our right to vote on taxes will soon be but a cherished memory. 

But Senator Heath got this one right. At least he’s asking us for more tax money. That’s where my appreciation for Heath’s efforts ends.

Heath and his campaign to raise taxes have been, shall we say, less than honest. Heath used fourth grade students as campaign props without asking permission. Robo-calls say it’s a time-out in cuts to education instead of a tax increase. The website for Prop 103 falsely claims that the new revenue will go to education. 

The biggest deception of all is in the proposed law itself. It requires the money raised by the tax increase to be spent on education. This is pure folly. Heath knows it and yet it’s his biggest selling point. 

The legislature is under no obligation to spend the money on education. Prop 103 is a law, and it is only valid until it is superseded by another law. That law is the budget. Prop 103 will not automatically move money into education. It must be done through the budget, a law that is passed every year by the legislature. They are not obligated to write the budget in accordance with Prop 103.

Heath could have written this as a constitutional amendment to direct the new taxes to education. He chose not to. He knows that the money is not required to be spent on education, yet he and his campaign continue to sell it that way. Heath is also not telling you if the money is spent on education it will create two huge education budget cuts.  

The 2012-13 education budget would have roughly $783 million in extra revenue for education. In 2013-14 there will only be $533 million in extra revenue. That’s a $250 million cut. And when (or if) the temporary tax increase ends in 2017, education funding would lose over $500 million. 

As disheartening as all of that is, the second worst part is that there is no plan for this additional spending to improve education. There is no correlation between higher levels of funding and improvements in educational outcomes as many studies have shown. AJTT.org compares spending to outcomes. Washington D.C. spends more per pupil than 47 states and is ranked dead last in outcomes. North Dakota is outspent by 41 states and has the 6^th highest quality educational system. Money spent on education funding will not guarantee better education. 

Now for the worst part: Prop 103 is a job killer. A study by Economics International Corp. found that the proposal would result in a loss of 30,500 jobs. The average family of 4 will pay $400 per year to lose those jobs. 

A dishonest tax increase. Future education cuts. Huge job losses. Is this what we want to be stuck with?

Reality Over Hope - Three Jobs Saved

We cannot solve our problems with the same thinking we used when we created them. Albert Einstein 

President Obama has explained his new stimulus program. Let’s see how the old one did. Obama’s Council of Economic Advisors (CEA) reports that the American Recovery and Reinvestment Act (ARRA) has been a success, creating or saving 2.4 million jobs through the first quarter of 2011 at a cost of $666 billion. As pointed out by The Weekly Standard, this comes to approximately $278,000 per job. We’d have saved $427 billion by just writing $100,000 checks to each person who has a job because of the stimulus.

The CEA is a group of three economists appointed by the President to…advise the President on economics. Being economic advisor to the man that spent $278,000 per job only to see unemployment stuck at over 9% would be a tough job. How do you tell the President that he wasted oodles of money and prolonged the recession –without losing your job? The report relies on Obama’s old campaign slogan. Heavily invested in HOPE, the president might see only what he wants to see in the report, and believe the skewed conclusions.

The report mentions twice that nobody can observe what would have happened in the absence of the stimulus. We can observe that the economy reversed its downward trend one quarter before the stimulus, and that the biggest positive jump was in the first quarter before 98% of ARRA funds had been spent. And we can see that as stimulus spending increased, the economic growth trend reversed again, going down. The report says that it can’t determine the cause of what happened, but in a triumph of hope over reality, it misconstrues facts, confuses correlation with causation, and lays the groundwork for more stimulus. 

It gets worse. The first company that got a government guaranteed loan under ARRA was Solyndra, a California solar panel manufacturer. Government guaranteed loans, by the way, are actually guaranteed by you and me. Solyndra got $535 million. Assuming all of its 1100 workers were hired because of the stimulus money, that’s over $486,000 per job. Now Solyndra is bankrupt. Solyndra’s 1100 jobs were lost because Obama was mistaken in his choice of handout recipients. How many more failures will we see? If a company requires a subsidy, it probably doesn’t deserve it. 

We’re not done with that CEA report yet. It relies on “independent approaches and supplements those estimates with those of numerous outside analysts”. The data was cherry-picked to create the desired outcome: Impress the President and save the jobs of three economists. If outside data is included, where is data from other countries that demonstrate whether their stimulus programs worked? 

Our nearest “rich country” neighbor is the closest thing to that which the CEA said could not be observed – the effect of doing nothing. Canada did next to nothing. According to David Lee, writing for the Mises Daily, Canada’s stimulus package “was little more than a clever display of political gamesmanship whereby the appearance of action was maximized, while the action itself was minimized…It is precisely in this abstinence that we find Canada's source of relative success”. Canada’s economy grew 3.3% in 2010. Job losses have been recouped. Their unemployment rate is 7.2%, compared with ours at 9.1%. A recent business survey indicates record hiring expectations and optimism about future demand. 

Canada is perceived as the hope-over-reality bastion of socialism in North America. But the truth is that in 1993 “Canada underwent one of the most fiscally responsible periods in its history…[Finance Minister] Martin made it clear from the start that the priorities of the government would be fixed squarely on eliminating the deficit and the record of the following decade leaves little doubt that this was a commitment that was delivered upon powerfully”. 

While the CEA shows us that they can save their own jobs, Canada shows us that government non-interference is how job creation really works.

Bananas and Broken Windows

A guy walks into his local grocery. Noting the price of bananas is 89 cents per pound, he complains that the grocery across the street sells bananas for 69 cents per pound. The grocer asks him why he didn’t buy bananas from the other grocery. “They are all out of bananas.” The grocer tells him, “When we’re all out, we sell them for 49 cents per pound.” 

It makes sense, doesn’t it? When Grocer A runs out of bananas, Grocer B can charge more. As the supply dwindles and he continues to raise his price, some customers will switch to oranges. Meanwhile, banana growers, realizing more profit, will produce more bananas. But now there are fewer customers because some converted to oranges, so grocers will lower the price to sell their bananas before they go bad. This shows that profits motivate sellers to adjust prices to meet changing supply and demand.

This is common sense economics, understood since people first began to trade. An “education” in basic economics just gives you the ability to draw graphs about prices, supply and demand. “Advanced economics” gives certain economists like Paul Krugman the ability to baffle the masses with more complicated graphs. We are led to believe that government intervention by politicians, justified by graph-makers, will cause more employment, abundant goods, stable prices, and a chicken in every pot. Common sense flies out the window. 

The economy is so complex that it’s impossible to determine all the effects of government intervention. A 19^th century economist, Frederic Bastiat wrote, “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.” Bastiat went on to describe the “Broken Window Fallacy” to illustrate the point. Let’s go back to the grocery. 

While the grocer and customer haggle over bananas, a hoodlum throws a rock through the front window. A crowd gathers and begins to discuss the misfortune of the grocer who will have to pay $500 to have his window repaired. Eventually someone points out that the window repairman will have more money to buy bananas for his family. He’ll also buy a pane of glass, providing income for the glass manufacturer. The glass manufacturer will buy raw materials. Truck drivers will deliver these materials. This stimulus will ripple through the economy. When you consider these benefits, isn’t the hoodlum a hero? 

The broken window and the economic activity it will create are easily seen. What is not seen is what would have transpired had the window never been broken. Prior to the act of vandalism the grocer had a good window and $500. After the repair he only has a good window, but not the $500. What would he have done with the $500? Perhaps Christmas bonuses for his staff, a vacation for his family, a new credit card machine to improve service at the checkout register? The very grocer who earned that $500 gets none of the benefit of it! Five hundred dollars of his wealth has been destroyed. If this were truly an effective economic stimulus, the government could hire hoodlums to break windows everywhere!  

The Broken Window Fallacy has been thriving ever since people first began asking government to improve their lives. It’s all the rage today. A tax levied on one group of people to benefit another group has the same effect as throwing rocks through windows. 

Here are some examples of the Broken Window Fallacy:

• Economic development subsidies (see Gaylord Entertainment)
• Stimulus programs
• War-on-Poverty programs
• Government jobs programs

No economist or politician can tell you what would have been created if the tax was never collected.  But you know what you would have bought with the money. Even if you just buy bananas, it’s best left to the wisdom of individuals who own the money instead of government.

The Anti-Stimulus Program

Politicians often lack a foundation in basic economics, or we probably wouldn’t be facing the possibility of a financial collapse. The average individual has a better intuitive understanding of basic economics than many of our elected officials, or even famous economists. Humans, from the time they first began to trade, have understood supply and demand, pricing, and the use of scarce resources. Billions of people know how to balance spending against income. Our most famous economists, however, are so wrapped up in fallacy that they have forgotten the basics. And history. 

Nobel Prize winning economist Paul Krugman is leading the call for a new WPA-like program. The WPA (Works Progress Administration) was a depression era jobs program. In 1935, just when it appeared that the economy was turning around, President Roosevelt feared that it wouldn’t turn around fast enough. Even though his administration was spending tax money at an enormous rate on public works projects, he created the WPA to give jobs to even more people, lower the unemployment rate, and right the economy. This was a stimulus plan, featuring “shovel ready jobs.” 

Did it work? No. Even the government at the time counted WPA workers as unemployed. Since the private sector could not provide jobs for them, it’s obvious that the economy had not improved.

During the depression, the WPA faced several unanswerable questions that undoubtedly limited its effectiveness. A new WPA program would face similar questions in a more complex world. Nobody can know the right answers. 

1. What wage should be paid? The WPA had a limited budget. They could put more people to work by paying lower wages. But low wages puts downward pressure on wages in general. In the free market, that’s not a problem. Remember basic economics of supply and demand? Labor is a market good. If there are lots of workers available (lots of supply), wages will already be depressed. But government labor is not a free market. It is controlled by unions who spend billions of dollars to elect their bosses. An influx of cheap labor would be bad for unions. Union supported politicians are not likely to do anything to jeopardize union power. 

2. What kind of work should they do? Again, we see a conflict with the unions. They will object strenuously to the government hiring non-union workers to compete with them at their skilled jobs. The WPA jobs will have to be low skilled, or workers will have to be unionized. Republican politicians who are rarely the beneficiaries of contributions from unions are not likely to let union power expand through government spending.  

3. How do you evaluate worker performance? Private sector workers must create value for their employers. The primary purpose of WPA jobs will be to lower unemployment. The longer it takes to complete a particular project, the more employment is created. If creating employment is the goal, the least efficient projects will be the most successful. In the private sector, that’s called waste. In this case, it’s a waste of our tax money. 

4. Who should get the jobs? If the goal is to reduce suffering caused by unemployment, it makes sense to hire the neediest people. Those people may have the fewest work skills. Hiring the least capable workers leads to even more inefficiency. This is more waste of our tax dollars. 

5. The program is ripe for corruption. During the depression, more WPA money went to districts with politicians that supported Roosevelt. WPA workers were pressured to register and vote as democrats and campaign for democrats.  

Now the biggest questions. Who has the wisdom to administer it? How big should it be? How long should it last? The Obama administration told us that the stimulus package would keep unemployment below 8%. They were very wrong. But government has a long history of throwing more money at failed programs. A new WPA would be another example.

The Spending Crisis

Breathe a sigh of relief – the debt ceiling has been raised. 

By and large, it’s pointless. Both parties have raised the debt ceiling time after time.  Its purpose is to limit the national debt, but since it always gets raised, it limits nothing. Often it has been merely a procedural vote – little debate, no Pomp and Circumstance, just a couple of votes, a quick signature, and more debt. 

Let’s talk about the real crisis – spending. The runaway federal spending is cause for concern from both parties. It’s a concern for everyone except President Obama, who wants to raise the debt ceiling so he can continue buying votes with our money, and the money of generations that have yet to exist. Obama wants to raise the limit by $2.7 trillion dollars.  He’s calculating that $2.7 trillion in new debt will last until after the 2012 elections. He doesn’t want to have this debate again before asking for your vote. 

Think about that. It’s 15 months until the election. From 1776 until now, our nation has accumulated $14.3 trillion in debt.  Obama wants authority to borrow and spend 1/5 of that in 15 months. Despite his rhetoric, he has offered no plan to reduce the debt or deficit. Republicans insist that the additional debt limit be matched by spending cuts over the next 10 years. The federal government will be borrowing something like $180 billion each month, and reducing spending only $22.5 billion per month. The spending cuts may not happen at all or may be reversed by future congresses. 

The debt ceiling will be raised. Even so, we still face the very real possibility that our debt will be downgraded. It was threatened before the debt limit debate, not because of a possibility of immediate default, but because of a potential future default. If our economy collapses under the extraordinary spending and debt, America will not be able to pay its obligations. That is the real crisis.

The Strawman Cometh 

I always cheer up immensely if an attack is particularly wounding because I think, well, if they attack one personally, it means they have not a single political argument left. Margaret Thatcher 

I am honored that Senator Lois Tochtrop responded to my columns about unemployment insurance (UI) (go here and here for my articles). Although she called my writings inaccurate, she never actually refuted anything I wrote. She prefers to mislead us with strawman arguments.

She tells us that employers would not forego hiring to avoid paying a payroll tax of $3.29 per week. But that’s per employee. $3.29 times 95 employees is enough to provide a job that’s substantially more than the average $125 per week unemployment benefit. One in five youths (who might like to work for minimum wage) is unemployed. They are sitting by idly while others accrue unemployment benefits. 

Tochtrop states that the Federal Reserve Board says “unemployment benefits are not important factors in the increase of unemployment or the length of unemployment.” I never argued that it does. Quite the contrary, UI is a disincentive to layoffs. If there are additional costs for layoffs, an employer thinks twice before hiring. 

She tells us that unemployment benefits creates more economic stimulus than tax credits for corporations. I’m not certain where tax credits came in to this discussion. I fear that Tochtrop believes that money is something government allows individuals and businesses to keep. She also seems unaware of what truly drives economic expansion and creates jobs – capital investment. An entrepreneur nearly always has to invest money to start or expand a business. This comes from some sort of savings. 

Tochtrop and her colleagues passed a law last year (HB 1128) that “will guarantee the long-term solvency of the Unemployment Insurance program.” Tochtrop is at best misleading. 1128 merely alters the manner in which higher unemployment taxes will be confiscated. Government programs will always be solvent as long as government is willing to extract money from citizens by force.

Gambling With Our Tax Dollars

Fired. Can you believe it? Governor Hickenlooper fired the entire gaming commission board. Their sin? They granted a tax rate reduction for Colorado’s casinos. When Coloradans are facing layoffs, wage cuts, increasing energy and grocery costs; and when the State is short on revenue and struggles to close budget shortfalls, these commissioners granted a tax rate reduction to one industry. Hickenlooper, in a fit of populist rage, appointed a new board that he hopes will reverse the tax cut.

The gaming commission is charged to “encourage business growth and investment in the gaming industry and to permit licensed operations…to realize a fair and just profit.” Isn’t that what the commissioners tried to do? In their judgment, a 5% tax rate cut would help the gaming industry achieve a “fair and just profit.” Keep in mind that statewide gaming revenue dropped an average of 7% during the last three years. 

You might ask, “Where’s the tax cut for all the other businesses in Colorado? What’s fair about that?” That question assumes the gaming industry starts from a fair position. They don’t. The gaming commission sets tax rates for the industry. Whereas other businesses pay 4.63% of their profits, the gaming industry pays a graduated tax on their Adjusted Gross Proceeds. The tax rate can vary from 0% up to 40%. Adjusted Gross Proceeds means the tax is based, not on profits, but on revenue less payouts, which is a higher portion of the same income. Casinos can’t deduct wages, benefits, capital expenditures, interest, depreciation or other normal business expenses. 

This is an industry that asked permission to operate in Colorado.  Colorado said, “Okay, but you’re going to pay dearly for that permission. You will be subject to the whims of an unelected commission. If the Governor doesn’t like what the commission does, you’ll be subject to a whole new commission. You really can’t guess how to budget for Colorado taxes, but rest assured: YOU WILL PAY THEM!” 

Compare that to the tax situation for Gaylord Entertainment’s proposed project in Aurora. We’re not talking quarter slots, this is real money - $300 million in public financing. It’s your money and politicians are gambling with it. 

Gaylord Entertainment wants to open a convention center and hotel with 1500 rooms and 400,000 square feet of conference space. Aurora, Denver, and the State of Colorado are offering subsidies worth over 36% of the projected cost of the project. Governor Hickenlooper, where is your rage? 

They justify this under the premise that it will bring conferences, people, and money to Colorado. The new activity is supposed to generate new tax revenue. According to their website, Gaylord Hotels “strive to make planning easier for you by providing ‘everything in one place.’ From guest rooms and meeting space, to recreation and dining, in a self-contained environment…” Any conventioneers that come to Colorado will not need to visit anyplace other than Gaylord Hotels. 

Reality check: what are the chances that the CEO of a large corporation will say, “Let’s have a convention, hold it in Aurora, and stay inside”? No offense, but…Aurora? Yet that’s what will be required for Gaylord to generate new revenue.  Here are three possible and obvious ways that your tax dollars will fail to generate the predicted tax revenue: 

1. Tax revenue might be diverted from other local hotels, restaurants, and other businesses to Gaylord. Instead of generating new revenue it just relocates it. Businesses that once depended on that revenue could be hurt.

2.  Conferences might very likely continue going to convention centers that are in more exciting locations than Aurora.

3. Gaylord appears to be a healthy, profitable corporation. So did Enron. If Gaylord fails, our tax money has been wasted. 

If it’s a viable, worthwhile project, private investors will invest in it. If it isn’t worthy of private investment, why should government force us to invest? Let’s leave the gambling where it belongs - in Blackhawk, Central City, and Cripple Creek.

Private Sector Jobs - Our Only Salvation

“I will not be satisfied until everyone who wants a good job that offers some security has a good job that offers security”. President Obama said that, speaking recently at an energy-efficient lighting plant.

Whew. I feel better. And more secure. Who wouldn’t want a good job with security? After all, with job security you don’t have to work. You just have to show up. And Obama is setting the bar pretty low - you only have to want the job.  

It seems like a nice sentiment, but it is neither achievable nor desirable. 

There was a time when people had to work to make an effort to get and keep a job. They did that because they had needs and wants.  If you needed food or shelter you got a job that would allow you to pay for food and shelter.  Need a car? Get a job.  Want a better car? Get a better job. Whatever you needed or wanted, working was the way to get it. 

Government likes to give to those who have needs. During the Great Depression the government created jobs through the Work Projects Administration (WPA) and gave them to needy people. During its eight years, nearly eight million Americans received paychecks from the WPA. This was part of the “New Deal,” a huge expansion of the federal government that was intended to end the Depression. 

It failed. As Henry Hazlitt writes in his classic and highly recommended book, “Economics in One Easy Lesson”:

For every public job created by [a] bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. . . . But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken from the taxpayers.  

The Depression was prolonged by government-created jobs and excessive government spending. In 1939, Roosevelt’s Treasury Secretary Walter Morgenthau said, “We are spending more than we have ever spent before and it does not work. . .I say after eight years of this Administration we have just as much unemployment as when we started. . . And an enormous debt to boot!” 

As money wends its way through the economy it generally ends up in one of two sectors – government or private. In general, government does not produce. It does not create things and sell them for profit. It does not seek a profit on its employees. It does not save money to invest in a capital project that will generate a profit. Simply put, money that ends up in the government’s coffers does not grow. Only in the private sector does money create more money. Advocates for more government spending claim that each dollar spent by government grows the economy, a “multiplier effect.”  That may be true, but private sector spending has a much greater multiplier. Private spending, savings, and investment turned America into the wealthiest nation in history. Excessive government spending threatens to destroy that wealth. 

Obama will not be satisfied until everyone that wants a good secure job has one.  My fear is that he will keep trying.  The stimulus plan started by Bush and put on steroids by Obama has been an abysmal failure. Obama laughed when he pointed out that stimulus projects were not as “shovel ready” as he thought. His arbitrary and capricious administration has prolonged this recession. Now Obama wants to spend more and tax more. That might work in the short term, but only until the economy collapses further under the weight of an incomprehensively large national debt.  

Government’s role, particularly during this recession, should be to provide the conditions (not incentives) necessary for expansion of the private sector. Get out of the way and leave the wealth and spending to us.

Unemployment Insurance Problems In Your Own Backyard

Did you know that if you hire your neighbor's kid to mow your lawn, you are liable, under Colorado law, for unemployment insurance for that kid?  

The fact is you cannot sell your labor for a price you are willing to accept unless it meets government criteria. As an employee, you must receive minimum wage -- and be covered by Unemployment Insurance (UI), workers compensation insurance, and have taxes withheld. This is how our state and country disrespect individual enterprise. Let's consider how this affects the small businesses that hire most of the people in our land:

In a recent blog I railed against the Unemployment Insurance (UI) system because it reduces private sector jobs.  The system creates a whole slew of perverse incentives, including these:

§       Businesses are more reluctant to hire an employee who might eventually become an unemployment claim that will raise UI tax rates.

§       Employers facing layoffs have an incentive to fire employees for cause so they avoid an unemployment claim.  This damages the work record of the employee, making it harder to find a new job.

§       In 2009, legislation gave The Colorado Department of Labor and Employment (CDLE) expanded powers to investigate businesses for potential “misclassification” of employees.  With the UI trust fund being $500 million in the hole, CDLE has reason not merely to audit for enforcement, but also to coerce businesses into paying taxes they should not owe. 

Employees don’t see a deduction on their paychecks to cover unemployment insurance.  Nevertheless, they pay for it.  In a competitive labor market, a tax paid by an employer is money that could otherwise be used for employee compensation.  Yet few of the employees who pay for UI taxes will ever receive the benefits.  You only get benefits if you become unemployed “through no fault of your own”.  Employers and CDLE both have strong incentives to prevent payment of benefits.  The UI system is of limited benefit and is a drain on job creation and payrolls.  

To me though, the worst part is that the government limits your right to provide labor.  That is exactly NOT the purpose of government.   Government’s role is to protect your property rights, including your right to sell your labor as you see fit.  You might disagree with me about the value of unemployment insurance, but it is indisputable that it restricts liberties. 

There is a class of people who are exempted from these restrictions: independent contractors and business owners.  If you want to mow your neighbor’s lawn for money, or design a software system for him, you can become a business owner.  Your neighbor won’t have to withhold taxes, buy worker’s compensation insurance, or pay UI taxes.   

But there’s a catch. Colorado law has a list of nine criteria that you must meet to be a valid independent contractor. If you don’t meet all nine, your neighbor will be liable at least for UI taxes.  It is solely the judgment of the auditors from CDLE that determines if you have met those criteria.   

In a recent audit, the auditor interpreted the rules to mean that if an independent contractor gets more than 50% of its revenue from one business, it could be reclassified as an employee and be subject to back taxes, interest and penalties. Such a ruling, were it applied universally, would be totally impractical.  A new contractor could not go into business until it had secured at least two contracts, each for half of its business.  An enterprise would be precluded from doing more than 50% of its business with its best customer.  

The criteria are vague and arbitrary. They lead to abuse by the CDLE who are empowered by the 2009 legislation to enforce the criteria in any way they see fit for the purpose of supporting a UI system that reduces job creation, damages resumes, and robs individual liberties.   

The legislature must change the law to loosen the restrictions on independent contractors. There is only one criterion that is not arbitrary and open to interpretation by unelected and unaccountable bureaucrats: the willingness of an individual to become subject to the risks of business ownership. By expanding the definition of independent contractor, more people will be able to opt out of the failed unemployment insurance system.

Who Pays For Unemployment Benefits?

Imagine you just interviewed for a new job. The employer tells you “You’re a great match for our company, and we’d be excited to have you work for us. We offer good pay, flexible hours, a comfortable work environment, and great benefits.” 

You say, “Great! When can I start?”

“Unfortunately, our benefits are so great, that we can barely afford them for the people we already have. So even though we’d love to have you work for us, we can’t afford to hire you.” 

You reply, “I don’t need all the benefits. I really need the job.” 

“Unfortunately, the benefits are mandated by government, so our hands are tied. Best of luck to you with your job search.” 

In Colorado (as of October, 2010, the latest information my research team (me) could find) every 95 people that receive wages represent one job that won’t be created because of unemployment insurance (UI) taxes.  That means those taxes potentially increase unemployment by 1%. And those taxes are increasing rapidly, so 95 people may soon become 75 or 65, and 1% becomes 1.3 or 1.5%. 

During this recession, Colorado’s Unemployment Insurance Trust Fund (UITF) has been bankrupt since January, 2010. Colorado pays $1.51 in benefits for every $1.00 it receives in UI taxes.   Despite our state constitution’s ban on deficit spending, the UITF has been borrowing money from the federal government since then.  We are currently $500 million in the hole.  Unemployment Insurance taxes are going up to cover the deficit, and with fewer businesses and employees to tax, the rates are skyrocketing. 

Our unemployment system creates huge problems. First is the incentive not to hire. Every new hire is a potential unemployment claim against the employer. Claims raise rates.  It’s better not to hire someone you may later have to lay off.  Second, employers are inclined to fire “for cause” if layoffs are necessary, so that the employee will not be able to make a claim against the company. This damages the resume of the new job seeker. 

But aren’t the benefits worth it? The Congressional Budget Office (CBO) says of the options it studied for government programs to stimulate the economy, UI is the most effective.  It also says that every dollar spent on unemployment generates up to $1.90 in economic growth.  This is preposterous on its face.  If it were true, we could all quit work and the economy would not just recover, it would flourish.

One option the CBO ignored is not taxing employers and not borrowing money to pay for the benefits.  If a dollar taken from an employer by the State and then redistributed to a beneficiary (who spends valuable but unproductive time to meet the State’s requirements) can generate positive economic growth, then a dollar left in the hands of an employer surely would generate more growth.  

Contrary to popular opinion, employers do not pay UI taxes. Sure, they write the checks. But the money comes from you and me, the workers, consumers, shareholders, etc.  UI taxes (as well as any other tax) are a cost to the business, and the business passes those taxes on.  If they don’t or can’t, that leads to fewer profits, business failures, and lost jobs. But if the business you work for fails, you’ll get unemployment benefits! That should make you feel better – you’ll be a beneficiary of the tax that added to the burden that led to the failure of your employer! 

And who gets the benefits?  The government and business both have incentive to deny claims to unemployed people.  Claims increase the experience rate of companies, and that raises their tax rates. Businesses will do their best to terminate for cause so that claims will not be paid.  Colorado government wants to display their “fiscal responsibility” by running a sound program that doesn’t run out of money and eliminates fraud and abuse.  So a relatively small percentage of those who lose their jobs actually receive the benefits.  Even now, only 37% of the unemployed receive benefits. 

So when you go to that next job interview, look at the employees.  Every 95 of them represents the job you won’t get, courtesy of your government.

Closing Windows on Taxpayer's Rights

The Constitution of the United States of America.

What a powerful opening statement for a blog.  Embodied in that document is the reason the United States has led the world in progress, affluence, and compassion for over 200 years.  It is because of the Constitution’s limits on government and protection of individual rights that society has advanced more in the last 200 years than in the previous 5000 years. 

The Taxpayer’s Bill of Rights (TABOR). 

Not quite as captivating, is it?  It doesn’t really stir one’s emotions.  But while the Constitution enabled great achievements by limiting the federal government, TABOR has helped to protect progress in Colorado by limiting our state government.   

California, believe it or not, preceded Colorado in protecting taxpayer’s rights with the GANN amendment.  Like TABOR, it limited the growth of state revenue to inflation plus population growth.  In the late 1980’s California repealed GANN. How has that worked out for them?  They are currently struggling to reduce their budget deficit from $25 billion to $9.6 billion. Let’s compare that to Colorado.  This year, our legislature succeeded in closing a $600 million budget shortfall. While it’s a constitutional requirement that we have a balanced budget, it’s TABOR that kept the size of government in check and prevented us from having an impossibly large shortfall like in California. 

Now Herb Fenster, an attorney from Boulder, is suing the state over the constitutionality of TABOR.  Fenster is the German word for window, and you can see right through him.  He’s another elitist who would prefer that common people remain powerless. The lawsuit asks the courts to make new law and remove power from the people.  Both purposes are antithetical to the republican form. If successful, Fenster’s lawsuit would vest power in the hands of unelected judges, and lawmakers who are more concerned with re-election than with the rights of citizens. 

Fenster’s lawsuit hinges on the “guarantee clause” of the US Constitution: “The United States shall guarantee to every State in this Union a Republican Form of Government…” In Fenster’s view, this means that citizens have only the power to elect representatives, but no power to enact laws, vote on tax increases, or amend our state constitution.  Fenster is wrong. 

According to constitutional law scholar Robert G. Natelson, the Guarantee Clause “meant that the federal government was obligated to intervene if the rule of law broke down within a state, or if a state erected a monarchy or government immune from citizen control…Otherwise, the states had broad power to choose their own style of governance…Although most of the Founders were not devotees of direct democracy, they did make it clear that it was consistent with the republican form for the people to exercise the legislative power directly.” 

The Declaration of Independence has a recurring theme: that all men are created with unalienable rights. To put it another way, each individual has sovereign power.  The Constitution was crafted to protect the sovereign power of individuals. They wanted to avoid a monarchy.  Until the colonies declared themselves to be free, they were under the rule of King George.  In a monarchy, only the King has sovereign power.   

According to Natelson, there are three required elements of a republican form of government:  1. Rule by the majority [or plurality] of participants, 2. The absence of a monarch, and 3. The rule of law.  These three elements combine to ensure that individuals retain their sovereign power. 

The Founders also created a system of checks and balances.  They understood that democratic institutions were an effective check against excessive representative powers.  The republic of Rome was held out as an example.  James Monroe, quoting Polybius, said of Rome, “…there was a…mixture of aristocracy, democracy, and monarchy, each of which had a repellent quality which enabled it to preserve itself from being destroyed by the other two, so that the balance was continually maintained.” 

TABOR protects the rights of individuals against a rapacious government that will use your money to expand its power and rob you of yours.  Because it limits government, TABOR is very much in line with the wisdom of the Founding Fathers and the Constitution of the United States of America.

House Paint, Stock Shows, and Shopping Malls

Backyard Bail-Outs?

 Sometime soon my house will need a paint job (I mention this at risk of an onslaught of painting companies soliciting my business).  If I don’t repaint, my house will likely lose value.  If I neglect it long enough, my neighborhood will lose some of its value.  As values go down, property taxes go down.  Clearly it’s in the best interest of my neighbors and government to get my house painted.

But we are in a depression.  I mean a recession.  Pardon me, we are officially in a recovery.  Somehow that doesn’t help me afford paint. My income has taken a drastic hit due to this economy, no matter what it’s called.

So here’s my plan: If all my neighbors pitch in and help me buy the paint and rent the equipment, I’ll paint my house.  All will benefit by having a nicer neighborhood with higher home values.  The taxing districts that rely on property taxes will benefit as valuations rise.

Some of my neighbors might not want to help. That’s not fair to the others since all will benefit.  We’ll create a Paint Renewal Authority.  The Authority will borrow the money and give it to me.  They will repay the debt with the higher property taxes in my neighborhood.  After all, those higher taxes won’t happen if my house remains unpainted.  Which I won’t do if I can’t afford it.

Trust me: I’ll use good paint and superior workmanship. I won’t sell my house to an illegal drug or prostitution ring.  I’ll faithfully water my lawn and maintain my property so that the Authority’s investment in my property will be safe, and all my neighbors will benefit. And you can rest assured that the higher property values in my neighborhood are entirely attributable to my fresh paint.

Economic Development?

On a much larger scale this is just one form of tax incentive that economic development authorities use. It’s called Tax Increment Financing, and this ridiculous scenario takes place across the country.  Economic development authorities use these incentives to attract developers to build malls, office parks, industrial complexes, etc.  And taxpayers are on the hook if the authority invests poorly.

Democrats hate Wal-Mart because their low prices make it hard for Mom-and-Pop businesses to compete.  Republicans praise Wal-Mart because they offer goods at lower prices, which raise our standard of living.  But Wal-Mart is the beneficiary of tax incentives, a valuable advantage that Mom-and-Pop aren’t able to access.  A government subsidy to Wal-Mart is a disadvantage to competing businesses that don’t get a similar subsidy.  It’s a grand example of government choosing winners and losers. 

Politicians get the immediate benefit of a visible improvement to the community and can point to new jobs. What isn’t seen is the loss of small businesses and their jobs. Also, the project might not work out as well as hoped, and the additional taxes might not come in.  Perhaps the development would have occurred without the subsidy. Or, as often happens, a new subsidized project will make the old one obsolete, perhaps even before higher tax revenues can retire the debt.  The politicians may be long gone before that happens.

Recent Examples

The National Western Stock Show might move to a new location. Taxpayers may be forced to fund development of the new site, a private enterprise. Walt Isenberg, CEO of Sage Hospitality said of the plan, “Colorado…and…Denver have spent a significant amount of money building a conference center downtown.  If this hotel and conference center is built, will they cannibalize that investment?” 

The Westminster Mall has received millions in taxpayer “investments” over the years.  It was once home to 300 shops.  Then Westminster helped develop the Westminster Promenade, and then the Shops at Walnut Creek. Now Westminster Mall has 15 shops. The city is buying the mall, and you and I are once again “investing” in the property. And the Promenade is losing tenants.

Look around at the major malls and developments in our Metro North area.  Chances are they have been subsidized by you and me and Mom-and-Pop who have to compete with them. Can you feel the despair of store owners who, by virtue of years of hard work, paid taxes to fund the superstore that runs them out of business? Who will bail them out?

Health Insurance Exchanges and the GOD Law

SB-200, the law that will establish Colorado’s health insurance exchange in compliance with ObamaCare has passed the general assembly and is on its way to the governor’s desk for signature.  I was at the committee hearing where it passed its final vote before being rushed through the final passage in the house and senate.

Those arguing in favor of the bill repeatedly stressed that this is our opportunity to create a uniquely Colorado exchange.  If we don’t, the federal government will step in and do it for us.  Yet those same testifiers told us that we must pass this bill now because if we don’t show significant progress toward creating an exchange that is acceptable to the federal Department of Health and Human Services by January 1, 2013, the feds will take over the job for us.

Therein lies the weakness of the argument.  Our exchange must meet the federal government’s standards.  The law (ObamaCare) mandates that the exchanges cannot be less restrictive than the federal government’s requirements.  That leaves one option for making it “uniquely Colorado” – make it more restrictive than the federal requirements.  We will at best have a program that mimics what the federal government would do.  At worst it will include more mandates that raise the cost of health insurance.

Majority Leader Stephens has said that "conservatives at all levels have touted the free market virtues of healthcare exchanges..."  But that is a mischaracterization of what conservatives promote.  The Heartland Institute for example says, “Encourage the creation of private exchanges (emphasis mine). Small, medium, and large businesses, trade associations, and civic associations should be able to set up their own market based insurance exchanges to offer their employees and members a wide range of possible insurance alternatives.” And that is the last of their eleven recommendations for healthcare reform.

State run insurance exchanges are required by ObamaCare. Without them, ObamaCare cannot be implemented.  States that comply are assisting in a federal takeover of our health care system.  ObamaCare is one of the two most dangerous policy issues facing America, the other being EPA regulation of carbon dioxide. Our State Attorney General sued the feds over the constitutionality of ObamaCare. Our compliance with SB-200 is legitimization of ObamaCare, essentially giving the keys to the federal government. If we allow ObamaCare to stand, the government will have power over every aspect of our lives.  The economic liberty and protection of private property that made America the greatest country in history will be over.

Representative Riesberg (D- Greeley) objected to the use of the term ObamaCare during testimony. Because of the immeasurable harm to our economy and liberty that ObamaCare will cause, I would suggest a new term – The GOD Law.  Game Over, Dude.

Reasons for Optimism

I’m standing at a door.  Outside, the wind howls at 90 miles per hour.  I step out and I’m falling.  As the airplane flies away, I plummet towards the earth, 13,000 feet below. In the back of my mind, I know that if I failed in any of my preparations, I could die. 

I had carefully packed my parachute.  The reserve parachute was packed by a certified specialist.  I had practiced countless times.  Before I jumped, I carefully checked to make sure we were over the landing area. I wore a helmet, in case I had a collision with any of my friends who jumped with me.  If I lost consciousness a device would automatically open my reserve parachute.

Back in the day, I made over 3800 skydives.  I’d say that’s pretty good evidence that I’m an optimist.  But it’s more than just optimism.  I carefully studied the risks and took care to reduce or eliminate those risks. Skydiving is a sport that’s governed by the laws of physics.  Gravity is a constant. Parachute openings are consistent within an acceptable range. The physics of freefall are known, allowing me to control myself in freefall and get away from others to safely deploy my parachute.  A sport that many consider to be “extreme” is really about controlling acceptable known risks.

Let me tell you what IS extreme: owning a small business. I’ve owned my own businesses for over 20 years. There once was a time that you could take a good idea, develop it, market it and make a living as a business owner.  Yes, there was risk involved, and there have always been business failures because there is always risk.

I was young and naive when I started my first business.  I built my facility, bought equipment, hired staff, got the word out and opened for business. Then I had to make payroll.  I remember the shock of payroll deductions in my first paycheck as a teenager. As a business owner I experienced a whole new level of shock when I wrote a monthly check to cover payroll taxes for all my employees.  But that became a knowable expense, so it was no longer a risk.  The biggest unknown was the economy. But as the business cycle fluctuated within acceptable limits, I could control for that risk by saving money during the good times to carry my business through the bad times.

Today the biggest risk to business comes from our own government. It expands at an alarming rate and consumes an ever greater share of the economy. The proliferation of taxes, rules and regulations can leave a company wondering what’s next.  There’s simply no way to plan when the rules change so quickly.  You can’t plan for the unknown.

100 lawmakers in Colorado’s General Assembly have submitted 666 new bills this year.  That’s potentially 666 new laws plus all the rules that are required to administer and enforce those laws.

In Congress, 535 lawmakers mandate untold numbers of bureaucracies in which unelected and unaccountable officials promulgate rules with little consideration of the effects on businesses and individuals.

Local governments exercise their broad powers in senseless ways, like prohibiting barber poles, entering rental properties under court order for unnecessary inspections, and mandating additional trash services.

The list of infringements on personal property and individual rights is endless and growing. Can you imagine investing your money, time and hard work to turn that great idea into a business under these conditions? Like jumping out of a plane without a parachute, it’s difficult to imagine how you would survive.

Still, I’m an optimist.  To paraphrase Milton Friedman, there are three reasons to be optimistic.  First is the “extraordinary ability and ingenuity of the American people in finding ways to get around laws.”  The desire to improve one’s lot in life will continue despite the force of government.  Second, government is inefficient.  Were it otherwise, we would already be serfs.  Government simply is too wasteful to rein in a population that seeks to remain free.  Third, the waste is so obvious and the infringements on freedom so great that people are demanding a return to limits on government. When liberty and property are respected and protected, Americans will return to business.