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10.3.05

Mrs. Blanco goes to Havana, gets snookered

Question: Gov. Kathleen Blanco signs a trade agreement with Cuba. Louisiana producers are promised $15 million in business, Cuba gets the goods. Who loses?
Answer: Kathleen Blanco.

And maybe the Louisiana people and AnPro Trading LLC and Louisiana Rice Mill. This is because the U.S. Department of the Treasury’s Office of Foreign Assets Controls declared last month that all purchases from Cuba must be cash in advance, which was not promised by the Cubans. As the department has clarified, this payment policy conforms to common understandings of international trade finance, and that it strikes a balance between administering sanctions against Cuba and ensuring that the island can continue to receive food and medicine shipments. The exception for food and medicine was granted in 2000.

In other words, this agreement may be worthless, unless Cuba changes its practice and supplies cash up front (if it even has the cash, debatable given its wretched economy – the typical Cuban makes $12 a month). On the other hand, Blanco has earned the undying enmity of ethnic Cubans in Louisiana for striking a deal that they believe will perpetuate the totalitarian dictatorship of Fidel Castro.

9.3.05

Blanco's "sin" taxes are convenient, not right

Is the Blanco Administration trying to perfect the art of mixed, disingenuous messages that have caused part of the lack of economic development in the state?

Last year, Gov. Kathleen Blanco got applause for not trying to hold certain programs “hostage” over budget deficits. That is, compared to past administrations (and also the Clinton presidential administration), her forces wouldn’t declare a popular and/or vital program in state government would be cut unless taxes got raised or some other drastic measure occurred.

But on the eve of the legal requirement of budget submission to the Joint Legislative Committee on the Budget 45 days ahead of the beginning of the legislative session, Blanco served notice that certain budget cuts would be “draconian.” Chief of Staff (and Foster Administration holdover) Andy Kopplin suggested the cuts merely are to be “severe.”

This may constitute one part of a campaign to pave more acceptance for “sin” taxes to which the governor continues to grant credibility. Given that perhaps not even half of Louisianans may do any of gambling, or smoking, or boozing (let’s get real here, this is Louisiana) perhaps this tax might even appeal to a majority. Nevertheless, a tax is still a tax, no matter what activity it is on.

In large part, it betrays a mentality akin to former Sen. Russell Long’s favorite aphorism, “don’t tax you, don’t tax me, tax the fellow behind the tree,” without taking into account the consequences of that tax. The largest portion potentially of it would come from gambling, already the activity with the highest tax burden in the state (the only thing perhaps as much being the 66 cents per liter on retail alcohol). As costs of this activity increase, to casinos for example, other pastures begin to look greener and greener.

In addition, money gets diverted out of the private sector (consider the impact a rise in the state’s video draw poker take on small, three-machine businesses some of whom argue they stay afloat only because of the machines) and if there’s any one thing anybody should know about economic development, it’s that money left in the private sector will do a better job of doing this than confiscating these resources and putting them at the disposal of the public sector (although some people still don’t seem to get it).

The other part of this campaign is to try to create linkage between the increased taxes and a perceived popular and/or vital need of the state. Blanco has done so with her statement that enough could be raised from them to give teachers a $1,000 salary boost.

Yet we need to question the assumptions behind this logic. For one, given that there are roughly 50,000 teachers in the state, this would cost $50 million. A review of forecasts for fiscal year 2003-04 totals predicted that tobacco and alcohol taxes combined would bring in only about $117 million not already allocated somewhere else. The bulk of this increase would have to come from the forecasted $680 million from all sources of gambling (assuming all sources are on the table, although the land-based New Orleans casino likely is not). Taking out the casino, we’re talking about an 8 percent increase across the board on all these taxes (and this is using static analysis, assuming the demand for these kinds of behavior do not decrease as a result of higher taxation). Is the Legislature really ready to go as high as a probable 10 percent increase across the “sinful” board?

The other questionable assumption is whether teachers really do need a pay increase. In fact, in a report prepared for the Board of Elementary and Secondary Education, under one scenario the authors questioned the need for a teachers’ salary raise given the objectives of increasing accountability and performance of schools and students (but in this and all other scenarios they noted a minimum hundreds of millions of dollars would be needed for any reform). In another, they did see a need for increasing teachers’ salaries; in both, they saw the real need as additional hiring of teachers.

However, both of these scenarios argued that Louisiana schools were overstaffed in some areas, principally in guidance counselors. Not including benefits, one scenario predicted the elimination of some guidance counselor positions would save $34.5 million, and the other saw savings of $55.8 million.

Given Blanco’s keenness on giving raises, why not restructure first to save and transfer savings into teachers’ salaries, instead of keeping things the way they are and asking for people to cough up more money to government? While the fiscally prudent thing to do, no doubt Blanco and legislators (and hundreds of school board members) would feel intimidated by irate ex-guidance counselors seeking retribution at the ballot box.

Which is why Louisiana has such a tax-and-spend history. Instead of doing the right thing, its leaders do the convenient thing. Which is what Blanco is doing by proposing these new taxes.

8.3.05

Keith Hightower, Bill Clinton's younger brother

Appropriate to yesterday's posting, a little musing is in order.

Keith Hightower rose to Shreveport political prominence as Bill Clinton geared up his run for the White House, leading many observers then and since to remark upon a physical similarity between the two. That’s not all they share: they approach political conflict in a way which make both very divisive individuals in government.

Within a couple of years as president, Clinton got into real trouble, presiding over a disastrous 1994 midterm election as he let his liberal, big government instincts get the better of his natural inclination to acquire power. In order to resurrect himself to win reelection, he did two things, submit to the Republican Congress on some issues (tax cuts, balanced budget, welfare reform) but on others to call them names and disparage them every chance possible even if the criticisms had no truth to them. Thus, when the GOP tried to curtail the rate of growth of government spending, Clinton and the Democrats, aided by a willing media, called these “cuts” in government spending. As a result, the Republicans were said to want to starve people, to throw old people out on the street, to despoil the environment, etc., when none of it had any basis in reality whatsoever.

It appears that Mayor Hightower takes a similar tack when it comes to opponents of his administration’s actions. The obvious example is on the convention center hotel issue. In a recent interview, he called opponents either bitter about being unemployed in city government (an apparent jibe at Fax-Net Update editor and former official in the previous mayoral administration Lou Burnett), or opposing only for partisan purposes (seemingly insulting the three Shreveport City Council Republicans), and the rest because they have “miserable” lives. A related explanation he often has given for opposition is that those against it are against “progress.” Still another is that opponents are “desperate” because they have private business interests at heart.

None of these psychoanalytic explanations acknowledges the real and compelling reasons why not to put taxpayers on the hook for $52 million or thereabouts:

  • No private firm believed the project feasible enough to risk its own capital. At first, Hightower explained this away by saying a Tax Incremental Financing district would bring costs low enough to make it profitable. When state lawmakers were so skeptical of the idea that they refused to create legislation to enable the TIF, Hightower said government still could do it profitably because of taxes not needing to be paid on it. Since Caddo Assessor Charles Hennington questioned whether the property would be exempt, Hightower has said nothing on the matter.
  • No feasibility study ever has shown the venture to be profitable. The closest thing to one, by the Louisiana Tech College of Administration and Business Economic Research Division, explicitly showed it would not be. But for his presentation to the state’s Bond Commission to get bonds issued for the project, Hightower took this study and on the fly changed numbers around in a way its authors did not endorse, in order to win approval.
  • Riverboat gambling (oops, “gaming”; the state is supposed to suppress gambling) revenues have fallen by over 10 percent this January compared to January, 2004, in this area as a direct result of competition to the west, and Texas continues to make noises about legalizing even more gambling. This aspect would be the linchpin of attracting convention business to Shreveport.
  • The convention industry itself is in decline as cost and travel concerns plus a rapidly-growing glut of facilities leave supply growing much faster than demand.
  • As a still-pending lawsuit points out, there is a genuine legal question whether the $12 million the state has thrown in can be used for building a hotel.

Despite being unable to satisfactorily address any of these concerns, check out the rhetoric used by Hightower referring to these in the latest newsletter he released:

MORE GOOD NEWS: We will be moving forward with the Convention Center Hotel project and begin selling the bonds within the next month in order to start construction in the spring.

The Louisiana State Bond Commission rejected Senator Max Malone’s request to rescind its approval of the sale of $40 million in revenue bonds and once again overwhelmingly affirmed the construction of our Convention Center Hotel with an 11 – 2 vote. Representatives Mike Powell and Wayne Waddell joined Senator Malone is his opposition, but their testimony was unconvincing to State Treasurer John Kennedy and the Bond Commission. You can rest assured that as your mayor I will be in Baton Rouge again if necessary, to fight any attempt by Senator Malone or Representative Powell to take away any money from Shreveport.

Our goal with the convention center project has been to further enhance the economic development of Shreveport by increasing its marketability, thereby creating jobs and a better quality of life for its citizens. This administration has survived a desperate barrage of negative attacks and rumors that have been found over and over again to be baseless and without fact. There really were no surprises with the Naysayers, who were at first against the funding mechanism before they had ever seen what it was. Then after that hurdle they did not trust the study of the project and so they spent more tax-payer money to fund another study with their own chosen consultants. Their study came back with more positive numbers than the original study, again substantiating an even a greater reason for funding the hotel project.

With all of their claims being proven false, they now demand that revenue bonds be voted on by the public. You might find it interesting to know that these same Naysayers vote on Revenue Bonds for the funding of projects on a regular basis without the approval of the citizens.

One might conclude that these Naysayers find it more comfortable and politically less risky to play it safe rather than to have the courage and fortitude to creatively nurture economic plans and see them turn into a reality. We could celebrate this victory over those who sit back offering only criticism and roadblocks, with no real answers or positive solutions to the economic problems that we face. However harboring negative attitudes toward one another is not in the best interest of our city and we all have much to gain by moving our city forward and working together to solve the problems that we face.

Why doesn’t Hightower admit to the very obvious legitimacy of these, instead seeking to denigrate the messengers who cast doubt on his plans? Logically, the only reason could be that Hightower himself cannot defend his own proposal, and therefore he must have other motives for trying to force this through over public opposition (as captured in a poll a couple of months ago) – motives it has been suggested that lie in his desire for higher elective office and to provide preferments and patronage to his supporters. Which is nothing close to the enlightened governance that Shreveport deserves.

7.3.05

Shreveporters expect service while Hightower grabs headlines

One frequent complaint raised about Shreveport mayor Keith Hightower in reference to the building of a publicly-financed hotel for the in-construction convention center (and some bring in the center itself as part of the criticism) is that he prefers to pursue grand, expensive schemes that probably won’t even accomplish their stated purposes while ignoring the little things in governing that makes a city work well.

Turns out more evidence supporting this view of Hightower was revealed today in two separate incidences. The Times ran a story on the long-standing problem of the city’s inability to get code violators on property standards to pay fines which multiplies when the city then uses taxpayers’ dollars to clean up the properties itself. It turns out the city is as much to blame for sloppy record-keeping as the intransigence and selfishness of the violators. How hard would it be to correct that? Let me put it this way, if the mayor cared to have discovered all of this and dealt with it, the problem would have been solved by now. But he seems disinterested in such unglamorous service to the citizenry.

More seriously, it seems that the reason why water rate increases, which have occurred to schedule nearly a 50 percent rise over five years by 2007, were phased in more quickly than planned, came as a result of an accounting error. This adds insult to injury: the rapid increase had to happen because of the quickly-deteriorating water infrastructure neglected over a series of years that could have been dealt with long ago.

While the problem predates the Hightower Administration, the fact is had Hightower acted immediately upon being elected six years ago, the problem would not have been as bad. Rate increases would have been smaller; indeed, they may have been minimal had the city tried a bonding strategy right then and there. Instead, it kept its powder dry, waiting to spend almost as much as could have solved the problem then years later on building a convention center and a hotel ….

But it’s not just bad decision-making evident here but lack of willingness to take responsibility for this. Operational Services blames Finance and vice-versa. It would be so refreshing to have Hightower just step up and say this problem happened and festered on his watch, and that he was to blame.

Don’t count on it; this administration has made the evasion of responsibility an art form. When it was discovered that sloppiness in accounting apparently was permitting individuals with connections to Hightower to receive extremely favorable treatment regarding a city lending program, the only reaction that came from Hightower was a week later to suspend the program and whine that most of the problem loans allegedly didn’t come during his watch as mayor.

It would be so refreshing when these happen, and they seem to be happening with increasing frequency, for Hightower to say that the buck stops with him, that he should have known of these things (which had gone on for years during his terms; for example, why weren’t red flags raised when borrowers stopped repaying their loans and the borrowers immediately pursued for payments?), and that he’ll do his best to rectify them quickly and to be more vigilant in the future. But that never has happened, and don’t hold your breath on it happening this or any of time in the future (because such problems seem likely to pop up time and time again with this administration’s track record).

Why does he seem to ignore overseeing (or overseeing properly those who oversee) the dull, mundane, unexciting, but absolutely necessary things of city government, and instead concentrate on the headline-grabbing, big-ticket expenditures that allow the city to award huge contracts creating lots of City Hall-dependent jobs? Does it, despite his being term-limited as mayor, have something to do with his future plans?

6.3.05

The joke is florist licensing, the punchline is ...?

This is so perfect. I joke with my State and Local Politics and Louisiana Government classes as an example of how state regulation has run riot and how a small interest can protect and enrich itself at the expense of the state is Louisiana’s incredibly backwards florist licensing (both retail and wholesale!).

Unfortunately, taxpayers, consumers and those wishing to get into the business are the butts of the joke. Taxpayers are one, because they have to pay to support the activities of the Horticulture Commission in regards to setting up and administering the procedures. True, there’s a fee associated with taking the test which probably in the end generates more revenue than cost but just the bureaucracy and state control involved in an intangible sense probably outweighs any pecuniary benefit.

Consumers are another, because what this regime does is creates an artificial barrier to entry to the profession. By limiting supply, demand held constant, prices are pushed up with excess profits (which can be created only when governments permits or assists in creating monopsonistic conditions) going to the “licensed” florists. For the same reason, petitioners into the industry are discriminated against because they are not permitted to practice the profession (who entry would increase supply and would enable prices to come down).

If we allow government to regulate anything, there must be a high burden of proof. It should take place only when some unmistakable, nontrivial threat to public health or safety may occur as a result of negligent actions. If you want the definition of an absurd argument, check out the supporters’ view of the licensing requirement, that people might get stuck with inferior floral arrangements. Is this a matter of public health or safety? And who says the licensing would prevent that? Most tellingly, the marketplace is smart enough to drive inferior florists out of business in short order. Don’t these nannies think the public is smart enough to spot better and worse arrangement, and force their operators to price accordingly (actually, probably most of them benefit from the excess profits generated by the licensing).

While I sympathize with the Institute for Justice’s position on this issue (an organization, by the way, which often has performed invaluable service in the courts in safeguarding people’s liberties), unfortunately the courts in this country expanded government’s power to interfere in the economy ways beyond its moral boundaries back in the 1930s. It will take state legislative action to solve for this.

That was tried last year and, despite heavy House support, the Senate Agriculture Committee spiked the idea. Which is why I wrote at the beginning of this posting this was just so perfect, because in recent months this and all else that is wrong about Louisiana’s good-old-boy network, business-as-usual government have become symbolized in one person. His department technically oversees the Horticulture Commission, he sits on it, and he rides herd over the Agriculture Commission (that’s its short name). He’s the perfect punchline for this sorry escapade.