Blanco's borrowing urge detrimental to state recovery

Be very wary of Democrat Gov. Kathleen Blanco’s idea to borrow the state’s way out of revenue problems caused by the recent hurricane disasters.

When former governor Buddy Roemer instituted the Louisiana Recovery District in 1988 to dodge the state’s requirement that borrowing not be used to fund continuing operations, it created a debt problem that took almost a decade to solve. At one time, debt per capita for Louisianans was among the nation’s highest as a result. The district borrowed $1.3 billion, while more than the $959 million figured bandied about now is about the same when figured in constant dollars. While the amount contemplated for borrowing at this time seems less, chances are the deficit will zoom higher in 2006 and the urge to do it again will return.

It’s a temptation well worth resisting. Roemer’s scheme cost the state hundreds of millions of dollars in interest and only now are debt levels in Louisiana per capita at ordinary levels, ranking 29th among the states and District of Columbia by 2001 ($1,786 per person). Having extra debt to drag down the state’s economy only could hamper any recovery.

Hines' remark illustrates coming battle for Louisiana's soul

Let the battle for the soul of Louisiana begin, with the 2005 First Extraordinary Session of the Legislature.

On one side, you have those that perceive the opportunity to break the state from its past populist, good-old-girl government represented by Gov. Kathleen Blanco and a large swath of Democrats, plus a few Republicans, in the Legislature. They see government as the main engine of economic growth and manifest this by arguing for more taxes to support greater-than-necessary spending and are reluctant to change past wasteful spending habits. To them, government is a tool designed to redistribute the people’s resources in the manner they deem appropriate, primarily as an avenue to promote political careers.

On the other, you have progressive reformers that want to minimize the resources government takes from the people, mostly Republican legislators but with a few Democrats thrown in. To them, government is an institution to facilitate the ability of individuals to pursue their own ends using their own resources with as little interference as possible, which in the aggregate makes all better off.

Potentially troubling items in session call

The formal call for the First Extraordinary Session of the 2005 Louisiana Legislature is out, and with it some potentially dangerous items:

#19 – this would allow the total unlocking of the Budget Stabilization Fund for its immediate use; currently, only a third of it could be used this year. While these are emergency conditions and that is the purpose of the fund, with so much uncertainty about real revenue losses, there should not be any temptation created to exhaust it until next year.

#27 – this would allow funds that ordinarily would be put into the Fund to be loosed for this again; again, a bad idea for the same reason above as the state should now concentrate on budget-cutting, not revenue enhancement.

On special session call, "b" stands for "Blanco" but not "bold"

“Bold,” to Gov. Kathleen Blanco, is a political organization and doesn’t describe the contents of her call for a special session beginning Nov. 6 – which it needed to be.

There’s plenty of the pedestrian – draw down the Budget Stabilization Fund, accelerate equipment tax cuts and corporate franchise tax reductions on debt (but only in “affected” areas of the hurricanes), tepid ethics tightening, etc. Only a couple of items even hint at the boldness required here, and they don’t even really address the catastrophic financial aspect – the possibility of state-run charter schools in Orleans Parish and consolidation of levee districts (Orleans being the worst but no doubt better off with a change in its leadership). For example, the legislature may tinker with the Minimum Foundation Plan for education, but real educational improvement and what would ideally meet these emergency conditions of short supply, vouchers, are off the table.

What you don’t see are avenues in the call’s outline to some good specific solutions that make the necessary extensive alterations to current fiscal practices. Nor will we see the necessary change in philosophy, both in terms of economic and development and fiscal priorities that can bring the state’s economy back and transform it.

Government planning will not reconstruct New Orleans

The moderately liberal Brookings Institute has delivered a report speculating exacerbating factors prior to the Hurricane Katrina disaster in New Orleans and suggesting public policy directions for Louisiana after it. It analyzes how we got to this point well, but then provides policy advice that, if anything, will make matters worse.

The report does a comprehensive job in identifying the factors which multiplied the destructive power of the storm’s aftermath, flooding. It identifies economic problems that tended to make the city poorer, concentrated that poverty among racial minorities, and will make recovery more difficult. Further, it shows how federal policy decisions in housing, highways, and flood protection opened up vulnerable living areas to mass settlement.

But it provides a blueprint for failure when it comes to many of its policy prescriptions to reconstruct the city in a “transformed” way. Its first recommendation – “make the region a paragon of high-quality, sustainable development” – is sketchy at best because the solutions it offers involve a high degree of government intervention in the process. As anybody who studies economics knows through the definitive work of F. A. Hayek, at best government can provide limited signage to point the private sector in the right direction, but heavy-handed involvement creates inefficiency, if not tyranny. Hayek shows that self-organizing institutions, such as the free market, do a far better job of promoting the liberty that leads to optimal economic development that any central planning such as by government.

Still, we can give this array of policy strictures the benefit of the doubt given a lot of government intervention will have to occur just to rebuild the area and set the stage for anything else. Its specifics make sense even if the philosophy behind it has problems ameliorated only by the drastic nature of the situation. Unfortunately, its other two broad set of recommendations utterly disappoint because of this flawed ideology.

When the report argues to “replace neighborhoods of poverty with neighborhoods of choice and connection,” it assumes that is a “problem” that a fair degree of residential segregation existed in New Orleans, along the overlapping cleavages of race and wealth. As a result, its solutions call for government policy to deliberately mix within neighborhoods families of different income levels (which to a smaller degree also would mix their racial compositions).

In short, it treats economic/racial segregation in living arrangements as if it were a flaw in a free market economic system that government should attempt to correct. In reality, this is a consequence of different attitudinal mindsets – at the one extreme, a very future-oriented mentality that promotes hard work, thrift, and lack of excess in conduct that subverts the acquisition of wealth; at the other, a present-oriented mentality that gives in to appetites of the immediate that prevents any meaningful wealth acquisition. Or to put it another way, people closer to the former mentality tend to congregate in similar neighborhoods, while those of the latter do likewise, with their levels of wealth being the discriminating factor.

This notion reminds us of the persistent inability of liberalism to understand the true nature of poverty. It’s not because the poor lack resources (because, liberals would argue, the free-market economy is biased against them), it’s because many of the poor ascribe to attitudes (despite all cues to the contrary) and behave accordingly that prevent them from acquiring resources. Liberals fashionably deny this truth, but many people in poverty are poor for long periods because, whether consciously, they choose to be poor, whether that be from engaging in certain detrimental behaviors (crime, drug use, multiple pregnancies with different partners, etc.) or neglecting to follow salutary behaviors (obtaining more education, making wise spending choices, etc.)

Some people never will be wealthy because of their limited abilities to contribute to the economy which rewards people with wealth in proportion to the contributions they make to society. But the least government can do for these people is to provide services and programs that allow them to live in situations separate from those who willingly squander their greater human capital. Simultaneously, higher achievers should not have their tax dollars (of which they pay almost the entire amount collected) used to try to encourage those with low-achieving attitudes to live around them where they are likely to engage in behaviors that devalue high achievers’ life prospects and property.

This same ignorance short-circuits Brookings’ idea to “transform the region from a low-wage economy to a high-road metropolis.” The specific policy recommendations again treat poverty as consequence of lack of resources, not of inferior attitudes. To do so sanctions behavior that is contrary to producing a higher-wage economy (such as by giving cash benefits that sap productivity).

New Orleans will need much infrastructural spending by government to allow for its transformation to come out of this tragedy better than it was. But beyond that, government policy must focus on promotion of individual liberty and economic choice – not planning and social engineering – in order to bolster the free market that it and it alone only can cause this transformation. It’s a concept new to the New Orleans held down by three-quarters of a century of economic populism and liberalism, and hopefully policy-makers at all levels of government will have the foresight to facilitate this rebirth.

Landrieu supports law to subvert federal elections

Sen. Mary Landrieu and Rep. Charlie Melancon stood with practically the entire Congressional Black Caucus and the kook leftist fringe of the Democrats in Congress (including failed presidential candidate Sen. John Kerry) in spouting support for a pair of bad bills, H.R. 3734 and S. 1867 which would facilitate people voting in two states.

Without any Republican support, these bills have no chance of passing, which would allow displaced people registered to vote in Louisiana outside of the normal process to vote in Louisiana federal elections. But is it indicative of the mindsets of Landrieu and Melancon that they would favor an unnecessary law that could subvert democracy.

(And so does Rep. William Jefferson, another co-sponsor, but he remained out of view at this press conference. How discriminatory, how non-inclusive, can Landrieu and her colleagues be? Doesn’t a looter from Louisiana have a right to express his opinion on these bills?)

This legislation is unnecessary because state laws clearly define a process by which a resident out of the parish on election day can vote in Louisiana – an absentee/early voting system designed to minimize the chances of voting fraud. RS 18:1303(4) clearly permits displaced Louisianans the right to vote this way (and the language of RS 18:1306(c)(1) in the use of the word “shall” would permit enough of these ballots to be distributed). The process outlined in RS 18:1307 is incredibly simple – make a request, follow simple instructions to fill out, and mail in.

But from the rhetoric bandied about at the press conference, you would have thought Louisiana was Zanzibar. “The right to vote is all that some people in the Gulf Coast have left,” opined Landrieu, somehow forgetting to explain how without these federal laws who was depriving them of the vote and how it would happen.

More blather from Landrieu: “We took unprecedented steps to protect the voting rights of every Iraqi. We should do the same for the people of the Gulf Coast.” Again, Senator, why don’t you name names so we can prosecute and bring the necessary lawsuits to stop this from happening? Then you might actually be doing your job.

Instead, she advocates passing a national law in an area the Constitution leaves up to the states that essentially is duplicative – does Landrieu, Melancon, and Jefferson deem to insult Louisiana by suggesting its absentee/early voting laws are inadequate? And where’s the money to pay for all of this duplication?

Worse, as lax as the state’s absentee/early voting laws are, these bills would make fraud even easier to accomplish because the state law allows voting only to those who indisputably are state residents. Of displaced people, who knows how many truly intend ever to be Louisiana “residents” again? Or whether the person who claims he is an “evacuee” really is?

We must recognize these bills for what they are – an attempt to subvert elections and the will of the people to choose their own representatives. The House bill sponsor Rep. Artur Davis laid this out perfectly for all to see when he said, “The occasion of a hurricane should not be a de facto redistricting.” Sorry, guy, but the Constitution is clear that only electors resident in a constituency as defined by the state may determine who their federally-elected officials are, not those who might be or never will be residents in the future. Redistricting is a political process, one that his bill attempts to perform unconstitutionally, while choice of residence is influenced by Mother Nature all of the time.

Landrieu, who will run for reelection in 2008 that is covered under the law, was so right when she spoke to us thus: “you basically are impacting your democracy in a way that you don't want to” – by passing unnecessary, expensive laws that subvert democracy. Her support of these bad bills shows that she lives down to her own statement.

Landrieu voices support for stifling economy, helping special interests

Usually, when Louisiana gets ranked last, or close to it, it’s a cause for concern. But there has come an instance where being ranked last in a so-called quality of life indicator is a good thing for the state – but you couldn’t tell from the actions of the state’s senior senator.

This is the last place finish that Louisiana gets in the University of Massachusetts’ Political Economy Research Institute Work Environment Index, in its most recent report. In essence, supposedly Louisiana is the worst state for workers.

But just a few minutes perusal of information about the Institute and the report shows the basis on which it was formulated rests on a hopelessly ignorant view of the economic world. For example, it focuses a major part of its work on the mythical “living wage” concept, the idea behind raising the minimum wage in fact will hurt, not benefit, workers. For a host of reasons, valid economic thought demonstrates that the marketplace will set the appropriate wage level and that artificially inflating it brings suffering to both employers and employees.

This bias carries through in the ideology behind the report. It emphasizes an invalid construct, “workplace fairness.” It assumes that unionization and “prevailing wage” laws are good when in fact unionization enriches a few at the expense of many and prevailing wage laws exacerbate the effect. It also incorporates the bogus notion of “comparable worth,” which argues that differences in men’s and women’s salaries are unnatural and a result of discrimination when, in fact, such differences are natural and healthy for both men and women.

The report even tries to argue, weakly as it turns out, that there is a relationship between its index and economic growth. It states that there is a moderately positive relationship between the index and growth (and is loathe to admit there is none between new business startups and employment growth, but tries to cover itself by stating the states high on the overall index “do not experience slower growth, even while overall conditions for workers in these states are better”).

That, of course, is because two-thirds of their index actually does a passable job of validly measuring economic climate, that which refers to job opportunities and (to a lesser extent) job “quality.” This is demonstrated by removing the “workplace fairness” measure and recomputing relationships among the index, all components, and the measures they choose to use for economic health.

As it is, Louisiana moves up 10 places by removing this component. Removing the “job quality” component (leaving only “job opportunity”) increases the state’s ranking still, to 34th. Most notable, however, is that the three separate components are a strange mix to arbitrarily make an index where each is one-third of the combined index. The job opportunity indicator is actually strongly negatively related to job growth (that is, the less opportunity there is, the more job growth – how does that make any sense?) and least valid of the three, the “fairness” indicator, only is weakly related to economic growth and to neither of the other two.

In short, this is what us social scientists would call an rather unreliable measure, compounded by the arbitrariness of making the total index from equal contributions of each of the three parts. (At the risk of boring you, a reliability test gives a Cronbach’s alpha of .13 – a very unreliable index by the numbers). In other words, garbage in, garbage out – this questionable measure created by this biased group doesn’t really tell us anything.

So, by this, we really cannot argue that Louisiana is the “worst” place for workers. Indeed, face validity would tell us it’s pretty good – right to work provisions (meaning workers cannot be forced into union membership) in the state give greater freedom to workers and lower costs to consumers, among other things. Opposition to this philosophy by the support of Sen. Mary Landrieu of the Davis-Bacon Act shows she would rather protect the interests of a greedy few rather than those of all workers and consumers.

Unfortunately, the recent action by the federal government to terminate the Davis-Bacon waiver in Louisiana in the aftermath of Hurricanes Katrina and Rita adheres more to the failed ideology of this report than the way the world really works. Regrettably, by artificially inflating wages paid to construction workers, it will hinder Louisiana in its reconstruction and economic recovery, while enriching greedy unions and their members now better able to take unfair advantage of the misery left behind by these disasters.

Stuck on stupid VII: Spend on pork while whining for dollars

Louisiana had the chance at least to attempt to undo the flub committed by the state’s Bond Commission last week, but instead sided with irresponsibility, all the while it leaders moaning about how the federal government is too restrictive with its purse strings.

There were at least two good reasons why the Commission should have reviewed, item by item, its package approval of $45.335 million in borrowing requests (which Treasurer John Kennedy could not even get a second to vote on one by one) that included unneeded reservoirs, sports complexes, livestock barns, civic centers, recreation areas, welcome centers, gyms, and film centers. For one, it would be a show of faith to the federal government that all nonessential spending would be curtailed in the near future until emergency needs are met.

But perhaps more importantly, the roughly $17 million dollars in these projects (which were pushed up from not being scheduled to be spent any time soon; indeed, some amounts weren’t scheduled to be spent at all in the next year) could have been used immediately by the state for reconstruction. It may well be that the federal government is paying 100 percent of this until the end of November, but why not get the process started now and ask for reimbursement in a month?

Kennedy moved today to bring up the package for reconsideration, but instead lost on a motion to adjourn by the panel packed with supporters of Gov. Kathleen Blanco led by her Commissioner of Administration Jerry Luke LeBlanc. The only to join him in resisting adjournment was Department of Culture, Recreation, and Tourism Secretary Angèle Davis whose nominal superior, Lt. Gov. Mitch Landrieu with Kennedy are considered Blanco’s strongest Democrat challengers for the Governor’s Mansion in 2007.

Yet the hypocrisy was to come when later the Commission approved lending out a good chunk of the money to local governments lent by the federal government to pay for their operations. LeBlanc fumed to the media about how the federal government was unfair in its conditions for use of the money and made the process too difficult.

If so, since some of the local government expenditures were paying employees to assist in reconstruction, why didn’t LeBlanc cut out the nonessential projects approved the previous week and use that money then to lend to local governments to pay for those activities? LeBlanc could have gotten local governments to do more things faster. Instead, he chose to whine about the federal government and to play pork-barrel politics as usual with the state’s resources (Blanco, after all, has to provide a payoff for legislators voting for her higher taxes. And this is the kind of spending she calls “economic development.”)

It’s little wonder that the federal government at this time wants assistance given in the form of loans rather than grants, with this combination of negligence and arrogance. And so the Blanco Administration remains stuck on stupid.

Failing "Field of Dreams" strategy to cost Bossier City residents

As the Soviet Union teetered to oblivion, it provided increasing comic relief by its “explanations” for poor agricultural output. The befuddled communist leadership kept reporting that “bad weather” year after year caused them to fall short of their quotas.

Of course, we knew then and now that it was the collectivist, planned economy behind communism that wasted resources and provided disincentives to produce, as well as robbing people of their economic freedom, that caused these repeated failures. Concerning this, one gets this feeling it’s like déjà vu all over again concerning Bossier City government and the Louisiana Boardwalk outdoor mall.

Only months ago city officials were hyping the project as a key component to turning around the city’s deteriorating finances, which for the previous couple of years had run an operating deficit, forcing the city to dip into its riverfront development fund, where funds go from deals struck with various casinos (after the fund has reached a certain level, then withdrawals may be made, a point long since attained). Now we learn the 2006 budget still is in deficit, to the tune of about $6 million.

MR-GO or not to go: that is the porkbusting question

As more is discovered about how New Orleans’ levees were breached by Hurricane Katrina, the more human error induced by political concerns seems to be the cause – and politics may keep us from realizing the proper solution to deal with the catastrophe’s effects.

Previous to the storm, some experts had argued the Mississippi River-Gulf Outlet would amplify a storm surge to amplify its speed and thus scouring power. The outlet serves as shortcut to New Orleans’ port facilities by cutting through the now-disastrously flooded St. Bernard Parish. Evidence is mounting that precisely this happened and triggered the flooding.

Even though policy-makers knew of this scenario, MR-GO was kept open because of the inattention of some and the forceful lobbying by the Port of New Orleans. It appears the Port used MR-GO as a blackmail item of sorts, arguing that since the Industrial Canal couldn’t handle larger vessels, MR-GO had to be there to do that (never mind the Mississippi itself can handle any sized vessel). This gave the Port a rationale to support the Industrial Canal lock project that could supplant the need to use MR-GO when finished.