Proponents of government intervention often cite market failures to justify their goals; however, government failure is also a concern: it’s not always clear that the government will succeed where the market fails. Neighborhood Effects notes:
Of course it’s true that markets can fail. But it’s important to remember that governments often fail too. Only an approach that considers both market failure and government failure can illuminate the best course of action when addressing a serious social problem like environmental degradation.
Show-Me Daily reports on an interesting program – a city run airport that’s received FAA grant money. The city wants to sell the airport, but the FAA grant assurances limit how the sale can occur. The bottom line is that the city is having a difficult time selling the airport. Hind sight’s twenty-twenty, but maybe the city shouldn’t have gotten into the airport business in the first place?
Two of the more cumbersome assurances for a city like St. Clair are Nos. 5 and 25. Assurance No. 5 obligates St. Clair to maintain it as a public airport and not dispose or sell any part of the airport without FAA approval. The FAA will only give approval if St. Clair can show that closing the airport improves aviation in the area. In addition, the dispensation to sell the airport does not free St. Clair from reimbursing the federal government all recent federal grants. This will cost the city more than $750,000.
Examples of poor government planning abound – they range from over-budget, behind schedule programs to purposeless projects. And property development plans are not immune to these problems.
Consider the St. Louis land bank agency. It owns tax delinquent and donated property within the city. Instead of selling the land to all prospective buyers, it has a history of rejecting offers and instead holding property for “future development.” Unfortunately, a recent study on the agency found that it’s amassing land at a faster rate than it’s selling the land. In other words, future development rarely materializes.
Or consider the Fort Collins land bank program. It was started to make land available for future affordable housing projects. That was 13 years ago (created in 2001, first property acquired in 2002), and none of the five properties it purchased have been sold. And although the land bank has been taking the long view from the start, property holds of more than ten years weren’t considered in the city’s feasibility study. More troubling is that the baseline scenario was holding property for five years!
Uncertainty is a characteristic of the world and not just for government, but these anecdotes could be a lesson for urban planners: anticipated developments don’t always occur.
As part of the Fraser Institute’s Economic Freedom of North America report, the Institute scores state and local governments on the size of government. Between 1981 and 2011, the average state score declined from 7.7 to 6.2 (governments grew larger). In the .GIF below, brighter blue represents a higher score on size of government and darker blue represents a lower score. What can be observed is a slight brightening until about 1990 followed by a sputtering decline and a sudden crash between 2007 and 2011 – governments grew larger during the Great Recession.
Michael LaFaive at the Mackinac Center notes that tax policy is correlated with population migration out of Michigan.
Mackinac Center research focused on Michigan has found for every 10 percent increase in personal taxes an additional 4,900 people leave the Great Lake State annually. So for example, an 11.5 percent individual income tax in 2007 has driven around 29,000 of our citizens away so far – and that’s a conservative estimate.
George Mason University professor and Cafe Hayek blogger, Donald Boudreaux, isn’t a big fan of the latest Ex-Im Bank cronyism deal. They’ve recently agreed to loan nearly $700 million to an Australian company to help them purchase Caterpillar’s equipment. He elaborates:
Uncle Sam – that allegedly prudent, responsible, and science-driven protector of the well-being of ordinary Americans – has just decided to transfer more treasure to large corporations (namely, Caterpillar, GE, and Atlas Copco). The transfer comes in the form of a loan of $694.4 million from the U.S. Export-Import Bank to an Australian mining company that will use the loan proceeds to buy products from these American corporations. Despicable.
Chris Edwards argues that because the federal government has been engaged in deficit spending, our fiscal policy has been relatively loose. He writes:
In the usual (and weird) Keynesian view of the economy, government deficits are stimulative while surpluses are “tight” or destimulative. The following chart (based on CBO) shows that in the four years after 2009, we had $4.4 trillion of federal deficit spending, or supposed Keynesian stimulus. Calling that “very tight fiscal policy” is absurd.
According to the Washington Examiner‘s Tim Carney, inequality is a big problem if it’s due to cronyism. While many studies contradict each other on inequality and its effects on an economy, there is no doubt in Carney’s mind that it is bad if it’s due to political connections:
The answer: “It depends.” It depends on how governments react to inequality, it depends on how developed the country is, it depends on whether it’s wealth inequality or income inequality.
Yesterday was the anniversary of the ratification of the 21st Amendment – the repeal of Prohibition. Prohibition was more than a social issue, it was also an economic issue; prohibition created an environment conducive to cronyism. From Cato At Liberty:
Prohibition-era state laws, many of which are still on the books today, created government-protected monopolies for alcohol distributors. These laws have survived for three-quarters of a century because of powerful, rent-seeking interest groups, despite the fact that they significantly raise costs and limit consumer options.
The Commonwealth Foundation points out an expensive mistake by the Pennsylvania Liquor Control Board:
Not long ago, they poured $66 million in taxpayer money—nearly two-and-a-half times the estimated cost—into a “state of the art” inventory system that failed to allocate adequate product levels, causing widespread shortages at retail outlets.