TIF Abuse in Chicago

Over the last few years, the amount of money that Chicago has brought into the tax increment financing district has increased to over a half billion dollars this year, TIF districts use current tax revenue to finance economic development that is suppose to later on repay itself through improvement in property values. The money is suppose to be used to increase economic growth and if often used to make pay out to private companies that will then use the money to create new jobs. While this sounds good in theory, in practice it rarely accomplish what it promises to, first of all the money usual ends up going to companies that do not need, companies that can easily raise any capital that they might need in the private investment markets. For the most part any business idea that is a good idea and economically viable will be raise the capital that it needs to get started and to run its operations. For this idea to work the government would have to have a better ability to decide what companies are economic viable than the market place does.
In Chicago you have the add problem that the TIF revenue is off budget so the Mayor Chicago has the ability to do pretty much what ever he wants with it and channel it to the projects he deems best. For example 40 million dollars went to the CME inc, the company that came into existence when the Chicago Mercantile Exchange bought out the Chicago Board of Trade, this merger also result in the company eliminating 400 jobs, so the city ended up paying the company about 100,000 dollars for each job it eliminated, and CME is easily a company that could easily raise all of its capital requirements in the securities market and has zero need for state subsidization.

Reforming Federal Government spending

As I stated in my last post, I intend to talk about ways the the Federal Government could reduce spending, cut taxes and benefit the economy.
End Farm subsidies, as I mentioned in one of my previous post, farm subsidies are bad for the economy and environment, ending the farm subsidy program would save taxpayers around 38 billion dollars a year.

Terminate the International Trade Administration, this department is suppose to promote US Exports, but most evidence indicates that it has little or no effects on the amount of goods and services that the United States exports each year, ending it would save tax payers around 400 million dollars a year.

Terminate the Federal Technology and Industry programs, these program are suppose to subsidize the development of new techonologies by private firms in the economy to make the American Economy more competitive, but in reality they have little effect and the 400 million dollars a year spent on this program is a drop in the bucket compared to the 100 billion spent private investors and organizations on the same thing. These programs sever little practical purpose and should be ended.

Privatize the four Federal Power Market Administrations, these agencies have the job of marketing power from the 120 federally owned power damns, privatizing these agencies would save the taxpayers several billion dollars a year and could raise 10 billion dollars in funds. Sell 3 of them was original proposed by President Clinton in 1996.

Terminate the Community Development Block Grants, these grants were designed to provide help to low income areas, but for the most part these grants are ineffective and produce little in the way of improvement in low income ares. Far more of the money ends up going to wealth neighbor, often funding thing like malls and shopping developments that should be paid for with private funds. End these programs or substantially cutting and reforming them could save the taxpayers up to up 5 billion dollars a year.

Terminate the operation of the Bureau of Reclamations, the job of this agency is to run operations to provide power and water to area in the west. Its operations make little economic sense and the projects that are under taken by it often damage the environment and the subsidization of the water and power that the taxpayers pay for through this agency is helping to cause the water problems in the American West by encouraging more people to move to the area than it can support. This agencies should be privatized and government subsidization ended, this would save the tax payers 1-2billion dollars a year.

Terminate the Bureau of Indian Affairs, this agency is a remnant of by gone age that needs to go, the management of Indians lands should be turned over to the tribes and subsidization should end. Terminating this Bureau would save the taxpayers around 5 billion dollars a year.

In my next post I will continue talking about programs that can be terminated or privatized and other fundlemental government reforms.

The Wrong mindset in Washington

While listening to speech given be a candidate to replace Congressmen Ray Lahood at Saturday morning Tazewell County GOP breakfast it struck my that many Republicans also share the wrong kind of mindset with Democrats, and that mind set is that everything will be ok if can just get more back from Washington D.C., part of the problem with Government right now is that to many members of Congress share this mind set. Instead of trying to find ways to reform Government, reduce it size and make it more efficient, they just want to get more pork for their district. So that when election time comes around again they can say look how much money I have brought back home and use projects to bribe support for interest groups, like business or unions that stand to benefit from pork projects. Each year the Government spends bills on pork projects that produce little in the way of actual benefits for the economy. Instead of Republican candidates talking about how they are going to bring more money back to there districts in the forms of new projects, we need ones talking about how they are going to leave more money in there districts by reducing unneeded government spending and reducing taxes.
In way it is weird that the biggest supporters of tax and spend, or borrow and spend, policies tend to be in political blue states, because these states tend to pay more money into the government than they receive back from it and red state that tend to have fewer supporters of these policies when they receive a disportant about the benefits from government spending. So when it comes to government spending, blue states tend to be net loser and red states net gainers. Over my next few post, I plan to talk about ways to reduce the amount that goverment spends each year.

The Great Farm Subsidy Scam

It’s the time again when the United States government is debating farm policy and agricultural subsidies and once again instead of focusing on bringing an end to the agricultural subsidies and making the farm sector a fair and free market, they are talking about how to reform them. Agricultural subsidies benefit a small portion of the population, the farm sector, and cost the rest of us.

There is a lot of myth out there about farm subsidies and how they affect the public and a lot of them that claim they benefit the public, so lets look at a couple of these myths. The first is that farm subsidies are needed to protect small family farmers, the first problem with this statement is that most farm subsides do not go to small family farms, around 70 percent of all subsides flow to the largest 10 percent of producer. So this means instead of helping the family farms like some proponents of subsides claim, they are really helping larger producers and actually hurt small farms because the value of future subsidies are capitalized into the values of land and other farm inputs, like machinery, raising there prices and making it more costly for small farmers to purchase more land and equipment and difficult for new farmers to enter the market because of the high cost, reducing competition in the long run. Since farm subsides are tied to production and size of the farm, increasing as the amount of output produced by farms increase, farm subsides actually encourage large farms to buy up small farms and land and price small farmers out of the market.

The next myth is that with out farm subsides the price of food in the United State would sky rocket and the general public would be hurt. This is just plain wrong and misconception on the part of many in the public because it ignores that right now there are two prices the public pays for farm goods. The first is the one that most of us know about which is the price we pay at the store, but there is a second hidden price, and that is the price we pay in higher taxes in order to fund the farm subsidies program. If farm subsides were to end, yes the market price would probably rise some but there is no reason that it would rise above true cost that we pay for farm goods, to be exact the cost to the public would probably be less since right now we are paying subsides for far more farm goods that are consumed. The other factor that people ignore is that only select groups of farm products are subsidize and many do not receive any at all, farmers that receive subsides are actually forbidden from growing certain crops, and ending farm subsides would have little effect on the price of these goods. The biggest change is that right now people have no choice on how they spend money that goes to hidden cost of farm products, but with out subsidies they would have a choice since they would be able to decide which items they purchase.

One other point about farm subsides are that are bad for the world economy and they are bad for the environment. They are bad for the world economy because farm subsides in developed countries, the United States far from the worse offender in this case, because they cause farmers in these countries to over produce, in some cases to the put that countries end up giving away some of these products because product is greater than world demand, this over production because of subsidization artificial lowers the prices of these crops in the world markets making it impossible for many farmers in underdeveloped countries to compete in one of the few industries that would have an advantage in and that could be produce an export good that would bring in hard currency, like dollar, euros, yens, ect, that could be used to help fund development in these countries. The over production of farm subsidies also hurts the environment because it leads to the over use of pollutants like fertilizers and pesticides and the over use of farm land with depletes it over time.

It would be better off for everyone in general, excluding of course subsidized farms, if farm subsidies were complete ended and the farm sector returned to a competitive free market. The free market would make farming a more competitive industry; it would create prices that reflect the true market cost and the values of the consumers and it would end the current practice were both the working and middle class are taxed to benefit large corporations.