Topic: Regulatory Studies

Public Financing of Vikings Stadium a Bad Deal for Fans, Taxpayers

The collusion between big business and big government that fleeces the rest of us has struck again – Tim Carney, iMessage your office – this time in the sports world. 

Minnesota governor Mark Dayton recently signed the midnight deal that state lawmakers struck with the owners of the state’s football team, the Minnesota Vikings, to build the team a new stadium.  This caused plenty of celebration in Minneapolis and elsewhere across the Gopher State.  Alas, the hangover is about to come for taxpayers regardless of their gridiron allegiance or level of fandom.

As former Cato legal associate (and Minnesotan) Nick Mosvick and I write in the Huffington Post, these stadium deals hurt most fans:

That’s because they lead to increased taxes and higher prices, squeezing the average fan for the benefit of owners and sponsors.  And that’s not even counting the overwhelming majority of taxpayers, regardless of fandom, who never set foot in these gladiatorial arenas.

Let’s look at this particular deal.  The stadium costs $975 million on paper, with over half coming from public funds, $348 million from the state and $150 million from Minneapolis—not through parking taxes or other stadium-related user fees, but with a new city sales tax.  In return, the public gets an annual $13 million fee and the right to rent out the stadium on non-game-days.

Vikings ownership, NFL commissioner Roger Goodell, and local politicians make a typical pitch for the deal: the stadium will attract investment to the area; local establishments will see a rise in game-day sales of $145 million; jobs will be created, including 1,600 in construction worth $300 million ($187,500 per job?!); tax revenues will increase $26 million; property values will rise; and, of course, the perennially underachieving team’s fortunes will improve.

Such arguments are always trotted out for these sweetheart deals, but the evidence regarding the economic effects of publicly financed stadiums consistently tells a different story.  For example, Dennis Coates and Brad Humphreys performed an exhaustive study of sports franchises in 37 cities between 1969 and 1996 and found no measurable impact on per-capita income.  The only statistically significant effects were negative ones because revenue gains were overshadowed by opportunity costs that politicians inevitably ignore.

An older study looked at 12 stadium areas between 1958 and 1987 and found that professional sports don’t drive economic growth.  A shorter-term study looked at job growth in 46 cities from 1990 to 1994 and found that cities with major league teams grew more slowly.  Even worse, taxpayers still service debt on now-demolished stadiums, including the $110 million that New Jersey still owes on the old Meadowlands and the $80 million that Seattle’s King County owes on the Kingdome.  And we shouldn’t forget that local governments often employ property-rights-trampling eminent domain to facilitate these money-squandering projects.

Read the whole thing.  It’s not a matter of ideology; we even quote Keith Olbermann approvingly!

The point is that these deals benefit team owners and the politicians who get to wrap themselves in team colors to the exclusion of taxpayers or fans (who are priced out of the games their increased taxes support).  If luxury stadiums were hugely profitable, why would the savvy businessmen who own the teams let the politicians in on the windfall?

‘Lawsuit Contentions, Like Beer Itself, Can Be Dangerous When Over-Quaffed by the Naive’

To be fair about it, New York Times columnist Nicholas Kristof has written some pretty good stuff about the Drug War and other topics. But when he’s having a weak day, he’s weaker than watered beer, or so I conclude in a new Reason piece about his latest crusade.

Last week Kristof urged readers to boycott Anheuser-Busch products until the brewer cuts off beer sales near the alcoholism-ravaged Pine Ridge reservation of the Oglala Sioux. Whatever you think of the paternalistic premises at work here, Nebraska’s system of wholesaler-protective beer regulation appears to make it impossible, even unlawful, for the maker of Budweiser to do any such thing. And Kristof’s second proposal, to extend the boundaries of the reservation itself, fails to allow for obvious adaptive responses by both sellers and buyers.

Kristof has more insight than most of his colleagues into why the Drug War has failed. Why does he seem to forget those insights when it comes to the most familiar of legal drugs?

Chris Christie Allows New Jerseyans to Quaff Better Wine

While perhaps more identified with eating than drinking, New Jersey Governor Chris Christie – who headlined Cato’s recent Milton Friedman Prize Dinner – signed a law in January that allowed out-of-state winemakers to sell directly to in-state consumers and retailers.  This wasn’t a spontaneous bit of New Year’s bonhomie – the U.S. Court of Appeals for the Third Circuit had ruled in Freeman v. Corzine that the previous rules benefiting in-state wineries was unconstitutional (that pesky Commerce Clause again) – but still it was a positive sign: even Wine Spectator took note.

More importantly, the district judge in charge of the nine-year lawsuit challenging that earlier law recently approved the consent decree whereby New Jersey’s new law remedied the claims brought by the out-of-state wineries.  The agreement creates an out-of-state plenary winery license (good luck saying that after having consumed too much of the the vintage) under which “foreign” wine can compete on an equal playing field with good ol’ New Jersey stock.  Specifically, the new law grants this license to out-of-state applicants, including those who sell their wares over the internet, who do not produce more than 250,000 gallons of wine per year and are duly licensed in another state.

The upshot is that the new law takes effect as of this month.

This all still seems like a bit too much regulation to me, but at least everyone is now subject to the same rules.  I may have to take advantage of this newfound freedom when I travel up to the Garden State for my college reunion in a few weeks.

For my previous writings on booze and the Commerce Clause, read this and listen to this.

Adult Supervision

Some politicians say that banks need more regulation because JPMorgan Chase lost $2 billion, about 2 percent of its annual revenue.

Meanwhile, the federal government will have a deficit of about $1.3 trillion this year, more than half its annual revenue (and about a third of its annual spending).

Is there some sort of regulation that might remedy that?

Survey: Which States Are Small-Business-Friendly?

As Tad has noted, in cooperation with the excellent Kauffman Foundation of Kansas City has produced this attractive, clickable map of the 50 states displaying the results of a survey of small-business friendliness. It’s worth checking out your state’s standing, as well as that of states with which it competes for new business. To a large extent the findings come in just about where one would expect:

  • California plus the Northeast (aside from New Hampshire) are the most unfriendly overall. Add in the trio of Midwest industrial states (Illinois, Michigan, Ohio) plus Washington and Hawaii and you get the full list of seriously unfriendly states, with “D+” or worse grades.
  • The list of best states also includes few surprises: Texas, Oklahoma, Idaho, Utah, Virginia and several other Southern states.
  • Virginia (grade of A) far outdistances Maryland (C-), notwithstanding the views of Washington Post business writers who often chide the Old Dominion for not emulating the economic policies of its neighbor to the north.
  • Other states, even in the Northeast, tend to do OK in one or two areas—New Jersey and Vermont avoid piling costs onto new hiring, Connecticut and Illinois are not entirely hopeless on zoning, and so forth. The exception is California: it’s awful on everything.

There are also some data available on the city level.

Tad and Econlog’s David Henderson pick up on the following remarkable sentence from the study:

Small businesses care almost twice as much about licensing regulations as they do about tax rates when rating the business-friendliness of their state or local government.

Everyone knows high taxes depress business activity; it is libertarians who go on to offer a critique of licensure laws, and never has it seemed so relevant.

The Institute for Justice Exposes the Plague of Occupational Licensing

Today, the Institute for Justice released a 200-page, comprehensive study on occupational licensing in the United States. The report details the plague of occupational licensing that has swept the country over the past 60+ years. According to the study, “In the 1950s, only one in 20 U.S. workers needed the government’s permission to pursue their chosen occupation. Today, that figure stands at almost one in three.”

Fifty years ago, in Capitalism and Freedom, Milton Friedman warned against the dangers of professional licensing. At that time, Friedman quoted a previous study on licensure by Walter Gellhorn:

By 1952 more than 80 separate occupations exclusive of ‘owner-businesses,’ like restaurants and taxicab companies, had been licensed by state law; and in addition to the state laws there are municipal ordinances in abundance, not to mention the federal statutes that require the licensing of such diverse occupations as radio operators and stockyard commission agents. As long ago as 1938 a single state,North Carolina, had extended its law to 60 occupations. One may not be surprised to learn that pharmacists, accountants, and dentists have been reached by state law as have sanitarians and psychologists, assayers and architects, veterinarians and librarians. But with what joy of discovery does one learn about the licensing of threshing machine operators and dealers in scrap tobacco? What of egg graders and guide dog trainers, pest controllers and yacht salesmen, tree surgeons and well diggers, tile layers and potato growers? And what of the hypertrichologists who are licensed in Connecticut, where they remove excessive and unsightly hair with the solemnity appropriate to their high sounding title?

The Institute for Justice’s study found that licensing has only become more wide-spread and more absurd. But an increase in licensure is expected when interest groups are allowed to capture government and violate our economic liberties. Public choice theory predicts a growth in licensing if the anti-competitive interests of trades are not checked by constitutional rights. As Friedman observed,

In the absence of any general arrangements to offset the pressure of special interests, producer groups will invariably have a much stronger influence on legislative action and the power that be than will the diverse, widely spread consumer interest. Indeed from this point of view, the puzzle is not why we have so many silly licensure laws, but why we don’t have far more.

There are significant real-world effects to these laws. In a world of nine percent unemployment, barriers to work should be the last thing we want, particularly if those barriers do not make us safer or better off. The study found that the average license forces would-be workers to pay an average of $209 in fees, take one exam, and complete nine months of training. In the four places in which they are licensed (three states and DC), interior designers have the highest barriers to entry, apparently to save us from shag carpeting and misuses of the Pottery Barn. In the face of such requirements, particularly the months of training, it’s easy to see how someone can be discouraged from even looking for a job.

In addition, out-of-control licensing has other, more human costs, such as the monks of Saint Joseph Abbey, who were prohibited from building caskets in their monastery unless they obtained a funeral director license. The Institute for Justice won that case. Here’s hoping the new study gives IJ’s attorneys the data they may need to defeat other unconstitutional licensing regimes.

Below is the video announcing the study:

Obama Labor Department Won’t Ban Kids’ Farm Chores

Farm families, along with the cause of liberty, won an important battle last week when the Obama administration scrapped plans to prohibit kids from doing a wide range of jobs in agriculture, even on farms belonging to their own family members. The rules would have barred youngsters under 16 from working with animals, storage bins, power-driven equipment, and various other things found on farms; perhaps most significant, they took an exceedingly narrow view of the so-called parental exemption provided by the law, so that (in the rules as proposed last year) kids would have been forbidden to work on an uncle or grandparent’s farm, or any farm less than “wholly” owned by their own parents. The Department of Labor was inundated by upwards of 10,000 comments, overwhelmingly negative, from farmers and ranchers; playing out in press outlets like the Custer County, Neb. Chief, the controversy was mostly ignored by the Eastern press, though NPR did do a report in December.

Commentator Ira Stoll has connected the dots about the Obama administration’s tendency to press ahead on extreme regulatory measures, then back off after a public outcry builds:

Examples include the mandatory automobile back-up camera rule, the ban of all cellphone use, even hands-free, while driving, the ban on 100 watt incandescent light bulbs, the NLRB’s action preventing Boeing from opening a factory in South Carolina, a right-to-work state, and the IRS’s cumbersome Form 1099 requirement as part of Obamacare.

Last fall I noted the same pattern, including retreats on EPA standards on dust, smog, and cross-state air pollution, and a misbegotten rule on lead abatement that could have made it prohibitively expensive to rehabilitate older homes. As I said at the time:

This, then, seems to be the new Obama administration compromise position …: they’ll hold off for now on saddling the economy with at least some potentially ruinous regulations – but they’ll make sure you know they’re not happy about having to take that stand.

More on the Obama administration and regulation here.