A minimum wage tutorial

Wages should be left to the fair and free competition of the market and should never be controlled by the interference of the legislature.

  • David Ricardo
  • “Principles of Political Economy” (1817)

Raising Pennsylvania’s minimum wage is said to be a priority this legislative session among “progressive” lawmakers, including those in Southwestern Pennsylvania.

They argue that inflation has increased but the government-mandated wage floor has been stagnant at $7.25 an hour for the past decade. One proposal would raise the minimum wage to $15 an hour by 2024.

Of course, supporters of higher minimum wages invariably see them as a “benefit” and not the cost they are. Additionally, they see this “benefit” being covered by “the rich.”

But their fallacy is multi-faceted, as John Phelan at the Center of the American Experiment recently reminded in an elementary tutorial that should be mandatory reading for all public policy makers.

“Minimum wage hikes are frequently presented as a way for government to help people struggling with the cost of living,” the economist reminds. “But wages are prices as well. They are part of that cost of living.

“When government tries to increase these prices by decree, it pushes up the cost of living – the very problem it is acting to alleviate in the first place.”

Thus, government’s attempts to help “actually hurt,” Phelan notes. “This will, in turn, lead to renewed clamor for government to ‘do something.’” And on and on and on a vicious cycle is replicated.

(This is analogous to, say, pork farmers, stung by low pork prices, seeking government price supports, which, in turn, serve to either artificially maintain overproduction levels or even increase them. And what does that lead to, class? Why, depressed prices and repeated demand for price supports that perpetuate this perverted cycle.)

Additionally, Phelan reminds it’s not “big business” that bears the cost of minimum wage hikes but small businesses already operating on the thinnest of margins. (That’s because many of those larger businesses already, voluntarily and based on productivity and employee value, pay $15 hourly.)

“(I)t is not some mythical ‘robber baron’ who will be forking out to pay for the promises of the state’s politicians,” the economist says. “Instead it will be those business men and women and their customers who pay the price … .”

“Beneficent” Western Pennsylvania legislators supporting a higher wage floor would be wise to embrace Phelan’s tutorial. But, of course, they won’t.

Instead, these government alms-givers, convinced they know better than the fair and free competition of the market, will look for someone to blame – and never themselves – for the resulting fewer entry-level jobs, jobs with fewer hours and even fewer businesses.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

 

Government Air & government as grocer

“New year, new airline,” is the way Allegheny County Airport Authority CEO Christina Cassotis touted the arrival of Via Airlines to Pittsburgh International Airport’s flight mix.

But reasonable people are forced to ask this question: “Same-old, same-old?” If not this one: “Thank you, sir, may I have another?!”

They certainly are apropos queries, considering the authority’s long list of failures in attempting to command the marketplace with public subsidies. Think OneJet. Think WOW. Think Qatar.

And think of the boilerplate bromides trotted out yet again to announce the coming spring arrival of Via, a small Florida carrier that will offer exclusive flights to Austin, Texas, Birmingham, Ala., Hartford, Conn., and Memphis.

There’s talk from Via of making Pittsburgh a “focus city.” There’s talk of adding more flights. We’ve heard it all before.

“We’re happy. We’re thrilled,” Cassotis said. “They’ve got the right-sized aircraft.  These are the kinds of markets that the serve and we know these markets will perform when they get service.”

Past being prologue, until they don’t, of course.

“It’s a perfect match,” said Rich Fitzgerald, the Allegheny County chief executive. Until it’s not, that is.

Public subsidies? Why, of course, yes. They are said to not be anywhere near the ridiculous $3 million or so given to the now belly-flopped OneJet. But there are subsidies, still being negotiated and other than a “traditional” one-year waiver of landing fees.

Cassotis describes them as marketing incentives of a “modest amount.” The public won’t know that amount until the deal is cut. But if public officials and Via are so confident that there will be demand for these flights, why should public dollars be needed to market those flights?

Via, by the way, is defended as being “established” and not the kind of “start-up” that was OneJet.

But, and yet again, what kind of due diligence was performed to vet Via’s financials. If it was the same process use to vet OneJet and WOW, public dollars could be taken for another ride.

All that said, the Post-Gazette reports Via doesn’t have the best service track record. Flight delays. Unscheduled stops. Canceled flights. As the P-G’s Mark Belko reports:

“Such complaints prompted the U.S. Department of Transportation to write to Via last year to express ‘serious concerns’ about them. Via at the time was receiving a federal subsidy as part of the Essential Air Service Program to ensure flights to smaller airports.”

That’s the taxpayer-subsidized program to put commuter planes at airports where there’s insufficient market demand. What could go wrong, right?

The P-G says Via’s service problems were so severe that two airports asked the feds to replace Via with another carrier. Can it get any more encouraging?

There’s another object lesson in the folly and failure of command economics unfolding in Pittsburgh’s Hill District.

Five years and three months after its October 2013 opening, the heavily subsidized (through public and foundation dollars) Shop ‘n’ Save grocery store appears to be struggling.

That word comes in ancillary news reports about struggles of Hill House Association, the nonprofit group that owns the shopping center in which the full-service grocery is located.

As the Post-Gazette reports it, citing court documents, Shop ‘n’ Save stopped paying rent in the spring of 2018 while another business, a coffee shop, hasn’t paid rent since July 2017, not long after opening.

Exactly what’s going on is unclear. Is the landlord not maintaining the property? Can Shop ‘n’ Save not afford to pay its rent? The coffee shop owner told the newspaper that the shopping center has not generated the customer traffic that either business expected when they signed on to the development. The shop owner alleges Hill House has not sufficiently marketed the complex.

Of course, more than a decade ago when do-gooders were clamoring for a full-service grocery store at the site, the public pretty much was told that if it was built, Hill District residents, without a full-service grocer for decades and stranded in a “food desert,” would flock to the store.

You’ll recall how that claim was, in an illogical twist, the rationale for millions of dollars in subsidies that far outpaced the private investment of the grocer itself.

Well, if it was such a simple matter as building it and shoppers would come, why did this grocery stores require such massive subsidies? You’ll also recall that proposals to build a smaller store with less-expansive offerings that studies suggested would better serve the Hill District were repeatedly rebuffed.

These days, even the foundation community has pulled back from supporting Hill House, obviously seeing little or no promise of sustainability.

Where governments attempt to create markets, governments typically fail. And what appears to be a foundering attempt at “government as grocer” is the latest manifestation of that public policy truism.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

 

More OneJet questions

A number of questions arise following a Post-Gazette story detailing the number and identities of investors allegedly snookered by OneJet.

OneJet was the heavily publicly subsidized business-oriented passenger air service that was forced into Chapter 7 liquidation in late 2018 by a handful of private investors. The highly touted airline began service to Pittsburgh International Airport in 2015. But by late last summer, it more resembled a flounder washed up on a beach.

The Allegheny County Airport Authority, the county Redevelopment Authority and the state Department of Community and Economic Development had ponied up about $3 million in public dollars. And it appears that nearly all of it likely will not be recoverable from the turnip that OneJet turned out to be.

But far more money is owed to private investors – “a who’s who of Pittsburghers,” is how the P-G characterizes them.

We’ve repeatedly raised the question of what kind of due diligence was performed by government agencies to vet the financial wherewithal of OneJet. What was the process? Who did it? Was it done at all?

But the release of the list of private investors begs a few more questions. What kind of due diligence did they perform?

Granted, a second, larger lawsuit by investors alleges OneJet’s principals misled them about the airline’s finances. But a number of those investors were, for lack of better phrase, “money people” – bankers, corporate executives and even UPMC Children’s Hospital. Did they assume too much? Did they accept at face value OneJet’s claims?

And an even larger question comes into play here: What, if any, influence did those private investors have on government officials to turn public money into venture capital dollars?

Did that influence play any role in government failing to perform its due diligence? Was it the proverbial blind leading the blind? Or did those government agencies fail on their own? Either scenario should raise eyebrows.

More questions – very serious questions — are being raised about the OneJet fiasco on a regular basis. And the need for a top-to-bottom review grows stronger.

As we’ve noted before, and will continue to note, that’s a job for the state Attorney General’s Office, which, per statute, has auditing purview over the Airport Authority.

And everything must be on the table, from how recipients of public dollars are vetted, to past conflicts of interest by authority board members, to the plenary power of authority CEO Christina Cassotis to grant subsidies in any amount, to what outside entities might be having undue influence on the operation of the Airport Authority.

Such a major public policy “fail” demands an exhaustive review. Until that happens, there will continue to be more questions than answers.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Tom Murphy’s ‘rehabilitation’?

“I’ve been rehabilitated,” Tom Murphy quipped, wryly, on Thursday after receiving the ceremonial “key to the city,” considered the highest civilian honor that Pittsburgh government can bestow.

The question, of course, is: Why?

Murphy, the city’s 57th mayor, left office 13 years ago after serving for a dozen years (1994-2006). But he left a public policy “legacy” that, overall, is neither worthy of praise nor emulation.

During the key presentation ceremony (the oversized key in a box given by Mayor Bill Peduto), Murphy lamented that “Virtually everything we tried do to, people opposed.”

As if that opposition, based on sound economics (if not economics morality) wasn’t warranted. For so many of Murphy’s proposals were the exemplar of poor, bad and simply lousy public policy.

When, in 1997, voters in 11 Southwestern Pennsylvania counties overwhelmingly rejected “The Stadiums Tax,” it was Murphy who thumbed his nose at the “people.” He hatched the plan that packed the Regional Asset District (RAD) board to divert multiple millions of taxpayer dollars to build the barons of sport new play palaces.

Between the thumping at the polls and the RAD end-around, Murphy mocked the public over stealth legislation in Harrisburg that would have funded the projects. The same “people” he derided did what thinking people do best – they demanded the measure be killed. And it was.

Nonetheless, the public continues to pay to this day. And in ways it never imagined. As the Allegheny Institute recently noted, sweetheart leases allow the Pirates and Steelers to offset lease payments for a litany of “deductions” that defy credulity.

Murphy also fancied himself as a command economist – waving a magic wand that dispensed taxpayer gold to “rebuild” downtown Pittsburgh as only a hubris-filled pol could. His marquee failure — $50 million in public dollars to build Lazarus a new Downtown department store. It went belly-up in five years.

Another Murphy scheme, to effectively bulldoze a large swath of Downtown for a publicly funded retail Mecca, never got off the ground. Thank goodness.

And all of this only scratches the surface of Murphy’s temerity.

Yet, in Thursday’s ceremony, Murphy’s trademark hubris again got the best of him, intimating that the majority of those who opposed his schemes, his end-arounds and his subterfuges of 20 years ago now have come to see the proverbial light.

“What happens after 12 years or 10 years or whatever it is, is that people sort of see the results. If they connect me to it at all, they sort of give me some credit for starting it.”

It’s further proof that hubris, fueled by ignorance, leads to historical impudence.

Indeed, Tom Murphy’s entire record is not cringe-worthy. After all, he did begin to take steps to address Pittsburgh’s chronic fiscal mess (though some would argue he had no choice). And he did take the long overdue step of slashing the city’s payroll.

But, on net, the Murphy years should serve as an object lesson in how not to devise or prosecute public policy. And in how not to disrespect the public’s intelligence. Those who seek to “rehabilitate” Murphy’s image only prove that they have failed to learn the lessons that Murphy’s mayoralty should have taught them.

That Murphy actually believes he has been “rehabilitated” more than suggests he still doesn’t get it – and that he likely never will.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

 

Slaying rail transit shibboleths

There’s a great new book that should be required reading for every elected and appointed official responsible for mass transit planning in Southwestern Pennsylvania as the new year rolls out.

It’s Randal O’Toole’s “Romance of the Rails,” subtitled “Why the Passenger Trains We Love Are Not the Transportation We Need.”

It’s a beefy (nearly 400 pages with exquisite footnoting) but very accessible look at the nation’s rail services, from the Transcontinental Railroad to urban and regional transportation lines, old and contemporary — and how government invariably mucked up (and continues to muck up) the works.

In fact, O’Toole, a long-time lover of all things trains (hence, the book’s subtitle), exposes darn near every shibboleth about the economic and operational efficiencies of passenger rail – oxymorons promoted shamelessly for more than a century by government and those who long have profited at taxpayer expense and at the expense of sound public policy.

It is no hyperbole to say O’Toole eviscerates every government-promoted rationale for passenger rail, especially the kind of light-rail passenger service that repeatedly has been being foisted on Pittsburgh and Allegheny County residents.

Agree or disagree, but O’Toole says the next bona fide public transportation revolution is upon us with autonomous vehicles, in general, and autonomous ride-sharing vehicles, specifically.

From O’Toole’s book:

“Some transit agencies admit that human-operated ride-sharing services are responsible for low transit ridership numbers. Despite declining ridership, some people continue to support construction of new rail transit lines.

“Most of that support comes from contractors expecting to profit from construction and environmentalists who irrationally hate automobiles even though it is far easier to build a green auto than it is to persuade people to stop driving and start riding transit.”

Continues O’Toole, in perhaps the book’s boldest pronouncement:

“Once driverless ride-sharing is available, there will be little justification to continue subsidizing transit, and most rail transit lines outside of New York City will turn to streaks of rust. …

“In the end, the argument for subsidies to any form of transportation is weak. … (A)ll the subsidies do is create demand for more subsidies,” O’Toole reminds.

“Romance of the Rails” is a critically important book as public transportation in this country arrives at a critical crossroad. How sad that many, if not most, public officials will scoff at its well-argued points and insist on continuing to prosecute the same, and failed, public transit “solutions” that only pay homage to Luddites.

This exact kind of intellectual vapidity was on full display in the Post-Gazette’s year-end story on the Port Authority of Allegheny County. The headline? “Transit CEO brings new attitude in her first year.”

Oh, by gosh, by golly, we learn that in Katharine Eagan Kelleman’s first year on the job (with a base per annum of $230,000) the Port Authority passed out 3,000 flashlights to transit agency workers last March on National Employee Appreciation Day to, as the P-G reported, “show the way to improvements.”

And, good grief, we are told that 60, count ‘em, 60 employees marched in last year’s St. Patrick’s Day parade “with the agency’s first-in-recent memory St. Patrick’s Day-themed bus.”

Of course, there’s also mention of a pricey effort “to create a new brand for the agency.”

But, alas, there’s not one mention of the Port Authority’s out-of-whack cost structure and its chronic ancillary problems.

And hopes that the new year will bring a real new day to the agency appear to have been dashed.

From the email inbox, a reader reacted to the Allegheny Institute’s analysis (Policy Brief Vol. 18, No. 46) of the latest abysmal PSSA scores (edited for clarity):

“It was good to read your article about our Pa. public school assessments.

“Being one of the payers for life, to enable the less fortunate to receive an education, I, for the past 40 years-plus, have wondered what I’m paying for.

“I am now in my 80s, spent three years overseas in the military keeping the present-day students’ grandparents safe.

“Again, for too many years I see public school students being bused to and from the schools — must be bad to walk nowadays; I never was on a school bus when I went to school.

“These kids are now fed breakfast and lunch, most given at no cost. Then, when you tally up the time spent at the feed lot and playing games, very little time is spent in a true classroom learning something.

“Our education system must be revamped; it is now being run by teachers for teachers. The teachers now demand over-average wages and benefits, plus the outstanding pension plans plus medical benefits.

“I sit here pondering how to find the lowest price for my medicine so I can feed myself better — due to paying my property taxes.

“I’m fed up paying for this horrible system.”

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

 

Challenge ‘conventional’ policy wisdom in 2019

Some things never change in public officials’ prosecution of public policy. Sadly. And just as sad are some additions to a long list of public policy perversions:

The state Auditor General’s Office is hailing “improved accountability for millions of taxpayer dollars invested in job creation” by the state Department of Community and Economic Development.

As Auditor General Eugene DePasquale put it, in a news release from his office:

“Pennsylvania taxpayers want to know if they’re getting a good return on the state’s investment in creating jobs,” he said. “To me, that’s the bottom line: If you receive taxpayer funds, you’d better do what you’ve promised to do.”

But the real bottom line should be if the practice isn’t merely done prudently but if it should be done at all. After all, Article VIII, Section 8, of the Pennsylvania Constitution could not be clearer:

“The credit of the Commonwealth shall not be pledged or loaned to any individual, company, corporation or association nor shall the Commonwealth become a joint owner or stockholder in any company, corporation or association.”

Certainly not directly but neither by any nod-nod, wink-wink proxy subterfuge.

Yet the constitutional prohibition never is mentioned by public officials doling out taxpayer alms. Of course, it is an extremely rare circumstance for those bellying up to the unconstitutional trough of “free money” to say, “Oh, no, no, no; I’m full.”

Coincidentally, the practice raised the ire of a correspondent who said he once worked as a lobbyist in Pennsylvania.

“I always hated lobbying for the economic development goodies,” he wrote in an email. “And I always thought that the (Redevelopment Assistance Capital Program, or RACP) was the shadiest of all the economic development programs.”

Continued the correspondent:

“I see the RACP as a slush fund for politically connected developers and their consultants. And I can’t believe that not only does the state give the proceeds of public debt to private entities in violation of the Pa. Constitution, but it also uses such proceeds to pay for consultants to manage RACP grants.”

This, by the way, from a former insider who says he’s now “pursuing a career in accounting and finance.”

As the Post-Gazette reported this month:

“Pennsylvania and eight other northeastern states have agreed to craft a regional plan to cut greenhouse gas emissions from vehicles and use the money from the new carbon market to invest in cleaner transportation infrastructure.”

The program – dubbed the Transportation and Climate Initiative – is designed to “achieve substantial reductions in transportation sector emissions and provide net economic and social benefits for participating states.”

But such “cap and trade” programs, or “cap and invest,” as this specific program is characterized, have myriad fatal flaws.

In a nutshell, per a white paper from the Institute for Energy Research, they are designed to raise the price of more affordable but supposedly socially incorrect fuels – think natural gas, among them – to drive the public to higher-priced (and typically taxpayer-financed but less reliable) energy sources such as wind and solar.

But “cap and trade,” an artificial “market” created by government eco-crats (if not social re-engineers), typically does little to decrease carbon dioxide emissions; has marginal impacts on the climate; disproportionately harm the poor; harms energy security; encourages industry to go abroad; and, in general, lead to pollution abatement plans whose costs exceed their benefits.

The Pennsylvania effort reportedly will focus on low-carbon and “resilient” transportation infrastructure, such as public transit and zero-emission vehicles.”

Never mind that the cost-structure of many public transit systems (think the Port Authority of Allegheny’s bus costs, among others) remains woefully out of whack when it comes to “efficiency.”

And never mind that there’s no such thing as “zero-emission” vehicles. After all, plenty of coal and natural gas is used to generate the electricity used to charge their batteries. And the “carbon footprint” to produce the apparatuses of solar and wind generation hardly is miniscule.

But perpetrators of such charades will continue to play their games in 2019 as they have in 2018. Which makes it incumbent for thinking people to be more ardent in calling out such fakirs preying on a public they take for rubes — supposedly for “the common good” but, actually, to the detriment of all.

Colin McNickle is communications and marketing director of the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

 

 

Another dusk before Christmas

There comes a time on Christmas Eve when something extraordinary happens. Above and beyond what already makes this day so phenomenal, that is. That “something” is the first hint of dusk.

And though we each experience it in different locales, and some of the details obviously vary, there is a constancy in the experience that is peaceful to the core. As long as we open our eyes to it, that is, to take a moment to partake of it.

I experienced this grand snapshot in time for the first 21 years of my life in the countryside of Southeastern Ohio. Then, for nearly 30 years, in suburban Pittsburgh. These days, I do so in a place I’ve come to love, not far from the childhood abode, in a place I’ve dubbed Jones Mountain in the Northern Panhandle of West Virginia.

So, sit back with your favorite holiday libation or other treat as the blank canvass is painted with another dusk before Christmas.

The last-minute shopping is done. Some of the cats are lounging on various beds and overstuffed chairs. Others are out for the count in the basement on two sets of summer furniture cushions placed in front of floor-to-ceiling windows. This time next year, there will be a new and large stone fireplace to warm all their slumbers.

Through those windows, by the way, they can see the stack of ash and apple wood that, once split and fully seasoned, will help warm their purrs for Christmas 2019. More wood will follow.

The buffalo chicken dip, deviled eggs and other goodies are chilling in various fridges. So, too, are two plum puddings received just this week, air-express from England. The latter will be the perfect dessert to cap the perfect feast of roast turkey with all the fixin’s at brother Shannon’s the next day.

On this late afternoon prelude to a journey over the hills and through the dales to a Christmas Eve gathering at brother Scott’s, the traditional roast beast, seared crispy brown on the outside and tantalizingly medium rare on the inside, has been devoured. As have been the traditional “1:4” mashed potatoes (that ratio representing one-part potatoes to four-parts butter).

And in what surely must be a universal and timeless act of holiday stealth, somebody’s sneaking a dip of the extra homemade dinner rolls into the boat of what’s left of the wine gravy, simmered with painstaking slowness.

“Shoot!”  that somebody blurts out, realizing an incriminating trail of gravy drips will have to be cleaned up post-haste to thwart discovery.

Outside, some of the junior illumination engineers in the neighborhood are a tad switch-happy — a mixture of white and multi-colored lights on the boughs and buntings of their door surrounds already are on.

Across the way, the window wreaths already are illuminated by small spotlights. Window candles, those beacons to weary travelers (i.e. Mary and Joseph looking for a suitable shelter to welcome the birth of the Christ child) are glowing as well.

But some of the neighborhood’s outside Christmas lights remain off. Perhaps, just perhaps, these neighbors know too the majesty of this very special moment.

Back inside, the tall and fat evergreen glows softly as its lights show off precious family decorations, many old and some new; some purchased during overseas travels, many secured here and there but nowhere necessarily special.

And the same small light bulb that brightened the “Nativity scene,” as it was known in childhood, now spotlights the old Stone & Thomas Department Store figurines in a stable made of cut branches by paternal grandfather “Pop” in the middle of the last century.

My, how time flies.

The days of listening to old Christmas songs – lightly snapping, crackling and popping on a turntable with a dime on the tone arm to prevent skipping – are long gone. The old tunes still are played, of course, but these days they are conveyed through a high-tech Internet radio, live from studios just about anywhere in the world.

On this day of days soon to become that night of nights, Der Bingle & Co. are coming from an Irish broadcast that raises money each year for the less-fortunate among us.

My, how small the world has become.

The cats now have stirred, sensing that the day turning long is something different. They’re not sure why but they feel a growing reverence in the air. And out of respect for that, they appear to have put aside any ambushing, chasing and hissing, albeit temporarily.

In fact, two of them – Wyeth and Oreo – can be seen sitting side by side at the front storm door partaking of the arriving magic.

As wondrously simple and tranquil as all this inside “activity” is, something of a minuet has begun to unfold outside as the dusk draws nigh.

Follow the deer tracks, not in any snow but in a soggy mountain foothill, and you’ll soon come upon a group feeding at the tree line of the leafless wood.  They’ve found the remnants of a buckwheat patch planted in the summer to bribe them away from the gardens.

From time to time, sensing they’re being observed, they pause to turn their heads, carefully watching for danger, if not a human handout. Sent a nod and wink by their potential human benefactors, they soon know they have nothing to dread.

Some squirrels are quenching their thirst in a mini-pond regularly replenished by a drainpipe carrying away this year’s plentiful rains. A stray bluebird, odd to see this time of the year, makes careful sorties in and out of the water, watched curiously by a pair of cardinals (indeed a true couple, what with one colored brilliant and the other muted) high in a bare tulip poplar.

And a fox, who newly revealed himself just a few weeks ago, thinks he’s concealed in the waning daylight at the wood’s corner. Ever the opportunist, he’s trying to determine if there’s something in any of this for him. Disappointed, his silhouette slides further into the waxing darkness; he’ll slink back into the picture soon enough.

But, set now is the sun.

Subtle are the winds.

Sweet is the smell of the crisp air.

It now is being punctuated by the scent from several fireplaces. Their tenders are stoking them for the early evening burn, a wonderful mix, the prevailing breeze confirms, of locust, cherry and something that hints of a musky oak.

Soon enough, the proverbial “Ma’s” in their “kerchiefs” and “Pa’s” in their night “caps” will settle in for the first of many “long winter naps” atop this windy outpost.

Then, one by one, the rest of the neighborhoods’ Christmas lights flick on.

The dusk before Christmas suddenly is gone. But as one wonderful moment ends, another begins.  And Christmas has come to Jones Mountain once again.

Silent night.

Holy night.

All is calm.

All is bright.

“The time draws near the birth of Christ,” reminded Tennyson. “The moon is hid; the night is still; The Christmas bells from hill to hill; Answer each other in the mist.”

Merry Christmas, every one.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

 

Combatting the region’s ‘delusive sophisms’

Public officials, elected and appointed, have had a tough year ‘round these parts in their prosecution of “public policy” that all too often disrespected the public and gave policy a bad name.

But the truly tragic part of all this is that the public has been disrespected for so long, and that dubious policy prescriptions have been foisted on them for just as long, that it has become inured to most of it.

Take, for instance, the ballyhooed multibillion-dollar bid to lure Amazon to Greater Pittsburgh. As bad as the precept of underwriting one of the world’s richest concerns with public dollars is, far worse was the subterfuge employed by public officials to keep details of the package hidden from those who would foot the bill.

So antithetical was the behavior to open government and sound public policy that a judge even accused the principals of using the Allegheny Conference on Community Development to establish a shell entity to “launder” the proposal out of public view.

Yet, there are no real repercussions for those who eschew sunshine and operate the laundry. They are free to launder again, and again, with impunity.

Then there’s the textbook case at the Allegheny County Airport Authority of how government interventionism is the lie that keeps on giving – and requiring successive interventions to cover up the failures – the lies — of past interventions. The practice of blindly throwing public dollars at airlines with questionable financial wherewithal has morphed into subsidizing airlines at Pittsburgh International Airport to kill off other subsidized airlines.

Some public officials have blamed the vagaries of the marketplace – the “shakeout” going on in the airline industry – for subsidized failure after subsidized failure. Never mind that free markets require honest failures to have successes. Never mind that government interventions so pervert the markets that their functions are so skewed that just about everyone becomes a loser.

Yet such behavior continues in Greater Pittsburgh. It long has been the norm instead of the exception. “It’s the way business is done,” we are told, ad nauseum, by those, who through their market-perverting behaviors, prove repeatedly they know neither sound business practices nor what truly sound public policies are.

But as Arthur Goddard wrote long ago in the preface to French economist Frederic Bastiat’s “Economic Sophisms”:

“The public has been despoiled of a great part of its wealth and has been induced to give up more and more of its freedom of choice because it is unable to detect the error in the delusive sophisms” that “exploit its gullibility and its ignorance of economics.”

Indeed, shame on the exploiters in Pittsburgh and Allegheny County. But shame on the public that, knowing no better, so subserviently succumbs to the notion that the proper role of government is to attempt to command the economy, never mind the repeated examples of predictable failure.

And, in typical fashion, as Bastiat himself wrote:

“Yes, we must admit that our opponents in this argument have a marked advantage over us. They need only a few words to set forth a half-truth; whereas, in order to show that it is a half-truth, we have to resort to long and arid dissertations.”

This is what the legacy-seeking pols practice. And this is what a more engaged public must work harder to counteract. Governments at any level don’t exist to “create” or “command” markets.  They exist to protect them by not facilitating their demise.

But as the late great economics author Henry Hazlitt also cautioned:

“It does no good for (the fundamental principles of economics) to be discovered unless they are applied, and they will not be applied unless they are widely understood.”

That must apply to government policy makers and the public that pays for these policies in equal measure.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

 

 

The Airport Authority’s due diligence crisis

Word that discount carrier WOW Airlines is slashing its fleet of jets nearly in half and laying off more than 100 employees in a major restructuring yet again raise serious questions about how the Allegheny County Airport Authority is operating.

WOW is three-quarters of the way through a two-year deal at Pittsburgh International Airport (PIT) that pays it a total of $800,000, public money coming from those hardly discerning almsgivers at the state Department of Community and Economic Development.

But touted as a major coup for the airport, the airline now is struggling to survive.

Spurned by one potential rescuer (Icelandair) but thrown a life line by another (Frontier Airlines parent Indigo Partners), WOW has slashed its Airbus fleet from 20 to 11 and will lay off 111 employees.

Bookings have been halted past mid-January. Which raises questions about PIT being part of WOW’s future plans. One traveler tells the Post-Gazette that his mid-January flight was canceled and that rebooking was not an option. WOW, in a statement, said contractors and short-term staff “will not be renewed for the time-being.”

It sounds as if the bell is tolling for WOW in Pittsburgh, if not a number of other markets. If not for WOW itself.

Which makes the pronouncements of November 2016, when the WOW deal was announced, all the more embarrassing.

Christina Cassotis, the Airport Authority’s CEO, called the deal an “investment that will pay off.”

Question: If WOW permanently suspends Pittsburgh services, is there a clawback provision in the contract that, if all of that $800,000 already has been given, pro-rates what WOW must return to the public kitty?

That appears not to have been the case with OneJet, involuntarily sent by creditors into Chapter 7 liquidation. Pre-bankruptcy, the Airport Authority was forced to file a lawsuit in an attempt to recover the lion’s share of its $1 million gift.

Back to November 2016. An airline consultant told the P-G that such subsidies are a way “to bring (airlines) along and mitigate their risk.”

By exposing the public to a risk that only these airlines should bear. The risk to the public be damned, right?

Said a travel agent of the WOW deal, quoted then in the same story: “This is magical.”

Sorry, but as the predictable failures of publicly subsidized air travel and cargo service at PIT are exposed, airline by airline, that “magic” is primarily smoke and mirrors and government-enabled hocus-pocus.

Which brings us back to the Airport Authority and Cassotis and questions repeatedly posed and worth asking anew. To wit:

The authority board gave Cassotis plenary power to grant these airlines subsidies of any amount. Where’s the check and balance?

Oh, of course, silly us – until recently at least three members of the authority had been investors in at least one of the subsidized failures (OneJet). And two of those board members have been named in a lawsuit filed by OneJet investors.

What a convoluted and conflicted mess.

And what kind of due diligence is done to thoroughly vet subsidized airlines for their financial wherewithal? The vetting of OneJet was a bad joke. What kind of vetting did WOW get? Surely a discount carrier that is expanding rapidly should be scrutinized extra carefully, yes?

What’s the process? Who’s does the vetting? Is there a process? Is there any vetting? Or does the authority CEO simply keep a giant rubber stamp hanging from a desk lamp to get the job done?

Said Cassotis in November 2016 of the WOW deal: “This is huge. … And I promise it’s just the beginning.”

More’s the pity. And all the more reason for the state Attorney General’s Office, which, by statute, has auditing power over the Airport Authority, to step in.

As embarrassing as these failures have been, it would be even more embarrassing to do nothing about them.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Airport Authority ‘uh-ohs’ & debunking an acolyte

The Allegheny County Airport Authority has unveiled development plans for a 195-acre tract overlooking Pittsburgh International Airport (PIT). But questions abound.

The same authority that posted an embarrassing record in 2018 attempting – and, predictably, failing — to command the air-services marketplace with public money now is touting something it calls an “innovation campus” at the Findlay Township site.

As the Post-Gazette’s Mark Belko describes it, it “could house offices, research and development labs and industrial manufacturing facilities – all built around a town center with restaurants and retail.”

Uh-oh.

There’s even talk of a light-rail link.

Uh-oh.

Airport Authority CEO Christina Cassotis told the newspaper her agency will be working on a strategy to attract companies to the “campus.”

Uh-oh.

Added Allegheny County Chief Executive Rich Fitzgerald, announcing the plan on Dec. 6, “Today is about economic vitality and about jobs.”

Uh-oh.

Added Dennis Davin, the former county development chief who now heads the state Department of Community and Economic Development, “This is something I think can be transformational.”

Uh-oh.

So what are all these “uh-ohs” about?

Well, given the government’s history of touting its development schemes as the best thing since sliced bread and soft butter, the immediate questions that comes to mind are these:

How much public money is going to be dangled over and/or thrown at this latest government central plan?

Will public dollars – i.e. from shale gas drilling and gambling proceeds – be offered?

And then will Airport Authority officials rationalize the corporate wealthfare as “not coming from taxpayers”?

Will tax-increment financing (TIF) be employed, never mind that TIF is a poor use of such an “incentive,” given retail’s insignificant multiplier effect and cyclical nature?

Light-rail? Really? Talk about a boondoggle in the making that might just dwarf the boondoggle that is the North Shore Connector.

Of course, if PIT’s “innovation campus” really is the be-all and end-all that government types insist it will be, here’s a novel idea:

Let those who want to be a part of it invest their own money in pursuit of profit.

But to the usual suspects that’s archaic thinking, if not old-school economics, by which they simply cannot abide. Of course, that’s the kind of mindset propagated by central planners and command economists who are all too willing to turn public dollars into a venture capital kitty.

Speaking of the Airport Authority, acolytes for bad economics continue to defend the authority’s practice of subsidizing airlines with public dollars, a practice that has, predictably, failed spectacularly in 2018 at PIT.

Writes one regular defender of the subsidies, responding to an Allegheny Institute commentary of the market-perverting practice in the Tribune-Review:

“The British Airways flight will only cost $3 million in incentives over two years but will generate $57 million per year,” the writer claimed.

But that claim is farcical, as Jake Haulk, the institute’s president-emeritus and senior advisor, wrote in Policy Brief Vol. 18, No. 31, this past August.

In fact, Haulk, a Ph.D. economist poked so many holes in the study touted by the Airport Authority – from a dubious methodology to making conclusions not supported by reality –that it wouldn’t even qualify as Swiss cheese.

The same writer takes issue with the institute’s contention that public dollars are being used to pay airline subsidies:

“They come from casino revenue and natural gas drilling revenue from airport land,” he says. But that clearly is public money. And it’s being pledged and allocated by a public authority.

The writer further touts that Qatar Airways, the cargo carrier that shook down public coffers for $1.48 million – and was incentivized by contract to fail — now is operating subsidy-free at Pittsburgh International. Never mind that officials are discussing future subsidies.

Then there is the writer’s defense of Delta Air Lines’ suspended Paris flights. He barks at how Delta operated for eight years “subsidy-free” after the Allegheny Conference on Community Development pulled its subsidy.

Conveniently not mentioned is that the Delta reduced those regular flights to seasonal when the subsidy ran out and, when the Airport Authority announced the multimillion-dollar subsidy for British Airways, a direct international competitor, Delta said it would pull out of PIT.

Sad to say, the facts are such the inconvenient thing for the Trib commentator.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).