Category Archives: Government

‘Jackass’ Approved for Ohio Motion Picture Tax Credit

bgThe upcoming film Bad Grandpa, part of the Jackass series, was filmed in Northeast Ohio.

I noticed a frame of the Veteran’s Memorial Bridge, a bridge I crossed frequently during my high school years on Cleveland’s West Side.

In an effort to win filming locations, Ohio offers the “Ohio Motion Picture Tax Credit” as an incentive, though many films use Cleveland as a backdrop for other cities like New York, Chicago, or Washington, rather than a feature. In other words, Ohioans are subsidizing Hollywood firms to turn Cleveland into New York.

So far as these incentives go, Ohio isn’t alone — over 75% of states offer some form of incentive.

According to the website of the Ohio Development Services Agency:

“The Ohio Motion Picture Tax Credit provides a refundable tax credit that equals 25 percent off in-state spend and non-resident wages and 35 percent in Ohio resident wages on eligible productions.”

It also specifies that “[e]ligible productions must spend a minimum of $300,000 in the State of Ohio”.

The Ohio Development Services Agency confirmed to me that, while “the production company has not yet sent in their final audit … the project was approved for a $1.5 million Motion Picture Tax Credit.” The production company projected that “47 percent was to be shot in Ohio.”

Motion Picture Tax Credits and other incentives for filming are popular among state legislators. The Tax Foundation observes:

“Forty-four states [in 2010] offer significant movie production incentives (MPIs), up from five states in 2002, and twenty-eight states offer film tax credits.”

While they are popular, they are not without controversy. The Economist called such incentives a “stupid trend.”

Since 2010, three states have dropped their motion picture incentives. Many others, including New Jersey — the epitome of states with silly policies, have suspended such programs.

The non-partisan Tax Foundation is skeptical of the value of incentives and credits for motion pictures:

“While broad-based tax competition often benefits consumers and spurs economic growth and development, industry-specific tax competition transfers wealth from the many to the few … Movie production incentives are costly and fail to live up to their promises.”

The report continues:

“Based on fanciful estimates of economic activity and tax revenue, states are investing in movie production projects with small returns and taking unnecessary risks with taxpayer dollars. In return, they attract mostly temporary jobs that are often transplanted from other states.”

and:

“Furthermore, the competition among states transfers a large portion of potential gains to the movie industry, not to local businesses or state coffers. It is unlikely that movie production incentives generate wealth in the long run. Most fail even in the short run. Yet they remain popular.”

I’m in agreement. Scrap them.

But if you’re going to keep them, at least require that they say they’re in Cleveland in the film, so that you can pick movies that cast Cleveland in a positive light.bsig

Here’s a screen grab from Google street view of the bridge seen in the movie.

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The next frame cuts immediately to Charlotte, North Carolina. From the trailer, it appears most of the film is depicted in North Carolina. (Also, Cleveland’s tallest building one of Charlotte’s tallest were both designed by Cesar Pelli and look similar.) Other scenes were filmed in North Carolina.

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You can watch the trailer here:

Cap South — What It’s Really Like to Work in Congress

There are tons of funny shows out there that touch on what it is like to work in the federal government. House of Cards is excellent, and the scene work is phenomenal. Veep — a show I just started watching — is entertaining, but not on the same level for me as House of Cards.

But, one new show might change all that. It’s a forthcoming web series starring my good friend / mortal prank enemy and former room mate, Andrew Heaton as the lead character. His girlfriend in real life, Naomi Brockwell, also stars in it.

It’s called Cap South. (You can learn more about it here eventually, but you can learn more now by following it on facebook.)

Since Andrew’s involved, and the show is run by a fellow Congressional Expat, I expected the dialogue to be highly realistic and very funny. I was correct. Below is what it is really like to answer un-screened phone calls.

Here’s the Trailer:

Answering the phone on the hill in real life (left) versus in Cap South (right). Spot on.
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Could Pop-Up Hotels Solve Disaster Housing Shortages?

I read with interest a recent piece in Businessweek about an innovate company that has managed to make something akin to a hotel food truck:

This year, Snoozebox Holdings is shipping 40 to 400 stackable containers to house guests at events including Le Mans, the Edinburgh Festivals of plays and concerts, and the G8 Summit. The prebooked rooms are equipped with flat-screen TVs, Wi-Fi, and running hot water.

Who would want to stay in one of those, you might ask? The company, Snoozebox, has already found some markets for its product.

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The answer is, mostly, rich people. However, like with most innovations, what starts as a toy or luxury for the rich (telephones, VCRs, televisions, internet) usually becomes pretty affordable and widespread.

Take the devastating tornado that recently ravaged Oklahoma. Or the one in Joplin, Missouri. Housing is one of the most needed commodities in the wake of natural disasters. Could Snoozebox, or its competitors save the day and provide a market-based solution to help people in need?

While the obvious answer is yes, the reality is probably not. Or at least not anytime soon.

Whenever an innovation disrupts the current natural order, vested interests often use the law and politicians in an attempt to stifle competition. Economists call the former “creative destruction” (good) and the latter “rent seeking” (bad).

Creative destruction, in the form of the Uber car service or food trucks, is really great for consumers. Their competition — well established taxi cabals and brick-and-mortar restaurants — don’t see it that way. They get politicians to enforce laws that would inhibit any competitor from setting up shop, and if the laws doesn’t exist for that purpose, those interests usually push politicians to pass them.

Let’s rewind the clock to a day after the tornado hit Oklahoma. You work at Bomblebox, a fictional competitor of Snoozebox. Oklahoma would be an ideal place to offer your services to a populace coping with disaster. Hotels are overbooked, people are cramped in the houses of friends — often far away from the site of their former home. There’s a natural market for the Bomblebox.

Could Bomblebox drive a couple of trucks over and set up shop somewhere? In this hypothetical, it’s unlikely.

Each of the fifty states has their own laws and regulations governing hotels and lodging. And it’s unlikely that a company not already licensed to do business there could get all the t’s crossed and i’s dotted before the window of opportunity closes.snoozebox-exterior-sunshine

Second, local hoteliers, their trade groups, and other interest groups would probably object. There are a ton of ways they could do this:

Would Bomblebox’s products be up to snuff with Chapter 285 — the part of Oklahoma law that regulates lodging establishments?  Is the plumbing consistent with the Oklahoma Plumbing License Act? Is the electricity system consistent with the Oklahoma Electrical Licensing Act? Does each unit “maintain at least one lighting fixture suitable for reading”? Do all the bathroom floors have “impervious floor surfaces?” Is the sewage disposal system consistent with “regulations adopted by the Oklahoma State Board of Health?” I don’t know.

Remember, these laws are for your safety. Created, supposedly, to protect you — but they also often serve to protect the current natural order from competition.

You get the point.

The time and money it would take to ensure compliance would probably guarantee that such a plan wouldn’t get past the research phase. There are a lot of questions to answer just to drive a box that people would pay $400 a night to stay in while watching a race or stay at a festival like Bonnaroo. Put another way, if people are willing to pay that much to stay in a box at a race or a festival, my guess it’s probably good enough for  to stay in after the wake of a disaster.

But that’s not how regulation and the natural order operate. Mutually agreed upon and beneficial transactions, even under extenuating circumstances, are often illegal outright. You’re not necessarily free to transact with others as you see fit. While FEMA does provide disaster assistance — think FEMA trailers —  some people probably would be willing to pay more, and could afford to get something a little nicer than a crappy camper because for their well being they want the comforts of home.

Let’s pretend for a second that Bomblebox is a Missouri company, and has plans to do business all over the southland to help people recover from disasters, and provide housing during political conventions and festivals.

Could Bomblebox then, had it complied with all the varying laws regulating hotels and motels, go into business? Again, the answer is probably not.

Ill-advised price gouging laws in each of the states would likely prohibit Bomblebox from charging the market rates necessary to make it profitable. And thus, local hoteliers and the government — which also hates competition — would likely object and prohibit the “evil” Bomblebox corporation from helping people at a time when they need it most.

What about renting (or selling) house-like version of the Bomblebox? At first glance, that might appear to be a better option.

But, again, the complex web of laws and regulations would make that difficult, and in addition to hoteliers, the competitors of the natural order (RV makers, prefabricated home makers) would likely throw in a monkey wrench to complicate things.

In my lifetime, we’ve seen creative destruction move at an amazingly fast pace. The days of radio-dispatched cabs that come because of a call from your home phone or payphone are over. We’re in the Uber era now, where my smartphone will get me a black sedan in mere minutes. Instead of having to go and wait in a long line to get a Georgetown cupcake, food fad fetishists can be satisfied by a 3 minute walk to Farragut Square where multiple food trucks offer similar (and often better) products with shorter lines and often at lower prices. Or, if you really have your heart set on Georgetown cupcake, Seamless can deliver it for you.

Generally speaking, our regulatory system and laws are outdated. Uber is discovering that first hand across the country, most recently in Los Angeles. The byzantine shackles of a outdated laws and regulations that keep cities (like my hometown of Cleveland) from returning to their former status of greatness exist all across the country in various degrees.

What keeps them there is politicians who cater to the special interests, and who see themselves as wizened sherpas of the regulatory Mt. Kilimanjaro rather than people whose job it is to make their constituents’ lives easier through good policy, not political dependency.

Going forward, the cities and states that recognize the burdensome constraints of outdated regulations and laws are the ones that will prosper. They’ll have the Ubers, the food trucks, and — when times are tough — people willing to provide innovative solutions to help them in their time of need.  Their citizens will lead happier, better lives, and bounce back from adversity faster than their friends in the cities and states whose leaders who let archaic policy and outdated thinking rule the day.

Few people argue for no regulations at all, but the people who think that deregulatory advocates believe this are often the very politicians who say “everything is fine.” Odds are, it’s not. And the joke’s on you if you believe them.

 

 

 

Unintended Consequences of Price Gouging Laws

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From The OK Disaster Scam Prevention Packet, as prepared by OK Attorney General E. Scott Pruitt’s “Public Protection Unit”

Most states have laws that purportedly protect people from evil “price gougers” in the wake of man-made or natural disasters. Some are toothless and silly, affording publicity seeking politicians to give themselves some good press, while others are draconian or invasive.

One point to consider is that price gouging laws do nothing to address or fix the shortage of a certain commodity due to either high demand or diminished supply. They’re not a solution.

These laws impose a “finder’s keepers” marketplace, where those conveniently situated to suppliers can hoard much needed goods at what are effectively below-market rates, rather than a market-based economy where buyers and sellers can decide what prices they’d like to charge or the price they’re willing to pay.

Oklahoma’s law seems especially pernicious because it restricts the ability of prices to rise by 10% not just for the immediate time after the disaster, but for 30 days after – and for “dwelling units, storage space and goods related to home repair and restoration”, 180 days after.

While big-box stores like Home Depot and Lowe’s have the size and scale to absorb potential losses from such a prohibition, it’s doubtful that your local mom-and-pop hardware store will escape as unharmed.

Of course, there are individuals who would try and skirt the law, and that’s not hard to understand because it is a bad law. Jim’s Hardware could mark up all items by 55% immediately before the disaster, and presumably be able to better absorb the price shocks they’d experience afterwards. However, you can bet that your local “consumer reporter” would be all over that in about a New York minute.

Lastly, even if price gouging laws do result in savings before the shortages occur, it’s worth asking whether, on net, the prosecution of violators if price gouging laws ends up costing taxpayers more than the money the few who were lucky enough to stock up on D-Batteries and bottled water saved?

Put another way, can you put a price on feeling good that you weren’t “ripped off” — even if you are living in the dark and thirsty? Will that round out the balance?

Could it be that these laws harm more than they help?

Here’s a good video on the topic:

Is Rand Paul Still Talking?

At the time of this posting, yes. Check out this webpage I made documenting Senator Rand Paul’s filibuster: http://www.israndpaulstilltalking.com/

And, while you’re here, check out a Podcast I did over at THE WEEKLY STANDARD on Rand Paul and his drone-related filibuster.

Update: It’s been a hectic couple of hours for the server, and I want to say sorry to the people who share a server with me for the duress it caused. Especially the person who said “you really need to learn how to code” whose site had issues as a result. I am pretty sure I found the error and fixed it. Sorry.

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Bomblecast #20 — The Minimum Wage

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In this podcast, we talk about the minimum wage and President Obama’s proposal to raise it $9 an hour.

Here’s Episode #20:

Inauguration Podcast

I joined Michael Graham yesterday on THE WEEKLY STANDARD podcast to discuss the Inauguration.

Will we get a deal?

fiscal-cliff-contact-congress

It’s increasingly unlikely that Congress will work out a deal to solve the so-called “fiscal cliff” before the December 31 deadline.

This time two years ago, the ink was drying on the President’s signature of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

The clock is ticking and by most public accounts, we are nowhere close to a deal. Especially now that the House couldn’t get the votes together for a deal.

Earlier this month, press secretary Jay Carney said that Speaker Boehner’s oddly named “Plan B” isn’t acceptable to President Obama because “it can’t pass the Senate.”

One wonders whether or not the President’s proposal can meet his own Senate passage test. What’s more, it’s worth asking whether Boehner’s Plan B can even pass the House — since it already failed once.

With less than a week left until the end of the year, this is pretty much where we are: the sides are talking, but no plan seems to exist that is guaranteed passage in either chamber.

Details are scarce. We’re only offered broad descriptions about rates and income thresholds. Specific line items are being kept out of the public eye to avoid a thousand side debates over the necessity of a certain program, or whether or not current funding levels are justified.

In 2010, a similar deadline loomed. A select group of lawmakers huddled in secret to work out a deal on expiring tax rates and other provisions. The details of the negotiations weren’t public, but the names of the negotiators were.

This time around, it appears no such secretive group exists.

Which means that either the only people doing the negotiating are the President and Congressional leadership or a super-secret group of lawmakers negotiating exists. The latter is doubtful, since secrets like this are too big to keep in a gossipy place like Congress.

In 2010, a deal was struck with time to spare. But not after weeks of deliberations behind closed doors. Once it was struck, it was swiftly passed by the Senate by a large margin, and eventually passed in the House by a vote of 277 – 148 (with mostly Democrats and a few conservative Republicans voting Nay).

The sentiment in 2010 was that most people wanted a deal. For a deal to happen, consensus had to be reached, and consensus is hard to build when you go through the normal process, since Congress has a tendency to pick things to death.

Thus, why the details were hashed out in private. Prying eyes will try to kill a deal. They tried. And failed.

Hundreds of lobbyists and activists converged on the hill to see if their sacred cows would be spared or slaughtered. Multiple calls, emails, impromptu office visits to this secretive cadre of elected officials took place on a daily basis. Usually in vain.

Most of those inquiries were ignored by those officials and their staff. Even confirming to a party that their provision was in the clear would make it more clear to others that their interests were at stake. Washington is a small town, and word travels fast.

Revealing much of anything would cue a flood of further lobbying — not that it wasn’t happening already in the form of spam emails from CapWiz . So the way the 2010 tax compromise happened was because people kept a tight ship, and a take it or leave it deal was presented to the rest of Congress.

Neither side seemed very happy with the 2010 deal, but compromises often yield ugly results. They took the deal.

In 2012, neither side seems to want a deal, or at least a deal like the one struck in 2010. Back then, the House was about to change hands and Democrats had to worry about whether or not a new Republican majority would be more insistent on getting their way. The incentive was there to compromise.

Like in December of 2010, an election has recently taken place and the voters have spoken. A “status quo” election as Fred Barnes described in THE WEEKLY STANDARD, since no chamber lost its majority and the President retained his job.

The President and his supports think this means voters sided with them. House Republicans think since they kept the House, the voters sided with them. Not a very propitious climate for a compromise.

Which leaves us with a few possibilities:

Boehner and Obama are closer than we think and a deal is close to being reached. This would probably require bi-partisan passage in both bodies, since the more polarizing members in each chamber are likely to eschew compromise.

We are going off of the cliff and a deal comes in January. If either side holds out in an attempt to cash in on an imaginary mandate come January, markets will crash and voter discontent will soar. It’s a risky gamble for either side, but it has the potential to pay dividends and can’t be ruled out.

No deal is in the works in the short-term. If enough members hold out, and the newly-elected 113th Congress can’t muster a deal, we could go over the fiscal cliff and stay there for months. Some conservatives want voters to see the real cost of a big government is – despite the fact deficits would still likely exist even under this scenario. Others don’t believe a compromise will truly cut spending and put the country on a path to fiscal sanity. Some liberals want to hold out for imposing even higher tax rates on high income earners and on capital gains, while others want to see deep cuts to defense spending.

A super-secret group of elected officials is working on a ‘Hail Mary’ like 2010. It is unlikely such a group could exist without some spurned member blowing its cover, but it’s always possible. There are retiring members like Senators Kyl, Conrad,  Lieberman and Hutchison who are known deal makers and would avoid the pains of re-election. But retiring members don’t hold as much sway as Party leadership does with people who still have to be re-elected.

Will we get a deal? It’s always possible, but the incentives have changed for the worse since 2010.

And from the little we do know,  there’s not much promise. PageLines- bsig.png

 

 

 

 

The Wonders of Privatization (Snow Edition)

contractorsBainbridge Township, Ohio

“Did they shovel our porch?” my sister asked my mother. “Yep.” replied mom. “Wow.”

Ohio, at least northern Ohio, is experiencing one of its worst storms in recent years. Last night, the meteorologists spoke only of dire outcomes. And we’re only supposed to get a foot of snow.

This is not the same Ohio I grew up in, where snow was quite prevalent and a few feet fazed only the carpetbaggers. Snowmageddon in D.C.? Nothing compared to the great snowstorm of 1996 where we got over four feet of snow.

In recent years, snowstorms have been more mild here.

A year ago, my parents were still residing in my childhood home on Eaton road in Shaker Heights. To its credit, Shaker Heights has a very good public works system relative to neighboring communities. Of course, that comes at a high cost.

Shaker recently raised its taxes to keep its very good public works system — snow and trash removal — despite state budget cuts in the form of aid to cities. They proposed, and the voters approved, tax increases.

My parents moved. One county over, in fact, to Bainbridge Township in Geauga County, where taxes are lower (both in income and property taxes.)

Despite telling us for years they would impound our childhood in storage and buy a loft downtown, they opted to move east to an even bigger home. It’s a nice home. But, it’s in the snow belt.

Shaker Heights, like all inner-ring suburbs, gets its share of snow. Chagrin Falls and the surrounding parts of Cuyahoga and Geauga Counties tend to get a lot more snow.

The meteorologists were a little off on the timing, but they seemed to be correct on the amount of snow. It’s coming down hard.

Interrupting our alcohol-fueled games of bananagram and Jenga was the sound of snow plows. Since most of Bainbridge is unincorporated, the communities (run by Home Owners Associations) hire contractors to do the work of government that cities, like Shaker, ordinarily perform.

Dad came out of his new office and notified us that Ali and I would have to move our cars if the contractors were to plow our driveway. It was more of a command.

This, of course, was foreign to us, since we grew up using the winter mouse murderer known as the snowblower.  (If you’ve never seen mouse blood and parts sprayed over snow, then you haven’t truly lived, my friend.)

In Shaker, the city plowed the streets. When I was younger, they had this strange device designed to plow sidewalks. But given the age of those sidewalks, it often resulted in destroyed slabs and damaged machines. I don’t know this for sure, but I am pretty sure they killed that program.

The plows were big, and all of their drivers were city employees. Presumably belonging to a union. While the plows afforded bigger economies of scale, the labor contracts probably negated those benefits, since public employees’ unions have CBAs with pensions and overtime.

Of course, you had to plow your own driveway, and we used our snowblower to clear the block’s sidewalks because that’s how we roll, but the streets were plowed well — better than in the city of Cleveland.

Out here, however, the contractors plow your roads, your driveway, your walkway, and your porch.

Ali’s car — the Lesboat I call it, since it’s a Subaru — has 4WD. It pulled out of the driveway with ease. The “Silver Fox”, my dad’s old Honda Accord  that I now drive– complete with FIGHT TERRORISM license plates –does not. It was quickly evident when trying to move it why he no longer wanted it.

It got stuck.

I tried, in vain, to back it out of the driveway, a slight decline. Our driveway in Shaker was about a one-story incline that required skill to navigate. This, one would think, would be easy. Not so much. Without 4WD, skill was required.

After a few tries, my dad put on his boots and came to my aid to help push my out. It didn’t work.

All of the drivers of the snowplows stopped and got out of their trucks to help push me out.

That’s service.

(My mom rewarded them with a sixer of Great Lakes Dortmunder Gold.)

It got me thinking about city-provided services and private contractors.

While city-provided big trucks may be superior at providing the economies of scale necessary to plow big thoroughfares, the same could be done by a smaller amount of F-250’s, or bigger trucks. (Ohio isn’t big into privatization, while my current home of Virginia has embraced it, with VDOT using private contractors to plow main roads.) If allowed to compete, they’d presumably buy bigger trucks.

When the weather is tame, cities eat the cost of stagnant trucks and employees. Contractors have more flexibility. If it is particularly snowy, they can hire guys with trucks to join their team for the season, or lease trucks fitted with plows. That saves time and money, especially when competing for contracts.

And when it comes to providing service, they do a better job and more thorough job, at least when it comes to plowing snow.

In Bainbridge, however, my parents still have to take the trash out to the end of the 30 foot driveway. In Shaker, they employ little golf-like carts that pick it up from the back.

In the end, it’s all about trade offs, I guess. And my parents seem to value lower taxes and better snow service.bsig

 

 

 

 

How much would it cost to put security guards in schools?

In the wake of the tragedy at Sandy Hook Elementary School, many people are focusing their efforts on discussing how such a tragedy could have been prevented.

I’ll leave the mental health and gun control debates to others, since those areas of discussion are often occupied by the shrill and/or uninformed — and that applies to both sides.

Which is not to say there aren’t practical folks discussing those topics. There are. It’s just that all I seem to see and hear on social media and in the news is just, well, often not those people.

So, I’ll focus on another aspect of the debate that people have suggested: Security guards in schools. How practical is it for each to have them? How much would it cost?

As you can imagine, it would cost a pretty penny:

By my back of the napkin estimate, it would cost about $9 billion a year. Or $8,893,530,000 if you want to get more precise, but that’s a low end estimate.

How did I figure this? By last estimate, there are 98,817 public educational institutions in the United States. I assume an average of three guards per school, at a level of payment of $30,000 a year each.

It’s a low end estimate because of a few reasons. Hiring costs. Insurance & benefits. Oversight. Vehicles and equipment. Unionization. There’s more, but you get the point — in reality, my estimate is likely to be off by a few billion dollars.

The Department of Education’s budget is about $68 billion, so for some perspective, that would represent about 13 percent of it.

Now the Department of Education’s budget is not what funds the majority of school-related spending. Most of that comes from state and local funding sources.

Many school districts already employ security guards. Some outsource that to local police, which supplants their normal duties and is essentially transferring the cost from the school to the police department.

Putting security guards in schools is often popular, but not everywhere. One thing’s for sure, it doesn’t come without very real costs.PageLines- bsig.png