Kansas City TV station KSHB, an NBC affiliate, aired an investigative story Monday about the Kansas Affordable Airfares Program, claiming the state “is paying for empty seats on airplanes from Kansas’ largest airport with little oversight.” It described how since 2006, the state has spent $5 million a year to subsidize low-fare air service, mostly for AirTran Airways and Frontier Airlines at Wichita Mid-Continent Airport. It claimed that “AirTran’s flights were relatively empty compared to other airlines flying in and out of Wichita,” citing federal data showing Delta and American Eagle flights at 74 percent capacity during the first three months of 2012, while AirTran’s were 44 percent capacity. The story highlighted a critical 2011 state audit of the airfares subsidy. It also quoted state Sen. Chris Steineger, R-Kansas City, as saying that the program’s proponents “oversold” its statewide benefits and calling it “a matter of bad priorities” that the airfares subsidy survived deep cuts to the state budget. Among the key points that went unmentioned in the story, though: that Gov. Sam Brownback has endorsed continued state support for the program, understanding its value to business and economic development regionally, and that the long-standing program helped win the commitment of Southwest Airlines to serve Wichita as it takes over AirTran. The Sedgwick County Commission approved the latest agreement with AirTran at Wednesday’s meeting.
“Years from now, we may look back on the Fourth of July week in 2012 as the time when the tide turned for Mobile. Imagine telling future generations how a French company planted a flag deep in U.S. soil on the Gulf Coast – allowing Mobile to get on the world map in aerospace,” editorialized the Press-Register in Mobile, Ala., noting that Airbus’ plan to build a $600 million assembly plant in town had been aptly code-named “Hope.” Editorial cartoonist J.D. Crowe was more blunt, blogging Tuesday: “As we celebrate America’s birthday, Mobile will also be toasting our new business partner with French Champagne. Meanwhile, in places like Seattle, crybaby Boeing will be gargling its cheap whine.” Boeing’s reaction to its rival’s announcement had been less than welcoming: “While it is interesting once again to see Airbus promising to move jobs from Europe to the United States, no matter how many are created, the numbers pale in comparison to the thousands of U.S. jobs destroyed by illegal subsidies.”
Another 125 area families are facing an uncertain future this weekend because of the latest layoff notices issued Friday by Hawker Beechcraft as the company focuses on “balancing our production rate with the challenging and rapidly changing environment we continue to face,” to quote a letter to employees. The latest layoffs were on top of 150 in May and 350 in April, apparently bringing local employment to about 4,000. Such decisions seem consistent with the company’s strategy of reorganizing under Chapter 11 and reducing $2.5 billion in debt. But it’s hard not to worry about the workers affected, or about the company drawing closer to the 3,600-job threshold of its 2010 deal to secure state and local incentives.
The political action committee of the Kansas Chamber of Commerce released last week a list of “pro-business candidates” it supports in the August primaries. A key litmus test was whether lawmakers voted against the temporary sales-tax increase in 2010. “Some in the Kansas Senate and House opted for tax increases instead of responsible spending cuts,” chamber PAC chairman Ivan Crossland said in a press release. Yet Gov. Sam Brownback and chamber-endorsed candidates had the past two years to revoke the sales tax but made no move to do so. In fact, the Kansas Chamber and Brownback now want the sales-tax increase to be permanent. The chamber also doesn’t seem to like lawmakers such as Sen. Dick Kelsey, R-Goddard, who challenged parts of Brownback’s agenda. Rochelle Chronister, spokeswoman for Traditional Republicans for Common Sense, said the endorsement list is useful to critics of the chamber’s tax policies because it identifies whom not to vote for – candidates who “push an out-of-step economic agenda that will force sales and property taxes to skyrocket.”
Johnson & Johnson announced this week that it was withdrawing its support of the American Legislative Exchange Council. In the past few months, more than a dozen companies, including Coca-Cola, Pepsi, McDonald’s and Walmart, have dropped their memberships with ALEC, a corporate-backed organization that provides “model legislation” for state lawmakers. The companies have been under pressure from liberal activists because of ALEC’s support of voter-ID laws and “stand your ground” gun laws. Common Cause has also filed a federal complaint that ALEC is violating tax laws by acting as a lobbyist and not a nonprofit. ALEC announced in April that it was refocusing its agenda on economic issues.
The Washington-based Tax Foundation, which conservatives regularly cite, isn’t impressed with Kansas’ new law eliminating income taxes on many businesses. “The small-business exemption creates an incentive for businesses to structure themselves as pass-through entities for tax reasons, even though it might otherwise be unwise for them to do so,” said Tax Foundation economist Mark Robyn. “Furthermore, promoting pass-through entities will not necessarily create net new jobs. Favoring those businesses over traditional C-corporations may lead to an increase in people employed by pass-through entities, but many of these ‘new’ pass-through entity jobs may simply be reclassified C-corporation jobs.” Some state lawmakers also questioned whether the cost of the tax cut will be greater than projected, if businesses reorganize in order to take advantage of the tax break.
Having lost so many headquarters to other cities via mergers and acquisitions, Wichita needs to prize its hometown companies and encourage their growth. So it was exciting news that Koch Industries is considering an expansion of its headquarters near 37th Street North and Oliver. The company employs 2,600 people in Wichita, and 67,000 worldwide, and has 200 vacant positions locally. Wichita and Sedgwick County leaders should stand ready to help however they can. Koch’s continued well-being is crucial to that of the Wichita economy.
South-central Kansans have been waiting a long time for a Cabela’s, the Nebraska-based chain that is equal parts outdoors retailer and tourist attraction. A public-private partnership helped bring the 80,000-square-foot store to 21st and Greenwich, where it’s anticipated to be part of a sales-tax and revenue bond district focused on sports. Here’s hoping the opening festivities, to include Gov. Sam Brownback, draw the attention and buying power of the region’s outdoor enthusiasts and lead to a long, successful run in Wichita for the landmark retailer.
GOP presidential candidates are arguing about which one hated the auto-industry bailout more. Though that may play well with some GOP primary voters, columnist and former George W. Bush speechwriter Michael Gerson thinks it is disingenuous. “Specific bailout policies can be disputed,” Gerson wrote, “but one fact cannot: No president — Republican or Democrat — would have allowed the economic collapse of the upper Midwest in the midst of a national economic panic. A conservatism that prefers ideology to reality is not particularly conservative.”
Secretary of State Kris Kobach usually argues that states and cities have the authority to pass immigration-related laws. But Tuesday he contended that a bill to help qualifying illegal immigrants gain work privileges in Kansas would pre-empt the federal government’s jurisdiction over immigration. “A state cannot deport someone, and similarly a state cannot confer status upon an illegal person,” Kobach said at a House hearing. Others who testified, including former Kansas Agriculture Secretary Allie Devine, said that federal law allows states to sponsor workers.
Reason.com has a spoof video of Chrysler’s “Halftime in America” Super Bowl ad. The narrator, in a raspy Clint Eastwood impersonation, says: “People are out of work and they’re hurting. And they’re wondering where all their money went. Well, $12.5 billion of it went to Chrysler. In the form of a bailout. But it’s OK, because Chrysler is all-American. Though, technically, 58.5 percent of Chrysler is owned by an Italian corporation. And Chrysler manufactures many of its vehicles in Canada. And Mexico. But I guess that doesn’t make for a great commercial.”
It’s encouraging that both Boeing Wichita and Spirit AeroSystems reached tentative agreements last week with labor unions. Boeing’s Machinists union announced an agreement that extends its labor contract for four years. Spirit AeroSystems and its technical and professional union reached a tentative deal on a 9 1/2-year labor contract. Those contracts still must be ratified by union members, and there is continued concern about whether Boeing will close its Wichita plant. But it is good that union and company officials have been able to work together. Here’s hoping for a long and profitable future for the companies and their Wichita workers.
In general, Gov. Sam Brownback agrees with some of his key free-market backers that government shouldn’t be in the business of picking winners and losers. But Brownback also recognizes the practical reality, as do most members of the Wichita City Council. Brownback noted at a Wichita Metro Chamber of Commerce forum last week that other states (and cities) are offering incentives to attract and retain companies. “I think we have to fund the incentives to keep competitive in the game,” he said. “In an ideal world, you wouldn’t have any incentives. You’d just all compete on a business and economic basis. That’s not where we are.”
Bank of America and several smaller banks recently announced they will impose monthly fees on customers for using their debit cards. Why are these banks taking such an unpopular step and dinging their customers $3, $4 or $5 a month? When Congress pushed through its big financial reform package last year, it included price controls on the so-called “swipe fees” banks can charge merchants for the use of debit cards in retail transactions. So why did Congress include these price caps? Supporters of the measure were aiming to help friends in the retailing industry who don’t like paying the fees. Before the law passed, the banks informed lawmakers that imposition of the controls likely would lead them to raise prices for other services they offer. But the price caps passed despite this warning. And so banks have done exactly as they said they would do — raise fees elsewhere to make up for the lost revenue, estimated at more than $6 billion. Banks are not the most popular institutions these days, but they can hardly be faulted for raising fees in one area of their business after Congress imposed price caps in another. — Nick Schulz, American Enterprise Institute
Bank of America is trying to justify its $5 monthly surcharge on debit cards as a consequence of new federal regulations limiting the amount banks can charge for debit transactions, casting the entire episode as an epic battle between free markets and government price-fixing. But in order to function fairly and effectively, markets require both competition and transparency. Before swipe-fee reform, however, the debit-card market had neither. The two dominant players, Visa and MasterCard, and their banks each effectively fixed the fees banks receive on debit transactions. Rather than charging these fees openly, they hid them by requiring merchants to pay a “swipe” fee on every transaction. A 2010 study conducted by the Federal Reserve found the actual cost to banks for processing a debit-card transaction was about 4 cents. Yet until the new regulations took effect Oct. 1, banks were charging merchants an average 44 cents per transaction — a hidden tax that generated $20 billion a year for the banks but cost the average household more than $175. The new regulations do not “fix” debit-card swipe fees. They merely establish an upper limit of 21 cents on the typical transaction. In other words , under these “draconian” new rules, banks still will be able to charge a 425 percent markup on debit-card transactions. — Mallory Duncan, National Retail Federation
Coleman Co. remains a cherished part of this community. Still, it was refreshing that city officials didn’t passively accept the company’s spin last week that relocating 25 key executives from Wichita to the Denver area didn’t amount to moving its headquarters. “I think Coleman’s headquarters is in the United States of America, if you ask me,” new Coleman president and CEO Robert Marcovitch said. Yeah, right. Wichita Mayor Carl Brewer’s response to the announcement: “I’m not happy.” The city also needs to look into whether Coleman should lose any of the incentives it received when it moved back to Wichita the last time. In 1995, the company moved its headquarters to Golden, Colo. Two years later, it returned to Wichita after concluding that it was a bad idea to separate top executives from the company’s operating divisions.
Good for Congress for approving this week free-trade agreements with South Korea, Columbia and Panama. The agreements, which have been delayed for up to five years, will particularly benefit Kansas farmers and ranchers, who should see direct exports increase by about $130 million. The trade agreements “will not only increase exports, lower our trade deficit and stimulate needed U.S. economic growth, but they will also erase the competitive disadvantage we’ve been suffering by providing new access to foreign markets, which were previously closed off with tariffs,” Rep. Mike Pompeo, R-Kan., said in a statement. Sen. Pat Roberts said that “opening foreign markets to U.S. goods, services and agricultural is an obvious and long overdue part of the solution” to slow economic growth. And Sen. Jerry Moran, R-Kan., said: “When American businesses are given better access to markets, they will succeed, help strengthen our economy and put more people back to work.”
A long cover story about “The secret sins of Koch Industries” in the November issue of Bloomberg Markets magazine is creating a stir. The article recounts various environmental and legal problems at the Wichita-based company, including how a French subsidiary used bribes to win business deals and sold millions of dollars of equipment to Iran. Melissa Cohlmia, Koch’s director of communications, said in the article that the company has learned lessons from past mistakes and now has a good relationship with environmental regulators and complies with all rules. Koch’s website also has a long response to the article, which it says “relied on flawed information from dishonest sources.”
Local foes of public-private partnerships got some potent ammunition from the Wichita City Council’s decision Tuesday to retool the KenMar development project. The reinvention of the once-decaying corner at 13th and Oliver hasn’t gone as planned in August 2008, necessitating some retroactive changes to the deal between the city and developers and the use of $2.5 million in city subsidies. But what local business and development plans haven’t hit detours over the past few years? The developers’ change of plans, including the sale of land to Walmart, could have used more transparency and scrutiny, as critics contend. But what matters most is that a commercial center once known for promoting crime is getting a Walmart neighborhood grocery and that property taxes on the site are now expected to pay back the city’s investment, plus 3 percent interest, over the next 17 years.
Median pay for top executives at 200 big companies last year was $10.8 million, up 23 percent from 2009, reported the New York Times, noting that “despite the soft economy, weak home prices and persistently high unemployment, some top executives are already making more than they were before the economy soured.” Meanwhile, the pay for an average American worker is up only 0.5 percent from the previous year — which means that, after inflation, the workers are losing ground.
The income disparity between the wealthy and everyone else is at levels not seen since the Great Depression. Yet until now, economists haven’t known what professions were driving this disparity. “Now a mounting body of economic research indicates that the rise in pay for company executives is a critical feature in the widening income gap,” the Washington Post reported. A review of tax returns indicates that CEOs and other managers make up the largest percentage of the highest-income earners. And their pay has been skyrocketing. “Executive compensation at the nation’s largest firms has roughly quadrupled in real terms since the 1970s, even as pay for 90 percent of America has stalled,” the newspaper reported.
Yes, the Obama administration’s regulatory-reform proposals will help spur private-sector job growth by identifying the regulations that fail to protect American families and then reforming or removing them. The proposal, spelled out in Executive Order 13563, reaffirms the principle, established in the Reagan administration, that enacted regulations should have benefits that exceed their costs. Where the order breaks from tradition is the requirement that agencies routinely revisit the measurement of costs and benefits of existing regulations and identify the least costly ways to achieve a regulation’s goals. It then requires agencies to amend their regulations. Of course, the executive order is not perfect. The evaluations are currently performed by the agencies that write the regulations. A next step might be to consider shifting to a system of independent evaluations. Still, the Obama administration has taken vital steps in reforming our system of regulation. — Michael Greenstone, Massachusetts Institute of Technology
It appears in the early going that the Obama administration’s executive order requiring a review of existing regulations “that are out-of-date, unnecessary, excessively burdensome or in conflict with other rules” has encouraged some regulatory agencies to make recommendations that will save businesses time, money, headaches and resources. But more must be done. That’s because the order exempts from review the huge flow of regulations in the pipeline generated by the health care and financial reform laws, as well as the large number of major rules generated by the Environmental Protection Agency over the past two years. This enormous onslaught of new regulations could well cost hundreds of billions of dollars, hamper our recovery, undermine our competitiveness and cost jobs. The regulations are being promulgated under the same system that generated the ones the administration found necessary to review. And the “look back” plans do not appear to fix this problem. — Evan Bayh and Andrew Card
The Wichita City Council and Sedgwick County Commission were right to nix a proposed Planeview-area grocery store last fall, because of the developer’s record of housing-code violations and request for a higher sales-tax rate to cover costs. But it’s great news that an even bigger Save-A-Lot store and shopping area are on track for the same site at Pawnee and George Washington Boulevard, with a groundbreaking scheduled next week and no plans to seek tax incentives. Good for the new owners for having found a way to build the store, with its value-priced food and 30 jobs, without putting a higher tax burden on its low-income customers.
“Don’t expect to see a lot of newspapers and websites with this headline: ‘Big Government Bailout Worked.’ But it would be entirely accurate,” columnist E.J. Dionne wrote about the bailout of the auto industry. He added: “Far too little attention has been paid to the success of the government’s rescue of the Detroit-based auto companies, and almost no attention has been paid to how completely and utterly wrong bailout opponents were when they insisted it was doomed to failure.”
It’s not over until it’s over, but it’s a relief that the Kansas House and Senate have agreed to continue contributing $5 million to subsidize affordable airfares for south-central Kansas. Though the state is wrestling with a difficult budget that is requiring painful cuts, the Affordable Airfares program is crucial to growing the Kansas economy and is a wise investment.
“U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers, have been hiring abroad while cutting back at home, sharpening the debate over globalization’s effect on the U.S. economy,” the Wall Street Journal reported. “The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show.”
Kansas City TV station KSHB, an NBC affiliate, aired an investigative story Monday about the Kansas Affordable Airfares Program, claiming the state “is paying for empty seats on airplanes from Kansas’ largest airport with little oversight.” It described how since 2006, the state has spent $5 million a year to subsidize low-fare air service, mostly for AirTran Airways and Frontier Airlines at Wichita Mid-Continent Airport. It claimed that “AirTran’s flights were relatively empty compared to other airlines flying in and out of Wichita,” citing federal data showing Delta and American Eagle flights at 74 percent capacity during the first three months of 2012, while AirTran’s were 44 percent capacity. The story highlighted a critical 2011 state audit of the airfares subsidy. It also quoted state Sen. Chris Steineger, R-Kansas City, as saying that the program’s proponents “oversold” its statewide benefits and calling it “a matter of bad priorities” that the airfares subsidy survived deep cuts to the state budget. Among the key points that went unmentioned in the story, though: that Gov. Sam Brownback has endorsed continued state support for the program, understanding its value to business and economic development regionally, and that the long-standing program helped win the commitment of Southwest Airlines to serve Wichita as it takes over AirTran. The Sedgwick County Commission approved the latest agreement with AirTran at Wednesday’s meeting.
