Honey Creek Money Pit

In July I reported to you on Honey Creek Resort in southern Iowa. I pointed out at that time that, in addition to diverting funds (about $58 million) from other more legitimate government projects, the state was creating a taxpayer assisted entity that would directly compete with private industry. I argued that the jobs "created" at Honey Creek were actually jobs stolen from around the state.

Now the Cedar Rapids Gazette reports that in its first 9 months of operation the resort lost $900,000. A state audit showed that between September 2008 and June 2009 Honey Creek had revenues of $3.1 million but expenses of almost $4 million.

In a separate piece, Gazette columnist Todd Dorman, who visited the resort last summer, said, "Although some lawmakers are talking about pulling the plug on state ownership, I’m withholding judgment until I see how a fully completed resort does this year in a slightly more stable economy." True enough. Plenty of businesses lost money in the last year. Unfortunately I'd be opposed to government ownership of the resort even if it posted a tidy profit, for the philosophical reasons listed above.

Dorman also added the warning: "If the state’s going to own a resort, it needs to think more like a crafty entrepreneur than a drowsy bureaucrat." Here Dorman misses the point. Rather than trying to teach bureaucratic ducks to bark like entrepreneurial dogs*, why not just sell the thing to real entrepreneurs in the private market?

It might be hard to find willing buyers right now, however, since entrepreneurs tend to be more wise with their own money than the legislature is with ours.

*Not every metaphor I come up with can be a gem, people!

Business Bogeyman Du Jour: Payday Lenders

There appears to be some momentum in the upcoming Iowa legislative session to restrict payday loans in the state. Sometimes called a “payday advance,” payday loans are short-term (usually two-week) loans where the borrower issues a post-dated check to the lender.

According to the Community Financial Services Association of America (CFSA), the industry organization for payday lenders, the typical fee charged by payday lenders is $15 per $100 borrowed. So a customer wishing to borrow $100 would write a check to the lender for $115. The lender would then give the borrower $100 cash. Two weeks later the lender would cash the customer’s check, keeping the extra $15.

This simple arrangement has managed to stir the ire of legislators across the country, including Iowa. State Senator Joe Bolkcom, D-Iowa City, head of the Senate Ways and Means Committee, said, "The payday loan industry is our local counterpart to the crooks on Wall Street." Other critics, such as Tom Chapman, executive director of the Iowa Catholic Conference, point out that interest rates on payday loans can run as high 400 percent. "We believe these types of interest rates are unjust and should be outlawed," said Chapman. "Instead of promoting the financial stability of consumers, the system actually creates a financial incentive in the failure of Iowa families rather than their success."

But CFSA’s website points out: “The typical fee charged by payday lenders is $15 per $100 borrowed, or a simple 15 percent for a two-week duration. The only way to reach the triple digit APRs [annual percentage rates] quoted by critics is to roll the two-week loan over 26 times (a full year). This is unrealistic considering that many states do not even allow one rollover. In states that do permit rollovers, CFSA members limit rollovers to four or the state limit—whichever is less.”

If a payday loan customer somehow did carry his loan for a whole year, how would that APR compare to other alternatives to low-income consumers? Again from the CFSA:

$100 payday advance with a $15 fee = 391% APR
$100 bounced check with $54 NSF/merchant fees = 1,409% APR
$100 credit card balance with a $37 late fee = 965% APR
$100 utility bill with $46 late/reconnect fees = 1,203% APR.

So compared to these and other “quick cash” alternatives, like pawn shops, payday loans are not terribly out of line. If consumers with poor credit ratings could get small, quick loans elsewhere (such as conventional banks) they no doubt would. Since the payday lenders offer an apparently popular service that consumers can’t get elsewhere, why shouldn’t they be able to charge a premium price for it?

So, what is the problem? The words of State Representative Janet Petersen, D-Des Moines, head of the House Commerce Committee, who favors new restrictions on payday lenders, offer some clues. Petersen says that, by restricting payday loans, “lenders will be forced to take some responsibility for ensuring that Iowans don't end up in a vicious debt cycle." [Emphasis added.]

In the minds of people like Peterson, consumers are ignorant sacks of meat that mindlessly throw their money to greedy, unscrupulous businessmen (in this instance payday lenders). Without smart and benevolent legislators like Peterson and Bolkom to protect them every moment of the day, the people they represent are little more than sheep to be shorn by capitalist predators. If anyone is to "take some responsibility" for the lives of Iowans, it must be the lenders (and the legislators) who apparently draw from a more intelligent gene pool than mere citizens.

Experience in other states has shown that restrictions on payday lenders result in fewer of those lenders. This would obviously mean fewer payday loans available to Iowans. Therefore, restricting payday lenders might allow liberal lawmakers to slap each other on the back for helping the “little guy,” but without reducing the NEED for or providing some new alternative to payday loans, they have only succeeded in worsening the little guys’ circumstances.

Life, Liberty and Property in '09

It's time once again to examine the old year and hope for a good new year. Let's review some of the top developments in 2009 in the Lockean categories of life, liberty and property.

Life

According to the FBI's preliminary report, murders in the first 6 months of 2009 were down 10% compared to the previous year. Final crime rates for 2009 won't be released until sometime in 2010, but if the trend continues throughout 2009, it would be the biggest one-year decrease in murders since at least 1960, the earliest year for which Bureau of Justice Statistics data is available. It would also give 2009 a per capita murder rate 51% lower than the all-time high in 1991.

During the same time six-month period, U.S. gun sales (as measured by the number of transactions on the FBI's National Instant Criminal Background Check System [NICS], the "background check" when a gun is purchased from a dealer) were up by about 24%. As the National Rifle Association Institute for Legislative Action (NRA-ILA) points out, the number of privately owned firearms in the U.S. rose by about 2%, to record levels. NRA-ILA also stated: "[T]he firearms that were most commonly purchased in 2009 are those that gun control supporters most want to be banned – AR-15s, similar semi-automatic rifles, and handguns designed for defense."

In a nutshell, in the last several years gun ownership has reached all-time highs while crime rates remain at or near record lows. "What this shows," said Alan Gottlieb, Executive Vice President of the Second Amendment Foundation, "is that gun prohibitionists are all wrong when they argue that more guns result in more crime. Firearms in the hands of law-abiding citizens are no threat to anyone. Perhaps violent criminals were actually discouraged by all of those gun sales earlier this year, because the media made a point of reporting the booming gun market.

He continued: "Anti-gunners have lost another one of their baseless arguments. Millions of Americans bought guns during the first six months of [2009], many of them for the first time. Yet with all of those new guns in circulation, coupled with an increased demand for concealed carry licenses around the country, the streets have not been awash in blood, as gun banners repeatedly predict."

In a slightly different vein (yet still in the life category), for the first time since the Gallup Poll began asking the question in 1995, a majority of Americans (51%) called themselves "pro-life" in 2009. According to Iowa Right to Life the number of abortions performed nation-wide peaked at about 1.6 million in 1990 (almost the same year as the all-time high murder rate mentioned above, hmm...) but has been trending downward since. It was at about 1.2 million in 2006 and is "back to levels not seen since the late 1970s."

Iowa had 5,888 abortions in 2005, 6,728 in 2006 and 6,649 in 2007. I haven't read any hard numbers for '08 or '09, but I would imagine they remained in that same range.

Liberty

The big news in Iowa this year was that Iowa became the third state to legalize gay marriage. The Iowa Supreme Court issued a ruling in April on the case Varnum v. Brien. It was argued that Iowa's law violated same-sex couples rights to equal protection and due process.

Not everyone was happy with the decision however. “A handful of people who were not elected to office — they were appointed — have rendered a decision, a decision that is contrary to the will of the people, it is contrary to God’s law and it’s time for the people through their elected officials and elected representatives to decide what the law is going to be in this state,” said Danny Carroll, chairman of the Iowa Family Policy Center’s board of directors.

But government exists to protect the rights of individuals from tyranny (even tyranny of the majority). Regardless of whether you morally approve of homosexuality or not, the ruling is certainly good for individual rights in Iowa. The argument made by social conservatives, that gay marriage is destructive to society, doesn't seem to be resonating with anyone but conservatives themselves. Nonetheless, efforts are underway to reverse the ruling.

Second Amendment supporters ended the year with more friends than they started with. This summer the gun control group Iowans for the Prevention of Gun Violence (IPGV) dissolved due to lack of funding. However, a new group of Second Amendment defenders sprung up in the state. The group Iowa Gun Owners was formed in January '09. In their first year in existence they managed to get a "Vermont/Alaska style" right-to-carry bill introduced in the Iowa legislature and earned it a tied procedural vote (to proceed, not be enacted) of 49-49 in the Iowa House. Not a bad first showing.

There was some work done on legalizing medical marijuana in Iowa in 2009. In July the Iowa Board of Pharmacy began holding hearings on the issue, but has not yet voted on its recommendation to the state legislature. In March a state Senate subcommittee held a hearing on medical marijuana bill, but the bill didn't advance out of the subcommittee. Although it remains to be seen what will happen, at least there is discussion of legalizing the pharmaceutical use of a drug that is less dangerous and addictive than many other commonly prescribed drugs.

In 2009 storm clouds continued to gather at the national level, with healthcare "reform" set to mandate insurance coverage and involve the government in some of our most personal decisions.

Property

In June I reported on a county government flanking maneuver to circumvent the state's anti-Kelo eminent domain law. The Clarke County Reservoir Commission voted to condemn the farmland of two dozen families in order to build a new 900-acre reservoir near Osceola. Critics have charged that planners have inflated the areas water needs in order to justify the new reservoir. In August the Clarke County Farm Bureau stated that they would NOT be helping the landowners whose land will be taken. Construction of the lake has not yet begun at this time.

In Washington and Des Moines our elected officials continued to bury this and future generations in debt in 2009. Since this will have to be paid back (with interest) it will obviously cost Americans a lot of money, therefore leaving less money available to us to acquire property (and less to pursue happiness with as well).

Governor Culver signed bonding issues adding almost $1.7 Billion in state debt, despite the fact that a Des Moines Register poll showed that 71% of Iowans opposed it. In D.C., President Obama and the Democrat Congress added about $1.45 Trillion in U.S. debt in 2009 alone. The U.S. public debt currently stands at over $12 Trillion. Our total unfunded liabilities amount to almost $107 Trillion.

So 2009 was a mixed bag for freedom lovers. Unfortunately, I think the few advances in personal freedoms are vastly overshadowed by the fiscal crisis looming on the horizon. Will we draw that crisis closer or will we begin to back away from it in 2010? I'll tell you next year.

2000's: Worst decade ever!

From the good folks at reason.tv

State Sovereignty Group Supports Lawsuit Against Obamacare

In my post four days ago I said to expect lawsuits challenging Obamacare's constitutionality. Well, the ink is barely dry on the recently-passed Senate bill and the lawsuits are gearing up already. The Utah-based Patrick Henry Caucus may be the first one to challenge the (sure to be signed) new law. Here's their press release from today:

UTAH PATRICK HENRY CAUCUS UNANIMOUSLY SUPPORTS A LAWSUIT AGAINST THE FEDERAL GOVERNMENT IN ORDER TO STOP THE FEDERAL HEALTH CARE BILL

Leading state sovereignty caucus strongly opposes the federal health care bill and supports lawsuits based on two violations of the U.S. Constitution.

The Patrick Henry Caucus adopted a unanimous position Wednesday, December 23, 2009, to oppose the Health Care Reform Bills, and to support a lawsuit against the federal government in order to stop the national health care bill from becoming law.

Calling the law unconstitutional, The Patrick Henry Caucus, which is comprised of legislators from both the Utah House of Representatives and the Utah Senate, vows to fight the federal law on multiple fronts. The Patrick Henry Caucus has an opt-out provision drafted and ready for presentation to the Utah Legislature next month. The opt-out would make it illegal for Utah agencies to implement any portion of the new federal law. The Caucus is calling on the State of Utah to join in with other States and take the lead on filing a lawsuit to stop the bill, should it receive final approval.

The Caucus believes the law is unconstitutional in at least two respects. First, the law unfairly gives preferential treatment to residents of Nebraska as a result of efforts by Senate Democrats to court the vote of Nebraska Senator Ben Campbell. The Caucus
believes that this preferential treatment violates principles of due process and equal protection and is therefore unconstitutional under the Fifth and Fourteenth Amendments.

Second, the law amounts to an excess of Congress’s enumerated powers inasmuch as it requires every American to acquire health insurance. This legislation marks the first time in history that Congress has required every single American to purchase a particular good or service, and cannot be reconciled with the notion that Congress possesses only those limited powers granted by the Constitution.

The Patrick Henry Caucus calls on the leaders from all States to join in the effort to file a lawsuit against the federal government in order to stop this wrongheaded piece of legislation. We must not allow Congress to commandeer one sixth of our nation’s fragile economy while simultaneously undermining the authority of the States.