- The Washington Times - Wednesday, March 8, 2006

A baseball burden

One quote in particular interested me in the article “MLB, city reach deal on ballpark” (Page 1, Monday): ” ‘We’re delighted, and I’m betting millions of Nats fans are, too,’ said Vincent Morris,” a spokesman for D.C. Mayor Anthony A. Williams.

Well, they should be. After all, they got disinterested taxpayers to subsidize their choice of entertainment. Why in the world rational people think poor taxpayers should subsidize rich team owners and their fans is baffling to me. Often one hears the argument that professional sports teams will generate jobs, taxes and other business activity. This has been the subject of several scholarly studies, none refuted, that demonstrated that professional sports teams in a city actually are net losers in taxes and jobs (which may explain the need to subsidize them).

That this is so can be understood by simple logic: Spending on entertainment (such as sports) is based on fans’ discretionary money. Absent a sudden source of new funds, spending on a new option (i.e., the Nationals) must come from discretionary funds intended for other entertainment. So, what about those who lose their jobs because of a loss of sales in those various other entertainment businesses?

Guess what, absent a sudden change in spending patterns, any jobs created by the new professional sports team are at the expense of other jobs. You see, entertainment, as desirable and even necessary to human existence it is, does not improve productivity of widgets or services. It is not an investment; it is just another option tugging at our discretionary funds.

I’m OK with people choosing professional sports entertainment, but it is immoral to force disinterested parties (which doesn’t include me, I love baseball) to pony up tax dollars for my entertainment.


Falls Church

Another question on port security

Lawrence Kudlow’s column on DP World’s investments was impressive (“Port split” Commentary, Tuesday).

Certainly the more income-producing assets another country owns in the United States the more closely that country will be aligned with us. From a security perspective, it would seem unlikely that any country with a huge investment in our country would be complicit in arranging to blow up its own assets.

One of the key points Mr. Kudlow didn’t cover was our need for security surveillance in foreign ports of goods that will be shipped to us. It would seem to be much more beneficial to discover a bomb at its point of origin rather than after it arrives in one of our ports. This approach could be conflicted if we seriously offend a country whose ports we would like to monitor. Certainly we would find it more difficult to maintain an effective posture in the Middle East if we could no longer use Dubai Harbor. We need more friends in the world. We are in error to deliberately antagonize the friends we have. Let us move on from this port affair and not leave the field to the demagogues and their wily ways.


Landenberg, Pa.

The role of labor unions

In his Friday Commentary column, “Something for nothing: Part II,” Thomas Sowell repeated the century-old argument that labor unions reduce wages for workers who are not in the unions. If this is true, why did blue-collar paychecks usually buy more in the 1950s and ‘60s than they do now? Back then, a much higher percentage of the work force belonged to unions.

By raising wages in union companies, unions force nonunion companies to pay their workers more in order to keep them. All workers benefit from a strong union movement.


Wilmington, Del.

In the late 1970s, I had retired from the Marines and was living in Germany, pursuing a master’s degree in labor economics. One day, we had a special speaker, the director of personnel from Daimler Benz, the maker of Mercedes automobiles. He gave an interesting and thoughtful description of his firm’s policies and practices. When finished, he opened the floor to questions. My wife and I had just ordered a new Mercedes diesel-powered car and were having to wait 18 months before we would be able to get it because of a substantial order backlog. This was a situation that General Motors or Ford cheerfully would have killed to have. Yet, Daimler Benz ran just two shifts, and there was a 10 percent unemployment rate at that time in Germany. Somewhat confused by what seemed to be a foolish passing of an opportunity, I asked why the company didn’t open a new shift and catch up with the production backlog.

At my question, the director shuddered. He then described the labor laws that largely prohibit layoffs and require payment of benefits for extended periods to laid-off workers. He further discussed the recent problems of Volkswagen, which had narrowly avoided going bankrupt because of high labor costs and no product to sell when it switched production from the Beetle to the newer models. Basically, he said, Daimler Benz was willing to lose sales and possible customer satisfaction rather than go bankrupt because it had to continue paying workers who weren’t contributing to the firm’s profit. German workers often had no option other than unemployment because of the labor laws.

The backlog situation persisted for some years. The backlog for German versions of diesel-powered vehicles went up to more than five years. Of course, the consumer suffered from this problem as well. As you may recall, inflation was a serious problem at that time. The price of our car increased more than $2,000 during our 18 months of waiting.



Surplus capital in Richmond

The letter ” ‘Bound away’ from Virginia” (Editorial, Sunday) recounts the tax increase of the previous governor resulting in the current budget surplus, which is well in excess of $1.2 billion. This is not pocket change, when you consider it is related to an overall state budget of approximately $30 billion. It is not a good thing to run a surplus of this magnitude; in fact, it should be viewed as deplorable.

The $1.2 billion is collected in taxes, and rather than expended for roads, schools and general government operation, it is invested. By law the investments vary from U.S. Treasuries, other states’ municipal bonds, repurchase agreements, time savings accounts, even bonds assumed by the Asian and African development banks. That’s right, foreign bonds. The effect of maintaining this huge surplus is to take a dollar of taxes from Virginia taxpayers and hand it over to someone else to spend on their own needs — the federal government, other states, and apparently even foreign governments.

Supposedly, when the national economy declines and Virginia’s tax revenues follow, the treasurer can sell the invested assets to make up the difference.

Of course, economic declines involve risk, and invariably defaults. The taxpayer should be concerned about the necessity of Virginia’s $1.2 billion surplus, and questioning why he is asked not only to pay for his own state services, but finance those of other states, and even the federal government.

There is another, more serious aspect to Virginia’s surplus. Peter Bernstein, a celebrated financial historian, was asked by an interviewer if it were not a bad thing that dividend payouts were increasing rather than being retained and invested by corporations. Mr. Bernstein responded, that based on his and other research, companies that paid out dividends were on the average more successful than those that did not. Managements that have excess cash tend to squander it, or at least fail to invest it optimally to expand the business. The best outcome is to pay the shareholders a dividend and force management to think long and hard about how they invest scarce capital.

Well, capital certainly is not scarce in Richmond and Virginia taxpayers are just being set up.



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