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Matt Walsh: 6 resolutions to improve the economy

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  • | 6:00 p.m. January 6, 2006
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Matt Walsh: 6 resolutions to improve the economy

In the Dec. 22 edition of the Review's 2006 Economic Outlook forecasting what's ahead for the Gulf Coast of Florida from Tampa Bay to Collier County, one of the conclusions that seemed universal is that 2006 should be another good year for the economy on the West Coast of Florida. The fretting about the real estate market can finally stop. Yes, it has slowed down. No, it's not a bubble, not a repeat of the horrors of the late 1980s and early 1990s.

We're in good shape.

But as with all things, we could be in better shape. Here, then, are six resolutions for business leaders and policy makers to take up to improve the economy, business climate and overall quality of life even more:

City and county governments should resolve to amend and discard their anti-growth policies, especially development boundaries and height and density restrictions.

Two sub-themes that ran through our Economic Outlook section were the high cost of housing and a continuing labor shortage up and down the coast.

Too bad government policy makers don't seem to connect the dots. Both challenges are a result, to a large extent, of zoning and growth-management policies that supposedly preserve the quality of life of those who are here.

But that's false. High housing costs lead to a tight labor supply and higher costs and taxes for everyone. Limiting population growth and development merely leads to unaffordability for the vast majority.

If Gulf Coast city and county commissioners make any resolutions for 2006, they should resolve to quit practicing insanity - applying restrictive growth policies and thinking that they are somehow going to end the shortage of reasonably priced housing.

We've pointed out many times in this newspaper how hypocritical it is to hear public officials and other do-gooders lament the high cost of housing and how they are hurting the so-called "working class." But instead of eliminating regulations that reduce supply, politicians and government regulators forever are enacting new laws to fix the unintended negative consequences of the existing laws. These days the leading flavor is creating housing trust funds with tax dollars and exactions from developers and giving homebuilders and developers "incentives" to set aside certain percentages of their projects to build lower-cost housing.

A subsidy is a subsidy - taking from one and giving an unearned benefit to another. The developers do not have the freedom to decide what's best for their property. No, to obtain additional entitlements to their own property, they must make trades with government. That is not private property; that is not free enterprise.

This hurts everyone, especially the poor. The poor have fewer, affordable housing choices, and the wealthy who don't want growth complain because the service providers are lacking and taxes are rising. Indeed, in a study published in early 2005, "Why have housing prices gone up?," Harvard researchers Edward L. Glaeser, Joseph Gyourko and Raven E. Saks concluded the overall volume of new construction in America has plummeted since 1950 and that housing prices have soared not because of a declining availability of land, "but rather are the result of a changing regulatory regime."

"In sum," the study says, "the evidence points toward a man-made scarcity of housing in the sense that the housing supply has been constrained by government regulation as opposed to fundamental geographic limitations." The way Glaeser, Gyourko and Saks see it "changes in housing supply regulations may be the most important transformation that has happened in the American housing market since the development of the automobile."

And yet our elected city and county commissioners do not have the political courage to do what is right. As simplistic as this may sound, the prescription to affordable housing has four components:

• Height (more of it)

• Density (more of it)

• Deregulation (privatized permitting and building code systems, see Resolution 2);

• Faith in the efficiency, fairness and compassion of capitalism and private property.

Increase the supply of buildable land and densities and reduce the ever-present bottlenecks and rules in the permitting process. The result will be an increased supply of housing and a leveling in the cost.

Resolve to privatize the construction permitting process.

One of the leading factors driving up housing costs is time - delays caused by contractors and others to get their permit applications reviewed, approved and inspected. While developers wait for permits, they keep writing interest checks on their loans, all of which adds to the final cost of a residence. Talk about insanity.

As in most areas of government, there is no financial incentive or punishment to speed up the permitting process, to be efficient. The only incentive is for county administrators to keep contractors happy so they don't complain to the media and elected officials. But this isn't much of an incentive. Government administrators often respond this way: If you want faster processing, the county will have to raise fees to pay for additional employees. But all this does is bring in more bureaucrats who still don't have a financial incentive to operate more efficiently.

Privatize the process. Certify architecture and engineering firms to be able to review permit applications and charge fees as the market will bear. It's puzzling, for instance, why permitting centers don't operate the way private computer repair companies operate. If you want immediate repairs, you can elect to pay a higher rate for premium, quick service. If your computer problem can wait a day or two, the fee is less.

Likewise, if a business wanted its new office buildout fast-tracked, give it the option to take its plans to a private vendor for faster response time.

Issues such as fraud and incorrect permit approvals could be handled the way contract law is handled now. If a vendor errs in approving a permit application, he and/or the applicant would pay a stiff fine. Better still, the market would sort out the good permit-approval operators. The ones who make the fewest mistakes will win the business. Those who err will go broke.

Privatize. Privatize. Privatize.

Resolve to convert the financing of highway and road construction to private means. Likewise, privatize highway and road maintenance.

State- and county-managed gas-tax models obviously aren't keeping pace with the demand. And given the inevitable population growth up and down the Gulf Coast for the remainder of this and much of the next decade, road construction will help determine the health of the regions' economies, as well as their abilities to attract employers other than service providers for retirees. We all want diversified economies, especially companies that export their goods and services outside of the region and import new dollars to the local economy. That is essential to creating new wealth. And road infrastructure is a crucial ingredient.

Privatizing the construction and maintenance of roads should start in Tallahassee and then work its way to every Florida county.

This is not pie in the sky. In the first 60 years of our republic, private enterprise constructed 10,000 miles of private toll roads. Consider what Peter Samuel, publisher of the Toll Roads newsletter, wrote back in 1998:

"The lack of pricing and markets for highway services is at the root of many of our highway problems. There is a constant moan from people about the lack of money for roads, a complaint you never hear in respect of building new electric generating plants, telephone lines, computer factories, car plants or pig farms. Because those products sell for a price, their producers are able to raise money by going out into the capital markets with estimates of the profits they may be able to generate through their proposed investment. So if highways were priced with tolls, the highway service providers could raise capital for good toll highway projects based on the prospective stream of future revenues.

"Full privatization would transfer ownership to investors and allow the assets to be traded, introducing the additional market discipline of competition in both consumer and capital markets," says Samuel. "By allowing takeovers, consolidations and spin-offs of highway assets, the markets would ensure that highways are managed for the best return on capital - the dynamic that gives us our food, our fuels, our housing, our electric power, and all the rest of what goes into our standard of living."

You can be sure of this, as well: If road building were privately enterprises, roads would be built faster and at less expense than they are now.

Dismantle Citizens Property Insurance Corp., the state-run property insurer of last resort, and move all of Florida's insurance legislation toward eliminating the regulation of rates.

Rate deregulation is spreading nationwide, with Illinois demonstrating that a free-market insurance industry is self-regulating and better for consumers than what exists in Florida.

The fact Citizens Property Insurance Corp. is now the second-largest property insurer in the state illustrates there is not a competitive market in Florida, that the rates insurers can charge are not adequate. Rate regulation has choked off supply and competition. What's more, Tom Gallagher's catastrophic fund approach to property insurance, created after Hurricane Andrew, is contributing to the shortage.

To be sure, Florida's rash of hurricanes has prompted insurers to reduce their exposure here. But if insurers were able to operate freely and without having to punish their customers by contributing to the state-run catastrophe pool, over time there would be more competition and choices for consumers.

As it is, all private companies insuring property in Florida are required to assess their policyholders if the state-run pool's claims run higher than its ability to meet those claims. The Citizens board last year approved an assessment on all homeowners insurers doing business in Florida to make up for Citizens' $515 million deficit. In effect, Floridians who live in areas not affected by hurricane damage are taxed to subsidize the inadequate premiums charged by other insurers. This isn't right.

Dismantling Citizens Property and the catastrophe fund and deregulating rates would improve the business climate and be pro-consumer. Lawmakers fear that consumers would get gouged. But when there's competition, prices come down and are held in check.

Create real competition in the public school system. And eliminate the teacher certification process at the state level and delegate it to the individual school districts.

First, teacher certification: Let districts establish their own teacher-qualification policies. This bureaucratic system discourages people from becoming teachers, thus contributing to Florida's teacher shortage. They are a barrier to tapping an enormous resource: retirees who could and would be good teachers.

The certification system and process, while intended to regulate the quality of teachers, is really a protectionist measure for those teachers already certified. Removing these barriers likely would lead to improved schools, another crucial ingredient to an attractive business climate and strong economy.

School choice/vouchers: Regardless of what new strategic plan school superintendents are promoting in their districts, none will ever be as effective as the elimination of the top-down, state-run school system and a system that lets parents use the tax dollars they contribute to public education at the schools of their choice.

As noted by Nobel laureate Milton Friedman, the undaunted advocate of school choice: "In most industries, consumers are free to buy the product from anyone who offers it for sale, at a price mutually agreed on. In the process, consumers determine how much is produced and by whom, and producers have an incentive to satisfy their customers. These competitive private industries are organized from the bottom up. They have been responsible for truly remarkable economic growth, improvements in products and increased efficiency in production.

"In elementary and second education," says Friedman, "government decides what is to be produced and who is to consume its products." The result: Just look at how U.S. students compare worldwide.

As Friedman also noted recently at a New York banquet honoring his choice efforts: "Just as the breakup of the Ma Bell monopoly led to a revolution in communications, a breakup of the school monopoly would lead to a revolution in schooling."

Economic development organizations from Tampa to Naples should team up and promote the Gulf Coast in national media and job banks as the nation's hottest region for jobs.

We need workers. We should promote the Gulf Coast's dynamic opportunities and let the nation - primarily the struggling North -know that we are open for business and have one of the most dynamic economies in America.

• • •

Too many Floridians fear population growth. They think only of traffic congestion. They think government should control insurance and schools. But the flip side of population growth and free markets is opportunity. Population growth and competition brings and creates innovation, specialization, more choices, economic efficiency, affordability and increased wealth.

All of that is the basis for these six New Year's resolutions. Gulf Coast business leaders and owners could make a big difference if they would embrace them, promote them and educate their employees to consider doing the same.


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