A Rare Case For Active Investing – In Public Education Reforms

(Photo credit: Sean MacEntee)


Anyone who knows the history of my investment career understands that I almost never make a case for active investing.  However, one rare exception deals with our country’s failing educational system. Unless parents and school board members exercise real leadership and improve our students’ math and science comprehension, our country’s future, and its ability to bounce back from current and future economic challenges will continue to weaken.

For entrepreneurs and business leaders, the “too big to fail” attitude that sometimes permeates school bureaucracies is just flat-out unacceptable.  By now, because of technological innovators such as Steve Jobs’ vision of the digital destruction of paper textbooks, and Sol Kahn’sKahn Academy offering of more than 3300 educational videos on everything from math, history, physics and finance, you might expect that our antiquated educational system would have accelerated change in how we prepare our 21st century students.  Parents are waking up to the fact that there are multitudes of free digital learning tools that do not require new levels of funding; a fact clearly demonstrated by the 150 million Kahn Academy YouTube views.

So why are our public schools so slow to reform, while other industries are adapting to the new digital world and thriving? Part of the answer lies with the active managers guiding America’s teachers unions.  The Wall Street Journal’s Alicia Mundy recently reported that America’s two largest teachers’ unions spent more than $330 million in the last five years on outside causes, political campaigns, lobbying and issue outreach.  Unless parents and taxpayers weigh in and advocate for performance-based results for kids, interests other than that of the pupil may dominate in your local school.

Thanks to a group of parents in California this week, union opposition to reforming a failing school lost a State Superior Court case after a two-year round of delay tactics.  The so-called “parent trigger” law called into question in this case works similar to the principle of a shareholder derivative lawsuit.  In the case of shareholder suits, shareholders are allowed to bring action in the name of the corporation against parties allegedly causing harm to the corporation.  Applied to California public schools, parents can now bring about local ballot action that will disrupt their failing neighborhood school’s reluctance to serve children better.   The parent trigger remedy is school choice in action:  turn a bad school into a newly governed public charter school.

The late free-market economist Milton Friedman recognized tragic disruptions to our education system as potential opportunities for comprehensive change. Recently, Washington Postwriter Jo-Ann Armao noted how government has reshaped its role in education in New Orleans after Katrina.  By adopting free-market principles, she argues, families have more choice about where their children can best succeed, and educators have more opportunity to choose a school that best aligns with their style.

Active fund managers and hedge fund investors may never see the efficient markets world as I do.  However, philanthropists who have an eye focused on improving our world should seriously consider supporting education policy change that will increase the number of high quality educational choices for parents in every state of the union. Parent trigger laws, teacher performance pay based on student outcomes, teacher tenure reform, expanding the number of high quality charter schools, and adopting virtual learning programs into the classroom go a long way to place the focus on the interests of the child and put the power of choice in the hands of parents.

To learn more about Rex Sinquefield, please visit www.rexsinquefield.org.

Governor Brownback’s Reformed Kansas Could Have Missouri Singing The Blues


Kansas Governor Sam Brownback(Photo credit: Wikipedia)

recent article covering Red Kansas and the leadership of Governor Sam Brownback, lays out a new trajectory for a Midwestern state that has decided to take Texas’ lead on tax policy, rather than that of California. Last month, Kansas Governor Sam Brownback turned the tide on Kansas tax policy, delivering on his legislative promise to ignite what the Wall Street Journal referred to as “the Heartland Tax Rebellion.”

His new system reduces personal income tax brackets from three-tiers to two-tiers, cuts the overall rates for each new bracket and lowers certain small business non-wage income from state income tax.

This new tax policy puts more dollars in the hands of working families and provides strong incentives for existing Kansas-based small businesses to stay in the state, and possibly expand.  Importantly for Kansas, the simplified, lower rates have the potential to spur new business filings in a state that needs them.

Some state governments are realizing that simplifying local, personal and business income tax codes may be the best defense against anti-growth policies on the federal level.  Certainly as this Fall’s presidential election looms, employers who are looking to expand in 2013 can take the Prairie State off their fly-over list.  Economists, such as Art Laffer, have clearly demonstrated that taxing income harms any state’s ability to contribute to the total U.S. economy.

One strong signal Governors can send that declares their state is open for business is structural tax policy change. Business owners understand that a higher rate of return in the form of lower tax rates anchors more local investment.  In my personal experience with Dimensional Fund Advisors, the path to relocation from California and its harmful tax policy was clear. We chose to move our headquarters to Texas, a state with no personal income tax, rather than moving to Missouri, which taxes personal income at six percent.

States that do not tax personal income, our most mobile resource, have the competitive advantage.  On census moves, non-farm payroll employment, and gross state product (GSP) growth, they consistently beat my home state of Missouri, which ranked 48thin GSP growth in the last decade. Business owners are voting with their feet and the penalty is job loss, poor economic performance and diminishing influence in Washington. This fact becomes clear when one compares the growing number of Congressional seats in states that do not impose a personal income tax, while states that impose a personal income tax are suffering reduced political influence. Population migration between states is happening at a record clip and evidence shows that tax policies are a clear driver.

To learn more about Rex Sinquefield, please visit www.rexsinquefield.org.

State Income Taxes In The Land Of Pawlenty Are Hard To Digest

By Rex Sinquefield, August 9, 2012

Photo Credit: Wikipedia

Mitt Romney’s next chess move is his vice-presidential pick from among a number of Governors, Senators, and former Cabinet leaders. Among the Midwestern contenders is former Minnesota Governor Tim Pawlenty.While Pawlenty has a record of holding the line on state government spending, his home state still remains behind the growth curve, with relatively high marginal tax rates.

No matter what Tampa plans may be in store for “T-Paw” during the 2012 Republican National Convention, he is not the only Minnesotan heading down to Florida. Since 1995, the Internal Revenue Service taxpayer files show that more than 37,000 residents from the Land of Lakes have moved more than $3.2 billion in adjusted gross income (AGI) there too. Florida, which has no personal income tax, ranks second on Minnesota’s state out-migration list.

Perhaps more alarming is what type of individuals are leaving Minnesota for the Sun Belt. The average AGI of a person who left Minnesota for the Gator State between 1995 and 2010 was a whopping $89,070 per transfer. In other words, Minnesota is losing wealthy residents – those paying the most taxes and those most likely to own businesses and create jobs.

To Pawlenty’s credit as Governor, he actively opposed tax bracket or rate increases to the state income tax code. Yet, according to the Tax Foundation, Minnesota ranks 45th in overall business climate index, with a top income tax rate of 7.85% and a corporate income tax rate of 9.8%. Relatively high marginal tax rates on corporate and personal income help explain why Minnesota lost $4.2 billion in net adjusted gross income (net AGI) between 1995 and 2010.

Most economists would argue that essential state government services should be funded through the imposition of a broad-base tax. However, Minnesota government has consistently carved out categorical fees, assessments, and gaming taxes, directly away from general fund use. Unfortunately, Governor Pawlenty deployed such tactics for the Minnesota Twins’ stadium, and now his successor has done the same by making taxpayers fund the Vikings’ new stadium.

As a result, there are places in Minnesota that now impose a mega-sales tax (more than 13%) on eating, drinking, and live entertainment. If such expansions were a long-term infrastructure investment to drive others into the state, using consumption taxes might have made more sense. Capturing any consumer tax revenue for sports stadiums, at the expense of public safety or education, seems shortsighted for any state to adopt.

In America’s Midwest, the new state debate is about how to reduce or eliminate net tax burdens on personal income. Taxpayers know all too well that the season for one-time gimmicks and federal stimulus dollars is over. Since most states have constitutional duties to prevent deficit spending with a balanced budget, much of the responsibility to reign in wasteful spending falls on America’s governors. If the land of Pawlenty is to become the land of plenty, it is time for state leaders to consider real tax relief from corporate and personal taxes.

Online at: http://www.forbes.com/sites/rexsinquefield/2012/08/09/income-taxes-in-the-land-of-pawlenty/

Tax Hungry Politicians In Ohio And California Stimulate…North Carolina


September 7, 2012

By Rex Sinquefield

This week, a wide spectrum of state political delegates, from progressives to moderates, occupied Charlotte, NC for the Democratic National Convention. North Carolina is one coastal state that has been fortunate to attract more working wealth than it has lost over the last fifteen years.

According to the Internal Revenue Service taxpayer migration data, North Carolina has been adding an average of $1.4 billion in net adjusted gross income (Net AGI) each year for the last fifteen (1995-2010.)

Many economists, including those at Missouri’s free-market think tank,the Show Me Institute, have studied how states with high marginal tax rates on personal income tend to lose wealth compared with those economies with relatively low tax regimes. With North Carolina gaining wealth due to migration from other states, analyzing where this migration is coming from is useful to states that want to improve local opportunities for job growth and economic expansion.

It is not surprising that two California counties, Orange County and Santa Clara County, contributed nearly $800 million in adjusted gross income to North Carolina’s state economy. The move from these two counties alone from the higher tax regime of California, to the relatively lower taxes of North Carolina represents nearly 12,000 taxpayers. The next two counties that appear down the migration list by AGI are Queens and Monroe Counties in New York State. Since both New York and California are known for complex tax codes and some of the highest tax rates, the attraction to Carolina growth regions, such as the Research Triangle, is not at all surprising.

When it comes to positioning a state’s overall business climate, less certainly can be more. Compared with many other states, the tax code in North Carolina is flatter and simpler. If you look at the North Carolina state income tax forms, they’re not complicated by extra deductions, credits or offsets for a basic household or filer. As Art Laffer and the National Taxpayers Union have published, the business of tax compliance employs more workers than Wal-Mart, UPS, McDonald’s,IBM, and Citigroup combined.

Given the fact that personal income is our most mobile of resources, high wage earners have a strong incentive to avoid higher taxes.

This can be true even within a fast-growing county such as Delaware County, Ohio, which has given the State of North Carolina its largest financial gain on a per person basis over the last 15 years. While less than 500 residents moved from the greater Columbus, Ohio region, those who did were exporting an average of $105,610 in annual adjusted gross income every time a moving van headed to North Carolina.

What economic factors would cause a Buckeye State resident to transfer to the Southeast? For some, it may be the ocean or early retirement. Perhaps there was a strategic merger or corporate relocation from another Ohio employer. However, for many, life in the Carolinas may look a lot simpler. Take for example the Ohio state tax table along with its numerous forms and descriptions. By the time the State of Ohio informs you of your rights, obligations, and special programs, your tax manual is longer than 40 pages in length.

In light of the current political debate about everyone paying their “fair share”, one needs to look no further than what’s happening with state-to-state wealth migration rates to see what economic policies are really working.

Online at: http://www.forbes.com/sites/rexsinquefield/2012/09/07/tax-hungry-politicians-in-ohio-and-california-stimulate-north-carolina/

Why Rahm Was Right To Fight For Kids


September 21, 2012

By Rex Sinquefield

This week, Chicago Mayor Rahm Emanuel negotiated a deal with local teacher unions designed to improve school operations for more than 350,000 children.  While the new contract is far from perfect, several items stand out as positive steps forward.

First, students may be given more opportunity to learn through longer school days across any given year.  As long as most students have access to an effective teacher with this additional time, one would expect more productivity to result.

Ultimately, the measure of any teacher has to come by assessing how well they teach their students, year after year.  Central to evaluating teacher quality and effectiveness must be periodic and regular student achievement tests and scoring.  It is unfortunate that many public sector unions that claim to represent a teacher’s best interests are reluctant to embrace value-added models of student advancement.


Today, the Institute for a Competitive Workforce is hosting a conference on how America is addressing the skills gap crisis. Employers, educators and workforce development organizations from around the country are meeting to discuss how to realign educator outputs to labor market needs and improve our workforce’s ability to compete in a global economy. Workforce demands are increasing at the same time that productivity inside the classroom becomes increasingly important. In today’s economy, educators will need to do more with fewer resources. Clearly, the need for the best, most effective teachers inside our classrooms is more critical than ever.

Peer-reviewed studies by Eric Hanushek of Stanford University have considered the effect of eliminating the worst teachers by replacing these teachers with average teachers.  Eliminating the least effective five to eight percent of teachers would bring up student achievement by very substantial standards when scored by international tests.  This is why seniority-based layoffs, such as those imposed in Chicago, are so harmful to society at large.  By making it difficult to dedicate our best teachers to America’s education challenges, union work rules are locking in higher prices with lesser results.

Unless your children are among those classes stuck with a poor performing teacher, you may be inclined to neglect this problem by hoping for better over the next school year.  However, the compounding costs from an incomplete education shows up in lost wages for employees, remedial training among colleges and universities, and even our aggregate growth rates for the national economy.  By one account from Hanushek and Woessman, the present value of added GDP from replacing our least effective teachers is worth $70 trillion (compared with a US GDP of $15 trillion in 2011).

It should not take a strident Mayor to rival a high-profile teacher strike in order to replace non-performing teachers.  Until America’s best and brightest teachers stand up to their own unions holding them back, I am glad that the kids have Mayor Rahm Emanuel.

Original article via: http://www.forbes.com/sites/rexsinquefield/2012/09/20/why-rahm-was-right-to-fight-for-kids/

Strangled By Taxes, Will Michigan Loosen The State’s Grip?


October 3rd, 2012

By Rex Sinquefield

Last month, the Michigan State Supreme Court affirmed that Michigan voters will get a chance to amend their State Constitution in a way similar to what our “Show-Me State” of Missouri did in 1980.  On November 6th, Michigan taxpayers will determine whether it will require a two-thirds vote by their state legislators in order to raise taxes by base or rate in the future. Proposal Five, a measure sponsored by the Michigan Alliance for Prosperity, hopes to help Michigan hold the line on taxes with this “yes” vote.

Michigan, Ohio, and Missouri have been ranked dead last (50th, 49thand 48th respectively) among all 50 states in economic growth during the past decade.  When states fail to respond to the competitive advantages that fiscally responsible rivals such as Indiana have expanded, it can result in a downward spiral of state government revenues.  When states rely upon highly volatile sources of revenue, such as personal or corporate income, these peaks and valleys tend to worsen in tough economic times and often lead to long-term, detrimental cuts in in spending on education and other critical government services. These cuts exacerbate an already dangerous trend towards economic decline.

Taxing issues would be harsh enough in the middle- and lower-income classes without the threat of real migration by those who seek to keep their tax burdens low.  Between 1995 until 2010, the State of Michigan has lost more than $15 billion in net adjusted gross income (Net AGI) to other states, according to Internal Revenue Service taxpayer data files. Michigan has sent more than 140,000 tax filers packing for Florida (which has no personal income tax) in the past 15 tax years, thereby effectively narrowing the state’s tax base and stifling its business climate. When other states grow faster than you in population, non-farm payroll employment, and economic activity, your state’s voice tends to weaken.  Before long, real reforms seem impossible to achieve with such narrow tax bases and high tax rates.

When faced with these long-term structural deficits, Governors and their job-seeking coalition partners, such as their State Chamber of Commerce, should realize that it is time to hold state government spending more accountable.  Instead, some political insiders prefer to play the “let’s pick the winner” strategy born from a flawed (albeit romantic) assumption that government is in the best position to decide which development projects or companies are worthy of a tax break.

Missouri’s State Auditor recently released a reporton the Missouri Quality Jobs Tax Incentive Program, which provides tax incentives to qualified companies for facilitating the creation of new, or retention of existing, jobs in Missouri. The audit found that after five years the Missouri Department of Economic Development reduced the job creation estimates by 41% from its original estimate of 45,646 jobs. In addition, the report said that the projected level of business investment had also been overstated. Discerning voters know that such governmental rent-seekers must be held in check by strong fiscal restraint within their State Constitutions.

In the years since Missouri passed the Hancock Amendment, which restricts tax increases without a public vote, Missourians have opted to keep relative tax burdens low when faced with their own decision.  However, as the Cato Institute studies related to state tax and expenditure limitations across many states have shown, tighter controls on state policymakers may still be needed.  Within each State Capitol, there is likely to be a strong self-fulfilling prophecy to skirt around ordinary taxpayers in favor of the next new thing that only government could sustain.

That is why states with the initiative and referendum process must protect the interests of small businesses whose influence is too diffused to easily organize.  Michigan can lead the way in the Midwest by passing Proposal Five this fall.

Original article: http://www.forbes.com/sites/rexsinquefield/2012/10/03/strangled-by-taxes-will-michigan-loosen-the-states-grip/

Hollywood Tax Hikes: What’s Happening In Vegas Stays In Vegas


By Rex Sinquefield, October 19, 2012

America’s 44th Vice President, Dan Quayle, once said: “I love California, I practically grew up in Phoenix.” Today, Dan Quayle is not alone in the sense that many Californians might consider Phoenix to be practically like living in California — with far less of the economic mess.

Many of California’s millionaires, under the threat of such tax hike plans asProposition 30, are likely to be moving more and more assets to lower tax burden regions such as Phoenix or Las VegasEntrepreneurs with a wider range of mobility are leaving the Southwest altogether for states that do not levy a personal income tax, such as Texas, Washington, or Florida.

Thanks to Internal Revenue Service taxpayer files, economists and think tanks can measure the long-term migration trends of individuals from high tax states towards states with a better business climate. By contrasting the wealth transfers into the state with relocations out of the state, we can confirm what is happening to entrepreneurial capital over the last fifteen years (1995 to 2010). Another way to track such interstate movement is from population changes available from the U.S. Census Bureau over the same period.

Since 1995, the greater Phoenix area has added a cumulative total of more than 326,000 new residents. Nearly a quarter of those people left California. More than 34,000 moved from Los Angeles County, California alone. Orange County lost nearly 13,000 residents to the Phoenix area. San Bernardino, Riverside, and Santa Clara lost 7642, 6726, and 5679 residents, respectively, over the same period.

When these taxpayers leave, they take their working wealth with them. The Metropolitan Phoenix area received $1.5 billion in net adjusted gross income (Net AGI) from Los Angeles County alone. Orange County contributed about $660 million in Net AGI to the Phoenix area. More than twenty-three percent (about $4 billion in Net AGI) of the growth in income inside the Phoenix beltway came straight from California.

But why should Californians move to Arizona to save 5% or more off their personal income tax burdens when they could move to a dry, sunny climate nearby and pay no state income tax? That’s precisely what many Californians have concluded for themselves by relocating to Nevada (where there is no personal income tax).

Between 1995 and 2010, the greater Las Vegas area added more than 232,000 new residents. More than 118,000 came from California. Nearly 60,000 alone left the Hollywood area for better opportunity in Vegas. Economists would bet that, once a move is imminent, more Californian wealth would choose Las Vegas over Phoenix due in part to the favorable tax advantages that Nevada offers.

That is precisely what has happened. More than $5.3 billion in net adjusted gross income has left California counties for the greater Las Vegas region. Californians account for 46% of all working wealth that has moved into the Las Vegas area since 1995. States without a personal income tax, like Nevada, know that what is produced in Vegas will stay in Vegas.

Several years ago, the Pacific Research Institute issued a Californian studysaying, “If policy makers want to understand why the Golden State’s economy is lagging behind those of other states, the punitive and steeply progressive personal income tax is a good place to start looking.”

When income earners leave one state for another, the tax benefits realized by the receiving state go to fund programs that contribute to the sustainability of that state’s economy, such as education, health care, transportation, economic development initiatives, environmental projects, state police and aid to local governments. For California voters at this November’s ballot box, it is important to note that the school funding that you are most likely to increase by voting in income tax hikes will be that of Nevada or Arizona.

Online at: http://www.forbes.com/sites/rexsinquefield/2012/10/19/hollywood-tax-hikes-whats-happening-in-vegas-stays-in-vegas/

Obamacare: The Latest Man-Made Disaster Foisted On The U.S. Economy


By Rex Sinquefield, November 1, 2012


This week, millions of Americans remain without power across the East Coast, thanks to the unleashed fury of Hurricane Sandy. Economic activity was suspended in large part, as citizens braced for survival.  For those impacted, their personal plans involving future investment, travel and savings were deferred simply to manage their way through their local emergencies.

Many state governments, such as those of New Jersey and New York, are scrambling to deal with their unique concerns, with or without prompt disaster assistance from Washington.  Estimates of the damage and lost business from Hurricane Sandy now range from $7 to $50 billion.  Thanks to the prospect of swift inter-government cooperation and to the remarkable generosity of the American people, affected communities will chart a sound path toward recovery.

From an economist’s point of view, man-made disasters often create many of the same direct and indirect effects as those brought upon us by more natural forces.  The economic losses from man-made disasters are just as real as those from natural disasters. New taxes imposed today are collected from tomorrow’s pocketbooks.  New taxes and increased government spending shift resources away from the individual and the entrepreneur. In 2014, the new federal taxes enacted as part of Obamacare could create similar and dramatic consequences within our states.  Fortunately, there is still time for Congress to act in 2013 to prevent much of this damage from hitting.

First, there is little doubt that implementing Obamacare would disrupt access to many healthcare services provided today.  Avik Roy, another Forbes contributor, has published physician results from his state surveys related to Obamacare.  In Ohio, estimates are that nearly 1 in 4 doctors will stop accepting Medicare patients altogether.  Thirty percent of Ohio doctors say that they will place “new or additional limits” on accepting Medicare patients after their fees decrease by ten percent or more. In Wisconsin, 21% percent of respondents to the National Physicians Foundation survey indicated that they plan to raise fees on those with private insurance in order to compensate for the cuts.

Robert Book, along with former White House budget official James Capretta, have now detailed the state-by-state impacts of Obamacare cuts to the Medicare Advantage Plan used by many seniors.  They found that Obamacare would cut $3,203 in Medicare Advantage services for every Floridian enrolled in the program: a 21% cut. More than one million Florida seniors would be impacted by these cuts.

Economists know that when you tax something, you get less of it.  Many working families cannot easily afford an additional tax of more than $1,300  (as stated in Roy’s Forbes article) a month for the average family of four.  Colorado’s share of these new taxes is estimated at $20 billion.  Virginia’s load is tallied at $32 billion.  If such figures are even remotely correct, how will middle class America afford such a permanent change?

It does not have to be this way if informed voters within their states speak with the power of their vote.  States, such as my home state of Missouri, should consider voting down a governor’s use of state healthcare exchanges.  Other legal challenges, such as the arguments posed from Oklahoma, may help steer our state ships away from this costly storm.  Voters should speak up now or otherwise batten down the hatches in their states for the economic storm that lies ahead.

Original article at: http://www.forbes.com/sites/rexsinquefield/2012/11/01/obamacare-the-latest-man-made-disaster-foisted-on-the-u-s-economy/

Californians Say No To More Taxes, Will The Other 49 States Follow?


In California this month, voters narrowly rejected an increase in the state’s cigarette tax. (Photo credit: Wikipedia)

This month, in my former state of residence California, voters narrowly rejected an increase in the state’s cigarette tax by voting down Proposition 29; an act that, for some, seemed out of touch with voter concerns about balancing their state budget. Others contend that the measure went down in flames because voters have lost faith in their government’s ability to manage their state’s budget. In fact, California voters have rejected every ballot effort to raise taxes since 2004. California’s general assembly should follow suit and begin to limit spending, as well.

My home state of Missouri has defeated increasing cigarette taxes twice by statewide ballot.  While each state’s ballot initiative process is different, ultimately certifying ballot measures correctly requires sound legal planning to survive likely legal attacks.

Case in point: This week, the Missouri State Supreme Court heard a number of state constitutional arguments that could impact our state’s ballot initiative process.  At the core of these debates are fundamental rights provided in the Missouri Constitution, “the people reserve power to propose and enact or reject laws and amendments to the constitution by the initiative, independent of the general assembly, and also reserve power to approve or reject by referendum any act of the general assembly, except as hereinafter provided.” Today, in 26 states citizens can place a measure on a statewide ballot through either a referendum or initiative process.

In difficult economic times, it is not surprising to see voter anxiety over taxes that may not help to balance their state’s budget.  Voters tend to avoid risk if they suspect that they may not benefit from the returns of a new or increased tax. Business owners who are concerned about the impact of government regulation and spending will limit investment and expansion.  If there ever is a state in which citizens should have the right to revolt it is Illinois, Missouri’s neighbor to the east. Illinois has placed such tight restrictions on their ballot initiative process that many policy experts refuse to recognize it as an initiative process state.

Recently Citizens in Charge commissioned a nationwide poll to determine public support for initiative and referendum. Hands down, across the country there was widespread support for the initiative and referendum process. People favor it by more by more than two-thirds.

Next week, as we celebrate our country’s birthday, we should consider the value that more than half of our states’ constitutions provide through the initiative and referendum process. If you vote in a state that offers a ballot initiative or referendum process, cast your vote. If you reside in a state that does not or that places extreme limits on this privilege, consider getting involved with the issue. Contact your legislator, write an op-ed for your local paper, and look into joining your local state think tank. The national coalition of free-market think tanks State Policy Network has more than 100 active members. Many of them are producing excellent policy studies while educating elected officials, voters and the media.

To learn more about Rex Sinquefield, please visit www.rexsinquefield.org.

A Missouri Compromise Akin to Real Progress

By Rex Sinquefield,

Amidst epic political struggles, it’s difficult to recall how often consensus through reasonable compromise has prevailed. Presidential election cycles tend to exacerbate the polarities at the base of the left and right, much to the chagrin of the silent majority of independent-minded voters. Case in point: The Show-Me-State of Missouri has been thrown onto the national stage this week in ways that few progressives or conservatives might have imagined.

Since Roger Ibbotson and I first co-published “Stocks, Bonds, Bills, and Inflation: Simulations of the Future (1976-2000),” there have been many times when the volatility of the financial markets parallels the volatility of political markets.

When political stocks analogous to prediction markets such as Intrade start to move within the presidential field, you can expect to see even less bipartisan consensus on any given issue. Nevertheless, whether our candidates are debating the fairness of our tax code, or the proper priorities of funding our education system, such discourse is a necessity to a civil society. Having a vibrant debate about who should lead this country is ultimately a sign of our collective strength, not our weakness.

So, before we write off our ability to resolve our political differences, I would like to offer one anecdote of real hope and change in my own home state. This month, a Missouri statewide ballot initiative was certified to restore control of the St. Louis Police Department back to its own city. St. Louis is one of only two cities left in America that does not operate its own public safety department.

The police force in St. Louis is controlled by a board of five people composed of the Mayor of St. Louis and four political appointees of the Governor. This special board, based in our state’s capital Jefferson City, is the ultimate authority in managing police operations and setting the budget.

As you might imagine, having a city police department operated from 130 miles away can lead to many inefficiencies that most mayors would not accept. However, fixing this 150-year-old problem, which is an unfortunate vestige of the Civil War, was no small negotiating task. The odds for real reform were stacked against our efforts, largely due to concerns regarding how the measure might impact police officer pensions, city governance, and one-third of our city’s general revenue fund. Police associations, Mayor Slay, urban elected officials, and rural outstate conservatives in charge of state government all had to work together to construct an agreeable compromise.

While it has taken several years to emerge, Missouri now awaits voter approval of Proposition A after one of the broadest issue coalitions ever to come together from our diverse state demographics. Across the political spectrum, from progressive liberals to Tea Party conservatives, all groups contributed to its broad coalition of support. Urban Democrats were able to convince rural Republicans that support for the local control initiative was the right choice when more than 200,000 of Missouri’s citizens supported the grassroots cause.

Missouri’s own, President Harry S. Truman once said, “It is amazing what you can accomplish if you do not care who gets the credit.” After these November elections, it will be time to set aside political rancor and begin to work together to advance the nation’s progress on several critical fronts, from tax reform to improving high quality educational access for all children. That is the time when political leaders should look to Missouri’s Proposition A, a shining example of how broad coalitions are built around a single issue when the stakes are as high as the commitment is strong.

Online at: http://www.forbes.com/sites/rexsinquefield/2012/08/24/a-missouri-compromise-akin-to-real-progress/