"Errors of Enchantment" Latest Blog Postings

New study says charter schools more productive—and generate a higher return on investment—than traditional public schools

Errors of Enchantment Blog Postings - Wed, 2014-07-23 14:55

A new report from the University of Arkansas should provide proponents of charter schools and school choice additional ammunition in their efforts to reform a struggling American education system.

According to Reason, Researchers examined data from 21 different states. While the results varied, charter schools were found to be more productive—and generate a higher return on investment—than traditional public schools (TPS). On average, charter school students scored so much better on assessments that spending money on charters was roughly 40 percent more efficient than spending money on TPS. According to the study:

Comparing [National Assessment of Education Progress] achievement obtained in public charter schools versus TPS for 21 states and DC, we find the public charter school sector delivers a weighted average of an additional 17 NAEP points per $1000 invested in math, representing a productivity advantage of 40% for charters; In reading, the public charter sector delivers an additional 16 NAEP points per $1000 invested, representing a productivity advantage of 41% for charters.

The bad news is that, according to the report, as pointed out on page 28 of the report, New Mexico’s charter schools have the lowest State-level Return on Investment for Charter Schools Relative to Traditional Public Schools of the states studied. It is still positive, but not as good as it could be.

New Study confirms film subsidies are a boondoggle

Errors of Enchantment Blog Postings - Wed, 2014-07-23 08:37

Rarely is one vindicated so clearly and yet, clearly, the media is absolutely clueless (that second part about the media is not so rare). A new study done by the State was discussed in some detail in today’s Albuquerque Journal. The results are touted as showing that “film incentives pay off” and that the incentives are “linked to economic gains.”

The reality could not be more different and, unfortunately for our media friends, this fact could not be more obvious. Take just a few numbers from the Journal’s report:

Between 2010 and 2014, the state (taxpayers) paid out $251 million in incentives to the film industry with $103.6 million in state and local tax dollars generated. That is indeed 43 cents on the dollar as the study notes and last time I checked, if I gave you $1 and you gave me back 43 cents, you still owe me money or I’m getting ripped off (it is the latter in this case).

Curiously, this lack of full-time jobs was borne out by the Albuquerque Biz First which carried a listing (only partially available online) of the “top film and video production companies” in New Mexico by full-time employees. The top company in New Mexico has 13 employees and it doesn’t take long to get down the list to one and two person companies. I counted 74 full time employees among the top 21 companies. Perhaps some companies didn’t share how many workers they have and there are obviously greater numbers of part-time workers on any given production, but this is not exactly an industry that is going to lead New Mexico out of a recession with a cost of $50 million annually.

Updated: There was an error in the original posting involving subsidy per job. The correct cost per full-time job per the study is that each job cost taxpayers a bit more than $8,500.

Goldwater Institute economist weighs in on New Mexico wire deal

Errors of Enchantment Blog Postings - Tue, 2014-07-22 13:49

There is a free market think tank in all 50 US states. We are all independent and set our own priorities and allocate resources based on our own priorities. It’s called the State Policy Network and it drives the left nuts.

Recently, we at the Rio Grande Foundation got in touch with our friends in Arizona at the Goldwater Institute to weigh in on a budding case of corporate welfare and economic development gone wrong. Read economist Byron Slomach’s piece from the Las Cruces Sun-News on the current discussion relating to an existing copper wire company based in Doña Ana County that could soon face some taxpayer-assisted competition.

Good news for American Health Care: Another Court deals blow to ObamaCare (updated)

Errors of Enchantment Blog Postings - Tue, 2014-07-22 10:56

The Hobby Lobby decision generated a lot of attention, but the real threat to ObamaCare is more likely to come from decisions like the one made today by the U.S. Court of Appeals for the District of Columbia in the Halbig case.

Michael Cannon, a health care expert with the Cato Institute, has done extensive reporting on Halbig and its potential impact on ObamaCare. Just yesterday, he summarized the case, saying that it:

(C)halleng(es) the legality of the health-insurance subsidies the IRS is dispensing in the 36 states that did not establish a health-insurance Exchange under the Patient Protection and Affordable Care Act, or “ObamaCare,” and thus have Exchanges established by the federal government. Though the PPACA repeatedly states those subsidies are available only “through an Exchange established by the State,” and there are indications IRS officials knew they did not have the authority to issue subsidies through federal Exchanges, the IRS is dispensing billions of dollars of taxpayer subsidies through federal Exchanges anyway.

More from Cannon on the case here.

In other words, the Courts could offer yet another rebuke to the Obama Administration which has repeatedly ignored or reinterpreted laws passed by Congress in ways that benefit its own agenda. Obama can argue whatever way he wants about what Congress “intended” to write into the law, but what really matters is what the law actually says, as written.

I’m no expert on the Supreme Court, but it seems unlikely that The Court will overturn this decision which is based on clear and unambiguous language. This is good news if you share the view that ObamaCare takes US health care down the wrong path towards big-government command-and-control policiesd and further away from market-based solutions.

As Cannon notes, Large numbers of New Mexicans (more than 94,000 to be exact) could be exempted from the individual mandate in the event that Halbig is upheld or is not appealed:

No reason to depend on Washington for roads

Errors of Enchantment Blog Postings - Mon, 2014-07-21 09:07

The following article appeared in the Las Cruces Sun-News on July 20, 2014. Although legislation has passed the House (and will likely pass the Senate soon) to temporarily prop up the highway program and avoid an immediate crisis, the need for fundamental change in how America builds and maintains its infrastructure remains.

The next manufactured crisis coming from Washington, DC involves the federal highway program. According to news reports, the Federal Highway Trust Fund is on the cusp of insolvency, with a cash shortage looming before the end of July. Despite the deadline, lawmakers are at an impasse over how to replenish an account that funds the nation’s highway projects.

U.S. Transportation Secretary Anthony Foxx is warning states would, on average, see a 28 percent reduction in federal dollars to cover the costs of current needs if additional funding is not found. One potential source of funding is a hike in the federal gas tax.

In its current form, the federal highway program is financed through an 18.4 cent-per-gallon tax on gasoline and a 24.4 cent tax on diesel fuel. Unfortunately, while the gas tax more closely resembles a user fee than other taxes charged by Washington, it isn’t. If it were a user-fee, gas taxes would finance roads, bridges and other items that benefit motorists who pay the tax. Instead, over the past decade, Congress has diverted well over $55 billion of gas taxes to non-highway projects, most notably mass transit.

Whether you want more mass transit or less, the fact is that transit riders don’t pay the gas tax, rather motorists subsidize these systems nationwide. Ideally, Congress would create transportation policy under the principal of “user pays.”

Unfortunately, Washington seems to be utterly incapable of making even the most basic reforms. Worse, transportation policies that work in New York and Chicago may not work so well in Albuquerque or Farmington, New Mexico.

The solution is simple: get Washington out of transportation policy and hand it back to the states. After all, as the Highway Program currently operates, Washington simply takes in the gas tax money, adds a bunch of requirements (like costly Davis-Bacon labor rules), diverts for pet projects and mass transit, and returns the money to the states.

This is silly. Washington played an important role in the creation of the Interstate Highway System, but that was completed in 1992.

Several bills have been introduced in Washington over the years that would devolve all or most of the program – thereby eliminating the federal gas tax – to the various states. The latest proposal called the “Transportation Empowerment Act” was introduced by Sen. Mike Lee (Utah) and Rep. Tom Graves (Georgia).

States would then be able to experiment with transportation policies that make sense for their own populations. Gas taxes could be raised or lowered. Or, as Oregon is considering, motorists could be charged based on miles driven. Priorities like transit could be emphasized or reduced also depending on the particular state.

Lastly, absent federal mandates favoring prevailing wage laws, Davis-Bacon states could decide for themselves whether they want to pay union rates for construction projects, build 15 percent more infrastructure, or save taxpayers up to 15 percent. New Mexico is a Davis-Bacon state, but neighboring Arizona, Utah, Colorado, and Oklahoma are not. Amazingly, Texas is the only adjacent state that, like New Mexico, unnecessarily inflates labor rates on public works projects.

Like so many things, the federal government undertook a specific project like the Interstate Highway System only to refuse to see its size and scope reduced. There is no reason for a disagreement in Washington to negatively impact New Mexico roads and bridges, but that is the system Congress has saddled us with.

We at the Rio Grande Foundation have often criticized policies enacted in Santa Fe, but there is no doubt that Santa Fe would do a better job than Washington. And, given innovation and competition from neighboring states to enact the best, most-efficient transportation system, I believe that Santa Fe would improve.

To date, none of New Mexico’s congressional representatives has co-sponsored this legislation or any bill that would really reform the federal transportation system. Unfortunately, that means New Mexico will continue to rely on the whims of a dysfunctional Washington for something as basic as transportation funding.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility

New analysis: average New Mexican missing out on $2,638 in personal income due to lack of a Right to Work law

Errors of Enchantment Blog Postings - Fri, 2014-07-18 13:24

The Competitive Enterprise Institute has produced another fine report this week. The topic of he new report is how much better off individual workers would be if the state had a Right to Work law in place (right to work simply means that one cannot be required to join a union as a condition of employment).

CEI’s analysis which looked at economic data going back to 1977, broke down the impact of not having a right to work law by state and found that on a per-capita basis, New Mexicans lost out on $2,638 in annual income.

This is obviously relevant to individual families and workers, but it is driven by the broader growth seen in such states nationwide (updated versions of this and other information can be found in the CEI report):

Carl Graham’s interview on Las Cruces PBS

Errors of Enchantment Blog Postings - Thu, 2014-07-17 16:26

Carl Graham recently sat down and talked with Fred Martino of KRWG TV in Las Cruces. The video of Graham’s interview can be seen below. Feel free to fast-forward through the valentine to heavily-subsidized so-called “renewable” industry to the 5:25 mark when Graham’s interview starts. After Graham’s interview, there is an interesting (albeit one-sided) discussion of the land the State of New Mexico could receive due to the Organ Mountains Monument land grab.

New Mexico was among first US states to enact a gas tax

Errors of Enchantment Blog Postings - Wed, 2014-07-16 15:01

Check out the following chart from our friends at the Tax Foundation. Looks like New Mexico is a leader in one thing: taxation.

And, while New Mexico’s Legislature has been controlled by Democrats for many years, both houses were under Republican control back in 1919. BTW: Woodrow Wilson was president at the time.

And gas taxes are not the worst tax in the world especially if they are dedicated to funding road construction and maintenance. Unfortunately, a large portion of the 18.4 cent/gallon gas tax collected by Washington is diverted to transit and other “transportation-related” projects.

NM Needs to Give Business Competition an Uber Lyft

Errors of Enchantment Blog Postings - Wed, 2014-07-16 13:40

Ride-share companies Uber and Lyft continue to face opposition at the Public Regulation Commission. Representatives of incumbent taxi cab companies have led lobbying efforts against the ride-share companies having published articles in various newspapers decrying the new companies’ plans to enter the New Mexico market.

Two articles, both written by taxi drivers, have appeared in the Albuquerque Journal alone. Concerns supposedly include “an uneven playing field” that gives ride-share drivers an “unfair” advantage.

Complying with complicated and arcane government regulations is expensive. Business models that avoid those regulations (often through the innovative application of new technologies) can provide better customer service at a lower cost. This is good, not bad for consumers.

Consumer interests are the other, oft-cited justification for onerous government regulations. In reality, consumers are no more than a fig-leaf in the fight against competition.

It is, after all, not angry users of these ride-share services that have been complaining to the media. We’re instead expected to believe that taxi drivers are so public-spirited that they are ignoring the benefits they receive from government regulations protecting their market-share to selflessly defend those poor consumers from being taken advantage of by the unethical competition!

In reality, of course, at least some self-interested taxi drivers are hoping to bend government regulations to protect their businesses. Absent government protections, taxi drivers are just another small business that must innovate and improve or whither away. Imagine if buggy whip manufacturers had been able to lobby government to strangle the automobile industry in its early years. How many American jobs would have been lost and how would living standards have been reduced?

The phenomenon of using government regulations to quash innovation in a given industry is called “regulatory capture” by economists.

Rather than lobbying for innovation-killing regulations on ride-share companies, it would be great if the taxi industry worked to deregulate their own industry to make it more competitive. The issue of market-entry was just dealt with a few years ago when modest reforms shifted the “burden of evidence” from proposed startups to the incumbents. Imagine having to ask your competition for permission to set up your business! But it is far from a “free” market when one has to hire legal help and beg the government for permission before trying to make a living.

And this is where New Mexico’s political culture and broader economy come into play. It isn’t news that the economy here in the Land of Enchantment is struggling terribly. And Lyft and Uber alone won’t provide enough jobs to drag our economy out of the ditch, but technophile Millennials in particular aren’t as interested in owning cars as were previous generations. They also like the hip factor that these services provide. We need to keep/attract these technophiles to New Mexico to start businesses and create jobs.

Of course, the suspicion of new technologies and outsiders attempting to make a profit is nothing new. It has been ingrained in the psyches of many New Mexicans for generations. Suspicion of free market capitalism has led to business and entrepreneurship-destroying public policies coming from Santa Fe. A report from the Canada-based Fraser Institute found New Mexico to be the least economically-free state in the US and New Mexico consistently underperforms its neighbors on business friendliness measures.

This lack of economic freedom was masked somewhat over the decades by generous federal spending in our state. We still had high poverty rates, but federal spending made the data look better than they really were.

That situation is changing. New Mexicans can no longer rely on Washington to prop up our economy. We need far-reaching, tax, education, and regulatory reforms. Allowing Uber and Lyft to operate in a competitive will not resuscitate New Mexico’s economy by itself, but such a move combined with broader deregulatory efforts could finally help grow New Mexico’s private sector economy.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility

Tune in to KUNM Thursday morning to hear RGF President Paul Gessing debate Supreme Court’s Hobby Lobby decision

Errors of Enchantment Blog Postings - Tue, 2014-07-15 13:14

Rio Grande Foundation president Paul Gessing will be defending individual and religious freedom in hostile territory when he appears on the KUNM Call-in show to discuss the Supreme Court’s recent Hobby Lobby decision which impacted the provision of certain birth control products under the health care law known as “ObamaCare.”

The KUNM Call-in Show will air live from 8 to 9am this Thursday morning on 89.9FM.

The call-in number is: 277-5866 or toll-free 877-899-5866

Gessing plans to argue, in part, that:

• The “original sin” of American health care involved placing corporations in between health care consumers and providers. This was done during WWII and the employer tax deduction for health care was enshrined into law shortly thereafter;

• I agree with opponents of this decision who don’t want businesses/employers making health care decisions for their employees. Individuals should purchase their own health care, not their employers;

• Individuals don’t give up their rights by being a part of corporations. If you are forcing me as a business owner to pay for something, I should at least have a say in what is purchased. Congress has gone a step further, specifically passing the Religious Freedom Restoration Act to protect religious liberties. The Court simply held that the law applied to private business and not just individuals;

• Even the very liberal Congress of 2009–10 never explicitly decided, or even really debated, whether to force companies to provide contraceptive coverage. HHS used the authority the law gave it to impose the mandate.

Hobby Lobby provides 16 kinds of birth control for its employees;

• Analogy: Hobby Lobby not providing specific birth control options is equivalent of a Muslim or kosher Jewish company refusing to offer pork and beans in the employee lunchroom. Employees could bring their own or go elsewhere to eat.

• Putting government in charge of health care purchases through a “single-payer” plan could result in a religious conservative president/congress outright banning certain procedures or products. Canadians are frequently forced to cross the border into the US in order to obtain various health care services. Only a few years ago, the Canadian Supreme Court ruled that individuals could purchase health care services through private providers as opposed to the government health care service;

Liberal Estes lives in economics fantasyland

Errors of Enchantment Blog Postings - Mon, 2014-07-14 14:19

I’ve previously called Nick Estes, formerly an analyst with the liberal group Voices for Children, a “crackpot.” Having debated him on economic policy issues, I can assure you that Nick is a very nice man, but he is genuinely clueless when it comes to economics.

Take his recent column in the Albuquerque Journal. For starters, there is the loose use of the term “we.” Who is this “we?” The federal government, state governments, corporations, individuals? He also makes it sound like any healthy, working-age person could simply be put to work building/installing solar panels and wind turbines. Unfortunately, these are fairly technical fields and not every “Joe” on the street is cut out for such work.

Yes, the federal government financed a lot of nice projects back in the 1930s, but as Estes himself seems to admit (and Amity Shlaes documents in her excellent “The Forgotten Man”, Roosevelt’s New Deal didn’t bring the US out of the Great Depression. The Depression ultimately ended after state management of the US economy ended in the wake of World War II.

Of course, throughout his piece, Estes claims that all of his economic policies can be enacted essentially “for free.” We all know that “there is no such thing as a free lunch.” The resources government taxes and spends must come from somewhere. These could be used elsewhere in the absence of government taking those resources.

Catholic Church leading charge on pre-k expansion, won’t push school choice which could help get students into Catholic Schools?

Errors of Enchantment Blog Postings - Mon, 2014-07-14 11:50

A personal note: I’m a Catholic. The Church’s politics make me crazy for a number of reasons. I’m not referring in this post even to economics, but to the Archdiocese of New Mexico’s position in support of a massive new pre-K entitlement. Advocates point to some very old, highly resource-intensive pre-k “experiments” from the 1960s, but conveniently ignore existing, large-scale, state programs that have been operating for decades in Oklahoma and Georgia.

So, the church is advocating for policies that would, we believe, waste billions of dollars in the Permanent Fund on a pre-k program. But that’s not what really drives me nuts about the Church’s policy stances. It is that the Church is not willing to put a fraction of the time and resources into promoting school choice (specifically, tax credits) which are now in place in 14 states (see a detailed analysis here) and were last seriously considered in New Mexico in 2012 when liberal Democrats introduced bills to expand school choice.

A further indictment of the Church’s position is that the data on student performance in Catholic Schools is actually much better than the costly new pre-K program. A University of Chicago study found that urban African Americans attending Catholic schools are 26 percentage points more likely to graduate from high school and twice as likely to graduate from college as comparable students in public schools. Considering that such programs could actually SAVE tax dollars, it is nothing less than mind-blowing to me that the Church hasn’t endorsed tax credits for school choice wholeheartedly.

Perhaps it is true what they are saying about Allen Sanchez?

New report: New Mexico has worst public pension situation in nation

Errors of Enchantment Blog Postings - Fri, 2014-07-11 11:17

The Competitive Enterprise Institute is a free market group based in Washington with which we sometimes work. They, like Rio Grande Foundation, are concerned about the fiscal impact of government employee pensions, specifically the fact that they are under-funded and poorly-designed in the first place. As time passes absent systemic reforms, these pension systems are destined to consume ever-greater public resources.

The RGF has known for years that New Mexico’s pension system was among the most troubled in the nation, but efforts to compare pension problems from state-to-state are challenging. The CEI report (available here) offers several different evaluations based on different methodologies each using their own calculation techniques. All of these are useful, but as Table 8 of the report illustrates, New Mexico’s pension system, when compared with those of other states, fares the worst when the various studies are factored together.

This poor result is particularly amazing considering the constant attention (at both the state and national levels) given to pension reforms in Illinois and other states facing pension issues.

Other states are dealing with the pension reform issue. Oklahoma recently shifted all new hires to a 401K-style system.

2013 Payroll of New Mexico’s Institutes of Higher Education

Errors of Enchantment Blog Postings - Wed, 2014-07-09 10:31

The Rio Grande Foundation has requested 2013 payroll information for New Mexico’s 16 institutes of higher education (universities, junior colleges, and community colleges). The Foundation has posted this information online in order to make information that is technically “public” (available upon request) more readily-available than before.

The Foundation was able to access records for 15 of New Mexico’s 16 institutes with only New Mexico Institute of Mining and Technology (New Mexico Tech) failing to comply with the Foundation’s requests.

One institute, New Mexico Tech, failed to comply. A representative of New Mexico Tech stated that employee payroll information was available only in printed format at significant cost.

On the flip side, Rio Grande Foundation President Paul Gessing noted with appreciation that “University of New Mexico and Central New Mexico Community College both post payroll on a publicly-accessible website. This should be the model pursed by all schools”

Gessing continued, saying “New Mexico’s taxpayers support each of these institutes of higher learning. In this day and age with the modern Internet now 20 years old, important public information should be proactively published online for the public to access. While the Rio Grande Foundation is happy to request public records on the public’s behalf, it is unacceptable to not have such basic information readily-available or to not respond to repeated and varied requests.”

Click on the name of each school to access the 2013 payroll of that institute.

University of New Mexico

New Mexico State University (also includes Doña Ana Community College)

Eastern New Mexico University

New Mexico Highlands

Western New Mexico University

New Mexico Military Institute

Northern New Mexico College

San Juan College

Central New Mexico Community College

Clovis Community College

New Mexico Junior College 

Santa Fe Community College

New Mexico Institute of Mining and Technology: “cannot comply”

Mesalands Community College

Luna Community College

 

 

 

 

Does Hillary Clinton agree with RGF on income inequality?

Errors of Enchantment Blog Postings - Wed, 2014-07-09 10:09

Hillary Clinton recently did an interview with the German magazine Der Spiegel in which the topic of “income inequality” was raised (the media focus has been on her “poverty” upon leaving the White House). After the usual platitudes about inequality being a “threat to democracy,” Clinton gave a more specific answer in which she largely agreed with conservatives’ views on inequality and the economy:

SPIEGEL: The average annual income of an American household is $43,810 (€32,191.77). You earn up to $200,000 an hour for a speech. Can you understand if people are bothered by that?

Clinton: Well, certainly, I can understand that, but that’s never been the crux of the concern in our country, because we’ve always had people who did better than other people. That’s just accepted. The problem is that people on the bottom and people in the middle class no longer feel like they have the opportunity to do better. The question is, how do we get back to having an economy that works for everybody and that once again gives people the optimism that they too will be successful.

This is exactly the point I made in my debate last year with liberal Nick Estes. Inequality is not the issue so much as the sputtering economy which has made living standards worse for working class Americans. Of course there are things that can be done to reduce inequality while also improving the economy including: school choice/education reform, end the Federal Reserve’s printing money, and work to shore up the American family.

Austin, TX looking to New Mexico for economic advice?

Errors of Enchantment Blog Postings - Tue, 2014-07-08 12:50

Check out this article from the Austin American-Statesman. I was quoted in the story. It looks like the movers-and-shakers in Austin are looking to get the city into the space industry game. Of course, no state has spent as much of taxpayers’ meager resources on such projects as New Mexico.

Notably, Austin is, while similar in some ways to Albuquerque, the polar opposite of Albuquerque economically. Forbes even recently named Austin America’s number one “boomtown” while Albuquerque was recently found to be in a “double-dip” recession. Texas as a whole is also doing well while New Mexico is not. Notably, Austin, a notably liberal city is located in a right to work, zero-income-tax state.

So, why would business leaders in Austin want to emulate New Mexico’s crappy economy? Beats me. Space is cool. It may be the next “big thing.” My quote from the article clearly states what Austin’s leaders might wish to do and what they might to avoid:

“There are opportunities in commercial space, but taxpayers shouldn’t be footing the bill for a speculative investment in a competitive market.”

“New Mexico went all-in on space tourism,” Gessing said. “It was like building an airport before the Wright Brothers.”

Does voter registration data show New Mexico trending red?

Errors of Enchantment Blog Postings - Tue, 2014-07-08 09:27

The headline in the Albuquerque Journal story is “Rejecting Party Labels” and true enough, as is clearly visible in the following chart, New Mexico voters are rejecting party labels in growing numbers:

What was really interesting to me is that the gap between Republican and Democrat registration in supposedly liberal 18-24 year olds is 11 percent according to the poll. That compares with an astonishing 18 point advantage for Democrats among voters 65 and up. All other age demographics had a party registration gap of 15 points.

I am not a pollster and Rio Grande Foundation is not partisan, but this data caught my eye when I saw it because to say that this deviates from national trends would be an incredible understatement. Check out the chart below from the Pew Center which does polling on politics at the national level (it is from 2012, but still relevant):

The Pew chart clearly shows that Americans generally identify more Republican as they age with the so-called “Silent Generation” being even and each subsequent group identifying more strongly with Democrats. The “Millennial” generation gap nationally is an astonishing 27 points in favor of Democrats.

Is there something unusual about Sanderoff’s polling here in New Mexico that drove these results? I don’t know, but from what I can tell, New Mexico’s oldest voters are far more inclined to be Democrats than their peers in other states and young people in New Mexico are somewhat more Republican than older voters or their peers in other states. Perhaps the winds of political change are coming to the Land of Enchantment?

Unfair subsidies to businesses won’t help New Mexico’s economy recover

Errors of Enchantment Blog Postings - Mon, 2014-07-07 11:15

There is no question that New Mexico faces significant economic challenges. Our overreliance on Washington’s largesse combined with business-unfriendly tax and regulatory structures have finally caught up with us. This has led to New Mexico bleeding jobs and people to other states, particularly our economically freer neighbors.

This has led to desperation among some quarters. Democrat Sens. Tim Keller and Jacob Candelaria seem to have even proposed a special legislative session for the sole purpose of offering subsidies and incentives to the Tesla car company. The hope is to attract a proposed battery factory to the state despite no concrete indicators from Tesla as to where they wish to locate said factory or what their criterion are.

Unfortunately, these Democrat legislators are not the only ones willing to engage in bad economic policies for a short-term political benefit in the form of “jobs.” The Doña Ana County Commission recently voted 5-0 to grant an industrial revenue bond (IRB) to a Turkish wire company to encourage the company to come to Santa Teresa. While this financing mechanism is somewhat complicated as a means of giving special advantages to recipients, the basic effect of an IRB is that it exempts the recipient, for up to 30 years, from property taxes on land, buildings, the useful life of equipment purchased with bond proceeds and an exemption from applicable gross receipts taxes on the purchase of project equipment.

While we at the Rio Grande Foundation prefer fair, free, and open economic policies, the kicker is that the subsidized Turkish firm is planning to open their door across the street from the International Wire Group, an existing player in the same market. It goes without saying that an unequal playing field inevitably favors one company over another and could allow the new entrant to undercut its cross-street rival on price or use its advantage to hire workers away from the existing company.

So, the very justification for issuing these bonds to the Turkish wire company — job creation — will likely backfire as the new company uses its government-favored position to squeeze its competition. Unfortunately, it does not seem to have occurred to the Commission that their policies may backfire in this way.

Whatever the reason they have for issuing this bond, it is nevertheless illegal. According to section 4-59-15 of the New Mexico State Board of Finance review provision: “The bonds in connection with such project shall not be issued until the State Board of Finance has determined that the proposed project will not directly or substantially compete with an existing business or enterprise located within the boundaries of the county or within five miles of the proposed project.”

Approval of this subsidy package, unlike any potential deal for Tesla, would appear to be in direct violation of the state’s own laws/regulations. On those grounds alone, the Board should reject the proposed subsidies out of hand.

While we certainly understand the desire on the part of policymakers to act quickly to attract businesses to the state, policymakers need to first and foremost respect those businesses that are already here in our communities providing jobs and tax revenue for our communities and the state. The worst thing that can be done is to offer generous subsidies — at taxpayer expense — to attract competition for existing New Mexico businesses.

The term “pro-business” is often a catch-all used to describe government policies that may, unfortunately, be abused for the benefit of some businesses at the expense of other businesses and taxpayers at large. New Mexico should instead strive for free-market policies that provide reasonable taxes and regulations across the board. When that challenge is undertaken in Santa Fe, New Mexico will finally rise from the bottom of so many bad lists.

Monnheimer is a policy analyst with New Mexico’s Rio Grande Foundation, an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Audit results show why Albuquerque should fully embrace private golf course management

Errors of Enchantment Blog Postings - Wed, 2014-07-02 14:05

Management of Albuquerque’s public golf courses was recently slammed in an auditors report as discussed in the Albuquerque Journal.

Based on my interpretation of the issues discussed in the report, it would appear that the problem stems from 2 things: 1) the fact that most golf course operations are privately-managed while the course itself is managed by the City; 2) poor oversight of contracts on the part of the City.

It would seem that the best solution is complete privatization of golf course management. Rather than the split system, outsource all aspects of golf course management, require a specific amount of money be returned to the City and negotiate an appropriate rate structure, and let the course management team innovate within those bounds.

This structure would mitigate against losses to the taxpayer; it would be simple to monitor, and it would likely improve conditions, especially at Ladera which has struggled in the past. Cincinnati is just one major city to have seen positive results from such a move. Rio Grande Foundation has previously covered this issue.

Conservatives should support private management because relying on the private sector is results in a better product at a lower cost.
Liberals should support it because limited taxpayer dollars should not be spent to subsidize golf courses.

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