Errors of Enchantment Blog Postings

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Why is New Mexico not realizing its potential?
Updated: 18 min 33 sec ago

Celebrating New Mexico’s Potemkin Industry

Tue, 2016-02-09 14:01

Yesterday was “New Mexico Film & TV Day” at the Roundhouse, but rather than a clear-eyed discussion and analysis of the taxpayer-provided goodies state politicians shower on Hollywood, the event served as a networking get-together for rent-seekers and a rally against worker freedom.

The New Mexico Film Office was on hand — distributing stickers and temporary tattoos — as was New Mexico Women in Film, the film program of Santa Fe Community College, the Digital Arts and Technology Academy, Nob Hill Studios, the New Mexico Italian Film and Culture Festival, UNM’s Interdisciplinary Film and Digital Media Program, Mitchell & Presley Talent Group, the Institute of American Indian Arts, and the New Mexico Post Alliance.

The day’s lowlight was an obnoxious, 20-minute harangue by Patrick Fabian (pictured above). The actor, who plays “Howard Hamlin” in “Better Call Saul,” told a fawning crowd of union members and activists that he wouldn’t have clothes on his back or a car to drive if it weren’t for the Screen Actors Guild‐American Federation of Television and Radio Artists. After all, corporations are “unaccountable” and only care about “the bottom line.”

Fabian cited dodgy stats about the impact of right-to-work laws in Oklahoma and Wisconsin, and warned that New Mexico would engage in a “race to the bottom” if it passed a RTW law. He also claimed that there was “vibrant production” in New Mexico, a state that is becoming a “top-tier destination for entertainment.” That’s nonsense, of course, as the Foundation has documented again and again and again.

One of Fabian’s statements was beyond dispute, though. He called himself a “knucklehead actor.” No argument there.

Right to Work : New Year, Same Results

Mon, 2016-02-08 10:49

The Rio Grande Foundation is tracking announcements of expansions, relocations, and greenfield investments published on Area Development’s website. Founded in 1965, the publication “is considered the leading executive magazine covering corporate site selection and relocation. … Area Development is published quarterly and has 60,000 mailed copies.” In an explanation to the Foundation, its editor wrote that items for Area Development‘s announcements listing are “culled from RSS feeds and press releases that are emailed to us from various sources, including economic development organizations, PR agencies, businesses, etc. We usually highlight ones that represent large numbers of new jobs and/or investment in industrial projects.”

In January, of 8,722 projected jobs, 6,823 — 78 percent — were slated for right-to-work (RTW) states:

Fifteen domestic companies based in non-RTW states announced investments in RTW states. Just two announcements went the other way.

RTW prevailed in foreign direct investment (FDI), too. Eleven projects are headed to RTW states, with two to occur in non-RTW states.

Marquee RTW wins included New York-based VOXX International’s opening of a “flagship” manufacturing facility in Florida (300 jobs), Ohio-based Toledo Molding & Die’s pick of Tennessee for a factory for “interior and air and fluid management systems” (250 jobs) and California-based Shift Technologies’s choice to build “its first East Coast operation” in Virginia (100 jobs).

Methodological specifics:

* All job estimates — “up to,” “as many as,” “about” — were taken at face value, for RTW and non-RTW states alike.

* If an announcement did not make an employment projection, efforts were made to obtain an estimate from newspaper articles and/or press releases from additional sources.

* If no job figure could be found anywhere, the project was not counted, whether it was a RTW or non-RTW state.

* Intrastate relocations were not counted, interstate relocations were.

Higher Taxes — Just What New Mexico Needs?

Fri, 2016-02-05 14:15

By itself, New Mexico’s tax on corporate income doesn’t render the state economically uncompetitive. A heavy and complicated overall tax structure, lack of a right-to-work law, extensive welfare architecture, reams of burdensome regulations, alarming dropout rate, and many other factors make the Land of Enchantment an undesirable place to do business.

But it’s important to note that, as the Tax Foundation recently documented, New Mexico’s top marginal corporate tax is higher than each of its five neighbors. The levy is statutorily slated to drop to 6.6 percent for the current year, down from 6.9 percent in 2015. Oklahoma, Utah, Colorado, and Arizona have lower rates — and Texas, of course, has no corporate tax at all.

Enter Sen. Mimi Stewart (D-Albuquerque). The hard-left legislator and “retired educator” has sponsored a bill to delay the “rate reduction to [2017] and all subsequent rate reductions by one year.”

Is hiking taxes during what’s looking more and more like an economic apocalypse for New Mexico a good idea? You make the call.


What’s happening in Santa Fe? House Dems propose “Economic Opportunity Plan”

Fri, 2016-02-05 11:02

The Rio Grande Foundation is tracking the goings-on in Santa Fe. Despite New Mexico’s worst-in-the-nation unemployment rate, most of the action — with the session more than half-over — has been on drivers licenses and “tough on crime” policies. That is not to say that large numbers of bills –including several economic reforms — haven’t passed the New Mexico House only to lay stacked on Majority Leader Michael Sanchez’s desk. It is true that there has been a shift in priorities (as you can see from the list of House-passed bills).

Click on Sanchez’s picture to go to that site: 

One group that claims to understand the need to focus on economic issues is the House Democrats. They rolled out their “Economic Opportunity Plan”  which House Democratic Leader, Representative Brian Egolf (D-Santa Fe) claims — with no research whatsoever — would reduce the State’s unemployment to 3.9%. That would take us from dead-last to tied with Idaho for 11th. 

These are the very same  people who, when they finally got booted from office after 52 years of House dominance, had helped New Mexico to the worst poverty rate in the nation. Needless to say, the most significant parts of their agenda comes from the far-left playbook although many of the bills on the lengthy list like (HB 11: Shaken Baby Syndrome Educational Materials) seem almost trivial and unrelated to the New Mexico economy.

  • HJR 10: Tap the Permanent Fund for Early Childhood Education;
  • HB 125: Increase Minimum Wage;
  • HB 255: New Higher Income Tax Bracket
  • HB 89: Public Employee Salary Increases

Interestingly, though the group decries the emphasis by Gov. Martinez on criminal justice issues, their list of public safety bills is almost along as the rest of their bills combined. Mostly, the “Economic Opportunity Plan” seems to be a laundry list of bills proposed by House Democrats during the 2016 session. There is no philosophical approach (besides more and bigger government). There is no analysis provided as to their impact. Just the old “Trust Us!”

A New Mexico Solution to Yucca’s Mountain of Failure?

Wed, 2016-02-03 18:38

Many on the right support the storage of spent nuclear fuel beneath Yucca Mountain, simply because “greens” and loathsome legislative careerist Harry Reid hysterically oppose the proposal.

But anyone who’s looked at the U.S. Department of Energy’s management of the project — not to mention Yucca’s status as a perpetual political football in Washington — recognizes that a one-size-fits all, bureaucrat-administered “answer” to the nuclear industry’s problem of radioactive leftovers is profoundly unwise.

More than $15 billion in ratepayer revenue has been spent on Yucca, but not one fuel rod has made its way to Nevada. (The Department of Energy was supposed to start filling the repository in 1998.)

The good news is that there’s a growing awareness that other options should be pursued. (Some of us figured that out long ago.) There’s plenty of money left in the Nuclear Waste Fund, and every penny should be spent on alternatives to Yucca.

One possibility is Holtec International’s proposal to built a interim facility between Carlsbad and Hobbs. Rep. Cathrynn Brown (R-Carlsbad) has drafted a memorial in support of the plan.

As one element of a broader effort to privatize high-level nuclear waste, Holtec’s safe, secure storage could help drive a stake through the heart of the Yucca boondoggle. Best of all, it would be real, sustainable economic development for New Mexico — based not on another infusion of federal cash, but a market-oriented response to epic-level D.C. incompetence.

Sorry, Senator, the ‘Scientific Evidence’ Isn’t Convincing

Tue, 2016-02-02 18:45

One of the greatest disappointments about public policy today is the Democrat-Republican consensus on “early childhood education.” The groupthink is on display in today’s edition of The Santa Fe New Mexican. Reporter Milan Simonich wrote that “Sen. Sander Rue, R-Albuquerque, said he was satisfied that scientific evidence shows that early childhood education is effective,” but expressed “concerns about taking money from the [Land Grant Permanent Fund] and then making sure it would be spent properly.”

Transparency, oversight, and accountability are always desirable, of course, but the senator is wildly off the mark in believing that preschool is backed by strong data.

Despite working for the left-leaning Brookings Institution, developmental psychologist Grover J. “Russ” Whitehurst, who once served as the director of the Institute of Education Sciences within the U.S. Department of Education, finds no “evidence of program success when we look to state pre-K programs.”

In Georgia, for example, studies have yielded sobering results. One concluded that the “estimated effects of Universal Pre-K availability on test scores and grade retention are positive, but are not statistically significant, suggesting there were no discernible effects on statewide academic achievement.” Another found that “positive effects for children from low-income families … were offset by negative effects for children from higher-income families.”

We’ve known for a long time that Head Start is a failure, and state-level programs are producing similar outcomes. “Universal preschool” has an enormous price tag, and there is no “scientific evidence” demonstrating that it is a worthwhile “public investment.”

Robert Zubrin Luncheon: Merchants of Despair – Albuquerque

Tue, 2016-02-02 13:15
Rio Grande Foundation Speaker Series Event:
Luncheon with Robert Zubrin
Author of Merchants of Despair: Radical Environmentalists, Criminal Pseudoscientists and the Fatal Cult of Antihumanism

Click here for registration form.

Mr. Zubrin’s latest book, Merchants of Despair: Radical Environmentalists, Criminal Pseudo-Scientists and the Fatal Cult of Antihumanism; is the newest addition to the New Atlantis Books series.

Merchants of Despair traces the pedigree of the ideology that human beings are a cancer upon the Earth — a species whose aspirations and appetites are endangering the natural order — and exposes its deadly consequences in startling and horrifying detail.

It exposes the worst crimes perpetrated by this antihumanist movement, including eugenics campaigns in the United States and genocidal anti-development and population-control programs around the world. And it provides scientific refutations to antihumanism’s major pseudo-scientific claims, including its modern tirades against nuclear power, pesticides, population growth, biotech foods, resource depletion, industrial development, and, most recently, fear-mongering about global warming. The book’s official homepage is:

  • Location:  Marriott Pyramid 5151 San Francisco Rd NE, Albuquerque, NM  87109
  • When:  Wednesday, March 16, 2016, 12:00 noon to 1:00pm.
  • Cost:  Seating is limited and can be purchased at the discounted price of $30 through Wednesday, March 9, 2016; $40 thereafter.

In addition to his writing on the environment and public policy, Zubrin is the author of the critically acclaimed nonfiction books The Case for Mars, Entering Space, and Mars on Earth; the science fiction novels The Holy Land and First Landing; and articles in Scientific American, The New Atlantis,American Enterprise, the New York Times, and the Washington Post. He has appeared on major media including CNN, C-SPAN, the BBC, the Discovery Channel, the Science Channel, NBC, ABC, and NPR.

Robert Zubrin is a New Atlantis contributing editor and a fellow at the Center for Security Policy. For many years, he worked as a senior engineer for Lockheed Martin.

Click here for registration form.

RGF attacked (again) on Right to Work; Non-partisan West Virginia report further buttresses economic case for RTW

Tue, 2016-02-02 11:09

A UNM sociology professor and her Oregon-based sidekick are on the warpath against the Rio Grande Foundation and our research on “right to work.” As usual, their “research” is lacking and elicited a swift response from us.

Interestingly, given the brevity of New Mexico’s 30-day session and the attention shift to criminal justice issues, it is looking less likely that “right to work” (or many other economic reforms) will get a serious look in the 2016 Legislature. That is not the case in West Virginia where “right to work” will likely pass in a matter of weeks (making the state the 26th to do so).

This article from West Virginia sums up the arguments on “right to work” fairly well. The author cites a study by the Legislature’s Bureau of Business and Economic Research which found “RTW policy leads to long-run rates of GDP growth that are around .5 percentage point higher than non-RTW states…The study also found a 1.4 percent job rate growth in RTW states over the last two decades, compared with one percent in non-RTW states.”

The writer also noted that,

While (right to work) would be a blow to union power, it’s not a death knell. Instead, it may give rise here to “members-only agreements” where unions represent only the workers who choose to belong. The unions are under no obligation to provide any representation or services for non-union workers.

New Mexico’s Other Cache of Unspent Money

Mon, 2016-02-01 17:55

Kevin Robinson-Avila, in today’s Albuquerque Journal, had a good overview of the state’s two permanent funds. As usual, they’re under siege by liberals who seek to siphon more revenue for “public investments.”

The two funds are mighty tempting targets. Together, they are worth nearly $20 billion — more than state government spends in an entire year.

But as the left dreams of using New Mexico’s “sovereign wealth” on another round of doomed-to-fail programs, attention may turn to another fund. The state’s budget reserve, according to the governor’s spending plan for the 2017 fiscal year, is $505 million, or 8.1 percent of “recurring appropriations.” As Medicaid costs balloon and the oil-and-gas industry continues to suffer, look for that share to dwindle, even though the Legislative Finance Committee prefers that the rainy-day kitty be kept at 10 percent.

With “new money” predicted to be just $30 million in the 2017 fiscal year, look for pols to start eyeing the budget reserve. A half-billion dollars can make a big contribution toward successful denial of fiscal realities.

Does New Mexico’s history doom it to poverty?

Mon, 2016-02-01 14:24

The Journal’s Winthrop Quigley had an interesting column over the weekend in which he detailed how New Mexico’s history of colonization and violence make it “anti-business.” While we’ve had our disagreements with Quigley, he hits on a number of truths in his article. Nonetheless, I want to weigh in with my own thoughts here:

1) It is interesting to me that Quigley almost constantly uses “right to work” to as an entree to discussing what he believes doesn’t work in terms of economic reforms. He’d never launch into a fatalistic discussion of New Mexico’s long and challenging history by denigrating the potential of early childhood programs or Medicaid expansion. He also fails to address more than a dozen other reforms that the Republican-controlled House has passed in recent years only to be killed without so much as a vote in the Senate. He just dismisses “right to work” as “not a solution” and moves on.

2) Quigley notes the lack of trust for outsiders in New Mexico. Interestingly, free market capitalism, despite its “dog-eat-dog” reputation, requires a great deal of trust. That trust usually results in benefits for all parties involved in a free exchange, but trust is nonetheless required. Trust is indeed lacking in New Mexico due in part to its history of colonialism and political corruption.

3) Cultures change. A recent report noted that New Mexico’s corruption has been enabled by the federal government. The loss of federal spending and now, significant oil and gas revenues, mean that change is imperative. The old ways never worked particularly well. Now, they are being exposed as a total failure. It is time for New Mexicans to embrace free markets and build the trust necessary to create a robust private sector.

Gessing weighs in on Los Poblanos’ new $15M IRB and IRB’s in general

Mon, 2016-02-01 09:29

The story is split in two with Gessing’s story starting at approximately the 2:40 mark:

School Choice? Cue the Crickets

Fri, 2016-01-29 15:55

Missed yesterday’s celebration of National School Choice Week in Santa Fe? Don’t go looking for media coverage — there wasn’t much.

The Santa Fe New Mexican‘s Robert Nott wrote an article — and dutifully mentioned the recent, and specious, Legislative Finance Committee that concluded that “charter schools cost more for similar results.”

The Foundation was proud to participate in two National School Choice Week events. In addition to speaking at the capitol rally, research director D. Dowd Muska presented an overview of the past, present, and future of school choice to the New Mexico State University chapter of Young Americans for Liberty.

For more on the subject, visit the Friedman Foundation for Educational Choice.

New polling data indicate strong support for school choice

Thu, 2016-01-28 17:30

Just in time for School Choice Week, the American Federation for Children working with Beck Research, LLC, has released polling on Americans’ support for school choice.

Key findings from poll:
· 70 percent fully support the concept of school choice, including 42 percent who strongly support it, while 24 percent oppose it.
· Last year, 69 percent supported and 27 percent opposed.
· 65 percent support private school choice (32 percent oppose), when those surveyed were asked if they support, “opportunity scholarships, also known as school vouchers.”
· Support among Democrats has increased from 60% in 2015 to 65% in 2016 while Independents’ (66%) and Republicans’ (80%) preference for choice remains steady.
· 53 percent of voters support “school vouchers” (without using the term “opportunity scholarship”).
· 65 percent support Education Savings Accounts with only 29 percent opposed.
· 75 percent support public charter schools with only 21 percent opposing it.

School choice tax credits legislation (HB 207) has been introduced in the New Mexico House. Similar legislation passed the House during the 2015 session but never received a vote in the Senate.

The poll, conducted January 19-24, 2016 surveyed 1,100 likely voters, including an 800 person national sample, on questions related to educational choice, vouchers and charter schools.

Small bit of GOOD news on New Mexico’s economy!

Thu, 2016-01-28 11:10

Earlier this week, the latest unemployment numbers were released and New Mexico remained stuck with the highest rate in the nation (6.7%). That’s obviously not good news.

But, as we’ve pointed out in the past, unemployment numbers only tell part of the story. If people have dropped out of the workforce, they are not included in the unemployment rate. So, it is important to consider the workforce participation rate as well.

And, as the chart below which tracks US and New Mexico workforce participation rates dating back to 1976, New Mexico (finally) saw a rebound in 2015 after years of decline.

Before you get too excited, it is worth noting that New Mexico still trails every other neighboring state:

Is this just a “dead cat bounce” or is it a sign that more New Mexicans are getting back to work? It’s hard to say. What we know is that New Mexico’s economy needs some dramatic free market reforms that push our unemployment rate down and increase the numbers of New Mexicans who are “makers” as opposed to “takers.”

States, not cities and counties, are paramount

Wed, 2016-01-27 11:17

COMMENTARY: “States may, if its citizens choose, serve as a laboratory.” Justice Louis Brandeis in New State Ice Co. v. Liebmann

When it comes to economic policy issues, the states are supposed to be the dominant actors. This is the view laid out by Justice Brandeis. It flows seamlessly from the United States Constitution’s design which emphasizes “federalism.”

But this isn’t another article about how Washington is overstepping its bounds. Rather, it is about how New Mexico’s Legislature might want to keep closer tabs on policymaking activities of local governments.

Local governments derive their powers from the states within which they are located. In some states they are given broad latitude. In others, like Virginia, their power is strictly limited. Virginia’s minimum wage and other employment-related policies are set by the Legislature.

For simplicity’s sake, this is a good thing, regardless of your views on the minimum wage.

While my organization does not support raising the minimum wage on economic grounds, that has not stopped New Mexico and more than half of all U.S. states from raising their minimum wages above the federally-mandated level of $7.25. New Mexico’s rate is currently at $7.50.

The $7.50-an-hour rate is straightforward, but as things currently stand, the cities of Albuquerque, Las Cruces, and Santa Fe have their own wage rates. Separate rates are mandated by the counties of Bernalillo, Doña Ana, and Santa Fe. It’s not just the complexity of varying wage rates and jurisdictions; there are additional, complex rules over how tipped wage rates are calculated depending on the provision of certain benefits like employer-sponsored health insurance.

Complying with myriad tax rates and formulas can be a nightmare for any business, especially small ones. Seemingly well-intended efforts to raise wage rates are creating tremendous complexity and compliance burdens for the very small businesses that we need to create jobs and dig New Mexico’s out of the current economic malaise.

Statewide preemption

That growing complexity is a big reason that groups like ACI and the New Mexico Restaurant Association have gotten behind a “statewide preemption bill.” The bill has been followed in the 2016 session by Rep. Harper in the House and Sen. Moores.

The idea that state legislatures, not a mixture of cities and counties, nor far-off bureaucracies in Washington, D.C., should regulate New Mexico’s economy is self-evident. In fact, Brandeis, quoting further from his “laboratories of the states” argument said that the idea was to, “try novel social and economic experiments without risk to the rest of the country.”

So, if California wants to adopt a $10.50 or even $15.00 per hour minimum wage, let them. If Texas would like to not impose legal wage floors at all, ideally that should be their prerogative. Of course, as things currently stand, the federal rate of $7.25 is the baseline for every state.

I believe that under such a system people and jobs will continue to move from heavily-regulated, high-minimum-wage states like California to less-regulated states like Texas, but I might be wrong. I’d love to give states the leeway to duke it out. Localities, not so much. It’s messy and convoluted with multiple jurisdictions at play. Local borders are unclear to all but the best-informed.

Lest supporters of high minimum wages think this is just an effort to kill minimum wages entirely, local minimum wage hikes give legislators a “pass.” After all, an Albuquerque legislator nowadays can say, “Why should the state raise the state minimum wage when Albuquerque has done it?”

The leading opponents of “preemption” might be rural legislators. They see “big cities” even here in New Mexico as a world apart from themselves and their more conservative constituents. Nevertheless, preemption makes sense. New Mexico’s cities and the businesses located there are engines for New Mexico’s entire economy. We are ultimately in this together.

Gessing is the president of 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.

Why mandate and subsidize the same thing (solar)?

Tue, 2016-01-26 13:22

Legislation is moving through both New Mexico’s House and Senate that would provide a 10% state tax credit for rooftop solar installations for eight years with that tax credit reduced to 5% after that and the total credits offered by the state limited to $5 million annually.

This is bad policy for several reasons.

1) It is a special-interest subsidy that complicates New Mexico’s broken tax code and will push additional tax burdens onto those who rent or can’t afford a solar installation on their roof. The state tax credit would be on top of a recently-extended 30 percent federal tax credit on the value of solar projects;

2) With oil and gas revenues declining, New Mexico shouldn’t be offering $5 million subsidies to particular industries. It needs to be fiscally-responsible;

3) Most importantly, New Mexico law already mandates solar. The “renewable” mandate requires solar for 20% of all “renewables” while “distributed renewables” (almost entirely solar) account for 3% of RPS requirement.

In general, governments at all levels need to get out of the game of mandating and subsidizing various energy sources. If solar is really cost-competitive with other sources, by all means let it compete.

Rio Grande Foundation to Participate in National School Choice Week Events Throughout New Mexico: Among 16,140 Nationwide

Mon, 2016-01-25 12:30

(Albuquerque) The Rio Grande Foundation (along with a host of organizations that support educational choice) is pleased to participate in School Choice Week 2016.

The Foundation is scheduled to participate in two New Mexico celebrations of School Choice Week, one in the Capitol in Santa Fe and the second

  • Join us at our State’s Capitol on Thursday, January 28, from 1pm to 3pm for speakers and performances relating to School Choice Week. Speakers will include Secretary Hanna Skandera, a representative of the Rio Grande Foundation, and performers that are coming together to celebrate school choice in our state. Hundreds are expected and all are welcome!
  • A second event is being held in Las Cruces at 7pm on Thursday as well. The organizers are from Students 4 Liberty at New Mexico State (check back for details).

Said Muska, “Freedom of choice is at the very heart of the Rio Grande Foundation’s mission. Given New Mexico’s real struggles with educational attainment, it is high time we give parents and students the freedom to attain the education that makes sense for them.”

School choice is a broad term that includes, but is not limited to: magnet schools, inter-district transfers, charter schools, parochial and private schools, virtual schools, and home-schooling.

The Rio Grande Foundation is philosophically supportive of all forms of school choice, but approaches education policy from the bottom-up perspective. In other words, funding should follow the students giving them the power to make the educational choice that makes the most sense for them. After all, no one has a greater interest in the success of a particular student than that student’s parent or guardian.

For a complete listing of School Choice Week events and participants, go to the School Choice Week official website.

The “Economic Engine” that is Medicaid: talk about “kindergarten math!”

Mon, 2016-01-25 11:51

The Journal’s Winthrop Quigley is simply not liberal (or economically-ignorant enough) for our “friends” at New Mexico Voices for Children. I recently dissected Quigley’s (correct) assertion that Medicaid is NOT a significant economic boon for New Mexico’s economy. I gave Quigley credit for that while noting that the seminal Oregan Health Study found no significant health benefits from Medicaid expansion.

Of course, that is beyond the pale for Voices which seems to be based upon the view that any expansion of government is a good thing. So, Sharon Kayne, the group’s communications director wrote an opinion piece that appeared in the Albuquerque Journal defending the notion that Medicaid expansion is an economic boon for New Mexico. The piece boiled down to two basic points:

1) She personally benefited from a government program “similar” to Medicaid;
2) Every dollar NM spends on Medicaid brings in almost four dollars from the feds.

No consideration of opportunity costs, or the possible downsides of putting healthy, childless workers on welfare. Simply one data point and the usual “OPM” (Other People’s Money) argument. RGF at least looked at job growth in Medicaid expansion v. non-expansion states and found no discernible difference in terms of job creation despite all that “free money,” but why let pesky facts get in the way of a cash grab?

Throwing water on New Mexico’s latest “economic development” fad

Fri, 2016-01-22 14:16

While he doesn’t come out and say it, that is the practical effect of a recent paper from the Federal Reserve Bank of Atlanta that was covered by Richard Metcalf in Monday’s Business Outlook section of the Albuquerque Journal.

The “creative class” model is largely credited to Richard Florida, a demographer and author. The idea is that cities should attract young, highly-motivated, and creative people to make an area “cool” and thus economically-prosperous. He uses the “Three T’s” Talent, Tolerance, and Technology to explain what cities need. This concept has seemingly formed the basis of many “economic development” strategies in Albuquerque and New Mexico as a whole with Marc Lautman leading the charge.

You can see these concepts reflected all over: Rail Runner, Spaceport, Bus Rapid Transit, InnovateABQ, broadband, and more. But is this an effective economic development strategy? Here are some quotes from Metcalfe’s article:

The basic finding is a low level or sometimes lack of trickle-down benefits from the college-educated strata of a metro population to the less-educated, more blue-collar working class. Of the four labor market measures, the lowest impact was in reducing the poverty rate.

One of the conundrums of economic development, especially in the context of growing a knowledge-based economy, is that the advantage goes to “a smaller group of workers within a metropolitan area that have high levels of educational attainment and skills,” the paper says. The upshot is more income inequality.

On the other hand, data also suggest that, in some metros, economic growth precedes growth in the percentage share of college grads – not the other way around – the white paper says.

In other words, lavishing tax dollars on the wealthy and prosperous “creative class” is great for the creative class, but there’s no real “trickle down” effect from this GOVERNMENT SPENDING. And, strong economic growth often PRECEDES growth in the number of college grads. They move where the jobs are!